Pension recovery from covid

Prism

itwasntme001 said:

Deleted_User said:

itwasntme001 said:

My overall portfolio is up about 13% YTD.  Not bad for a 7-figure portfolio in the midst of one the the biggest economic crashes in modern history.  But one year or even 5 years is just too short a period to celebrate wins.  The true test of portfolios is over the longer term when it becomes less about noise/luck and more about intelligent decisions.

+1.  And I don’t report YTD at arbitrary times throughout the year. Note how this has started after the recent run-up. 

As is typical with retail "investors" that frequent these boards, you get threads started when things crash down as well as up.  The general message I hear all the time is time in the market and if you are young you should be close to 100% invested.  Nothing can be further from the truth.  There have been long periods of equity under-performance.  Coupled with the fact that the "fads" of today in the likes of fundsmith and SMT, I do wonder what people will be saying on these boards when (not if) these "fads" start turning into "duds".  Active managers require timing the market because economic regimes change and what works today may easily work terribly tomorrow.

There certainly is likely to be a period of underperformance of your typical growth large cap equities, a bit like in 1970's or 2000's  S&P. Difficult to know if the current active managers will switch style. Last time the play was Japan or the UK markets. Its all a bit more globally linked nowadays so its possible there will be nowhere to hide.

The retail investor switching styles, and funds, is more likely than the fund manager doing it. That said, its possible with continual low interest rates and deflationary technology forces fighting inflationary QE, that there are many more years of growth to come.

Personally I'm sticking with Fundsmith. Got out of SMT way too early and missed the recent fun.

JustAnotherSaver

I should've pumped in a wedge the moment when I started talking about it which would've been either the week before or on the week where things seemed to hit the bottom. 

Problem was I got too greedy, thought it'd go in for a few weeks or a month more and that's when I'd jump in with my lump sum. 

It didn't happen. Therefore my lump sum never happened. 
Oh well. 

itwasntme001

Linton said:

itwasntme001 said:

Just to add confusion to the debate, equities can also be though of as long duration for a subset.  So they can be (indirectly) influenced by changes in interest rates, particularly in the long end.  Stocks that are pricing in earnings growth far out into the future.

If you do not like long duration bonds at current levels, you should also be thinking twice about investing in that "growth" fund.

Some equities are certainly pricing-in earnings growth into the far distant future and well beyond.  However there are also equities solidly priced on current profits.  Part of diversification is to get a fair proportion of both.

But a key difference between equities and bonds is that with growth equities you can diversify between very different companies.  Some surely will match their promise.

However with gilts there is no diversification or competition.  Each gilt is priced within a fraction of a % by the mathematics based on the known guaranteed % return against the initial price, the known duration and the market interest rates. 

I am not sure what point you are trying to make.  Investing at the highest level should be a decision about asset allocation.  What proportion of bonds vs equities is the most common.  Whether bonds have less choice vs equities is not really a strong argument for holding one over the other.  They are both completely different animals with differing risk profiles and objectives.

You do have some competition within bonds and it is largely due to duration (and if we widen the scope for bonds, you do have corporate bonds as well which are also quite different).  You can hold short duration bonds to reduce duration risk (although this increases reinvestment risk) so that when longer term rates rise, proceeds of the short duration bond can be reinvested into longer dated bonds at a higher interest rate.

Both equities and bonds are priced by the market and it comes down to differing on views on the valuations of these assets.  There are differing ways to value them and differing assumptions and that is what drives market volatility in the short and long term.  Bonds are more "pure" in the sense that they are only dependent on one market variable - interest rates, everything else is a known fact (assuming government do not hard default).  Equities are priced using interest rates but also other factors such as risk premium, earnings forecasts which are themselves dependent on so many other variables largely company specific.

It is easy to say equities are a no brainer vs bonds, especially after such a strong run in bonds that do not "appear" have anywhere to go but down, but its not quite that simple.  On a risk adjusted basis, both bonds and equities should be expected to return exactly the same.  The question really comes down to, how lucky do you feel, punk?

Thrugelmir

itwasntme001 said:

If you do not like long duration bonds at current levels, you should also be thinking twice about investing in that "growth" fund.

Central Banks and Governments pumping endless cash into the system and it's got to go somewhere. Every month seems to get harder and harder to find reasonably priced investments. The extent to which investors are prepared to pay for future endings. One wonders if there'll be a period of subsequent flat lining, akin to the US in the 1980's in the medium term. 

itwasntme001

Prism said:

itwasntme001 said:

Deleted_User said:

itwasntme001 said:

My overall portfolio is up about 13% YTD.  Not bad for a 7-figure portfolio in the midst of one the the biggest economic crashes in modern history.  But one year or even 5 years is just too short a period to celebrate wins.  The true test of portfolios is over the longer term when it becomes less about noise/luck and more about intelligent decisions.

+1.  And I don’t report YTD at arbitrary times throughout the year. Note how this has started after the recent run-up. 

As is typical with retail "investors" that frequent these boards, you get threads started when things crash down as well as up.  The general message I hear all the time is time in the market and if you are young you should be close to 100% invested.  Nothing can be further from the truth.  There have been long periods of equity under-performance.  Coupled with the fact that the "fads" of today in the likes of fundsmith and SMT, I do wonder what people will be saying on these boards when (not if) these "fads" start turning into "duds".  Active managers require timing the market because economic regimes change and what works today may easily work terribly tomorrow.

There certainly is likely to be a period of underperformance of your typical growth large cap equities, a bit like in 1970's or 2000's  S&P. Difficult to know if the current active managers will switch style. Last time the play was Japan or the UK markets. Its all a bit more globally linked nowadays so its possible there will be nowhere to hide.

The retail investor switching styles, and funds, is more likely than the fund manager doing it. That said, its possible with continual low interest rates and deflationary technology forces fighting inflationary QE, that there are many more years of growth to come.

Personally I'm sticking with Fundsmith. Got out of SMT way too early and missed the recent fun.

Well it it is possible but then many things are possible.  I also own growth funds like fundsmith, SMT, monks, PCT, BG GD, single stocks like Amazon, Microsoft etc etc.  But lets not pretend, all we are really doing is market timing.  Maybe not in the crazy way some do going in and out of positions month by month.  But market timing it still is at the end of the day.

[Deleted User]

Thrugelmir said:

itwasntme001 said:

If you do not like long duration bonds at current levels, you should also be thinking twice about investing in that "growth" fund.

 One wonders if there'll be a period of subsequent flat lining, akin to the US in the 1980's in the medium term. 

I sure hope it will flat line like that.  S&P 500 went from 105 at the start of 1980 to 353 at the end of 1989. Once you account for dividends and reinvestments, the line flatted upward at a very decent angle. 

itwasntme001

Thrugelmir said:

itwasntme001 said:

If you do not like long duration bonds at current levels, you should also be thinking twice about investing in that "growth" fund.

Central Banks and Governments pumping endless cash into the system and it's got to go somewhere. Every month seems to get harder and harder to find reasonably priced investments. The extent to which investors are prepared to pay for future endings. One wonders if there'll be a period of subsequent flat lining, akin to the US in the 1980's in the medium term. 

Well technically the cash that the CBs "pumped into the system" just went to the bank reserves back to the central banks.  Recapitalised the banking system with no real lending being done to the real economy.  It also had the obvious effect of lowering interest rates which is what caused valuations on assets to rise.  It has been fiscal policy this year that has resulted in retail "investors" ploughing the taxpayer funded support into the stock market, particularly those racy tech names.  The pandemic and support also helped the big tech names bring forward demand, so some of the rises do make logical sense.  When you think about it, this pandemic has essentially been free marketing for some of the big tech names because it forced people to use their services as digital became more essential.

Prism

Deleted_User said:

Thrugelmir said:

itwasntme001 said:

If you do not like long duration bonds at current levels, you should also be thinking twice about investing in that "growth" fund.

 One wonders if there'll be a period of subsequent flat lining, akin to the US in the 1980's in the medium term. 

I sure hope it will flat line like that.  S&P 500 went from 105 at the start of 1980 to 353 at the end of 1989. Once you account for dividends and reinvestments, the line flatted upward at a very decent angle. 

I wonder if Thrugelmir mean the 70's. Just about positive over the decade but negative after inflation.

Thrugelmir

Prism said:

Deleted_User said:

Thrugelmir said:

itwasntme001 said:

If you do not like long duration bonds at current levels, you should also be thinking twice about investing in that "growth" fund.

 One wonders if there'll be a period of subsequent flat lining, akin to the US in the 1980's in the medium term. 

I sure hope it will flat line like that.  S&P 500 went from 105 at the start of 1980 to 353 at the end of 1989. Once you account for dividends and reinvestments, the line flatted upward at a very decent angle. 

I wonder if Thrugelmir mean the 70's. Just about positive over the decade but negative after inflation.

No the 80's. S&P underperformed both cash and inflation for a period. 

[Deleted User]

Thrugelmir said:

Prism said:

Deleted_User said:

Thrugelmir said:

itwasntme001 said:

If you do not like long duration bonds at current levels, you should also be thinking twice about investing in that "growth" fund.

 One wonders if there'll be a period of subsequent flat lining, akin to the US in the 1980's in the medium term. 

I sure hope it will flat line like that.  S&P 500 went from 105 at the start of 1980 to 353 at the end of 1989. Once you account for dividends and reinvestments, the line flatted upward at a very decent angle. 

I wonder if Thrugelmir mean the 70's. Just about positive over the decade but negative after inflation.

No the 80's. S&P underperformed both cash and inflation for a period. 

False.  http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm