Stock markets are too high and set to fall?

[Deleted User]

https://forums.moneysavingexpert.com/discussion/comment/82013959#Comment_82013959

Sure, it's not JUST about bubbles, it's about all the things that make a sole and focussed investment like the S&P500 risky…..markets, capitalisation, sectors, geography and even asset classes. There again and to play devils advocate with my own argument, a bet on the S&P500 for a 21 year old American, with plenty of cash and income, and as a long term buy and forget, may not be all that bad, Brits probably do similar with the FTSE100 I imagine, albeit the FTSE is more international than domestic.

InvesterJones

Many of those 'risks' apply to equities as a whole - equities are risky - that's why investors demand a return, which, over the long run, has beaten other asset classes. It's impossible to know where the next underperformance will come from, hence a global market-cap portfolio is the most neutral stance (for equities) that saves having to make a bet/guess/informed view that one might have access to a crystal ball.

UncleK

And that's why I'm not sure about the wisdom of "giving the problem of fund selection to an IFA is money very well spent". You need to have a very well informed conversation with your IFA about your appetite for risk - a really really good IFA will have the right questions to get that out of you (won't they?). But the cynic in me reckons that the average IFA will have some sort of formula based on age and amount of funds that just points to some mix of funds and bonds, type thereof plus yearly visits and a nice percentage thank you very much.
Hence I agree with the global market-cap portfolio (via a tracker) approach.

[Deleted User]

https://forums.moneysavingexpert.com/discussion/comment/82014082#Comment_82014082

I share your cynical view! My one and only interaction with an IFA years ago, resulted in a useful selction of funds which initially did very well. Things that happened/were revealed later were less good but the choice of funds at the outset was sound, far better I think than chosing some global trackers. I suppose part of the answer depends on what your risk profile suggests or demands. But if your starting postion is zero knowledge, informed advice can only help. Perhaps you wont get 100% of what you need, straight out of the gate but neither are you likely to be told to invest 100% in the S&P500 either!

Linton

https://forums.moneysavingexpert.com/discussion/comment/82014082#Comment_82014082

In my view individual fund selection is about the least important factor in investing. Far more important is the investment strategy and the allocation of underlying assets appropriate for your circumstances and objectives. That is where an IFA can be valuable if your knowledge is insufficient to do this yourself. What funds you choose is largely irrelevent provided that they together form a portfolio that is compatible with the investment strategy and asset allocation.

[Deleted User]

https://forums.moneysavingexpert.com/discussion/comment/82014140#Comment_82014140

Doesn't it depend what the problem is that you're trying to solve? If the problem is that you want to invest for retirement, then I agree that fund selection is of low priority, because all the mechanics that lead to returment are very complex. But if the problem is that you have retirment planning largely sorted out but you have some money you want to invest but don't know how, the wrapper and fund selection become the main driver. That's exactly the situation I was in during 2004 when I returned to the UK briefly and wanted to tie up some lose ends, one of which was a some pots of money and a couple of small pension funds, all separate and distinct from my retirment income and retirement savings. What I wanted from an IFA was a wrapper that would contain all those things and a vehicle to invest in markets, along with a recomended portfolio. The IFA I chose set me up with those things and whoever put together the portfolio did a decent job. My reading of the op's previous post is that he wants the last part rather than the full IFA experience….but I may well have missed something somewhere.

Linton

https://forums.moneysavingexpert.com/discussion/comment/82015127#Comment_82015127

If you dont know how to invest your money then does that not suggest you have no real objective or need? In which case how do you justify any particular fund selection? Does it really matter?

[Deleted User]

https://forums.moneysavingexpert.com/discussion/comment/82015299#Comment_82015299

It is well documented that lots of people in the UK both want and need to invest but don't understand how, other than fixed rate bank deposits or similar, the numbers are something like 50% to 70%. Often, the fear of investing in markets is a real deterent. Moving from bank savings interest to investing, even simply in markets, is a giant leap for many. The culture in the UK, despite Big Bang, is still to hold money in cash or near cash accounts, the markets investing take up rate is still very low by comparison. Fear of loss and lack of confidence are significant factors that make cash king in the UK.

Justifying fund selection to a risk averse UK investor is an issue of degrees of risk, combined with time and experience. How much more risk is involved in buying a global index tracker combo, or a handful of KiiD level 3 equities funds, versus that HSBC online saver account? Part of the answer is the return on risk, which in the case of the HSBC account, is around 3.7% today, vs the global tracker/below average equities funds which will return somewhere between about 7% and say 11%.

I am an amateur investor today purely by chance. My IFA sold his business and my SIPP ended up with a firm that ignored it and me for two years, because it was small change and because I was not UK resident. The SIPP was with a UK provider that was designed for IFA access only, every trade cost me 36 Pounds and goodness knows what else in fees. I eventually managed to get the account transfered to HL which left me needing to understand how to invest into funds…UK IFA's wouldn't touch me because I was not UK resident, I contacted at least 50 via email without sucess, mostly via unbiased.com. The firm that bought my SIPP settled with me because of their lack of care and management, which left me on my own but with my SIPP stagnating on an investor unfriendly platform. Fortunately, an ex collegue from my Big 4 days was a long term investor and he gave me lots of help and guidance to get me started, without it I don't know what I would have done. Nervous and scared? You bet I was. So I have lots of empathy for novice UK investors who want to get started but cannot, for whatever reason, which is really my main focus when I write in these threads, rather than for discussion with savvy investors who have been formally trained and had years of work experience. Unfortunately, those beginers often get overlooked in the discussions and lost in the high end jargon and often overly competetive debates.

aroominyork

I was recently talking to a friend who has about £80k in cash and has never invested (outside her workplace pension) about how she can better save/invest. She sees the logic in investing but it's scary stuff for the reasons we all know. I suggested she invests £5k, £10k at most, and sees how it feels. Sleepless nights? Constant checking? Freaked by a 10% correction? And once she understands her emotional reaction to investing, she can develop a long term plan.

ShinyStarlight1

https://forums.moneysavingexpert.com/discussion/comment/82012202#Comment_82012202

Actually, I am relatively new to the world of investing and I do find chiang_Mai’s discussion points and generous information sharing very helpful.