AyG
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Post by AyG on Sept 21, 2021 19:36:32 GMT 7
^^^ Jesus wept.
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Post by rgs2001uk on Sept 21, 2021 20:15:21 GMT 7
I concur. However as I have mentioned before, horses for courses, whatever gets you through the night.
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Post by rgs2001uk on Sept 21, 2021 20:16:51 GMT 7
For rgs's sake let me pre-empt his question, why. I've been trying to transition my entire portfolio to less risky assets, I want to end up holding something along the lines of Capital Gearing and Personal Asset Trust accounting for 80/90% with the remainder held in a couple of well chosen global reach funds, MNP being one candidate, Baillie Giffors International another (a long held staple) and/or Mid Wynd. I haven't made that transition fully because I'm waiting for a decent dip in which to buy. I think markets are currently in transition from seeing several large increase days each month to one that is much much harder to make money in. We're long overdue for a 5% or 10% fall except for this time I think it could be much larger. Inflation, tapering, covid recovery and now the effects of global climate change are all factors. Yes yes yes I know, you can't time the market, at least not perfectly. But I see nothing wrong at my age to take money off the table and wait for a year to see what happens, if that costs me 4% to inflation, so be it because the potential downside is much mich bigger whilst the potential upside is not that big. Your money mate, up to you, whatever helps you sleep at night. I appreciate your honesty.
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AyG
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Post by AyG on Sept 22, 2021 7:43:07 GMT 7
I've been trying to transition my entire portfolio to less risky assets, I want to end up holding something along the lines of Capital Gearing and Personal Asset Trust accounting for 80/90% That level of caution comes at a very high price. Compare the performance of PNL (B) and CGT (B) over ten years with that of iShares MSCI World Index (ETF) (A). Over that timescale you could be up 353.7% simply by investing in all markets passively. PNL and CGT, 70.2% and 72.2% respectively.
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chiangmai
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Post by chiangmai on Sept 22, 2021 12:23:10 GMT 7
I've been trying to transition my entire portfolio to less risky assets, I want to end up holding something along the lines of Capital Gearing and Personal Asset Trust accounting for 80/90% That level of caution comes at a very high price. Compare the performance of PNL (B) and CGT (B) over ten years with that of iShares MSCI World Index (ETF) (A). Over that timescale you could be up 353.7% simply by investing in all markets passively. PNL and CGT, 70.2% and 72.2% respectively. Ah yes, those magic words, could be, closely related to if, should be and might be. I'm all for being positive, I think that's a good thing. But consider for a moment the downside risk for a 72 year old and the time to recovery in the event of a major fall (markets, not the 72 year old). The younger you are the more the reason to stay invested in risky assets, the older you are the less reason there is. At some point in your life you will reach that cross over point, I've reached mine. If I could get 6% in the banks I would take it, the next best thing I see is PNL and CGT. Don't let anyone twist your arm and don't succumb to peer pressure or greed, let me ask you, do you feel lucky!
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Post by rgs2001uk on Sept 22, 2021 20:30:55 GMT 7
^^^ you dipped your toe in the water, you had a learning experience and decided the markets arent for you, no shame in that, you have done more than many ever do.
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chiangmai
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Post by chiangmai on Sept 23, 2021 8:35:45 GMT 7
^^^ you dipped your toe in the water, you had a learning experience and decided the markets arent for you, no shame in that, you have done more than many ever do. I see the situation differently, I continue to think the markets are for me but the extent of risk I am prepared to assume is far less under current conditions than it was say a year ago. There is no logical reason to exit the markets because there is no viable alternative. But the degree of risk one assumes whilst participating in markets can be moderated, for many if not most people this is about moderating their expectations and managing the greed element of their personality. The older one is the easier those things are to do, the younger one is the less important those things are. It's the guys in the middle that face the real dilemma, especially those who have experienced many years of stellar returns and become accustomed to large gains.....giving up that buzz is going to be tough for many. Regardless of whether you're in gold and T'bills or emerging market equities, you're still in the markets. Both PNL and CGT achieve their growth from global equities, it's just that they have other things that you for one don't like, things like T'bills and gold and gilts. Plus, their priorities are different, preserving wealth is most important, making profit is secondary and that doesn't provide the same buzz, until you breach 70 or so.
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AyG
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Post by AyG on Sept 23, 2021 9:51:27 GMT 7
Chiangmai, what is clear to me is that when you went into this you understood neither your investment timescale nor your tolerance of risk, both of which should have been clearly nailed down before your starting to invest. From what you've written, it appears that you have a better grip now on both.
I don't know whether you've lost money with your previous investment strategies - I sincerely hope not. And I hope now that you've hit upon a strategy that is right for your time horizon and risk tolerance.
Good luck!
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chiangmai
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Post by chiangmai on Sept 23, 2021 12:31:59 GMT 7
Chiangmai, what is clear to me is that when you went into this you understood neither your investment timescale nor your tolerance of risk, both of which should have been clearly nailed down before your starting to invest. From what you've written, it appears that you have a better grip now on both. I don't know whether you've lost money with your previous investment strategies - I sincerely hope not. And I hope now that you've hit upon a strategy that is right for your time horizon and risk tolerance. Good luck! I was crystal clear from the outset that investing in markets was a learning process for me which is still not complete although I have learned much. I fully understood from the outset that the minimum timescale would be 5 years but this was mitigated by the pandemic and the economic events that followed. I also understand well my risk tolerance and threshold for pain which is why the events resulting from the pandemic have caused me to change course prematurely....simply put, I think todays risk is much higher than it has been previously during my sojourn into equities investing. You will recall our early discussions about the 60/40 approach because it potentially reduced risk. That was the level of risk I wanted to be at but the approach was fundamentally flawed and was set aside. Today I'm back into something similar to 60/40 but the funds objectives are very different, preservation first, not accumulation. Indeed I do have a better grip on both those things currently and I think the key is to be flexible and adapt as conditions change.....the same suit won't fit forever and must be tailored periodically. I also worry that bravado and testosterone are major components of some peoples strategies along with over confidence that the world could never change to such a huge extent...it doesn't hurt to have a leaning towards pessimism at times. I have made a return on capital of 22% which is far more than I expected, plus it's been fun and exciting. If I could do it all again, knowing what I know now that return would probably be closer to 40%. If I could do it all again knowing what you know now it would probably be the same except yours would have been planned and mine would still be luck.
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Moobin
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Post by Moobin on Sept 23, 2021 18:35:31 GMT 7
That level of caution comes at a very high price. Compare the performance of PNL (B) and CGT (B) over ten years with that of iShares MSCI World Index (ETF) (A). Over that timescale you could be up 353.7% simply by investing in all markets passively. PNL and CGT, 70.2% and 72.2% respectively. Ah yes, those magic words, could be, closely related to if, should be and might be. I'm all for being positive, I think that's a good thing. But consider for a moment the downside risk for a 72 year old and the time to recovery in the event of a major fall (markets, not the 72 year old). The younger you are the more the reason to stay invested in risky assets, the older you are the less reason there is. At some point in your life you will reach that cross over point, I've reached mine. If I could get 6% in the banks I would take it, the next best thing I see is PNL and CGT. Don't let anyone twist your arm and don't succumb to peer pressure or greed, let me ask you, do you feel lucky! To be honest, if I could get a guaranteed return of 6% per annum parking my money with banks I would. That would give me more than enough to live on comfortably. In fact that is nearly double what I am budgeting for. Unfortunately, that ain't going to happen.
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chiangmai
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Post by chiangmai on Sept 24, 2021 3:41:14 GMT 7
Ah yes, those magic words, could be, closely related to if, should be and might be. I'm all for being positive, I think that's a good thing. But consider for a moment the downside risk for a 72 year old and the time to recovery in the event of a major fall (markets, not the 72 year old). The younger you are the more the reason to stay invested in risky assets, the older you are the less reason there is. At some point in your life you will reach that cross over point, I've reached mine. If I could get 6% in the banks I would take it, the next best thing I see is PNL and CGT. Don't let anyone twist your arm and don't succumb to peer pressure or greed, let me ask you, do you feel lucky! To be honest, if I could get a guaranteed return of 6% per annum parking my money with banks I would. That would give me more than enough to live on comfortably. In fact that is nearly double what I am budgeting for. Unfortunately, that ain't going to happen. That was my original strategy when I retired in 2004, I planned on 4% in IOM fixed rate bonds and that would have worked nicely. It worked for a while but then eventually I was forced into riskier assets, I'm sure it's a well trodden path.
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Post by rgs2001uk on Sept 24, 2021 20:23:02 GMT 7
^^^^ count yourself lucky compared to some of the train wrecks I have seen out here, wont bother repeating the stories, we have all heard them before.
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chiangmai
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Post by chiangmai on Sept 25, 2021 8:12:33 GMT 7
I was thinking about what AyG had said earlier about understanding risk tolerance and investment horizons.
I think the key point to make here is that whilst we all (mostly) understand that we need to monitor and adjust our funds and investment sectors because economic circumstances change, we also need to reassess risk and timeframes as well because these are equally as fluid. I liken this to driving in Thailand, you can't just look straight ahead, you have to key an eye out over 360 degrees, all the time.
I hear somebody say, ah yes, but this is why I use good quality Fund Managers or this is what my broker is for. There's no doubt those things provide a level of protection but they are very unlikely to consider your risk tolerance. That's only something you can understand and if you don't look at it seriously you'll never know. I guess this is why people need to follow the media and try to understand what's happening on different fronts and then form a picture, that forms a part of the risk picture. What was an acceptable investment environment yesterday, may easily become a totally unacceptable one tomorrow, if only you relaised that things had suddenly changed!
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AyG
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Post by AyG on Sept 25, 2021 9:53:12 GMT 7
we all (mostly) understand that we need to monitor and adjust our funds and investment sectors because economic circumstances change However, for best returns we should not be changing because we fear something may or may not happen in the next couple of years, or perhaps even decade. Most of what we read in the financial pages is simply short term noise, and shouldn't put us off course. The significant changes to economic circumstances are on the scale of decades, or even longer. For example, coal and tobacco companies are probably facing a long term decline. However, they may continue to perform well globally for the next 23, 30, 40 years. It would be premature to ditch shares in them based upon their economic prospects. (However, one may wish to eschew them on moral grounds.) we also need to reassess risk and timeframes as well because these are equally as fluid. Not sure if you mean "market risk", or personal attitude to risk. The former should be an irrelevance if one's investment horizon is more than 5 years. (And if it's less than 5 years one shouldn't be investing in equity markets at all.) The latter really doesn't change much. Once a nervous nelly, always a nervous nelly; once a fearless honey badger, always a fearless honey badger. I hear somebody say, ah yes, but this is why I use good quality Fund Managers or this is what my broker is for ... they are very unlikely to consider your risk tolerance. Of course, fund managers don't consider your personal risk tolerance - they are managing pooled investments. However, if you've ever used a traditional broker, pretty much the first thing they do is get you to fill in a questionnaire to assess your attitude to risk. Here are a couple of examples of such questionnaires: retirementplans.vanguard.com/VGApp/pe/PubQuizActivitywww.financial-expert.co.uk/investing-risk-appetite-questionnaire-tolerance/(The questionnaires used professionally are usually proprietary, so aren't available on the web. They also have substantially more questions.)
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chiangmai
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Post by chiangmai on Sept 25, 2021 11:50:46 GMT 7
Adjust Funds - I totally agree we shouldn't chop and change just for the sake of the flavour of the month but that shouldn't preclude making a change based on events and our attitude to the risk that is present. People do that, we've seen evidence of that in spades in this forum. People jump out of funds because the PE has gone sky high, they change because the funds performance has gone unnaturally supersonic or has taken a prolonged deep dive. I was also thinking of cyclical investment cycles that aren't necessarily covered by fund managers in a particular fund; emerging markets vs mature markets; currency implications of geopolitical stresses; inflation vs the steady-state, etc. There are lots of good reasons to change but it's desirable that we don't.
When I think about the news I think of a larger picture, of which financial short term news is only a small portion, that sort of news usually points at something bigger that should be looked into. Cases in point, for example, include the increasingly dire impact of global warming and the risk of conflict in the South China Sea. Neither of those is a 10 year hence issue, they are tomorrow issues if not today and their impacts are mammoth. Should we be changing funds as a result of what we see and how we feel about those things? Yes, absolutely, it would be bloody-minded to say that I've made my decision I'm going to stick with it through thick and thin, that's gambling.
Risk - No, I mean personal tolerance to risk and personal risk thresholds which change, not market risk. I think nervous nelly and honey badger are the extreme ends of the scale, most of us sit somewhere in between and quite often we vacillate based on events and investment performance, we've seen that demonstrated here in spades also.
Fund Manager/Risk - Of course FM's don't consider our personal risk but it's perhaps tempting to think sometimes that they are looking out for our best interests and we are perhaps lulled into thinking they understand our risk tolerances. Having a decent FM is not a proxy for personal risk assessment and management, I think. How many people looked at Woodford and his fund holdings and said, that's a bit dodgy by he's a good bloke with a great reputation and he's on the box regularly, I'm sure he's got it all in hand!
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