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  • FIRST POST
    • Type 45
    • By Type 45 3rd Apr 18, 7:18 PM
    • 93Posts
    • 7Thanks
    Type 45
    Next recession, trade wars, up to 50% portfolio losses
    • #1
    • 3rd Apr 18, 7:18 PM
    Next recession, trade wars, up to 50% portfolio losses 3rd Apr 18 at 7:18 PM
    Anyone concerned?
Page 10
    • dunstonh
    • By dunstonh 13th Jul 18, 3:43 PM
    • 95,834 Posts
    • 63,545 Thanks
    dunstonh
    They weren't referring to VLS funds per se. They were referring to equities generally.
    So, you had a fund that was only invested 60% in equities. So, a 30% loss wouldn't see your fund lose 30%.

    A 30% loss would be "generational"? The Dot.com happened around 2000. The Credit Crunch happened in 2008. We are due another right about now. These aren't generational, unless by that you mean every 10 years.
    I was referring to a 30% loss potential on your particular investment. That is what matters after all. Not some hypothetical spread that you dont have.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • ValiantSon
    • By ValiantSon 13th Jul 18, 3:44 PM
    • 2,536 Posts
    • 2,518 Thanks
    ValiantSon
    This didn't age well did it?
    Originally posted by ColdIron
    Yeah, but some bloke on Twitter said it wasn't going to turn out so well. Based on authoritative argument like that, who can blame Type45 for selling up now and getting sub-inflation returns in deposit accounts.
    • Type 45
    • By Type 45 13th Jul 18, 3:45 PM
    • 93 Posts
    • 7 Thanks
    Type 45
    This didn't age well did it?
    Originally posted by ColdIron

    How does that conflict with my post today? Long term vs short term.
    • ValiantSon
    • By ValiantSon 13th Jul 18, 3:50 PM
    • 2,536 Posts
    • 2,518 Thanks
    ValiantSon
    How does that conflict with my post today? Long term vs short term.
    Originally posted by Type 45
    You're messing with us, aren't you?

    If not, and you can't see the incompatibility of your two posts, then I'd advise you to seek some professional independent financial advice.

    Oh, hold on a minute. Let me quickly set up a Speak Your Idiotic Brains Twitter account and advise you to invest in my nice new shiny pyramid scheme! I guarantee that it will make you a millionaire, and because I said it on Twitter it must be true! (N.B. Just to be clear, I'm not actually advertising or running a pyramid scheme).
    Last edited by ValiantSon; 14-07-2018 at 7:11 AM. Reason: Typo
    • AnotherJoe
    • By AnotherJoe 13th Jul 18, 3:51 PM
    • 11,517 Posts
    • 13,330 Thanks
    AnotherJoe
    They weren't referring to VLS funds per se. They were referring to equities generally.

    A 30% loss would be "generational"?



    Yes. 30% across the board.


    The Dot.com happened around 2000.



    Dot com was dot com. Not non dot com.


    The Credit Crunch happened in 2008. We are due another right about now. These aren't generational, unless by that you mean every 10 years.
    Originally posted by Type 45
    It doesn't work that way.
    • AnotherJoe
    • By AnotherJoe 13th Jul 18, 3:54 PM
    • 11,517 Posts
    • 13,330 Thanks
    AnotherJoe
    How does that conflict with my post today? Long term vs short term.
    Originally posted by Type 45
    Because you dont get long term returns (except poor ones) by dipping in and out of the market short term . Thats a lesson most people take some time to learn. It did me.

    BTW, "hundreds of millions" isn't even a rounding error in terms of worldwide capitalization. If it was significant markets woudl already be falling.
    • Type 45
    • By Type 45 13th Jul 18, 3:55 PM
    • 93 Posts
    • 7 Thanks
    Type 45
    So, you had a fund that was only invested 60% in equities. So, a 30% loss wouldn't see your fund lose 30%.



    I was referring to a 30% loss potential on your particular investment. That is what matters after all. Not some hypothetical spread that you dont have.
    Originally posted by dunstonh

    When a crash happens, it affects bonds too. General misery pervades. And we live in an age where many people are moving away from bonds anyway in favour of cash.
    • ValiantSon
    • By ValiantSon 13th Jul 18, 4:00 PM
    • 2,536 Posts
    • 2,518 Thanks
    ValiantSon
    When a crash happens, it affects bonds too. General misery pervades. And we live in an age where many people are moving away from bonds anyway in favour of cash.
    Originally posted by Type 45
    Um, you do know that bonds and equities markets are separate, don't you? You do also know that the forces that move those separate markets mean that bonds don't necessarily follow equities? And you do know that you were originally talking about equities?

    "General misery pervades." What exactly does it pervade? During the last market crash I was actually quite chipper.

    Oh, and one more, are you really trying to educate an experienced IFA on bond and equities markets? Hubris, thy name is....
    Last edited by ValiantSon; 13-07-2018 at 4:02 PM.
    • Type 45
    • By Type 45 13th Jul 18, 4:04 PM
    • 93 Posts
    • 7 Thanks
    Type 45
    Um, you do know that bonds and equities markets are separate, don't you? You do also know that the forces that move those separate markets mean that bonds don't necessarily follow equities? And you do know that you were originally talking about equities?

    Oh, and one more, are you really trying to educate an experienced IFA on bond and equities markets? Hubris, thy name is....
    Originally posted by ValiantSon



    In theory, bonds and equities are counter balances. But in reality they have been going up and down at the same time in the recent bear market (GFC) and the bull market which has followed.


    WHEN the next crash happens, I expect bonds will go down with equities. Not necessarily in perfect unison, but travel in the same direction.
    • dunstonh
    • By dunstonh 13th Jul 18, 4:13 PM
    • 95,834 Posts
    • 63,545 Thanks
    dunstonh
    If not, and you can't see the incompatibility of your two posts, then I'd advise you to seek some professional independent financial advice.
    Oh come on. Its Friday afternoon. Please do not inflict that pain on some poor IFA.

    When a crash happens, it affects bonds too. General misery pervades. And we live in an age where many people are moving away from bonds anyway in favour of cash.
    Bonds and equities are not normally correlated. Most stockmarket crashes do not see bonds fall as well. it can happen but it depends on the cause of the crash. More often than not, if equities crash, bonds rise.

    In theory, bonds and equities are counter balances. But in reality they have been going up and down at the same time in the recent bear market (GFC) and the bull market which has followed.
    Have you taken movements in Sterling into account when comparing differences as well as the individual market events on each asset class?
    I suspect not.

    WHEN the next crash happens, I expect bonds will go down with equities. Not necessarily in perfect unison, but travel in the same direction.
    They may do. However, statistically, they probably wont. Nobody will know until it happens.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • ValiantSon
    • By ValiantSon 13th Jul 18, 4:18 PM
    • 2,536 Posts
    • 2,518 Thanks
    ValiantSon
    In theory, bonds and equities are counter balances. But in reality they have been going up and down at the same time in the recent bear market (GFC) and the bull market which has followed.
    Originally posted by Type 45
    Kind of. However, what you are overlooking is that this is a specific feature of a very recent phase in the market. You shouldn't expect it to always be like that.

    WHEN the next crash happens, I expect bonds will go down with equities. Not necessarily in perfect unison, but travel in the same direction.
    Originally posted by Type 45
    Nobody has suggested that there won't be another crash. Indeed, most of the regulars on here make the consistent point that there will be another crash.

    You may be right about how the bond markets will behave, or you may be wrong. Either way, it doesn't change the fact that you are conflating a speculative 30% fall in global equities values with the same fall in bond values (and which kinds of bonds are you talking about, anyway?).

    As I've said, feel free to do what you want, but your action is based on nothing more than a speculative hunch. It also completely ignores what happens when markets recover, and the erosion in the value of your money due to inflation in the intervening period. If my investments lose 30% in the next 12 months, I will make a big purchase of more fund units, then watch my original holdings recover over the coming years, and my cheap purchases make even more money for me.
    • Thrugelmir
    • By Thrugelmir 13th Jul 18, 5:27 PM
    • 61,075 Posts
    • 54,294 Thanks
    Thrugelmir
    3) We live in unstable times. Trump/China/tariffs/long time since the last recession... it could all go t*ts up at any time.
    Originally posted by Type 45
    Times are always unstable. That's why timing the market, if one is a long term investor, is pointless. Instead better to spend ones times rationalising why to buy or hold something in particular. The world never stops.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • Prism
    • By Prism 13th Jul 18, 6:59 PM
    • 537 Posts
    • 442 Thanks
    Prism
    I recently read an article by Vanguard in which they are saying we should only expect gains on 3-5% going forward. The good times are over for the time being. Is a 3-5% upside really worth a 30% loss risk should a crash happen? Surely it's better to have 1% upside from a savings account with 0% loss risk.
    Originally posted by Type 45
    We can all have different opinions of what the future brings. Myself - i expect a 20% gain (again) over the next year. I could be wrong of course.
    • bowlhead99
    • By bowlhead99 13th Jul 18, 7:03 PM
    • 8,295 Posts
    • 15,186 Thanks
    bowlhead99
    We can all have different opinions of what the future brings. Myself - i expect a 20% gain (again) over the next year. I could be wrong of course.
    Originally posted by Prism
    Plan for the worst, hope for the best.

    Well, OK, don't plan for the very worst as (a) it's depressing and (b) you will have to work unnecessarily hard if you never take any investment risk over your lifetime. So plan for something better than the worst, but have an awareness of what the worst might be so you aren't surprised or scared by it.
    • Prism
    • By Prism 13th Jul 18, 7:18 PM
    • 537 Posts
    • 442 Thanks
    Prism
    Plan for the worst, hope for the best.

    Well, OK, don't plan for the very worst as (a) it's depressing and (b) you will have to work unnecessarily hard if you never take any investment risk over your lifetime. So plan for something better than the worst, but have an awareness of what the worst might be so you aren't surprised or scared by it.
    Originally posted by bowlhead99
    Absolutely. All my investments are for my retirement. Worse case I retire in 20 years (my plan) and best case in 10 (a lucky alternative). Thats the only plan I really need at the moment. The flexibility of not having a fixed date at the moment does a lot to reduce worries of a crash. I have been through 2000 and 2008 without budging (though admittedly things are much more transparent these days) so I reckon I can withstand another.
    • OldMusicGuy
    • By OldMusicGuy 13th Jul 18, 7:48 PM
    • 618 Posts
    • 1,301 Thanks
    OldMusicGuy
    The good times are over for the time being. Is a 3-5% upside really worth a 30% loss risk should a crash happen? Surely it's better to have 1% upside from a savings account with 0% loss risk.

    So, I am moving to cash for the time being. Utilising my 3% Tesco accounts, and possibly an NS&I saver account for the rest.
    Originally posted by Type 45
    3 to 5% is better than inflation. If/when there is a 30% crash, the markets will recover (like they always do), just make sure you don't sell when things go down.

    You need to think about your long term objectives. It's a poor choice not to be invested in the markets for the long term if you want serious growth. I know from my own experience. And I too, like you, switched into all cash at times and missed out on growth.

    Why not have a mix of cash and equity/bond investments? That's what I do. Set the mix so that it balances your risk and you know you can hold investments through any short term volatility while you have cash as a backup. Going all in then all out is a poor investment strategy.

    Why not consider lower risk VLS funds to limit your downside?
    • Type 45
    • By Type 45 13th Jul 18, 9:24 PM
    • 93 Posts
    • 7 Thanks
    Type 45
    Point remains though:

    Invested: 3% upside, 30% risk.

    Banked: 1% upside, 0% risked


    Do the math.
    • Prism
    • By Prism 13th Jul 18, 9:32 PM
    • 537 Posts
    • 442 Thanks
    Prism
    Point remains though:

    Invested: 3% upside, 30% risk.
    Originally posted by Type 45
    The point is that Vanguard or nobody else have a clue what the upside is % growth is. Or chance of a crash. Or drop in a crash.

    You can't do the maths when you don't know the numbers to plug in
    • Type 45
    • By Type 45 13th Jul 18, 9:40 PM
    • 93 Posts
    • 7 Thanks
    Type 45
    The point is that Vanguard or nobody else have a clue what the upside is % growth is. Or chance of a crash. Or drop in a crash.

    You can't do the maths when you don't know the numbers to plug in
    Originally posted by Prism
    We do know some of the numbers:

    - We know that banking money has 0% capital risk.

    - We know that in the Credit Crunch some portfolios lost 50% of their value. So 30% in another crash is pretty safe and not even a worst-case scenario.

    - We know what interest banks pay. It's 1%-1.3%.

    The only figure we don't know is the upside of investing. But that's why I quoted Vanguard themselves. They said "3%-5%".


    So we do know what the figures are. And I haven't made any of them up. It is what it is.
    • masonic
    • By masonic 13th Jul 18, 9:45 PM
    • 10,135 Posts
    • 7,426 Thanks
    masonic
    1) I recently read an article by Vanguard in which they are saying we should only expect gains on 3-5% going forward. The good times are over for the time being. Is a 3-5% upside really worth a 30% loss risk should a crash happen? Surely it's better to have 1% upside from a savings account with 0% loss risk.
    Originally posted by Type 45
    That 3-5% is probably a rate of return after inflation. Whereas, even at current inflation rates, you won't have a 0% loss risk - more like 100% risk of a small loss. That's with inflation at a little over 2%.

    With talk of trade wars and worst case scenarios, it would be prudent to plan for double-digit inflation without any significant increase in savings rates. That would give you at least a 10% loss risk. But without the potential for double-digit gains on the other side. Three years of such double-digit inflation rates and you could be seeing the spending power of your cash reduced by a third.
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