Does my plan need altering already?

bowlhead99

tcallaghan93 said:

tcallaghan93 said:

dunstonh said:

The UK is at a high risk of Japanification.   In that scenario you want to avoid banks.  That is a major part of the FTSE100.  Oil is in decline.  Another major part of the FTSE100.     The FTSE100 is far too biased to too few industries/companies.
However, the UK is very good with small and mid cap which, inevitably,  get bought by overseas companies to exploit.  Good for investors even if not good for the UK.   Effectively, the FTSE100 is a bit like the UK in general.  It has the industries of a past era.  There is not a lot to like about UK large cap.

/
I don't know where you get the idea of Japanification from, but I agree with you on UK mid and small cap.  I think that M&A/inward FDI I think explains a decent chunk of the relative outperformance but I have yet to study that in conclusive detail. 

/
Also where does obsession with Japan come from?

There isn't an 'obsession' with Japan but it is an example of the perils of investing in one region rather than more globally. 

Their economy was in a serious bubble at the end of 1989 with the Nikkei 225 index at almost 40000, the market cap of their stock exchange at that time was highest in the world. In the 80s people thought Japan was great with loads of successful manufacturers and other international businesses, high technology, high property prices and so on. A powerhouse economy with an understandably soaring stock market and to some at the time it would not have felt like a bubble that needed to pop, merely market prices finally recognising all the potential.

Then came the fall from grace and the term 'lost decade' was coined, and then a lost two decades. Today the Japanese market is still second in the developed world behind the US in market cap, but the market is still well below its late 80s peak when priced in yen.

So where people advocate investing heavily in one region or another (even if it's the region in which they live) and think that on paper it can perform better than the average of everything else within a broader global market, as has been suggested on this thread, you will get more experienced investors bring up the example of Japan. An example where one region produced markedly different results from other regions.

Some would say that it wouldn't happen again, lessons have been learned etc. But one of the lessons that has been learned is not to put too much faith in any one region even if your justification for it seems strong at the time.

Newer investors who have just looked at five year charts, or have been seeing the results of Abenomics over the last 8 years or so since they first started buying their own investments, may not really be aware of what has gone before. But investing is for a lifetime and not just for a decade or a generation. Over a lifetime, it's more likely that at some point what can go wrong, will go wrong.

So caution is urged when people say that they would prefer to invest mainly in one region and are happy that companies in that region have international revenues anyway. In the 80s Sony was wowing the world with Walkmans and Betamax videos, loads of international revenues etc. Still worth ten trillion yen today. But worth a lot fewer yen than it was worth two decades ago. It actually did relatively ok as the 1989 Japan bubble burst, only losing half its value, but unfortunately there are lots of other Japanese shares that weren't so successful whether they had international revenues or not.

83705628

bowlhead99 said:

tcallaghan93 said:

tcallaghan93 said:

dunstonh said:

The UK is at a high risk of Japanification.   In that scenario you want to avoid banks.  That is a major part of the FTSE100.  Oil is in decline.  Another major part of the FTSE100.     The FTSE100 is far too biased to too few industries/companies.
However, the UK is very good with small and mid cap which, inevitably,  get bought by overseas companies to exploit.  Good for investors even if not good for the UK.   Effectively, the FTSE100 is a bit like the UK in general.  It has the industries of a past era.  There is not a lot to like about UK large cap.

/
I don't know where you get the idea of Japanification from, but I agree with you on UK mid and small cap.  I think that M&A/inward FDI I think explains a decent chunk of the relative outperformance but I have yet to study that in conclusive detail. 

/
Also where does obsession with Japan come from?

There isn't an 'obsession' with Japan but it is an example of the perils of investing in one region rather than more globally. 

Their economy was in a serious bubble at the end of 1989 with the Nikkei 225 index at almost 40000, the market cap of their stock exchange at that time was highest in the world. In the 80s people thought Japan was great with loads of successful manufacturers and other international businesses, high technology, high property prices and so on. A powerhouse economy with an understandably soaring stock market and to some at the time it would not have felt like a bubble that needed to pop, merely market prices finally recognising all the potential.

Then came the fall from grace and the term 'lost decade' was coined, and then a lost two decades. Today the Japanese market is still second in the developed world behind the US in market cap, but the market is still well below its late 80s peak when priced in yen.

So where people advocate investing heavily in one region or another (even if it's the region in which they live) and think that on paper it can perform better than the average of everything else within a broader global market, as has been suggested on this thread, you will get more experienced investors bring up the example of Japan. An example where one region produced markedly different results from other regions.

Some would say that it wouldn't happen again, lessons have been learned etc. But one of the lessons that has been learned is not to put too much faith in any one region even if your justification for it seems strong at the time.

Newer investors who have just looked at five year charts, or have been seeing the results of Abenomics over the last 8 years or so since they first started buying their own investments, may not really be aware of what has gone before. But investing is for a lifetime and not just for a decade or a generation. Over a lifetime, it's more likely that at some point what can go wrong, will go wrong.

So caution is urged when people say that they would prefer to invest mainly in one region and are happy that companies in that region have international revenues anyway. In the 80s Sony was wowing the world with Walkmans and Betamax videos, loads of international revenues etc. Still worth ten trillion yen today. But worth a lot fewer yen than it was worth two decades ago. It actually did relatively ok as the 1989 Japan bubble burst, only losing half its value, but unfortunately there are lots of other Japanese shares that weren't so successful whether they had international revenues or not.

/
I know what happened I just don't see how people think that's likely in the UK. Our economy is fine, "normal" compared with Japan's sustainable multiple of debt to GDP ratio given their exports and ownership of foreign asses, our demographics are fine and even low fertility population projections don't put us on a collision course with how Japan's population pyramid looks. We don't have an asset bubble except for property prices, but certainly not on the Japanese scale, i.e. the Imperial Palace in Tokyo being worth more than California at the peak of the bubble, in fact by all measures the UK in cheap compared to the rest of the world currently and recent performance cannot be said to support concerns that the UK is in an equity bubble. 
Western companies were so in awe on Japan, that's what started all the management BS we have to put up with today like continuous improvement. If anything, our Japan moment was the turn of the 20th century when the UK occupied 25% of global market cap, and the technology causing the bubble at the time was rail. I don't see the same clamour to learn how British companies "get it right".
I kind of agree and kind of disagree with your point about investors saying it won't happen again, lessons learned. People don't learn, and every generation has to learn investing for itself. But I wouldn't agree with someone who said "we've seen this all before", nothing that was widely predictable ever happened in the markets, every crisis is different, no two crashes are the same.

dunroving

tcallaghan93 said:

bowlhead99 said:

tcallaghan93 said:

tcallaghan93 said:

dunstonh said:

The UK is at a high risk of Japanification.   In that scenario you want to avoid banks.  That is a major part of the FTSE100.  Oil is in decline.  Another major part of the FTSE100.     The FTSE100 is far too biased to too few industries/companies.
However, the UK is very good with small and mid cap which, inevitably,  get bought by overseas companies to exploit.  Good for investors even if not good for the UK.   Effectively, the FTSE100 is a bit like the UK in general.  It has the industries of a past era.  There is not a lot to like about UK large cap.

/
I don't know where you get the idea of Japanification from, but I agree with you on UK mid and small cap.  I think that M&A/inward FDI I think explains a decent chunk of the relative outperformance but I have yet to study that in conclusive detail. 

/
Also where does obsession with Japan come from?

There isn't an 'obsession' with Japan but it is an example of the perils of investing in one region rather than more globally. 

Their economy was in a serious bubble at the end of 1989 with the Nikkei 225 index at almost 40000, the market cap of their stock exchange at that time was highest in the world. In the 80s people thought Japan was great with loads of successful manufacturers and other international businesses, high technology, high property prices and so on. A powerhouse economy with an understandably soaring stock market and to some at the time it would not have felt like a bubble that needed to pop, merely market prices finally recognising all the potential.

Then came the fall from grace and the term 'lost decade' was coined, and then a lost two decades. Today the Japanese market is still second in the developed world behind the US in market cap, but the market is still well below its late 80s peak when priced in yen.

So where people advocate investing heavily in one region or another (even if it's the region in which they live) and think that on paper it can perform better than the average of everything else within a broader global market, as has been suggested on this thread, you will get more experienced investors bring up the example of Japan. An example where one region produced markedly different results from other regions.

Some would say that it wouldn't happen again, lessons have been learned etc. But one of the lessons that has been learned is not to put too much faith in any one region even if your justification for it seems strong at the time.

Newer investors who have just looked at five year charts, or have been seeing the results of Abenomics over the last 8 years or so since they first started buying their own investments, may not really be aware of what has gone before. But investing is for a lifetime and not just for a decade or a generation. Over a lifetime, it's more likely that at some point what can go wrong, will go wrong.

So caution is urged when people say that they would prefer to invest mainly in one region and are happy that companies in that region have international revenues anyway. In the 80s Sony was wowing the world with Walkmans and Betamax videos, loads of international revenues etc. Still worth ten trillion yen today. But worth a lot fewer yen than it was worth two decades ago. It actually did relatively ok as the 1989 Japan bubble burst, only losing half its value, but unfortunately there are lots of other Japanese shares that weren't so successful whether they had international revenues or not.

/
I know what happened I just don't see how people think that's likely in the UK. Our economy is fine, "normal" compared with Japan's sustainable multiple of debt to GDP ratio given their exports and ownership of foreign asses, our demographics are fine and even low fertility population projections don't put us on a collision course with how Japan's population pyramid looks. We don't have an asset bubble except for property prices, but certainly not on the Japanese scale, i.e. the Imperial Palace in Tokyo being worth more than California at the peak of the bubble, in fact by all measures the UK in cheap compared to the rest of the world currently and recent performance cannot be said to support concerns that the UK is in an equity bubble. 
Western companies were so in awe on Japan, that's what started all the management BS we have to put up with today like continuous improvement. If anything, our Japan moment was the turn of the 20th century when the UK occupied 25% of global market cap, and the technology causing the bubble at the time was rail. I don't see the same clamour to learn how British companies "get it right".
I kind of agree and kind of disagree with your point about investors saying it won't happen again, lessons learned. People don't learn, and every generation has to learn investing for itself. But I wouldn't agree with someone who said "we've seen this all before", nothing that was widely predictable ever happened in the markets, every crisis is different, no two crashes are the same.

I think your last sentence make a good case for geographic diversity - we don't know which country will fall off a cliff next.

bowlhead99

tcallaghan93 said:
 But I wouldn't agree with someone who said "we've seen this all before", nothing that was widely predictable ever happened in the markets, every crisis is different, no two crashes are the same.

It is your very point that 'no two crashes are the same' which means you should not just assume that because UK now has a better population profile or some other metrics than Japan in the 80s, or appears 'cheap' on some measure, we could not experience a significant downturn felt more heavily in the UK than elsewhere at a time when the average of the rest of the world was doing better.   

When you say you prefer to invest mostly domestically and people note the experience of Japan, this is not to say that they expect the UK market to tank due to the exact same factors as Japan, they are merely pointing out that investments concentrated into particular regions can do badly in isolation, for long periods, giving Japan as an example; the specific root of that problem is not the lesson to take away.

For example the UK housing stock you mention grew by more than a couple of trillion quid over the last decade. It's fueled by the fact that borrowing costs are on the floor, new builds have planning restrictions, and in London for example, everyone prefers to live in places with easy commutes. It's not beyond the realms of possibility that some of these things could change, and if people feel they have less property wealth or higher mortgage bills there is a knock on effect on what they will spend on consumption or investment.  If the UK property market changes, or Brexit is a disaster, it can be a somewhat localised issue (i.e. not impacting the rest of the world too much). 

tcallaghan93 said:

Western companies were so in awe on Japan, that's what started all the management BS we have to put up with today like continuous improvement. 

Is 'continuous improvement' at a former workplace the reason you now find yourself with time for hundreds of posts per week on investment forums, having barely posted until a couple of weeks ago?

83705628

bowlhead99 said:

tcallaghan93 said:
 But I wouldn't agree with someone who said "we've seen this all before", nothing that was widely predictable ever happened in the markets, every crisis is different, no two crashes are the same.

It is your very point that 'no two crashes are the same' which means you should not just assume that because UK now has a better population profile or some other metrics than Japan in the 80s, or appears 'cheap' on some measure, we could not experience a significant downturn felt more heavily in the UK than elsewhere at a time when the average of the rest of the world was doing better.   
I didn't say couldn't, I said I don't expect it to happen, an opinion.
When you say you prefer to invest mostly domestically and people note the experience of Japan, this is not to say that they expect the UK market to tank due to the exact same factors as Japan, they are merely pointing out that investments concentrated into particular regions can do badly in isolation, for long periods, giving Japan as an example; the specific root of that problem is not the lesson to take away.
I have no opposition to buying global equity for that reason.
For example the UK housing stock you mention grew by more than a couple of trillion quid over the last decade. It's fueled by the fact that borrowing costs are on the floor, new builds have planning restrictions, and in London for example, everyone prefers to live in places with easy commutes. It's not beyond the realms of possibility that some of these things could change, and if people feel they have less property wealth or higher mortgage bills there is a knock on effect on what they will spend on consumption or investment.  If the UK property market changes, or Brexit is a disaster, it can be a somewhat localised issue (i.e. not impacting the rest of the world too much). 
So your point is to invest based on the fact that anything could happen... my original point was to question why I've seen UK Japanification mentioned a few times, when the factors that led to Japanification are not present in the UK. I'm asking the people mentioning Japanification to rationalise their position a bit more because, IMHO, it seems like a "what would happen if" statement.

tcallaghan93 said:

Western companies were so in awe on Japan, that's what started all the management BS we have to put up with today like continuous improvement. 

Is 'continuous improvement' at a former workplace the reason you now find yourself with time for hundreds of posts per week on investment forums, having barely posted until a couple of weeks ago?
I've been reading the forums for years never bothered to post, work is very quiet and I've had a bunch of job offers come through all at once and the one I'm going for starts in November, and I'm trying to get my mum and dad's retirement planned out so I wanted to try posting to check my understanding (i.e. I used to think the PTA for a retiree was £16,666.66, now I know), and I've learned so much since I first got interested in money I thought 'why not?'. Also, kettle teapot eh? You're the most prolific poster on here.

/ oh apparently i need to type something in the white bit for it to post

AdmanPea

Is there a next step for me, do you think? So I have my investments on the go (those two) and I'm overpaying on the mortgage. Is there something else I can do to maximise income to try and achieve a level of financial freedom well before retirement? Invest elsewhere? Dividends? Just more of what I'm doing now?

AdmanPea

Perhaps property? Although I feel that won't be simple...