US Markets Risk

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/81867889#Comment_81867889

Ah yes, timing is a very different issue.

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/81867887#Comment_81867887

You appear to have commented on Masonic's quote rather than on my reply to it! If the investing horizon is decades away then fine. But I put forward an investor aged 65 or more, for which decades is not fine! I also questioned how many investors today, fully understand that a decades wait might be in their future. If they were to fully understand that, how many would do things differently today. I think for many people, the idea of a major crash with decades for recovery is the type of scenario that you find on IFA risk docuements, rather than anything that is real and that might happen to them.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81867610#Comment_81867610

Perhaps some of our fellow posters, who recommend 100% equity global index funds to many new posters with no idea about their risk tolerance, should read your anecdote.

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/81867916#Comment_81867916

Exactly. I read recently where one poster said that he was invested in the S&P 500 because it represented the 500 biggest and best companies and he felt that was low risk. Another has said that he is invested in a global equities fund and that was all. The fact that fund invests over 70% in US markets, was not a concern. I think that if people make those decisons, knowing fully what the risks are, and they are of an age to recover losses if markets crash, then fine. It's clear however from various posts that many decisons to buy those funds is not made in the knowledge of all the facts and are seen as a "safe" or low risk option.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81867974#Comment_81867974

Or they are recommended to newbie posters as the 'one size fits all' solution for everybody, which they clearly are not.

aroominyork

OP says "…there are obvious visible economic risks out there that investors need to be aware of and to attempt to mitigate to at least some degree." Agreed, but the market will not necessarily reflect the risks. It might decide that P/Es can rise further or it might decide to cut the market's P/E and leave it there for a decade or more. Below is the trailing twelve month S&P 500 going back 100 years - there are not many years when it was higher than now and I am certainly glad I am not starting my investing journey now.

chiang_mai

P/E's could indeed rise to a new normal but we probably wont be able to confirm that for quite some time. Markets P/E is only one aspect of risk, it's a starting point rather than a be all/end all of risk. We need to be aware of fund and markets P/E and also other factors such as concentration (as in the Tech Sector currently), geographic isolation (such as all in the S&P500), currency (as in a falling USD currently), asset allocation (as in only holding equities) and so on and so on.

masonic

It's probably not so bad for someone starting a multi-decade investment journey now, assuming they are drip feeding from income. A major crash in the early years helps to test your mettle with relatively little at risk. I was treated to the GFC. Regular contributions shorten the time in the red. But I do not think there is a good investment case for concentration in what is currently "winning", whatever that may be.

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/81868890#Comment_81868890

Really good post. One worth bookmarking and linking to when people post about being nervous to start investing.

sheenas

https://forums.moneysavingexpert.com/discussion/comment/81867581#Comment_81867581

While these thing maybe true and you could base discissions on such factors, often these are already priced in. Debt is not really issue unless it debt that can't be paid back (bad debt). The assets US companies have on the books form part of their valuation and we don't know the true worth verse recorded assets value. We have seen Musk make a move by merging Space X, AI and X into one large pot, that will hide any lack of sustainability,

What I am pointing out these articles don't take into account alternative solutions, US companies may find. Any one who is sensible and spreads the risk can make their own decisions, personally I don't invest in retails share companies.