Trend from Passive funds to Bank accounts

GazzaBloom

eskbanker said:

Sg28 said:

My point is for someone looking at buying (or holding) vls60 for example with 10 year annualised performance of 6.11% and 5 years at 3.7% those 6%+ 1 year fixes are going to seem very attractive.

What's the scenario where it would be valid to compare apples and oranges in that way?

You are looking backwards for the VLS60 anualised performance and comparing it to the current performance for cash. What has been the 10 & 5 Year historical annualised return on cash?

What is the expectation for how long the current 6% fixed rate accounts will last? Do you really expect cash to outperform equities or an equities/bonds mix looking forward 10 years? History suggests it won't.

Doctor_Who

Sg28 said:

By the way, Im not personally moving to cash and im still adding the same monthly amount to my investments, although it does seem tempting temporarily. 

Regular monthly investing over ~30 years worked wonders for me! As did ignoring all the 'noise' when the markets declined. Although I can understand that some might not sleep soundly knowing their investments have made a paper loss.

VXman said:

I must admit I am concerned by my passive investments (Vanguard). However I am loathed to sell as that would just crystalise my losses. I am hoping for at least a modest return before I cash in. There are some good fixed rates around and I have just opened a Nat West 2 year ISA at 5.9% with the thoughts that rates might decrease in the next year. 

I suppose it could be the time to purchase more from the likes of Vanguard but I can't quite bring myself to do that.

When do you need the cash? If the money is needed in the short term it really shouldn't be in the stock market. You sound conflicted by talking about 'cashing in' and 'purchase more'? If you don't need the money for 5-10 years then making a regular monthly investment is a good way to remove some of the emotion from investing. 

Malthusian

Savers when they got minus 1% returns from cash: "We're being robbed!"
Savers getting minus 4% returns from cash: "Woohoo! Eat our dust long term investors!" The melting dog in the house fire is coming to mind.
(Ok, that's uncharitable. If you don't need the return and you don't want to take the risk, there's nothing wrong with cash. I'm just amused at the concept of cash being more attractive because it returns less.)

My point is for someone looking at buying (or holding) vls60 for example with 10 year annualised performance of 6.11% and 5 years at 3.7% those 6%+ 1 year fixes are going to seem very attractive.

Someone who made a 2%pa real return on their money over the last ten years is going to love the prospect of semi-guaranteeing a 4% real loss over the next one?

By the way, Im not personally moving to cash and im still adding the same monthly amount to my investments, although it does seem tempting temporarily. 

Good for you. The little guy on your shoulder with the wings and halo and pocket calculator is right.

Sg28

Just to be clear, im not advocating stocks to cash or doing it. 

Im merely suggesting a probable reason for the inital ops observation.

baldeagle09

We have all heard the saying:- 'Sell in May and go away'
Bloomberg are saying to some degree:- 'July and goodbye?'
The consensus is now shifting to 'mild' and/or 'short-lived' recessions. However there are many who view that global economic prospects are consistently more pessimistic than the consensus forecast.
As a layman I would agree with this pessimistic outlook.

Albermarle

As a layman I would agree with this pessimistic outlook.

Well at least you have a 50% chance of being right !

Doctor_Who

Someone who made a 2%pa real return on their money over the last ten years is going to love the prospect of semi-guaranteeing a 4% real loss over the next one?

I'm surprised by the number of posts on the Pensions board about converting significant proportions (or all) of DC pension pots to cash or cash-like investments. It makes sense for the money you plan to drawdown over the next 1-3 years, but not for the money you plan to drawdown in 10-20 years time. Pensions are longterm investments (even for many of those already in retirement) so why would you hold your pension as cash for extended periods of time. If the plan is to re-enter the markets in the future, then this sounds like 'timing the market' and we all know the perils of trying to do that! 

InvesterJones

I agree with the savings vs investment sentiment - volatility is such that those two are separate categories. That said.. if for some reason you did want to compare over 1 year then you could compare AER from savings to analysts predicted forward earnings for equities. For the S&P 500 that's currently 4.88% of the price, so you're paying a penalty for higher volatility in that particular market - but then perhaps traders expect analysts to get it wrong and they expect earnings to be higher, or they expect interest rates to fall and so don't mind a low yield for equities when savings will likely drop, or perhaps they are looking beyond this year and onto far future earnings.

Chickereeeee

InvesterJones said:

I agree with the savings vs investment sentiment - volatility is such that those two are separate categories. That said.. if for some reason you did want to compare over 1 year then you could compare AER from savings to analysts predicted forward earnings for equities. For the S&P 500 that's currently 4.88% of the price, so you're paying a penalty for higher volatility in that particular market - but then perhaps traders expect analysts to get it wrong and they expect earnings to be higher, or they expect interest rates to fall and so don't mind a low yield for equities when savings will likely drop, or perhaps they are looking beyond this year and onto far future earnings.

If analysts could predict equity returns then equities would not be a risk asset, and returns would be low.

I don't beleive they can.

InvesterJones

Chickereeeee said:

InvesterJones said:

I agree with the savings vs investment sentiment - volatility is such that those two are separate categories. That said.. if for some reason you did want to compare over 1 year then you could compare AER from savings to analysts predicted forward earnings for equities. For the S&P 500 that's currently 4.88% of the price, so you're paying a penalty for higher volatility in that particular market - but then perhaps traders expect analysts to get it wrong and they expect earnings to be higher, or they expect interest rates to fall and so don't mind a low yield for equities when savings will likely drop, or perhaps they are looking beyond this year and onto far future earnings.

If analysts could predict equity returns then equities would not be a risk asset, and returns would be low.

I don't beleive they can.

I'm not so sure accurate predictions of earnings would do anything to reduce risk - rather price is driven by the chaotic sentiment of traders instead of a single 1yr earnings factor, even if there were a rigid function of it.