How do you know which funds to invest in?

AndyT678

bostonerimus wrote: »

You could always borrow money to invest..........just joking, that's for fools and ITs

And for the millions of people who have both mortgages and pensions perhaps?

bostonerimus

AndyT678 wrote: »

And for the millions of people who have both mortgages and pensions perhaps?

Buying on margin without collateral is very different from a mortgage and I don't understand the pension reference.

bowlhead99

bostonerimus wrote: »

Buying on margin without collateral is very different from a mortgage and I don't understand the pension reference.

A pension is an investment that most of us can only afford to make because we financed our house/apartment with a mortgage rather than paying cash for it. As such, we have more money to invest, purely because we took the personal gearing - meaning that our home is at risk if we don't keep up the repayments or are unable to refinance it when the time comes.

When a typical investment trust takes 10-25% gearing it is likewise borrowing to give itself more money to invest, and the collateral which allows it to access decent finance rates is the entire pool of Investments (which well exceed the borrowing amount).

So generally the investment trusts are not borrowing without any collateral but they are committed to servicing the debt or refinancing it to another credit provider, just like an individual who runs a mortgage while also running a pension or ISA. You see "pay off my mortgage or save/invest" threads here all the time and there are always a sensible set of pros and cons.

Audaxer

BananaRepublic wrote: »

No. Studies prove that what counts is time in the market. Otherwise why not keep all of your money as cash ready to invest? I recall that for many years prior to the GFC I was expecting the markets to tank, but they didn't, and huge gains were made.

I understand what you are saying, but if you have cash accounts as part of the defensive part of your overall portfolio as well as bonds, is there any disadvantage of using some cash to invest in some more cheaper equity when there is an equity crash? You will not know when the market has reached the bottom, but you would still be investing in more equity at cheaper prices.

Alexland

BananaRepublic wrote: »

You could not be more wrong. According to numerous sources in various governments, the Western banking system was on the verge of collapse, something that the greedy and ignorant bosses of these banks failed to appreciate until it was almost too late. It would have led to an inability to pay wages, the shutdown of bank teller machines etc. Some bankers with smallholdings were buying livestock so that they would have something to eat.

I remember 2008 was the clearly, at the time, a very good time to invest. So I put as much in as I could without borrowing. The fear was causing the companies of the world to be extremely undervalued. Even if that worst case did happen then the cash would probably be worthless too. So what would be the downside of investing?

Alex

BananaRepublic

Audaxer wrote: »

I understand what you are saying, but if you have cash accounts as part of the defensive part of your overall portfolio as well as bonds, is there any disadvantage of using some cash to invest in some more cheaper equity when there is an equity crash? You will not know when the market has reached the bottom, but you would still be investing in more equity at cheaper prices.

Oddly enough I do that. Once the market has crashed, it’s relatively safe to put in the emergency fund since it shouldn’t drop much more, and will recover soon. Of course a crash often corresponds to job losses so it’s not always a good idea. But it worked for me.

BananaRepublic

Alexland wrote: »

I remember 2008 was the clearly, at the time, a very good time to invest. So I put as much in as I could without borrowing. The fear was causing the companies of the world to be extremely undervalued. Even if that worst case did happen then the cash would probably be worthless too. So what would be the downside of investing?

Alex

I was disputing your statement that the markets were enjoying an emotional response. It was a very real existential crisis.

However I do of course agree that it was a fantastic time to invest for those of us lucky enough to be in work and earning well. I also bought a house not long after, at a good price thanks to the GFC.

The downside of investing? None unless you resisted investing for many years beforehand.

Audaxer

BananaRepublic wrote: »

Oddly enough I do that. Once the market has crashed, it’s relatively safe to put in the emergency fund since it shouldn’t drop much more, and will recover soon. Of course a crash often corresponds to job losses so it’s not always a good idea. But it worked for me.

You said you keep 5% cash as an emergency fund which doesn't seem a lot to have to take advantage of the next equity crash, but I suppose it's a balancing act as to how much cash to keep for that purpose. I have been moving funds from maturing Cash ISA's over the last year, but as we have been in a bull market for so long, I am more comfortable keeping a bigger cash buffer to hopefully take advantage of an equity crash when it comes.

Fatbritabroad

AndyT678 wrote: »

And for the millions of people who have both mortgages and pensions perhaps?

Yes effectively what I'm doing in a way. Fixed my mortgage for ten years at 2.4%. Cash and savings currently 50k and trying to save and invest toward paying a good chunk off this when it renews

darkidoe

movilogo wrote: »

6. Become rich

Rich is a relative term. It is much better to setting specific goals of investment (ie growth, income generating, wealth protection) or life goals (early retirement, etc). Quite important when you start I think, because that will determine your strategy.