Index Trackers Are So Widely Recommended..... But...?

Prism

itwasntme001 wrote: »

Volatility is not the same as risk.

Volatility is a risk but not the only one. However its one of the only ones you can put a number against. Its also pretty important when you are withdrawing your investments, during retirement for example. Good diversification can almost completely remove other risks like fraud and company failure but its more difficult to reduce volatility by a large amount without reducing the overall return.

Thrugelmir

itwasntme001 wrote: »

It is not just low interest rates (actually it is net interest margin that matters and it is not clear whether or not their margins are that low even now)

Low interest rates are compressing lending margins. One only has to look at mortgage rates to see that. HSBC yesterday announced further job cuts that will hit European operations the hardest. HSBC actually recorded a loss in Europe in the first half of this year.

Banks are cyclicals so they tend to do really well when there are signs of coming out of a recession or more growth and do really bad when there are signs of a slow-down or recession.

Under such scenarios fair to say that many companies earnings will be upgraded or downgraded significantly. Consumers will still borrow to purchase homes and cars etc. As not discretionary spending as such. Mortgage lending dwarfs that of commercial lending for the UK banks.