Woodford Concerns

AnotherJoe

Jonah01 wrote: »

OP here, Although I didn't lose a significant amount of money I am still slightly bruised by this encounter.

Having read this entire thread with interest it does seem like funds/shares/trusts/multi funds and the rest are all a bit of a gamble.

I currently have my money sitting as cash in an ISA and a SIP. I have no idea where to put it in terms of investments as I fear I'll choose one and the bottom will fall out of it.

Then put it in the global market. Many investments that cover the top 4-5-6k companies globally. Then you dont need worry about "the fund" since its the market. Then dont look at it for ten years.

seacaitch

Jonah01 wrote: »

Short term losses wouldn't panic me in a well diversified portfolio because i know long term the result will be positive.

This is very easy to say but in practice will likely prove extremely difficult.

For anyone whose whole investing experience is post-2008/9 they have little idea what it's like to retain investment discipline throughout a deep and prolonged market downturn, and they (and you, if you fit that profile) will face a huge personal test one day. This really cannot be emphasised enough. Very many people who say, and mean, that they won't sell into the next deep bear market will do just that: lose discipline and sell low.

And the reason they will sell low is that in the depths of a bear market it really won't be at all clear that, as you wrote, "long term the result will be positive". It will look like the opposite: the problems facing us will be grim, intractable even, and the economic outlook dire. Many investors will believe, or rationalise, that selling is what they need to do to protect what they have left.

Markets aren't like the ebbing tides or the sun setting or rising. Historic price charts do not guarantee they'll rise again in shortihs order (or even at all) rewarding us handsomely if we hold on. Retaining discipline is something of an act of faith and losing discipline is the easiest thing to do.

I am not about to jump into an investment without the knowledge required so I do not believe I am a danger to myself at all but I appreciate what you are saying. (obviously ignoring my Woodford experience as I jumped in two footed there!)

And equally obviously, we can't ignore your Woodford experience because that's Exhibit A: what you actually did as opposed to what you say you'll do...

Every investor is a danger to themselves. All of us. The less experienced you are - the less you've been tested by very difficult markets - the more at risk you are.

I also know I am not going to leave my money as cash and miss out on the oppoutunity of investing and the rewards that can come with it.

Come the next deep bear market, then many people, and especially those whose investment experience is all post-GFC, will wish they had fewer risk assets and more safer assets. Don't underestimate how hard it is to hold onto risk assets throughout a deep downturn.

My suggestion is to properly take a bit of time to educate yourself a reasonable amount before proceeding with investing your money. At no point in the future are you likely to regret time spent better equipping yourself with this knowledge thereby gaining a better understanding of the risks (and realistic rewards) involved in investing.

Jonah01

seacaitch wrote: »

This is very easy to say but in practice will likely prove extremely difficult.

For anyone whose whole investing experience is post-2008/9 they have little idea what it's like to retain investment discipline throughout a deep and prolonged market downturn, and they (and you, if you fit that profile) will face a huge personal test one day. This really cannot be emphasised enough. Very many people who say, and mean, that they won't sell into the next deep bear market will do just that: lose discipline and sell low.

And the reason they will sell low is that in the depths of a bear market it really won't be at all clear that, as you wrote, "long term the result will be positive". It will look like the opposite: the problems facing us will be grim, intractable even, and the economic outlook dire. Many investors will believe, or rationalise, that selling is what they need to do to protect what they have left.

Markets aren't like the ebbing tides or the sun setting or rising. Historic price charts do not guarantee they'll rise again in shortihs order (or even at all) rewarding us handsomely if we hold on. Retaining discipline is something of an act of faith and losing discipline is the easiest thing to do.




And equally obviously, we can't ignore your Woodford experience because that's Exhibit A: what you actually did as opposed to what you say you'll do...

Every investor is a danger to themselves. All of us. The less experienced you are - the less you've been tested by very difficult markets - the more at risk you are.




Come the next deep bear market, then many people, and especially those whose investment experience is all post-GFC, will wish they had fewer risk assets and more safer assets. Don't underestimate how hard it is to hold onto risk assets throughout a deep downturn.

My suggestion is to properly take a bit of time to educate yourself a reasonable amount before proceeding with investing your money. At no point in the future are you likely to regret time spent better equipping yourself with this knowledge thereby gaining a better understanding of the risks (and realistic rewards) involved in investing.

Superb post thanks.

what I say I'll do is based on experiences from Exhibit A, so a very different scenario to when I made my decision for Exhibit A

Unfortunately I showed a great lack of panic and didn't sell my Woodford units quick enough believing his performance would turn around (long term blah blah). Luckily I got out just before he suspended the fund.

I'm going to take my time like you suggest, read the great posts on here and keep reading on the subject.

Terry98

MaxiRobriguez wrote: »

A short term positive return is possible.

It's called a Marcus account.

When inflation is 2.5%?

justme111

The thing is just as now there are people rationalizing and explaining the woodford downfall when there is another drop , either generalised or a particular fund's one there may be around people rationalizing those drops and likelihood of no recovery and you (and I ) may well think we taken a wrong decision and sell because we have little knowledge on our own , only regurgitated narrative of a few websites and narratives change... Because at the end of the day if the markets recovered for the last 100 years it does not mean they will keep doing that , and particularly to recover within reasonable timeframe ( because if they do in 50 years it may not be good enough for us).

MaxiRobriguez

Terry98 wrote: »

When inflation is 2.5%?

Op was suggesting the need for emotional comfort by seeing a gain in their investment. We are nowhere near discussing sensible long term investment choices let alone inflationary pressures and real-term gains.

gadgetmind

dividendhero wrote: »

Quite so, when you buy a car you go buy the reputation of the manufacturer and car reviews - unless you're some kind of petrol head or fleet buyer you don't go into the technical spec of the vehicle

I disagree totally. I hate the glossy !!!!! the dealers hand out, and generally distrust reviews, as I want to *know* what I'm buying. I even read the manual for my current car cover to cover *twice* before buying it.

These are huge purchases so putting in a few hundred hours of work before buying makes all the sense in the world.

gadgetmind

AnotherJoe wrote: »

Again you need to understand no one knows what the future holds

As someone recently mentioned Japan, there is a Japanese proverb that (very roughly) translates as "One inch into the future is darkness."

george4064

Terry98 wrote: »

When inflation is 2.5%?

To be fair, the OP simply asked for a 'positive return short term', not a positive 'real' return.

Terry98

george4064 wrote: »

To be fair, the OP simply asked for a 'positive return short term', not a positive 'real' return.

Am I imagining it or did I really make a 'real' return on top rate savings accounts prior to 2008?

I am sure I had a fixed rate 5 year Cash ISA with Skipton that paid 5% when inflation was a lot lower!