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  • chucknorris
    chucknorris Posts: 10,785
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    A_T wrote: »
    One would expect Chuck Norris to be 100% equities :D

    At the moment my (excluding my wife's investments) portfolio is:

    35% investment property
    34% equities
    18% fixed pension
    13% cash (not normally this high, but looking to upsize home)

    But over the next 5-6 years (for retirement) I will be re-balancing my portfolio to something like this:

    34% equities
    30% bonds/cash (mainly bonds)
    23% fixed pension
    13% investment property
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
  • bowlhead99
    bowlhead99 Posts: 12,295
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    edited 10 February 2018 at 6:55PM
    2010 wrote: »

    Well in Dec 1999 the Ftse 100 hit 7000 and then fell and it then took around sixteen years to hit 7000 again.

    Some people haven`t got time to be in it for the long term.

    Dividends reinvested it only took a few years for a typical FTSE100 investor to be back to break even if he had invested all of his money on 31 Dec1999 (pretty much the worst possible day in his lifetime to have invested it) and unfortunately found himself with no other money to invest at the new lower prices over those next half a decade.

    The FTSE100 is a poor index to invest your entire life savings into due to a high concentration in specific industries and it is only one of the world's major markets; If you had invested in the same dot-com bubble on the same day via the much larger S&P500, you'd be in profit within about a couple of years. The MSCI ACWI took about six years to break even IIRC.

    Similarly you could have invested in the broader FTSE250 on Dec 31 '99 (that terrible day to invest), left it a decade and a half with divs automatically reinvested, and your £10k would be £36k, despite another major crash during the global financial crisis. And that was just the first fifteen years from some old article I had saved - there's been another 20% growth since then, even net of the falls of recent weeks.

    What you often hear from people who are predominantly savers rather than investors is that investing can be a bad idea because 'look at all those people who invested in the index, it took X years to get your money back', and in doing that they use the capital value of the index rather than total return, and they assume that you put all your money in at the highest point, and threw all the dividends in the bin.

    I remember reading an article that was looking at the 'break even points of the S&P' for a Dec 1999 investor who had got back into profit but then sat through the GFC / credit crunch as well... it took until early 2012 to get back to square one again on a capital only basis, although by that point it was a 25% gain counting dividends reinvested, which pretty much made up for the inflation over the twelve years. The article pointed out that if you had invested in the capital value of the US index in Jan 1950 and thrown away the dividends you'd have got about an 8000% return by Easter 2012, but if you had let the dividends be reinvested your accumulated return would be over 66,000%.

    So, I tend to view the figures of people who only bang on about the FTSE capital number from the evening news, with scepticism - they are usually well meaning but misguided. But it's true to say we don't know the depth or duration of the next major upset. The 07-09 crash wiped almost 60% off the FTSE All-World on a total return basis in US dollars from peak to trough, so nobody can tell you the next fall won't be as much as 50% in sterling or that it will necessarily recover in three to five years. It could be a large swift fall and take a decade to claw back. Or a long slow fall with an even longer recovery as we enter a 'new normal'.
    Alexland wrote: »
    The problem is you can't just wait until markets correct themselves to match your view of the world. If you sit there waiting for this dip to hit at least a 30% drop before you start buying then you might miss the opportunity because it only ever drops 29.5%.

    Over a century of history we have seen markets enter new phases where there is a sea-change of attitudes and returns. There could be another within the next couple of years. The only thing you can say for sure is that the future is not certain. So, people with 100% in equities because they "don't need it any time soon and will ride out the blips", or people who prefer to "sit on the sidelines and wait for the inevitable better pull-back", may each be regretting their actions, depending what transpires.
  • It is very subjective, if it was me, at your age, and I had no specific or outline plans for that 30% cash, I would probably reduce it to about 10%, and invest the remaining 20%, but there is no right and wrong answer, it all depends how you feel about it.

    Indeed. The person who knows when to invest in equities, and when to withdraw, would end up very rich. Unfortunately the markets are driven by sentiment, and a huge number of unknowns. We could quite conceivably have several more years of a bull market, or a significant crash. I doubt that anyone here knows with any certainty either way. I recall that the last bull market went on for ages, until it was no longer sustainable. I do not at present see a huge problem looming over the world, the elephant in the room if you wish, although the reduction in cheap money might be the cause of a crash.

    I guess for young people investing for the long term the only option is to invest steadily, with the realisation that sometimes newly invested money will plummet in value for several years. But on balance the net result will in the long term be positive.
  • Thrugelmir
    Thrugelmir Posts: 89,546
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    bowlhead99 wrote: »
    I remember reading an article that was looking at the 'break even points of the S&P' for a Dec 1999 investor who had got back into profit but then sat through the GFC / credit crunch as well... it took until early 2012 to get back to square one again on a capital only basis, although by that point it was a 25% gain counting dividends reinvested, which pretty much made up for the inflation over the twelve years. The article pointed out that if you had invested in the capital value of the US index in Jan 1950 and thrown away the dividends you'd have got about an 8000% return by Easter 2012, but if you had let the dividends be reinvested your accumulated return would be over 66,000%.

    The average investor wouldn't have benefited from this I suspect. ;)

    Even the great WB wasn't investing in 1950.........
  • LHW99
    LHW99 Posts: 4,135
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    What you often hear from people who are predominantly savers rather than investors is that investing can be a bad idea because 'look at all those people who invested in the index, it took X years to get your money back', and in doing that they use the capital value of the index rather than total return, and they assume that you put all your money in at the highest point, and threw all the dividends in the bin.
    Of course a problem for those in retirement is that they are likely to be wanting to live on the dividend income, hence they won't benefit from being able to reinvest them. Hence why 100% equity may not be the best option in retirement unless you can cut down / stop taking the dividend income during the worst of a major crash.
  • Alexland
    Alexland Posts: 9,653
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    Thanks coastline - your graphs always deliver a fresh perspective. Very interesting. Alex
  • Thrugelmir
    Thrugelmir Posts: 89,546
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    coastline wrote: »

    All good stuff...that 1000 point Dow reversal late on Friday was similar to the bottom in 2009..

    Only takes the DOW back to where it was in November though. Hardly a bottom.
  • coastline
    coastline Posts: 1,647
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    Thrugelmir wrote: »
    Only takes the DOW back to where it was in November though. Hardly a bottom.

    If its a correction then we might just be there...not saying its a crash.
    Look at those candles late Friday thats the way bottoms are commonly made with a huge daily reversal. Look at the tail on the big candle.

    https://tradingeconomics.com/united-states/stock-market
  • Alexland
    Alexland Posts: 9,653
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    edited 10 February 2018 at 9:10PM
    I agree we could just be looking at a correction here as some markets were just too hot in the last few months.

    As UK investors as we didn't really see the rapid overseas share price growth as our currency was strengthening at the same time negating a lot of the upside.

    It might be the next crash comes for all the reasons mentioned in this thread but after this correction has recovered? Who knows.

    Alex
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