Who has a Pension

[BlasterBates]

Personally I think sticking your money in housing is not a clever idea, not because you'll lose stacks of money but simply because the returns are "bull".

I've just done the sums and 8-10% return on capital is easy peasy in relatively safe short term (pay off in a year) bonds yield 5% and equities (usually emerging markets, but some underpriced US and European equities) that are currently pulling 20% (30% plus in emerging markets) as long as you subscribe to some decent bank/investor rag that is keeping an eye on the warning signs. I'm calculating here 80% in bonds and 20% in equities.

With 300 K you're looking at 30K a year, ....good if you get caught out, I reckon could go down to 20K, but with a heavy weighting in bonds I wouldn't expect to make losses, not in the current market.

[BlasterBates]

...to answer the question if you don't have a pension, when you are 65, then its quite simple, you live on social security hand outs. If I remember that would be a bedsit plus £50 a week.

[Fungus]

Personally I think sticking your money in housing is not a clever idea, not because you'll lose stacks of money but simply because the returns are "bull".

I've just done the sums and 8-10% return on capital is easy peasy in relatively safe short term (pay off in a year) bonds yield 5% and equities (usually emerging markets, but some underpriced US and European equities) that are currently pulling 20% (30% plus in emerging markets) as long as you subscribe to some decent bank/investor rag that is keeping an eye on the warning signs. I'm calculating here 80% in bonds and 20% in equities.

With 300 K you're looking at 30K a year, ....good if you get caught out, I reckon could go down to 20K, but with a heavy weighting in bonds I wouldn't expect to make losses, not in the current market.

Over the last five years buy to let has made huge returns from capital appreciation. It has become less attractive now that prices are increasing more slowly, and in many areas you do little more than break even when taking into account vacant periods, the cost of maintenance and repairs and the mortgage costs. And then there's the hassle of dealing with whiney tenants. But it's okay in the long term.

Buying the most expensive house you can afford might also be sensible given that it is free from CGT when sold.

I have quite a lot of money in stocks and shares. The problem with stock markets is that they are unpredictable and hence they are long term investments. My Japanese shares are still down after more than 5 years. Whereas my UK trackers bought when the market was plunging have grown by 50% in a couple of years. One of my European trusts has tripled in value in 5 years, another has grown by 20%. Selecting which market will do well, and deciding which trust/shares to buy is more luck than skill. IMO you are best to buy tracker funds if investing in Western Europe and North America.

The best time to buy is when everyone is cacking themselves. Stock market crashes are great news for investors.

The main thing that I have learnt in 10 years of stock market investment is that the experts know nowt. If they really were experts, they would be filthy rich by now. Basically no-one knows what will happen as it is unpredictable. And if eveyone thinks that a particular economy is set to take off, chances are that this has already been factored into the share prices. So avoid the latest trends. And I don't trust the advice from so-called Independent Financial Advisors. What they don't well you is that a) they take a huge up front commission (sometimes as much as 5%) and hence will not recommend trackers that do not give commission and b) they get renewal commision each year. The two I've dealt with were slime bags. Just watch how they react when they hear that you are an IT consultant: their ears and nose will start twitching, and their eyes will brighten, followed by a torrent of honeyed words. It really is quite amusing to see.

I've also noticed that most financial experts do little more than recommend funds and markets based on past performance. It's easier to sell something by saying "Fund X has grown by 200% in 5 years".

The best advice I've seen is to diversify, and hence spread your risks: shares, bonds, property, and maybe even antigues etc.

Fungus

[BlasterBates]

The best advice I've seen is to diversify, and hence spread your risks: shares, bonds, property, and maybe even antigues etc.

That's probably good advice, though at the moment at least for the next year or two the stock market is offering good returns.

Don't forget you can invest based on P/E ratios and growth potential, so no it isn't just luck, you can certainly do better than random, though agreed some "financial advisors" aren't worth their money. I've been checking through historical recommendations of the equity research, from this highly recommended investor institution and, well, hats off, the stocks I checked up on they posted their warnings before the stock slid, so I'm going to be following some of their stock picks for a while.

[Fungus]

That's probably good advice, though at the moment at least for the next year or two the stock market is offering good returns.

Don't forget you can invest based on P/E ratios and growth potential, so no it isn't just luck, you can certainly do better than random, though agreed some "financial advisors" aren't worth their money. I've been checking through historical recommendations of the equity research, from this highly recommended investor institution and, well, hats off, the stocks I checked up on they posted their warnings before the stock slid, so I'm going to be following some of their stock picks for a while.

"at the moment at least for the next year or two the stock market is offering good returns"

I wish I had your ability to forecast the future. I've been following the markets for about 10 years, and it's amazing how it can turn round overnight.

But in the long term (10 years) the stock market is a very good bet and create a portfolio of shares spreads the risk.

"you can certainly do better than random"

I'm not so sure about that. Not so long ago a major newspaper's annual stock pick contest was won by a young girl. I think she pretty much chose at random, and certainly did no P/E analysis etc.

Well okay, a skilled person can learn to pick good stocks, based on such things as P/E ratios, and as long as they create a portfolio, they can make money over time. But it takes hard work. And you really need to be able to read and understand the accounts for each company.

Each year the Saturday Telegrph publishes forecasts for the year end index values from leading financial insitutions and you just have to compare them to the actual values a year later to see how little they know.

Warren Buffet is the only financial analyst I know of who can consistently beat the market, and do so by a large margin.

Part of the problem is that fund managers do well regardless of how the fund performs. What matters to them is the up front fee and repeat fees.

Fungus

[BlasterBates]

Well yes that's right, what return have you made Fungus ?

I made an investment in property well before the boom and sold off in 2003, because tenants were demanding golden elephants before they would move in, and made all in all a return of 9% per year on my investment. The last eight years I've pulled in 8% on the stock market.

Now looking at UK property, I wouldn't touch it with a barge pole, I mean If you can only make 9% which included a substantial increase in the house price. what the hell are you going to make in the next ten years. I reckon you'd be lucky to get more than 3% the way things look at the moment.

The German property market looks quite different however , not that I'll be ploughing in there.

[Fungus]

I've done very well (maybe 10% pa) mainly because a) I chose the funds myself b) I used PEP and ISA wrappers using the full allowance for many years to avoid tax on gains c) I diversified over several areas i.e. UK, Europe and Japan d) I bought the funds from fund supermarkets thus avoiding the initial 5% hit and e) I bought lots during the last crash f) I have some trackers which have low annual fees and do well.

During the last crash my funds were looking pretty dire, but they are now doing very well.

I would recommend UK and European tracker funds to anyone looking to invest in the markets but not wanting to buy shares directly. The problem with actively managed funds is the high charges and knowing which manager will do well. Most don't outperform trackers i.e the index.

But ... I don't own a property .... sigh ... I started contracting as the house market picked up and thought I couldn't get a mortgage due to no past accounts ... sigh

[BlasterBates]

10% there you go, very respectable.

But that is what I mean. I invested and made the huge mistake (halved in value in the first year) and still made 8%.

[Fungus]

10% there you go, very respectable.

But that is what I mean. I invested and made the huge mistake (halved in value in the first year) and still made 8%.

Yes but if you look at historical trends you will see that there are periods where you make no gains over 5 years. So it is for the long term.

I cannot see any point to a SIPP instead of ISA/PEP wrappers, at least until near retirement, when you get the 40% tax back.

[BlasterBates]

...yeah that's right mainly in the seventies but the last 10-15 years have been brilliant, though you would need the courage to dive in after those corrections.