Liquidate entire portfolio until virus is over?

BananaRepublic

worldtraveller: investing in S&S is not a casino bet, they do not compare. At the risk of being rude, that statement shows a lack of understanding of the principles of investing. If it was a casino bet, you’d expect most people to retire with nothing given that most pension investments are stock market based. And the days of cushy public sector pensions are long gone. The government have for years, and rightly so, been downgrading public sector pensions. Oddly enough MPs have pretty good pension entitlements ...

worldtraveller

BananaRepublic said:

worldtraveller: investing in S&S is not a casino bet, they do not compare. At the risk of being rude, that statement shows a lack of understanding of the principles of investing. If it was a casino bet, you’d expect most people to retire with nothing given that most pension investments are stock market based. And the days of cushy public sector pensions are long gone. The government have for years, and rightly so, been downgrading public sector pensions. Oddly enough MPs have pretty good pension entitlements ...

Really! They are now still, mainy, average salary based, as opposed to final salary based, as they were before, yet still offer a 100% inflation index linked for life pension. You still believe that that's not still 'cushy', compared to those in the private sector, who, I still believe, are in a casino investment environment and will be, increasingly, subsidising public secor pensions for years to come?

Do you still not believe, that retirement is now, and increasingly so, a two tier one?

bigadaj

BananaRepublic said:

bigadaj said:

 i dont see covid as the end of civilisation, but certainly a trigger for a correction in an over stretched market. in my opinion it wont be seen as serious in terms of finance and equities as the gfc as that was a situation where it looked the world financial system was in meltdown. from a purely financial perspective its a worthwhile learning experience for many people given virtually unlimited growth for ten years or more,  the collapse of capitalism is in virtually nobodys interest so measures will be put in place to maintain stability whilst tempering peoples expectations of double figure annual growth with low single figure inflation.

We were due a correction, and financial indicators were pointing in that direction last year. As to whether this is as serious as the GFC, I am not as sure as you.

Many if not most businesses have limited cash reserves and operate on low margins, as the economy is so competitive thanks to globalisation and the internet. That means we could see a collapse of certain sectors and huge job losses. Retailers on the high street and the restaurant trade were suffering before the lurgy struck. And the huge funds that will be pumped into the economy by the government means huge debt and a concomitant reduction in services (or increase in taxes) in future. Unfortunately this could go on for a long time, I have seen no clear discussion of an exit strategy, other than let the old and inform die as allegedly suggested by Dominic Cummings some time ago.

The one positive aspect is that lending dried up in the GFC and I can’t see that happening. 

The hope is that once this is contained, there will be a dead bug bounce, with people splashing out on social activities and goods, driving a recovery, with the high street having only charity shops, estate agents, a few restaurants and cafes, and opticians, and Amazon and co dominating.

just to clarify i wasn't opining that this will be better than the gfc, just that at the same stage post the shock then an exit strategy seems clearer. who knows whether the solution, which seems to be huge amounts of qe, will be successful; i think the main positive to it is that it will probably be a coordinated action between developed economies and we still have the issue around a lack of alternative places to put your money. cash will be losing money due to inflation and whilst precious metals may increase in relative  value they don't pay a return  and there are large numbers of mothballed mines and prospects that would fire back into production with prices increasing.

BananaRepublic

worldtraveller said:

BananaRepublic said:

worldtraveller: investing in S&S is not a casino bet, they do not compare. At the risk of being rude, that statement shows a lack of understanding of the principles of investing. If it was a casino bet, you’d expect most people to retire with nothing given that most pension investments are stock market based. And the days of cushy public sector pensions are long gone. The government have for years, and rightly so, been downgrading public sector pensions. Oddly enough MPs have pretty good pension entitlements ...

Really! They are now still, mainy, average salary based, as opposed to final salary based, as they were before, yet still offer a 100% inflation index linked for life pension. You still believe that that's not still 'cushy', compared to those in the private sector, who, I still believe, are in a casino investment environment and will be, increasingly, subsidising public secor pensions for years to come?

Do you still not believe, that retirement is now, and increasingly so, a two tier one?

There is some information here:
https://www.which.co.uk/money/pensions-and-retirement/company-pensions/public-sector-pensions-explained
They were generous, and some people will have some or all of their pension based on the older schemes. You can’t take away entitlements post hoc. The latest schemes are IMO not particularly generous. Yes inflation linked, but each year working accrues a small proportion of average salary typically 1/60. I don’t think salaries for teachers and nurses are generous, quite the opposite, so personally I have nothing against their current pension schemes. Doctors and school admin staff probably do rather well, but that’s life. Have you seen how much union leaders earn? Including the Marxists. 🙄

BananaRepublic

bigadaj said:

BananaRepublic said:

bigadaj said:

 i dont see covid as the end of civilisation, but certainly a trigger for a correction in an over stretched market. in my opinion it wont be seen as serious in terms of finance and equities as the gfc as that was a situation where it looked the world financial system was in meltdown. from a purely financial perspective its a worthwhile learning experience for many people given virtually unlimited growth for ten years or more,  the collapse of capitalism is in virtually nobodys interest so measures will be put in place to maintain stability whilst tempering peoples expectations of double figure annual growth with low single figure inflation.

We were due a correction, and financial indicators were pointing in that direction last year. As to whether this is as serious as the GFC, I am not as sure as you.

Many if not most businesses have limited cash reserves and operate on low margins, as the economy is so competitive thanks to globalisation and the internet. That means we could see a collapse of certain sectors and huge job losses. Retailers on the high street and the restaurant trade were suffering before the lurgy struck. And the huge funds that will be pumped into the economy by the government means huge debt and a concomitant reduction in services (or increase in taxes) in future. Unfortunately this could go on for a long time, I have seen no clear discussion of an exit strategy, other than let the old and inform die as allegedly suggested by Dominic Cummings some time ago.

The one positive aspect is that lending dried up in the GFC and I can’t see that happening. 

The hope is that once this is contained, there will be a dead bug bounce, with people splashing out on social activities and goods, driving a recovery, with the high street having only charity shops, estate agents, a few restaurants and cafes, and opticians, and Amazon and co dominating.

just to clarify i wasn't opining that this will be better than the gfc, just that at the same stage post the shock then an exit strategy seems clearer. who knows whether the solution, which seems to be huge amounts of qe, will be successful; i think the main positive to it is that it will probably be a coordinated action between developed economies and we still have the issue around a lack of alternative places to put your money. cash will be losing money due to inflation and whilst precious metals may increase in relative  value they don't pay a return  and there are large numbers of mothballed mines and prospects that would fire back into production with prices increasing.

Quite reasonable remarks.👍🏻 The Chinese saying “May you live in boring times” probably did not have The Great Lurgy in mind. 🙂

kinger101

BananaRepublic said:

worldtraveller: investing in S&S is not a casino bet, they do not compare. At the risk of being rude, that statement shows a lack of understanding of the principles of investing. If it was a casino bet, you’d expect most people to retire with nothing given that most pension investments are stock market based. And the days of cushy public sector pensions are long gone. The government have for years, and rightly so, been downgrading public sector pensions. Oddly enough MPs have pretty good pension entitlements ...

I agree investing for a DC pension isn't (or shouldn't be) a casino, particularly with the default lifestyled funds.  But there is still a large degree of uncertainty in how any portofolio might perform, which is out of control of the individual investor.  And this happens both during the accumulation and drawdown phase, as anyone who's run a CFireSim analysis will know.  Given it's out of the investors control and unpredictable, "luck" is reasonable term to describe  a large part of the performance of a DC scheme.  All the individual can do is come up with a strategy for riding out periods of bad luck.  Including basing the amount they save on the premise they'll have less than average luck.

Public sector pensions are still  fairly cushy.  The minimum standard for a public scheme is a CARE with 1/80th salary and 3 x lump sum, index-linked for life, with half-pension for spouse/partner.  Which typically costs the employee around 9% of their pay, the rest being met by the taxpayer.  The total contribution usually ends up just shy of 30% salary.  Compare that to the minimum for auto-enrollment.  Not difficult to see why recipients of [edited] DC schemes either need to make additional arrangements, or end with a very poor pension.

LHW99

The total contribution usually ends up just shy of 30% salary.  Compare that to the minimum for auto-enrollment.  Not difficult to see why recipients of DB schemes either need to make additional arrangements, or end with a very poor pension.

Possibly you mean DC schemes here?

And whilst the current AE minimum is low, many employers will put in more ifthe employee does. There is nothing to prevent any employee adding more (from bonuses or othersavings) if they want to. And the AE levels are likely to be raised in future IMO.

kinger101

LHW99 said:

The total contribution usually ends up just shy of 30% salary.  Compare that to the minimum for auto-enrollment.  Not difficult to see why recipients of DB schemes either need to make additional arrangements, or end with a very poor pension.

Possibly you mean DC schemes here?

And whilst the current AE minimum is low, many employers will put in more ifthe employee does. There is nothing to prevent any employee adding more (from bonuses or othersavings) if they want to. And the AE levels are likely to be raised in future IMO.

Yes, meant DC schemes.  Edited

Most employees don't contribute more than the minimum, and many on the lower end of the salary scale simply won't be able to afford this.    

justme111

Well if DB members can contribute 9% of their pay as you yourself said nobody stops auto enrolment members putting in 9% instead of 3%.
Keep in mind - CARE scheme can be taken unreduced at 67 currently - let's be honest ,  it that much life is left after 67... All this "generous" pension will probably be enjoyed for about 15 years only ..

bowlhead99

justme111 said:

Keep in mind - CARE scheme can be taken unreduced at 67 currently - let's be honest ,  it that much life is left after 67... All this "generous" pension will probably be enjoyed for about 15 years only ..

Life expectancy for a 67 year old is more than 15 years (and there is coverage for a spouse too after that), and could end up being 30 or 40 years, which is a long time to manage a personal pot of money obtained from the DC scheme when you don't have any ability to put new money into it to top it up if the markets are rocky. If the markets are rocky on a DB scheme, the employer just puts more money into it and the retiree is carefree.

Well if DB members can contribute 9% of their pay as you yourself said nobody stops auto enrolment members putting in 9% instead of 3%.

Auto enrolment members could of course put in 9% instead of 3% but unless their employers also put in 20% they will not be getting the same level of risk free benefit enjoyed by the DB members. Some employers do put in more money than the government-mandated bare minimum 3%, and there are some private sector businesses that have moved to a DC scheme that pay quite a large contribution - a lot of which is to do with the fact that employers who still have some employees on DB schemes would find it difficult to justify offering as little on the DC side as the average employer does, because the workforce would be up in arms.  The average company that has never offered DB schemes in recent memory are not offering double digit percentages.  Still, that can be balanced to an extent with higher headline salaries available in some roles.