Are the Markets Too High to Invest?

kidmugsy

jimjames wrote: »

The thing that is also generally forgotten by those quoting FTSE levels in 1999 as a reason not to invest is that dividends are also paid out. Currently just under 4% so even if the market does nothing or drops, you are still getting a return way above cash interest rates.

I wonder whether that's true. We sold equities in '99 and invested some of the loot in cash. From then until recently we found it very easy to earn interest above inflation both from ISAs and from Index-Linked Savings Certificates. For most, perhaps all, of that time we were getting well north of 4% p.a. We are still getting better than 4% p.a. on one 'legacy' ISA that has yet to mature.

Often cash does much better than investment writers admit because they are thinking of the dismal returns often available to their funds rather than the better rates that have often been often available to the personal investor.

Now, however, things look gloomy for the cash holder. And probably the holder of gilts. And perhaps the holder of US equities too.

There's certainly a case, I'd say, for holding cash in high interest current accounts and regular savers, and for any ILSCs that one might still own. My own guess is that just as 'passive' investing is often best for shares, 'active' investing is often best for cash.

kidmugsy

jimjames wrote: »

The year still ended higher than it started! Yes there was a pretty sharp crash but also a fairly quick recovery and the bull market carried on. Recollection can be a strange thing!

I remember that dip. I also remember that it seemed to make no sense so I just ignored it. It's not very scientific, the business of investing.

It's also a reminder that investing in the years of accumulation is rather a different beast from investing in, or near, retirement.

kidmugsy

StevieJ wrote: »

Wait a minute! the Ftse has only recently passed the the level it reached in 1999, 17 years ago. Having said that, with addition of dividend income, losses would have been recovered far earlier. Anyone know how long it would have taken someone who invested at the Ftse peak in 1999 to break even with dividend income accumulated?

If you're going to add the dividends, should you not also subtract the inflation?

I'd rather like to see the chart with both adjustments made. Can anyone help?

Linton

kidmugsy wrote: »

If you're going to add the dividends, should you not also subtract the inflation?

I'd rather like to see the chart with both adjustments made. Can anyone help?

Inflation and dividends are hardly equivalent. Dividends are part of the performance of the investment as much as price. They are different for each investment whereas inflation is a factor that applies equally to all investments. So inflation isnt particularly useful for comparing one investment with another.

I dont know of any free facility that shows inflation adjusted returns across a range of assets. Trustnet doesnt. You could put together a spreadsheet that does the job, but then you would need a source of downloadable historic data.

MonroeM

ChesterDog wrote: »

So gain would have been roughly £3,810 or £5150 respectively, on an investment of £15,240 from April 2016.

So that is a substantial gain over the past 12 months! It may not be the same this year but I suppose the people who opted to invest the £15,240 at the end of the tax year have lost out significantly!

JohnRo

The index and CPI data are no problem, reliable historic yield data for the index is.

Sally57

MonroeM wrote: »

So that is a substantial gain over the past 12 months! It may not be the same this year but I suppose the people who opted to invest the £15,240 at the end of the tax year have lost out significantly!

Yes, I do realise I have 'lost out' by not using my ISA allowance at the beginning of the tax year but there was a lot of uncertainty at the time with Brexit.

However, that's why I don't feel like holding back any longer but the IFA suggestion through me off course a bit hence the thread!

Pincher

Sally57 wrote: »

Fair enough, but I started this thread to ask the question and people's views mainly because I had a meeting with an IFA last week primarily about my pension fund.

He is no doubt looking out for your interest, and trying to preserve your capital through a cautious approach.

What did you tick on your form for attitude to risk?

I know how I would drive, and sitting in the passenger seat in a minicab lets you see how other people do it. If they are too cautious, or too daring, it will annoy you.

I have yet to hear somebody who says they ticked high risk.
But you know you want to.

Sally57

Pincher wrote: »

He is no doubt looking out for your interest, and trying to preserve your capital through a cautious approach.

What did you tick on your form for attitude to risk?

I know how I would drive, and sitting in the passenger seat in a minicab lets you see how other people do it. If they are too cautious, or too daring, it will annoy you.

I have yet to hear somebody who says they ticked high risk.
But you know you want to.

It was an initial first meeting and the attitude to risk was medium, a 7/10.

ChesterDog

Sally57 wrote: »

Yes, I do realise I have 'lost out' by not using my ISA allowance at the beginning of the tax year but there was a lot of uncertainty at the time with Brexit.

It's important to remember that there is always uncertainty. There is always bad news, worrying potential developments. It's never a good time to invest, news-wise. If it SEEMS to be a good time to invest, that's a very good sign that it's not - because you will have missed the upswing, and a downswing will probably be on the way.

Without the use of hindsight, the best time to invest is now and the best thing to do having invested is to leave it invested.