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For those familiar with Lars Kroijer and his views

edited 30 November -1 at 12:00AM in Savings & Investments
101 replies 6.1K views
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  • dales1dales1 Forumite
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    I knew there was something the book raised. I just can't find the bloody section to quote it now
    Try the end of chapter 6 and the commentary on Figure 6.4, which shows the Nikkei 65% down on 1990 for over 20 years (and nowhere near recovered even now).
  • ThrugelmirThrugelmir Forumite
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    arwain wrote: »
    So the chances something like that will be worth less in 20 years than it is now, especially if you reinvest the dividends for those 20 years is fairly unlikely, but not impossible.

    Depends where you are in the cycle of life. 40 year investment horizon. Fine, time to recover and save more. Just retired. Not so comfortable.
    "In the short run, the market is a voting machine but in the long run, it is a weighing machine." - Benjamin Graham
  • AudaxerAudaxer Forumite
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    Linton wrote: »
    The objective for my set of portfolios as a whole is to provide a steady income of at least 4%, and preferably a lot more, of money invested for the rest of my and my wife's life.
    So if I understand that correctly, your main objective is taking withdrawal rate of at least 4% per annum increasing with inflation. As 4% is the much talked about safe withdrawal rate, I'm sure that will be achievable, especially as markets have been on a bull run since you retired. Do you think it might be different for someone retiring now if we do enter a bear market soon, even with a good strategy like yours?
    Managing risk and asset allocation is to help ensure the income is steady not to maximise long term return.
    That's the bit I'm not sure I understand - I know you have an income portfolio which you occasionally top up from your growth portfolio, but is there something else you do to manage your asset allocation to ensure you have a steady income?
  • Crashy_TimeCrashy_Time Forumite
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    I knew there was something the book raised. I just can't find the bloody section to quote it now so i'm going to have to go off a hazy memory but now that i've only remembered it on page 3 of the thread it may get buried.



    I'm pretty sure it was the Japanese market that Kroijer mentioned. I could be wrong on the country though.


    Now from what i read i was of the belief that say you're in your 20s-30s and investing for your 'typical' retirement. You have 30-40 years of investing ahead of you.
    So people reference huge crashes. It's all ok exposing yourself to huge risk, VLS100 going all in on equities (not specifically VLS100 btw) but what would you do in the event of big dips? Hold your nerve or panic sell or whatever.


    Now i was of the belief that it 'doesn't matter' - i've got 30 years ahead of me so the market will come good again, crash again, come good again and so on. Hopefully it's good when i retire.


    But from reading the book & this mentioning of Japanese market, i'm sure he said something like 20 years on from some bad crash (i'm sure you guys will know what i'm referring to but i'd never heard of it before) and it's still not where it was.



    So the belief of it'll always come good after a crash (if you're investing for the long term) may not be true? Not if we're talking long term as in a typical working life (say 30-40 years of investing (30 in my case)).


    Wasn't really sure what to make of that and wondered what others who are more in the know thought.




    Kroijer mentions that early on in the book too.

    He makes the point that you need to consider a crash in the market and no recovery within your realistic time-frame for needing the money to be available. The Motley Fool used to say things like "If stock markets cease to exist/function, then you will be more concerned with basic survival than your net worth and therefore shouldn`t worry about this scenario" etc. etc. meaning that complete financial meltdown was very very unlikely outwith Total Global war or massive natural disaster or pandemic, something like that where how many bits of paper you are worth becomes pretty meaningless.

    I had investments in Japanese markets in the mid to late 80`s that did very well, and I managed to sell out before it all went south, mainly due to pure luck than anything else, someone who had a globally diversified portfolio (as LK recommends) wouldn`t have been burned by the Japanese meltdown the same way as someone who had all their eggs - property, pension, job, other investments - relying on the health of the Japanese economy/markets.

    I think you need to find a sensible middle ground between worrying about armageddon and expecting Buffet like returns from a few hours on here and browsing a couple of books (not saying that is what you are expecting, but some people just shy away from markets all together - BTL is my pension people, or get crazy ideas about what is achievable - Day trading is easy money people) and instead think about how much you want to allocate to certain investments, how risky they are, how liquid they are, and as mentioned what outcome you are hoping to achieve from these investments/allocations. I think it is a good idea to have the equivalent of six months to a years salary somewhere totally safe and accessible before you start dabbling in stock markets, even trackers,and go slowly, research each thing that you are doing carefully before allocating any money (The basic advice in the LK book could be all you need?)

    There was a discussion on here about how the Dow actually recovered investors money (if they stayed invested) quicker than (I) thought after the great late 20`s crash, and there is maybe an equivalent alternative story about Japan that someone on here can post up, although I think japan is the true recent example of how it can go badly wrong for a long long time.
  • AudaxerAudaxer Forumite
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    arwain wrote: »
    You are correct, see bottom of page 69 and top of page 70. Regarding something like VLS100 and similar funds, they invest in markets all over the world not just one county. So the chances something like that will be worth less in 20 years than it is now, especially if you reinvest the dividends for those 20 years is fairly unlikely, but not impossible.
    I would say that was very unlikely. I think it would have to be a case where there was a bad recession just after your invested the money, and then another one at Year 20 with a few other equity crashes in between. If there was a bad crash at year 20, the best thing to do would be sit tight for another few years if you can until markets recover before selling any equity investments.

    If a globally diversified 100% equity fund of passive indexes like the VLS100 was worth less at the end of a 20 year period, I would think most active portfolios of 100% equities would also be worth less over the same 20 year period.
  • Crashy_TimeCrashy_Time Forumite
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    Linton wrote: »
    I would question the significance of the Japanese crash as being that relevent to most endowment policies as people generally at that time would be highly invested in the UK. A Japanese fund would be seen as somewhat esoteric.


    What happened to the Japanese markets is a valuable warning to investors. However it would be far less likely to happen and would not be a serious problem for investors generally now that markets and people's portfolios are truly global. Were it to happen on a global basis it would be one of those situations where our investments would be the least of our problems.

    Not as I remember it, I think it was a standard recommendation at the time from financial advisers etc. as it was boom time in that sector of the markets, the same way property recently has been lapped up by pension funds etc.
  • Crashy_TimeCrashy_Time Forumite
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    He makes the point that you need to consider a crash in the market and no recovery within your realistic time-frame for needing the money to be available. The Motley Fool used to say things like "If stock markets cease to exist/function, then you will be more concerned with basic survival than your net worth and therefore shouldn`t worry about this scenario" etc. etc. meaning that complete financial meltdown was very very unlikely outwith Total Global war or massive natural disaster or pandemic, something like that where how many bits of paper you are worth becomes pretty meaningless.

    I had investments in Japanese markets in the mid to late 80`s that did very well, and I managed to sell out before it all went south, mainly due to pure luck than anything else, someone who had a globally diversified portfolio (as LK recommends) wouldn`t have been burned by the Japanese meltdown the same way as someone who had all their eggs - property, pension, job, other investments - relying on the health of the Japanese economy/markets.

    I think you need to find a sensible middle ground between worrying about armageddon and expecting Buffet like returns from a few hours on here and browsing a couple of books (not saying that is what you are expecting, but some people just shy away from markets all together - BTL is my pension people, or get crazy ideas about what is achievable - Day trading is easy money people) and instead think about how much you want to allocate to certain investments, how risky they are, how liquid they are, and as mentioned what outcome you are hoping to achieve from these investments/allocations. I think it is a good idea to have the equivalent of six months to a years salary somewhere totally safe and accessible before you start dabbling in stock markets, even trackers,and go slowly, research each thing that you are doing carefully before allocating any money (The basic advice in the LK book could be all you need?)

    There was a discussion on here about how the Dow actually recovered investors money (if they stayed invested) quicker than (I) thought after the great late 20`s crash, and there is maybe an equivalent alternative story about Japan that someone on here can post up, although I think japan is the true recent example of how it can go badly wrong for a long long time.

    https://forums.moneysavingexpert.com/showthread.php?t=5941553&highlight=crashy+time&page=4
  • AlexlandAlexland Forumite
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    There was a discussion on here about how the Dow actually recovered investors money (if they stayed invested) quicker than (I) thought after the great late 20`s crash, and there is maybe an equivalent alternative story about Japan that someone on here can post up, although I think japan is the true recent example of how it can go badly wrong for a long long time.

    Similar to the Wall Street Crash when you consider total return it shows that investing in the Nikkei has not been a total disaster for the unfortunate person who only put in a lump sum in just before the big crash.

    https://pensionpartners.com/the-nikkei-straw-man/

    I expect the majority of Nikkei investors will have done better as they would have gains from the big ramp up before the crash and the lower prices for units bought after the crash. So a disappointing investment but not a wipe out.

    Alex
  • sendusendu Forumite
    118 posts
    Now i was of the belief that it 'doesn't matter' - i've got 30 years ahead of me so the market will come good again, crash again, come good again and so on. Hopefully it's good when i retire.
    [...]
    So the belief of it'll always come good after a crash (if you're investing for the long term) may not be true? Not if we're talking long term as in a typical working life (say 30-40 years of investing (30 in my case)).

    What happened in Japan is one of the reasons you should diversify globally, and not put all your eggs in one basket. It's quite unlikely for the global economy to effectively lose 30 years of growth.

    At least one country ought to come out on top, and if you're in a passive global index tracker that's cap-weighted, you'll automatically benefit.
  • MalthusianMalthusian Forumite
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    Not as I remember it, I think it was a standard recommendation at the time from financial advisers etc. as it was boom time in that sector of the markets, the same way property recently has been lapped up by pension funds etc.

    "Stick all your money in Japan" was not a standard recommendation from anyone in the UK, not even in the 70s when financial advice was far less regulated and scientific than it is now.

    And endowments weren't invested in Japan funds, they were generally - especially in the 70s and 80s - invested in the insurer's With Profits fund, which would have been unlikely to overweight Japan.

    The endowment scandal was not about endowments underperforming due to betting everything on Japan, but about unrealistic projections of growth that would have not have been met whatever the insurer invested in. And investors spending the money they saved as interest rates decreased, instead of investing it to pay off the capital, to counteract the effect of lower interest rates, lower inflation and lower growth on their endowment.
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