FTSE100 best single year return since 2009.

Veloflyer

I agree with much of the above - but would only comment that the goalposts of our discussion have changed somewhat from the original question of the merits of volatility/historical data.

chiang_mai

Veloflyer said:

I agree with much of the above - but would only comment that the goalposts of our discussion have changed somewhat from the original question of the merits of volatility/historical data.

Not really. We've already said that the CAPE adjusted ratio is 39 whislt the long term median is 16. That's historic data that one sees creeping upwards, if one choses to review it. Ditto the volatility readings of Mag 7 stocks will confirm the extent to which they also crept upwards. Even the historic Beta of some trackers is now at 1.0 and this would have been seen to be increasing over time, a sure sign that risk is increasing. 

Veloflyer

chiang_mai said:

Veloflyer said:

I agree with much of the above - but would only comment that the goalposts of our discussion have changed somewhat from the original question of the merits of volatility/historical data.

Not really. We've already said that the CAPE adjusted ratio is 39 whislt the long term median is 16. That's historic data that one sees creeping upwards, if one choses to review it. Ditto the volatility readings of Mag 7 stocks will confirm the extent to which they also crept upwards. Even the historic Beta of some trackers is now at 1.0 and this would have been seen to be increasing over time, a sure sign that risk is increasing. 

I guess it depends how much faith you put in historical data to determine the future. My faith in it is so small so as not to signify very much in my decision making - others have a different view.  

chiang_mai

I think many people misunderstood what Warren meant when he said that the average invester should buy an S&P tracker and then forget about it. He didn't say that everyone should buy one, regardless of knowledge and ability. He said "average investor", which implies an average knowledge of investing and the associated risks et al. I think what we have today is lots of people holding investment products they don't understand and who are likely to get badly burned at some point. 

Veloflyer

chiang_mai said:

I think many people misunderstood what Warren meant when he said that the average invester should buy an S&P tracker and then forget about it. He didn't say that everyone should buy one, regardless of knowledge and ability. He said "average investor", which implies an average knowledge of investing and the associated risks et al. I think what we have today is lots of people holding investment products they don't understand and who are likely to get badly burned at some point. 

I don't think they are going to get particularly more burned than they would elsewhere. I am a below average investor and over the past 15 years or so the S&P has done me pretty well and practically I forgot about it. I am well aware that may not continue as I too am increasingly nervous about the weight of the Mag 7. However, folk have been ringing alarm bells about this aspect for years and for me they are not ringing loud enough just yet.  However I may dip an increasingly larger toe into ILGs simply to preserve more of what I already have - given my proximity to retirement.     

masonic

Warren Buffett's choice of tracker was no doubt tailored to the target audience, although I'd argue even Americans would benefit from global diversification. His 2013 letter to investors stated "The goal of the non-professional should not be to pick winners - neither he nor his “helpers” can do that - but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal."

Investment is a long term activity, and it must be accepted that there will be some very painful periods thrown in. This is why we diversify out of equities. There's very little hope of avoiding those painful times by diversifying within equities or avoiding certain sectors.

Enzo_L

chiang_mai said:

I think many people misunderstood what Warren meant when he said that the average invester should buy an S&P tracker and then forget about it. He didn't say that everyone should buy one, regardless of knowledge and ability. He said "average investor", which implies an average knowledge of investing and the associated risks et al. I think what we have today is lots of people holding investment products they don't understand and who are likely to get badly burned at some point. 

He was also talking in the US to US investors, so he was actually referring to the "average american investor" who lived in the US, did all their earning and spending in the US in US dollars, and had all their property, assets and debts in the US.

eskbanker

Not sure I'd place too much reliance on the pronouncements of someone in that position anyway, any more than I'd listen to Jeff Bezos telling me where to shop or Elon Musk giving recommendations about what to drive!

Veloflyer

masonic said:

Warren Buffett's choice of tracker was no doubt tailored to the target audience, although I'd argue even Americans would benefit from global diversification. His 2013 letter to investors stated "The goal of the non-professional should not be to pick winners - neither he nor his “helpers” can do that - but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal."

Investment is a long term activity, and it must be accepted that there will be some very painful periods thrown in. This is why we diversify out of equities. There's very little hope of avoiding those painful times by diversifying within equities or avoiding certain sectors.

I'd agree. If I thought otherwise about investing, all my money would be under the mattress - losing value due to inflation. I'd also say that if the US sneezes then everywhere else is likely to catch a cold, so perhaps there is little chance of escaping any US-led downturn in any event. I have though modified my portfolio to global trackers to minimise such an eventuality.      

Veloflyer

eskbanker said:

Not sure I'd place too much reliance on the pronouncements of someone in that position anyway, any more than I'd listen to Jeff Bezos telling me where to shop or Elon Musk giving recommendations about what to drive!

Buffet has made gazillions  - he must be doing something right? I'd give him time of day over many other financial commentators any day of the week.