STOLLY :eek: control yourself man :rolleyes:
Printable View
STOLLY :eek: control yourself man :rolleyes:
Stolly, is that your 18 year old? No wonder Allan T keeps getting excited!!
Nice belt!Quote:
Originally Posted by Stolly
I'm not implying that diversification is good - it is good (and the FSA agrees - they could uphold a complaint for misselling against advisers if there was no diversification). The whole point of diversification is to lessen the impact on your portfolio if things go belly up - a case of not putting all of your eggs in one basket.Quote:
Originally Posted by christopher leigh
The best example of this is commercial property - between 2000 and 2006 the returns exceeded average UK share returns. I know of at least 3 financial advisers who used to write investment bonds solely investing in property funds, which was fine when the returns were good.
However, about a year ago, people started withdrawing money from the funds because they suspected the end of the bubble - subsequently proven to be correct. Because of the illiquid nature of property (if people withdraw too much money, they have to sell a property), companies started imposing notice periods of 6 - 12 months (i.e you couldn't get your money out for that period) and property prices crashed. Those people whose advisers advised that they invested solely in property lost on average 24% (the sector average) of their investment in 2007 and a further 12% already this year. There's nothing they can do about it as they can't withdraw the money (or switch funds) due to the notice period.
Property is a special case (you don't have notice periods on most other investments) but it does highlight the need to spread your investments across different areas.
You are the king of spin, aren't you! What I actually said was we're probably heading for recession (we're not there yet) but it's not 'quite at depression stage yet' meaning that the way you've been going on, one would assume we were in a depression! I can't see us getting to that stage.Quote:
Originally Posted by Christopher Leigh
Apparently.....
You'd have lost less money by drinking £1000 worth of lager and recycling the cans than investing in Northern Rock, HSBO etc.
http://www.spectator.co.uk/coffeehou...-turmoil.thtml
I'm off to Tesco to start investing! :D
The above shows your misunderstanding of mutual funds. Collective investments (funds) lower the costs because you are sharing them with other people. Coincidentally, the BlackRock fund actually invests in shares gold mining companies and not physically in gold itself.Quote:
Originally Posted by christopher leigh
A gold exchange-traded fund (ETF) tracks a gold prices index, but is backed by allocated gold held in a vault on behalf of the investors. It allows people to participate in the gold bullion market without actually taking delivery of the gold.
The price of the shares in the ETF rise and fall in line with the gold price but you can short-sell (in the media at the moment!) to gain from falls in the market. Because it's a tracker fund, it requires very little management and fees are low.
The average fees for a gold ETF are about 0.4% per annum - I dare say that just insuring the gold alone would cost a lot more than that per year as an individual investor. If you bought gold though Bullion vault, it would cost you 0.92% per annum in fees (for them to hold and insure it for you, in addition to their commission) - more than double the price.
Diversification is not necessarily good, which you seem to insist on. And I'm not interested in the opinions of an interfering and meddling regulatory body,like the FSA. If a person invests in 4 companies and they all fail then his diversification wasn't good. You seem to be implying that if you spread your money around enough, then that in itself will secure success. Your position is deterministic.Quote:
Originally Posted by TheHeathens
We are in a recession already and it's obvious to most people. We don't need to wait for government figures to know that. The question is will we reach a depression in the next few years. The answer to that depends on what our government does from now on. It isn't looking too promising.
Quote:
Originally Posted by christopher leigh
There is one word that will make or break the current situation.
Confidence
They are going to try and throw all this money at it , 600, 700 800 billion whatever but if confidence is lost then it will all spiral rapidly out of control.
My industry is cutting back for the first time since the late eighties. Large companies are laying people off. Not good for confidence.
You can chuck all the money you like at this problem but in the end the goverment, bank of england, bush whatever cannot and dont know how to stop the spiral if it comes quickly.
Bradford and Bingley have basically been saved from going bust. You dont need many more before a meltdown occurs.
The yanks are saying there is three trillion dollars worth of bad debt:eek:.
No one knows what will happen because we have never been in this situation before.
I know all this, but you're missing My point. My comments are not based on normal conditions, they're based on a worse case scenario I.e. the collapse of the pound. In that case it's no good having gold in a fund or shares in a gold mining company in South Africa.Quote:
Originally Posted by TheHeathens
Daz H I think we do know where it could end and it's too terrifying to contemplate. People on here think we've been exaggerating the consequences of the credit crunch over the last few months, but now the reality is hitting home.Quote:
Originally Posted by daz h
We really need to get this government out now. They haven't changed their policies one little bit, and because of that they're going to take the whole country down with them. The problem is replacing them with what.
Oh forgot to sayQuote:
Originally Posted by christopher leigh
All the taxis in London are being recalled. Seriously if yours is one from that company that makes them in err Tamworth check it out Chris.
They have had some burst in flames.
The cabbie at Trafalgar Sq yesterday was telling me this.
Err back to the economy. I still think its gonna go pair shaped big time.
But it does in an ETF as the shares are backed by gold. A trust is set up and they actually own the gold. You are legally a beneficiary of a debt owed by the trust and backed by its gold.Quote:
Originally Posted by christopher leigh
There are additional risks over physically holding gold, but then there are many benefits of gold ETFs as well, not least liquidity and no storage fees. In addition, you would pay VAT on physical gold purchases - which you wouldn't in a gold ETF.
If you do want to invest in gold, then a mixture of the two would be sensible - the gold ETF to allow liquidity and easy access to the market and physical gold for the additional security it offers. I'm not against physical gold ownership but it could be very dangerous to put all of your money in it. We've already seen this year that it can be very volatile, losing 20% of it's value in a few weeks.
I take your point about the collapse of the pound, but this is still unlikely and what happens if your apocalyptic view doesn't occur, but gold has fallen by 40%?
Your view is extremely simplistic - shown by talking about just 4 companies, but let's take that example for a minute:Quote:
Originally Posted by christopher leigh
What are these 4 companies? Banks, Pharmaceuticals, Tobacco & Alcohol, Manufacturing? Where are they based? China? Japan? USA? Brazil? UK? Iceland? Do you expect all of these type of sectors to react to market conditions in the same way?
Are the economies of the above countries built on the same principles? Does the China market react in the same way as USA? Does the autocratic nature of the Chinese government mean they have extra regulatory powers to try and reverse an economic downturn, when compared to the UK government?
What's the business model of the companies involved? Are you going to invest in equities, or bonds? What default rates are already built into the share price? What's your attitude to risk?
Do you want an income from the investment (can you get that from gold?) or are you investing for growth? Do the companies have a good track record of paying dividends, and just as importantly have those dividends increased each year?
Who mentioned companies anyway? What about Government backed securities like Gilts? How about index-linked gilts? How about National Savings certificates which pay returns tax free in excess of inflation (RPI), thus maintaining the real value? What do you expect inflation to do over the next 3/4 years? How about gold, gold ETFs, gold mining shares? How about other commodities like oil and energy? How about cash as a major part of your portfolio - are the returns likely to exceed inflation? How about holding property as part of your portfolio - is this sensible?
On a very basic level, in times of economic slowdown, interest rates are lowered to stimulate growth. When you decrease interest rates, the price of gilts and fixed interest securities tend to increase in value as they look attractive when compared to cash, but the reverse also occurs when interest rates rise. What is your expectation for interest rates over the next 2/3 years (most economists reckon they will go down to approx 3.5%)?
Most people don't have time to ask these kind of questions so they appoint a professional adviser. If you get a good one, (and there's a lot of crap out there) they should be able to ask these questions and make informed investment decisions for you. Diversification alone is not a guarantee for performance, but if you've asked all the right questions then it should usually provide a better hedge against an economic downturn than investing in individual stocks.
We agree on something, if not the magnitude of the event :DQuote:
Originally Posted by christopher leigh
It's nice to know you've finally conceded that diversification is not necessarily good.Quote:
Originally Posted by TheHeathens
As far as I was aware there was no VAT on gold for investment purposes. You state that gold has lost its value(40%)recently but that misses the point. The point is gold like silver or platinum is a safe store of value.
Whilst governments are printing money the gold will increase in value, provided the printing is in excess of growth in the economy. When the governments are not printing money, the price of gold decreases.
Gold in other words will approximately buy you the same amount of goods regardless of the status of the pound or dollar. People at the moment want to protect their savings from government confiscation(borrowing). They can't do this with stocks and shares at the moment, and they can't do it by investing in a gold fund.
In fact those who invest in a gold fund whilst the current crisis unravels are asking for trouble. I know this because of the principles involved, and also because I've seen a forum discussion about this subject, and some of the people are saying exactly the same as what I'm saying. Mainly that when you try to get your gold out there is no gold.
Thanks Daz H. I'm aware of this.Quote:
Originally Posted by daz h
No I haven't. You're doing that spin thing again, and it's getting really tiresome. What I actually did was shoot your argument about diversification to pieces - you were talking about randomly diversifying a portfolio which is clearly not what you'd (well maybe you would, but most people certainly wouldn't) do.Quote:
Originally Posted by christopher leigh
Depends on the purity of the gold. Investment gold is gold in bar or wafer form that is of a purity too high for jewellery but also includes some gold coins. Plus, I didn't say gold had lost 40% of it's value - read it again. I said what would happen if you'd put all your money in gold based on your apocalyptic vision, and gold then lost 40% of it's value (for example), but the economy recovered?Quote:
Originally Posted by christopher leigh
So when are Tesco & Sainsburys going to start accepting Kruggerands?Quote:
Originally Posted by christopher leigh
Why can't you do it by investing in a gold ETF then? It's backed by gold and it tracks the gold price so it in effect acts as, gold.
Oh! Well if you've seen a forum discussion on it!!! :rolleyes::rolleyes: Why don't you post the link to this forum discussion so we can see it for it's own merits?Quote:
Originally Posted by christopher leigh
You're really missing the point about funds and I'm not convinced you know much about them at all (and I'm not just talking gold funds). What exactly are the principles then?
Also, how can you 'get your gold out' of an ETF? Although it's backed by gold, you're only an actual creditor on the gold if the company running the ETF goes into liquidation, which as far as I'm aware has never happened as ETFs have only been around for a few years.
I suggest that if you have an interest in investments, sitting the CF2 exam offered by the Chartered Insurance Institute (CII), which is an introduction to investments and investment principles.
As I've said in previous posts, I do think that gold has a place in an investment portfolio (I've got exposure to it in my pension) but there is more than one way to skin a cat. Plus, the reasons you are giving to physically hold gold are based on financial meltdown which is still very very unlikely whatever the current financial situation (and the FTSE hit 11 year lows today - which just shows the dangers of having all of your investments in UK shares).
Paragraph 1) You stated in an earlier post that DIVERSIFICATION alone is not a guarantee to performance. Then you went on to the 'but' 'if you've asked all the right questions.' So I'm not spinning anything. You've gone from deterministic certainty about diversification to putting conditions on it, like 'asking all the right questions.'Quote:
Originally Posted by TheHeathens
The problem with your argument is the asking of all the right questions. You cannot ask questions when there are no answers. One example will suffice: A few years ago pubs were doing very well here. So if you decided to buy a busy pub, then you could expect to do well. Then the fascists in government sprang the smoking ban on them. Now pubs all over the country are going out of business. Not just because of the smoking ban I know, but a big part of it.
The point of the above is in this country the government can do what ever it likes as long as it's in the 'public interest.' So you can never ask all the right questions about a business, because you never know what the government will do next(just look at Northern Rock).
Another point is the idea that investing in several companies(or whatever) is better than investing in one. Maybe it is, maybe it isn't. It really depends on the companies(or whatever). Actually if you invest in 3 companies and they all do well, you've made the wrong decision(think about it).
2nd paragraph) I've been talking about gold not a mixture, although I know at the purest level there are small quantities of other things, but that doesn't invalidate my argument. Neither does the fact I put 40% instead of the 20%.
All your other main points I've dealt with. Anybody who wants to know what others think of 'gold funds' can type in that on google and go to those pages.
Diversification is really for people who don't know what they're doing(the ignorant). Which is understandable considering the points I made about our government.
Well this has been an interesting lunctime read!
I have rarely seen an argument so comprehensively, convincingly and articulately won. Well played TheHeathens!
Your position is quite natural considering our history.Quote:
Originally Posted by marty mcfly
huh?Quote:
Originally Posted by christopher leigh
not sure what you mean.
Think you 2 should have a head to head via somthing similar to the link below, see who the shrewdest cookie is...............
http://www.bullbearings.co.uk/
Firstly, I never said it guaranteed growth in any post - I said it was an effective hedge against an economic downturn. Even with your simplistic example of 4 companies, there is a chance that you would lose less money (being an effective hedge doesn't necessarily mean you make money) than if you'd ploughed all of your money into one.Quote:
Originally Posted by christopher leigh
Let's put this to bed - you're intentionally missing the point now.Quote:
Originally Posted by christopher leigh
Quote:
Originally Posted by TheHeathens
Quote:
Originally Posted by TheHeathens
Quote:
Originally Posted by TheHeathens
Quote:
Originally Posted by TheHeathens
Ok, so where did I say at any point it would guarantee performance.Quote:
Originally Posted by TheHeathens
Firstly, that's an very poor example - you could have foreseen the fact that a smoking ban was going to come in, because it had done in Ireland and a few US States to name but two beforehand. You should have asked that question.Quote:
Originally Posted by christopher leigh
Secondly, where's the diversification in just buying just one pub? You've perfectly proved my point with that example! If you ploughed all your money into one investment (like gold, or the pub in this example) you shouldn't be too surprised if it falls in value.
Diversification would be (for example purposes) buying a pub, and shares in Tescos (whose alcohol sales have risen). You wouldn't stop there though, because statistics show a correlation between Pubs and Supermarkets so you'd invest in something not related to them (for example, gold and gilts) and spread your investment around. The more uncorrelated your investments, the better the diversification. It's a very simple concept.
What I think you are trying to illustrate is called Systematic (or Market) Risk and is caused by things like legislation changes, inflation rates, exchange rates, political instability, war and interest rates. This is just a risk you have to accept as in investor (and applies to gold too) but you can make educated guesses about the likely outcomes.
Unsystematic Risk is specific to a company, industry, market, economy or country; it can be reduced through diversification (i.e not putting all of your eggs in one basket)
Ok, I'll give you a working example of one of our portfolios for someone with a risk profile of 6/10, but first, you need to take a few things into account:
1) These are invested in collective funds. Collective funds invest in about 40-80 individual shares (different companies within the same area - e.g UK All Companies) so you already have some diversification there.
2) The different funds are (generally) invested across different geographical areas / sectors so you've got further diversification.
THIS DOES NOT CONSTITUTE ADVICE!
Ok, the funds:
http://wareing.www.idnet.com/funds.gif
You can see that over the last year, the portfolio has lost 7.64% (remember I said it was no guarantee for positive performance) but the FTSE 100 has lost 22.53% over the last 1 year.
Over 3 years, the portfolio has gained 18.04% whilst the FTSE has lost 2.24%. Just a footnote - investing in shares should be seen as a minimum of a 5 year investment
Now the diversification bit:
http://wareing.www.idnet.com/Region.gif
Ok, notice the asset allocation split. Most is in equities (shares), but there's a little bit in cash and about a third in fixed interest.
Next the Sector allocations show you where the money is invested (product areas) and the Region Allocation show which countries the portfolio is invested in.
Lastly, look at the top 10 holdings: You've got Gilts, Oil, Pharmaceuticals, Telecommunications and Banking (HSBC are largely unaffected by the credit crunch). These do not react to the market in the same way.
Finally, the performance over 3 years v the FTSE 100:
http://wareing.www.idnet.com/graph.gif
They've pretty much been the same until the start of the Credit Crunch a year ago, when the diversified portfolio has come into its own, outperforming the UK shares (FTSE 100).
That's just one example - your problem is that you're thinking on a far too small level. Across those funds above, there are probably 400 - 600 individually held shares spread across Europe, Asia, North America, Latin America, UK, Oceania. Within each of those areas, you then have further diversification; for example, China banks, China Mining Companies, China Textiles, UK Banks, UK Oil, UK Gilts.
I'm not going to waste any more time on this, because it's clear you know nothing about it and are arguing for the sake of it. I recommend you visit the following website for a crash course : http://www.investopedia.com/?viewed=1
However much you think you are, you are not Warren Buffett!Quote:
Originally Posted by christopher leigh
In my view most Financial Advisers have no more idea about a portfolio than any reasonably educated person.
Small gains = lower risk shares
Big gains= higher risk shares
simple rules. We have to eat, need water, gas, electric etc etc , dont risk everything in say the electronics sector, spread it about a bit. And yes like Heathens says 5 years minimum.
Its not rocket science.
Blimey - must be quiet in Theheathens office at the moment!
Working from home today - flexible hours you see and I was doing a Suitability report on that portfolio. But this has taken far too much time!Quote:
Originally Posted by Boy Wonder
Quote:
Originally Posted by daz h
You're absolutely right Daz. But the difference between a good financial adviser and a bad one is huge. In my old job, there was a financial adviser who wrote a group pension scheme and put the default fund down as an ethical UK equity fund. Most employees joining their employer's pension scheme just invested in this fund, and it's gone down 22.1% over the last year.
The industry is getting more professional (at the moment the entry level exams are akin to A-Levels but this will hopefully be rising to the degree level ones) and this is being embraced by the majority of the profession. The main people opposing the change are the advisers who aren't very confident that they will survive the FSAs Retail Distribution Review.
A good financial adviser will spend a large amount of time going to seminars, researching the market and deciding where the smart money is to be invested. The trick then is then researching the best funds within that sector (not necessarily past performance - those funds that have done well over the last 10 years included banks etc). You can't stop there though because the economic conditions change and you need to continually re-assess your portfolio (at least annually).
Someone may look at index-linked gilts (that track indexation) and the performance over the last year, and decide to invest. In fact the current markets (lower demand) mean we're probably going to experience disinflation and you've probably already missed the boat. If (as many economists think) interest rates are reduced to about 3.5% then Corporate Bonds and Gilts may be the way forward, whilst index-linked gilts will probably reduce in value.
It's not rocket science but you do need knowledge of the markets and time to research properly, which is beyond most people's inclination.
Heathens you're a waffler. You're waffling to divert attention from the crux.I don't appreciate your snide comments either, about my education. You either want to debate properly or you want to waffle.Quote:
Originally Posted by TheHeathens
You stated that diversification is good. I say not necessarily. In other words it might be or it might not be. If I invest in the heroin industry in 3 countries is that good? If I invest in 1 or 2,3,4,5 pubs(diversification) and they all fail is that good?
Now you say that people should know that the government was going to bring in the smoking ban. How do they know? Because they did it in other countries? Why do you think countries have their own laws? They don't always follow suit.
The reason you advocate diversification is precisely because of the above. You don't know what's going to happen next. If you did you'd invest in one company. The most successful one.
To make this clear to anyone interested in this debate, I'll prove my point: If you invest in three companies and we'll assume for the sake of argument, they're all successful. In that case it's very unlikely they'll all succeed to the same degree. Therefore you didn't make the right decision, because if you'd invested in one(the most successful) you'd have got a bigger return than diversifying in three.
Diversification is for gamblers. Like people who play roulette and put five one pound chips on each square, in the belief that that, is better than placing one five pound chip on one square. It's called gamblers fallacy.
It's all right, Chris.Quote:
Originally Posted by christopher leigh
I'm sure the forum don't judge your arguments on your education.
Though they may judge them based on the comments made by other people who know a little about sports science, financial advice, politics, economics...
Quote:
Originally Posted by christopher leigh
For god's sake! Where did I make snide comments about your education!?
If it was the 'you don't understand', do you remember this:
Quote:
Originally Posted by Christopher Leigh
And you still clearly don't get diversification. Investing in 5 different pubs is not true diversification because they correlate far too closely. It was fairly obvious to me that it would only be a matter of time before the smoking ban was brought in because we tend to follow the example set by America.Quote:
Originally Posted by Christopher Leigh
What has heroin got to do with it? I must have missed that Heroin Exchange Traded Fund, or have you been investing in the physical stuff because that's what it seems like.
If you can afford to go and risk all of your money on one company, then go and do it. You may get better returns but if it goes tits up then don't say I didn't warn you. It's called Risk v Reward and I've already covered it in this thread.
Now you've not said anything new, so we'll leave it there shall we.
Chucking in my twopence worth, I too am a financial adviser :eek:. Theheathens explanation may be long winded but its bang on the money. Think of diversification as improving the odds but lowering the maximum payout. Betting on black in roulette is a more 'diversified portfolio' than betting everything on zero :D
Bloody Hell,glad i have a life
Me too. What the feck are they on about:confused:?
Basically Grouse....Quote:
Originally Posted by Grouse
You give me your pebbles and then I give them (less a few that I keep for myself) to someone else. They then spend your pebbles on "stuff" that they then sell on for hopefully more than they bought the "stuff" for. They then give me those pebbles (less a few that they keep for themselves) back to me and I give them back to you (less a few that I keep for myself).
It's easy, we're all guaranteed to make money and you take the risk that you might not get any pebbles back.
Can I give you my pebbles to invest?Quote:
Originally Posted by dominion
Well I say my pebbles. I actually stole them from some workers...
Pebble laundering?Quote:
Originally Posted by Mud
Oh. Oh.
I had to write it twice because it said the message was too short.
Grouse you are a bird of very little brain.