Worst case investment scenario - what to do?

Audaxer

FinancialIdiot said:

Malthusian said:

Without a drastic change in economic circumstances, you won't get £100 per month from an annuity of £30k (not with inflation increases and assuming reasonable health), so that suggests your actual investment timeframe is your lifetime, not just 10-15 years. You won't be spending all your money when you retire, you will be spending some of it but most of it will remain invested for the next year and the next and so on.

Are you hoping to spend your entire lifetime timing the market - staying in cash when the markets are at or near an all-time high but there are lots of things to worry about in the medium term (i.e. nearly all of the time) and investing at just the right moment?

How come you didn't invest all your money in March? It appears you've already missed the last big chance.

Well, with regard to pension provision, I'm expecting to want certainty of income in retirement so I'm expecting to want to withdraw the money from the stock market and use it to either buy an annuity (if that's possible and depending on how much I would get) or possibly more likely just put it into a savings account so I can withdraw the amount I need each month. Either way I'm expecting to want to (or have to) take it out of the stock market after 10-15 years.

If not taking an annuity, the choice the vast majority of people take nowadays is to leave the money invested when retired and take an income from that. It may not provide the absolute certainty of income that you want, but a reasonably safe withdrawal strategy is likely to give you a much better and longer-lasting income over a long retirement than putting it all in a savings account at retirement.

Thrugelmir

Sailtheworld said:

Thrugelmir said:

Malthusian said:

FinancialIdiot said:

Malthusian said:

When do you plan to spend the money? I don't mean "in 10-15 years", I mean, what will it be spent on, what will the trigger point be that changes "in 10-15 years" to "now", what happens if the market is down at that time?

The purpose of the investment would be to help fund retirement, which should be reached in 10-15 years. Ideally the £30k invested now would produce maybe £100 per month throughout retirement or as close to that as possible if such a target can't be reached. At a push it might be possible to leave the money invested for 20 years but I doubt it could be left longer than that and there's no guarantee it could be left for more than 10 years (though that will probably be possible).

Without a drastic change in economic circumstances, you won't get £100 per month from an annuity of £30k (not with inflation increases and assuming reasonable health), so that suggests your actual investment timeframe is your lifetime, not just 10-15 years. You won't be spending all your money when you retire, you will be spending some of it but most of it will remain invested for the next year and the next and so on.

Are you hoping to spend your entire lifetime timing the market - staying in cash when the markets are at or near an all-time high but there are lots of things to worry about in the medium term (i.e. nearly all of the time) and investing at just the right moment?

How come you didn't invest all your money in March? It appears you've already missed the last big chance.

Thrugelmir said:

Which market are you referring to? There's plenty to choose from. 

The appopriate benchmark to use depends on the level of risk, however as far as globally diversified portfolios suitable for retail investors goes, there is no evidence that anyone can beat a global market-cap weighted index with a comparable risk level.

With over 3,500 stocks would be a challenge for any active manager. The cost and time to administer would be an insurmountable challenge. Trouble is with that number of stocks the star performers which account for the bulk of the returns are somewhat diluted. 

Of course it's a challenge for an active manager to beat a global market cap weighted taking the same risk - that's why most of them don't. And, if they take more risk to beat the index you have to make a judgement as to whether it's luck and whether the returns justify the additional risk.

That's a low benchmark you've set yourself.  If you held the S&P 500 in any form (without income reinvested) over the past 5 years. You would have outperformed a global tracker by a sizable margin.  

Prism

Sailtheworld said:

Thrugelmir said:

Malthusian said:

FinancialIdiot said:

Malthusian said:

When do you plan to spend the money? I don't mean "in 10-15 years", I mean, what will it be spent on, what will the trigger point be that changes "in 10-15 years" to "now", what happens if the market is down at that time?

The purpose of the investment would be to help fund retirement, which should be reached in 10-15 years. Ideally the £30k invested now would produce maybe £100 per month throughout retirement or as close to that as possible if such a target can't be reached. At a push it might be possible to leave the money invested for 20 years but I doubt it could be left longer than that and there's no guarantee it could be left for more than 10 years (though that will probably be possible).

Without a drastic change in economic circumstances, you won't get £100 per month from an annuity of £30k (not with inflation increases and assuming reasonable health), so that suggests your actual investment timeframe is your lifetime, not just 10-15 years. You won't be spending all your money when you retire, you will be spending some of it but most of it will remain invested for the next year and the next and so on.

Are you hoping to spend your entire lifetime timing the market - staying in cash when the markets are at or near an all-time high but there are lots of things to worry about in the medium term (i.e. nearly all of the time) and investing at just the right moment?

How come you didn't invest all your money in March? It appears you've already missed the last big chance.

Thrugelmir said:

Which market are you referring to? There's plenty to choose from. 

The appopriate benchmark to use depends on the level of risk, however as far as globally diversified portfolios suitable for retail investors goes, there is no evidence that anyone can beat a global market-cap weighted index with a comparable risk level.

With over 3,500 stocks would be a challenge for any active manager. The cost and time to administer would be an insurmountable challenge. Trouble is with that number of stocks the star performers which account for the bulk of the returns are somewhat diluted. 

Of course it's a challenge for an active manager to beat a global market cap weighted taking the same risk - that's why most of them don't. And, if they take more risk to beat the index you have to make a judgement as to whether it's luck and whether the returns justify the additional risk.

Of course none of this matters if you have a knack for timing the market or being able to pick someone who can

How about taking lower risk to beat the market? Over recent years (20ish) that has been what has seemingly worked well. Maybe thats here to stay.

dont_look_now

Thrugelmir said:

That's a low benchmark you've set yourself.  If you held the S&P 500 in any form (without income reinvested) over the past 5 years. You would have outperformed a global tracker by a sizable margin.

They say hindsight is 20/20. So your post at least has the merit of being made in an appropriate year