chiangmai
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Post by chiangmai on Feb 6, 2021 23:54:44 GMT 7
Indeed I did.
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chiangmai
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Post by chiangmai on Feb 7, 2021 5:27:07 GMT 7
It seems to me there are normal times when investing is a risky process that comprises typical or normal levels of risk, markets go up and down, they surge and then pull back but it's all BAU stuff and somewhat predictable. During these times you'll make money and from time to time a pullback will cause you to lose money but there are no 1929 type events in these periods, it's all normal stuff. Then there's the stuff around the edges, the times that are highly unusual when markets aren't behaving normally and everyone knows it, but because we're all making money we disregard the abnormalities and come up with justifications such as the amount of free money floating around in the system or the effects of the pandemic!!! The PE ratio is off the scale, many of the "expert observers" are heading for the bunkers, debt levels are stellar and behaviour is abnormal, surely these are times when the probable risk of a 1929 event has increased many times over? I have to say there are strong arguments that favour sitting on the sidelines for perhaps up to a year, what's to lose or gain? Well, potentially the loses could easily reach 20% by all accounts and if I had gains of 20% in one year I'd think that's pretty damned good. So, the argument is somewhat balanced regarding the potential down and upsides, the trouble is it will take a year to regain 20% and only an hour or so to lose it! Ah yes, I hear AyG say, but if you picked the right funds the fall will not be as great and recovery time will be faster, slow and steady wins the race (copyright). I don't mind admitting that my portfolio is primed for profit in the first instance and safety is a secondary consideration, if I'd wanted safety I'd have left everything in cash.....which is what I'm contemplating. And in a years time will things be clearer, I will have forgone a potential 20% uplift but will I care? If there's a crash and I am in cash I'll be back in the market at the bottom so I'll only have deferred my 20% uplift which may well turn out to be even 25%, Of course, if the market doesn't crash I'll look like a noodle but at least I'll have slept well at night.
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chiangmai
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Post by chiangmai on Feb 7, 2021 5:59:37 GMT 7
You can always find a piece from a reliable source to justify whatever you're thinking so the following doesn't mean that much really. What it does do however is confirm that lots of people are all thinking the same thing, and if enough people think the same and act the same it's hello crash. "Some investors, however, worry that the wild swings in GameStop and other “meme stocks” may have exacerbated concerns over market volatility and elevated valuations that could make market participants more risk-averse. The S&P 500 stands near its highest forward price-to-earnings ratio in about two decades after rallying 74% from its March lows. “The recent retail activity was concerning for the broader market,” www.reuters.com/article/us-usa-stocks-weekahead/wall-street-week-ahead-gamestop-frenzy-reveals-potential-for-broader-market-stress-idUSKBN2A52L1
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AyG
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Post by AyG on Feb 7, 2021 9:30:34 GMT 7
Adding protection to one's portfolio (in this case by switching into cash) inevitably comes at a cost. Let me give an example: I have been convinced for several years now that inflation is going to rise, so I have allocated part of my portfolio to US TIPS and UK index-linked gilts which will protect both capital and income from the ravages of inflation. At the time I took out these positions I was expecting inflation to kick in within a couple of years. It didn't happen. It's still not happened. Over the last 5 years GILI has returned 6.1% annualised, and TIPG about the same - significantly less than my equity investments. Many times I've thought of selling my linkers and giving up the protection. However, I still believe inflation is going to rise, and have seen enough articles over the years to show I'm not alone in my belief, so I've hung in there. (Partly there's been a belief that if I sell up, then inflation is almost inevitably going to rise steeply the following month.)
The moral of this story is that timing markets is very difficult, if not impossible. You could rotate into cash, and the impending crash may not happen for several years. In the meantime the value of your portfolio would be eroded by inflation. Perhaps after a couple of years you'd weaken, and rotate back into equities, perhaps just before the cash actually happens.
In the current situation I'm reminded of a quotation, allegedly from John Maynard Keynes "the markets can remain irrational longer than you can remain solvent." There's little doubt that markets at the moment are irrational. However, they can stay like that for a long, long time - years. And one of the effects of the coronavirus and associated lockdowns has been the rapid rise of the Robinhood app that allows for commission-free trading. This has sucked in a large number of novice investors - the kind who hear that a stock has done very well recently and so pile in, further driving up the (already irrational) price.
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chiangmai
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Post by chiangmai on Feb 7, 2021 10:07:28 GMT 7
Perhaps instead of going into cash I could go into inflation linked gilts, 6% or so would see off any devaluation and is a far better rate of return than the banks can offer presently.
All other points noted and agreed.
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AyG
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Post by AyG on Feb 7, 2021 12:34:02 GMT 7
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chiangmai
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Post by chiangmai on Feb 7, 2021 18:04:51 GMT 7
The iShares product looks about right so thank you for that. I'm starting to think along the lines of keeping Martin Currie and Mid Wynd IT's, dumping the US and UK small caps along with the higher risk Fidelity EU and the S&P tracker. The final model would look something like: iShares Gilts (or similar) - 50% (risk level 2) Existing IT's - 30% (risk levels 3 & 4) A scaled down global large caps such as Baillie Gifford Int - 7% (risk level 6) A scaled down Fidelity EM - 6% (risk level 6) A scaled down FSSA Asia - 7% (risk level 5) I think this is more about risk reduction rather than risk elimination, the above leaves me with 20% in the high risk category, 30% medium and 50% low risk, that seems about right for an adventurous and still youthful pensioner. I shall play with this some more but will appreciate comments from anyone who has an interest.
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Post by rgs2001uk on Feb 8, 2021 20:58:38 GMT 7
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chiangmai
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Post by chiangmai on Feb 9, 2021 4:01:19 GMT 7
This is a risk reduction and scaling down exercise rgs, not abandonment. If I'm brutally honest it's insane for a 70 year old to hold such a high risk portfolio, especially in todays market conditions. For that reason I'm moving from 100% of capital at medium/high risk to something like 20% at high risk, 30% at medium risk and 50% at low risk, or similar. I'm not sure I'm interested in low risk IT's but thank you for taking the time to look anyway. I'm planning on keeping <10% in my small caps, that along with the remaining high/medium risk funds should provide enough growth and income to make it worthwhile and keep things interesting, it's just that underneath it all I'll have this layer of protective dullness but hey, that's the price to be paid for security.
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chiangmai
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Post by chiangmai on Feb 9, 2021 5:53:57 GMT 7
rgs - I think if I was looking for a lower risk IT, I might go for FGT rather than go for an IT that is designed specifically to be low risk.
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chiangmai
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Post by chiangmai on Feb 9, 2021 6:17:22 GMT 7
This was helpful: www.fool.com/how-to-invest/investing-strategies-retirement-asset-allocation.aspxI was debating whether I should reduce my exposure to small caps because of their downside risk when markets fall, the article above suggests small and large caps in equal parts was the best performer over time, in the study that is cited. But of course, that study was over a long period of time so you'd expect everything to come right, for a pensioner it's more about recovery time following a markets crash. I'm now evenly split, one third each in high, medium and low-risk assets AND one third each in large, medium and small caps, that's a big improvement over what it was previously.
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AyG
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Post by AyG on Feb 9, 2021 11:41:10 GMT 7
If you found that helpful, then you must be an American. It's pretty much irrelevant to someone not indoctrinated into the cult of believing "USA #1".
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chiangmai
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Post by chiangmai on Feb 9, 2021 13:36:48 GMT 7
If you found that helpful, then you must be an American. It's pretty much irrelevant to someone not indoctrinated into the cult of believing "USA #1". FFS AyG, don't you ever stop with this shite!!!
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AyG
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Post by AyG on Feb 9, 2021 16:27:38 GMT 7
FFS AyG, don't you ever stop with this shite!!! FFS chiangmai, don't you ever stop to try to understand who and what is behind an article? What you describe as "This was helpful" is advocating a portfolio invested 86% in the USA for those "Getting Golden". On what planet is that "helpful"? I will repeat: If you found that helpful, then you must be an American. It's pretty much irrelevant to someone not indoctrinated into the cult of believing "USA #1". And I'd add, it's not particularly good advice even for Americans, either. Unless you believe that America is going to outperform all markets because, well, USA #1, then you're better off being more globally diversified. p.s. Unless "shite" means "trying to be helpful" in your part of the world, you've used the wrong word.
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chiangmai
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Post by chiangmai on Feb 9, 2021 17:04:18 GMT 7
FFS AyG, don't you ever stop with this shite!!! FFS chiangmai, don't you ever stop to try to understand who and what is behind an article? What you describe as "This was helpful" is advocating a portfolio invested 86% in the USA for those "Getting Golden". On what planet is that "helpful"? I will repeat: If you found that helpful, then you must be an American. It's pretty much irrelevant to someone not indoctrinated into the cult of believing "USA #1". And I'd add, it's not particularly good advice even for Americans, either. Unless you believe that America is going to outperform all markets because, well, USA #1, then you're better off being more globally diversified. p.s. Unless "shite" means "trying to be helpful" in your part of the world, you've used the wrong word. I don't have your hard on for Americans or muslims plus I don't do your forensic analysis of everything I read hence I haven't developed your degree of paranoia that behind every written word is a hidden meaning or a plot. I take my information where I can find it and if I come across something that I think is useful it is my prerogative to think it is so, and it's my right to say it is so. But if you disagree I really don't give a shite, especially when your only reason for disagreement is a suspicion that both the author and myself are American. I mean really, how long have you been reading this forum, if you don't understand by now that I'm a Yorkshireman you must consider the possibility of early onset dementia or at a minimum a visit to Specsavers! Now that we've got the first round of insults out of the way: perhaps if you had put forward more constructive and useful criticism of the article I posted or asked me why I found it useful that might have served you better. If you'd done the latter I would have replied....I liked the way the author set out the table of asset allocations from the pre-retirement through the retirement years, I was interested to see how the allocations changed and indeed what he included in the allocation. I was also interested to see the comparison of performance of small cap versus large cap funds, I was just sorry that he didn't also show recovery times, but I think I already said that, I only repeated it in case it is early onset dementia. You have to bear in mind that I don't hold your god like status as an investment guru, I'm just a novice at these things, a trainee, (he says doffing his cap and touching his forelock) and you know how numbskulls people like us are, oooo shiny, nice....so you really must try and find some tolerance when you talk down to us!
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