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Autumn 2018 stock market drops

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dave559
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Re: Autumn 2018 stock market drops

#173773

Postby dave559 » October 15th, 2018, 12:49 am

Backache wrote:The way I sometimes look at it is have I got the investment process right? Is my basic plan sound?
As most people have pointed out last weeks sell off although bigger than is common in a week in overall stockmarket terms was a rather trivial fall. It could well fall a lot further.
You have to ask yourself can I cope with significantly larger falls for a prolonged time because they do happen from time to time and they are always disquiteting however much we try to ignore them.
Things which would concern me more would be if my portfolio went down disproportionately to the stock market and I couldn't work out why then I might think my investment process was wrong.
If you are concerned about whether or not you would be prepared to put up more money if the market was to fall significantly or worse be a forced seller this would suggest that you have maybe committed more money to the market than you are psychologically equipped to deal with, at some point in the future the market almost certainly will go down considerably more than it has for the past week and for a long time that is the nature of the market.


Wise words, thank you!

I wouldn't say that I have been especially foolish over the past year, but perhaps that what had been encouraging signs for most of the year maybe encouraged me to then become a little less cautious in some of my investment funds as the year progressed than I maybe should have been (possibly serving as a good reminder to me that a single year is still a short time overall when considering investments, but also that significant changes can occur within just a few days).

After becoming fed up with the poor interest that I was getting on my cash ISA for the past few years, I was finally prompted to look into the stock market (and to this forum and other similar sources of advice), and decided to take the plunge (toe first, at least). I then switched most of my usual monthly savings into a S&S ISA, gradually coming to the realisation that I really should have looked into this much sooner once I had started to have a modicum of cash savings. For most of the year, returns were looking quite encouraging, but after the recent drops, I am now unfortunately practically back where I was at the start of the year. That's disappointing, but not a worry as yet (after all, my Cash ISA at 1% wasn't really earning me very much, either).

This has been a useful lesson for me near the start of my investing activity, and has served as a reminder to perhaps invest a little more in "safer" bond funds, and a little less in some riskier equity-only funds, and, also to keep adding to my cash savings as a much safer fallback (over the past year, I had been putting about 4/5 of my normal monthly savings into my S&S ISA instead, so maybe I should adjust that a little more towards cash).

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Re: Autumn 2018 stock market drops

#173801

Postby tjh290633 » October 15th, 2018, 9:15 am

Dave, rather than being discouraged by a fall in the market, which is a regular occurrence, see how the potential dividend income from your share ISA has been affected and compare that with your cash ISA. Don't forget that falling share prices mean that you buy more dividend for your money .

You are on the right track. Stick to it and don't waver.

TJH

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Re: Autumn 2018 stock market drops

#173908

Postby odysseus2000 » October 15th, 2018, 3:20 pm

Hi Dave,

If you are going to go the route of what long time Fool write PYAD called strategic ignorance then you have to believe that history will repeat and that over time equities will produce historic returns. As of now there is no evidence to suggest otherwise, but no certainty they will.

If you are going down this route you need to be able to let investments do as they will and that means you have to have other income, job, business etc such that you are not troubled in any material way by falling equity prices, dividend cuts, special dividend taxes etc all sorts of bad things that can happen over multiple years and which may easily even with dividends re-invesments cause all your accumulated investments and dividends to fall well below what you put in. You also ideally need a cushion for unexpected and bad events in your life: medical, spouse trouble, jobs loss ...

History suggests that equity falls will be recovered, but no one can ever be sure what the future holds.

All of these things will have emotional impacts on you which was one reason Pyad like to preach that folk should invest and not bother checking on progress save for when something needs to be done such as a take over etc.

Another emotional trouble of long term buy and hold is that you have no flexibility to take advantages of sell offs. The folk who made out like bandits after the 2008 crash were those who where in cash and who then bought the market.

The problem with trying to time the market is that to have any hope of doing it you need to study hard and have the right mentors which is certainly neither the main stream media or most of the folk who post on social media. As Munger put it the odds on folk prospering who get their information from CNN etc is low.

Just to make it yet more difficult is the likely development of robotics and potentially AI. Both of these are likely great disruptors that may change the whole business environment in such a way that equities historical returns become purely historic.

Often I have a reasonable idea what prices will do on a short time scale or minutes to hours but beyond that I don't have any clarity and although many will tell you that they do my studies suggest that many folk will get lucky every so often and feel they are an oracle but in the by and by the certainty that some success has brought to their minds will destroy their portfolio. Buffett e.g. often preaches how he hasn't a clue about the future direction of equities.

In my practical experience equities are hard, anyone who tells you they are easy and you just follow some tactics to profit is imho deluded and/or selling. Folk on here and similar social media will tell you how well they have done, folk of similar age and experience who have done badly won't tell you how badly they have done. There is intense survivor ship bias on forums like this.

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Re: Autumn 2018 stock market drops

#173984

Postby BobbyD » October 15th, 2018, 7:36 pm

dave559 wrote:Thank you, everyone, for your replies. Trying not to get too worried is useful advice.

It is disheartening to see almost all of the theoretical gains that I had made over the past year vanish over just a few days, but, on the other hand, there was a little recovery on Friday, so, hopefully that might be a sign that it might be just a market correction, rather than the start of a longer drop.


Think of it as a sale...

Investors are the only people I know who complain when the things they like to collect get cheaper!

The only day you want a share to have a high price is the day you sell it, if you sell it.

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Re: Autumn 2018 stock market drops

#174593

Postby TUK020 » October 18th, 2018, 7:20 am

Itsallaguess wrote:
dave559 wrote:
Anyone care to share their thoughts on the current situation?


You'll get used to it - stick with a plan and continue to regularly invest through all market conditions. Don't sell into a panicking market, it'll recover over time.

Go and spend some time on Yahoo, looking at the historical chart of the FTSE -

https://tinyurl.com/ybujt2fh

Understand that markets can and will have prolonged periods where prices drop. Also understand that markets then recover.

Itsallaguess


When looking over this timescale, it is worth remembering that this chart a) is about capital value, not reinvested dividends, and b) is in nominal as opposed to real terms - i.e. is not adjusted for inflation.

You can divide the chart into 2 periods: before 1997, when there were higher inflation expectations, and after 1997, when inflation expectations were considerably lower.
In both cases, the chart is made up of a rising linear component, with noise superimposed, Since 1997, the rising linear component (overall average market gain) is lower as expected, but to a large extent this is the effect of higher inflation stripped out.

Short term movements are impossible to predict. Stock markets are close to being perfect markets, in economists terms about the number of players, liquidity, widely available information etc. You are very unlikely to be able to 'beat the market' in the short term without inside information.

Long term, they look fairly predictable - a gradually rising line, with a whole bunch of up/down cycles overlaid on this.

Stock markets are volatile in capital values. If you want the superior gains that go with this in the long term, you have to live with this.

A very important piece of self knowledge is whether you have the temperament to cope with rapid and sudden collapses in capital value without flinching.

A chap who used to post under the label "Munroman" summed this up with:

There are only a few rules in finance.

Markets are volatile, get used to it.
No one really knows what is going on, so join the club.
Dividends keep companies a bit more honest.
Compound interest works.
Diversification reduces risk.

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Re: Autumn 2018 stock market drops

#174622

Postby odysseus2000 » October 18th, 2018, 9:14 am

tuk020
When looking over this timescale, it is worth remembering that this chart a) is about capital value, not reinvested dividends, and b) is in nominal as opposed to real terms - i.e. is not adjusted for inflation.

You can divide the chart into 2 periods: before 1997, when there were higher inflation expectations, and after 1997, when inflation expectations were considerably lower.
In both cases, the chart is made up of a rising linear component, with noise superimposed, Since 1997, the rising linear component (overall average market gain) is lower as expected, but to a large extent this is the effect of higher inflation stripped out.

Short term movements are impossible to predict. Stock markets are close to being perfect markets, in economists terms about the number of players, liquidity, widely available information etc. You are very unlikely to be able to 'beat the market' in the short term without inside information.

Long term, they look fairly predictable - a gradually rising line, with a whole bunch of up/down cycles overlaid on this.

Stock markets are volatile in capital values. If you want the superior gains that go with this in the long term, you have to live with this.

A very important piece of self knowledge is whether you have the temperament to cope with rapid and sudden collapses in capital value without flinching.

A chap who used to post under the label "Munroman" summed this up with:

There are only a few rules in finance.

Markets are volatile, get used to it.
No one really knows what is going on, so join the club.
Dividends keep companies a bit more honest.
Compound interest works.
Diversification reduces risk.


This is a good description of the media view of markets.

Let us examine a few points.

Did anyone in 1997 know that inflation would be lower with very low & in some cases negative interest rates? Did anyone in the late 1960's know that inflation would be very high with high interest rates?

Now we all know these things, at the time we didn't.

If you were to go and ask prop traders (folk who trade money for others) what is most predictable & manageable, they will tell you it is day trading, anything beyond that they will mostly avoid and/or use options to reduce risk. If you start in prop trading you are often forbidden to hold over night positions.

The well known relation that markets rise over time is correct, but given a typical investment period is finite, say 20-30 years, the effects of buying at the wrong time and or relying on dividend income alone can devastate a person's wealth even if in the by & by things improve. Managed funds that are endlessly talking about long term are far from immune. A neighbour likes to tell the tale of his investment for 30 years in a with profits fund that returned about what he put in, nothing more & he was so vexed that he took it up with ombudsman who said that if there were no profits there were no profits. One can also look at Pyad's long term portfolio and note how although it has done well there have been some weak years and currently we have been in a super bull market since 2008.

Equity investment is very hard, pick the wrong stuff & you will lose a lot of money, pick the right & you will do well. Buffett advocates the lowest load index fund you can find which is about as strong a warning as one could have as to the difficulties of making money in the stock market.

Individuals will mostly get their information from the media, articles by folk forbidden to invest, telling anyone who reads how to invest. It is a recipe for trouble & countless folk buy into the myths & leave a lot poorer, never to post on message boards.

There are people who will hold equities for a long time & make money, there are people who will trade & make money and there are a lot more folk who will lose at what ever they try in the stock market. The folk I have known who have made a lot of money in stock markets in relatively short time periods have not been those using long term buy & hold tactics, but those who have used volatility to their advantage, something that can be learned, but not from the media.

I personally do not advise people to invest in equities, property or a business are in general more under the individual's control where as equities require a skill set that is hard to learn & even for folk who have it, their abilities may not be shared by their spouse who can scupper investment approaches.

Equities are not an easy path to wealth other than in the very long term and that may be beyond an investor's time horizon. Making money on a continuous basis in equities is extremely hard unless you are taking commissions & managing other folks money.



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Re: Autumn 2018 stock market drops

#174688

Postby TheMotorcycleBoy » October 18th, 2018, 1:47 pm

TUK020 wrote:When looking over this timescale, it is worth remembering that this chart a) is about capital value, not reinvested dividends, and b) is in nominal as opposed to real terms - i.e. is not adjusted for inflation.

I was actually unaware of this emboldened point. Thank you. Hence...

TUK020 wrote:You can divide the chart into 2 periods: before 1997, when there were higher inflation expectations, and after 1997, when inflation expectations were considerably lower.


Additionally...
TUK020 wrote:In both cases, the chart is made up of a rising linear component, with noise superimposed, Since 1997, the rising linear component (overall average market gain) is lower as expected, but to a large extent this is the effect of higher inflation stripped out.

Presumably in developing countries, and possibly in bigger developed countries with potential for further industrialisation (more factories, business springing up), then an additional linear upward factor is manifest?

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Re: Autumn 2018 stock market drops

#174701

Postby odysseus2000 » October 18th, 2018, 2:50 pm

TheMotorcycleBoy

Presumably in developing countries, and possibly in bigger developed countries with potential for further industrialisation (more factories, business springing up), then an additional linear upward factor is manifest?


Maybe, but it depends on competition, trade (currently tariffs are flavour of the day), currencies, state of the economies of the potential consumers for the widgets these factories make etc etc

Moreover the trend has been for declines in industrialisation production as a % of GDP and the rise of service sectors and with more prosperity it is often no longer the cheapest goods that sell, e.g. one can buy very inexpensive smart phones, but iPhones are still extremely popular despite being much more expensive.

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Re: Autumn 2018 stock market drops

#174796

Postby Backache » October 18th, 2018, 9:56 pm

odysseus2000 wrote:
Equity investment is very hard, pick the wrong stuff & you will lose a lot of money, pick the right & you will do well. Buffett advocates the lowest load index fund you can find which is about as strong a warning as one could have as to the difficulties of making money in the stock market.

Individuals will mostly get their information from the media, articles by folk forbidden to invest, telling anyone who reads how to invest. It is a recipe for trouble & countless folk buy into the myths & leave a lot poorer, never to post on message boards.

There are people who will hold equities for a long time & make money, there are people who will trade & make money and there are a lot more folk who will lose at what ever they try in the stock market. The folk I have known who have made a lot of money in stock markets in relatively short time periods have not been those using long term buy & hold tactics, but those who have used volatility to their advantage, something that can be learned, but not from the media.

I personally do not advise people to invest in equities, property or a business are in general more under the individual's control where as equities require a skill set that is hard to learn & even for folk who have it, their abilities may not be shared by their spouse who can scupper investment approaches.

Equities are not an easy path to wealth other than in the very long term and that may be beyond an investor's time horizon. Making money on a continuous basis in equities is extremely hard unless you are taking commissions & managing other folks money.



Regards,

I am not sure if you are warning about playing the markets or about equity investment in general.
Playing and beating the markets is indeed a hard skill, drip feeding money into equities and getting market returns over time is not that difficult and though it is not guaranteed to be profitable over time it has consistently served people well.
You appear to be advising people to go into property or business instead.
Statistics show that approximately 55% of start up businesses fail within five years and property has had considerable prolonged downturns in the past.
All forms of investment have risk but I'm not sure that for the long term investor equity investment is a higher risk than any alternatives .

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Re: Autumn 2018 stock market drops

#174830

Postby odysseus2000 » October 19th, 2018, 1:16 am

Backache wrote:
odysseus2000 wrote:
Equity investment is very hard, pick the wrong stuff & you will lose a lot of money, pick the right & you will do well. Buffett advocates the lowest load index fund you can find which is about as strong a warning as one could have as to the difficulties of making money in the stock market.

Individuals will mostly get their information from the media, articles by folk forbidden to invest, telling anyone who reads how to invest. It is a recipe for trouble & countless folk buy into the myths & leave a lot poorer, never to post on message boards.

There are people who will hold equities for a long time & make money, there are people who will trade & make money and there are a lot more folk who will lose at what ever they try in the stock market. The folk I have known who have made a lot of money in stock markets in relatively short time periods have not been those using long term buy & hold tactics, but those who have used volatility to their advantage, something that can be learned, but not from the media.

I personally do not advise people to invest in equities, property or a business are in general more under the individual's control where as equities require a skill set that is hard to learn & even for folk who have it, their abilities may not be shared by their spouse who can scupper investment approaches.

Equities are not an easy path to wealth other than in the very long term and that may be beyond an investor's time horizon. Making money on a continuous basis in equities is extremely hard unless you are taking commissions & managing other folks money.



Regards,

I am not sure if you are warning about playing the markets or about equity investment in general.
Playing and beating the markets is indeed a hard skill, drip feeding money into equities and getting market returns over time is not that difficult and though it is not guaranteed to be profitable over time it has consistently served people well.
You appear to be advising people to go into property or business instead.
Statistics show that approximately 55% of start up businesses fail within five years and property has had considerable prolonged downturns in the past.
All forms of investment have risk but I'm not sure that for the long term investor equity investment is a higher risk than any alternatives .


Every individual has to make his or her mind up.

Sure drip feeding has worked, if someone has the mentality to do it & can do so over prolonged periods of time likely in automatic ways where they don't ever consider the market but just make regular contributions & likely this will continue but certain it is not.

In my obviously limited experience I have seen more folk make more from property without knowing what they are doing & from business where they have done things that are well suited to their personality and interests and where they can more easily evaluate when it is time to buy or sell.

By contrast I have seen many folk burned in equities, selling when they should be buying, buying when they should be selling.

The media & the entire financial industry likes to present equities as a way to wealth and they can be, but the skill set needed is imho not possessed by many & anyone taking their lead from the media is only likely to do well over long periods. By contrast the media writers & the investment funds generally do well what ever happens to the market. Or in more simple terms: Where are the customers yachts?

Regards,

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Re: Autumn 2018 stock market drops

#174838

Postby TheMotorcycleBoy » October 19th, 2018, 6:16 am

odysseus2000 wrote:In my obviously limited experience I have seen more folk make more from property without knowing what they are doing

I guess that's a market timing thing, unless you are actually a builder for a living. When we lived in North Beds. we bought for 110k in 1999 and sold for 240k in 2009. So we made money - although of course we still had to live somewhere and spent all the proceeds on the next place. The point being if we had owned a second property we'd have seen a similar 100% + rise in that time frame.

I'm not too sure that you can rely on that kind of easy-win on property any more, though. About 2 years ago, before Mel and I started stocks and shares private investment, we did wonder upon ways of deploying our savings. The neighbours house was up for 300k: and we toyed with the idea of buy-to-lent. However, the cash (deposit) you need for that type of mortgage is immense these days, and second property ownership is itself an extra risk, and maintenance burden.

I guess the point I'm trying to make is, is that for our (and many other) small-time private investors, 10-20k per year in an ISA is a much more approachable, and less risky, than 100s of k in property.

Matt

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Re: Autumn 2018 stock market drops

#174850

Postby Backache » October 19th, 2018, 7:56 am

odysseus2000 wrote:
Every individual has to make his or her mind up.

Sure drip feeding has worked, if someone has the mentality to do it & can do so over prolonged periods of time likely in automatic ways where they don't ever consider the market but just make regular contributions & likely this will continue but certain it is not.

In my obviously limited experience I have seen more folk make more from property without knowing what they are doing & from business where they have done things that are well suited to their personality and interests and where they can more easily evaluate when it is time to buy or sell.

By contrast I have seen many folk burned in equities, selling when they should be buying, buying when they should be selling.

The media & the entire financial industry likes to present equities as a way to wealth and they can be, but the skill set needed is imho not possessed by many & anyone taking their lead from the media is only likely to do well over long periods. By contrast the media writers & the investment funds generally do well what ever happens to the market. Or in more simple terms: Where are the customers yachts?

Regards,

Personally I know far more people who have been burned by property than by the stock market, being a forced seller in a downturn in the property market when you have leveraged to buy which mots people do means losses can and frequently are serious.
By far and away my biggest financial hit was when I was a seller in a downturn when I went to live abroad.I know several people who have been left with major financial problems when a divorce and forced sell has left them impoverished.
I might not know many people who have become truly wealthy purely through stock investment but I don't know any who have been left impoverished in the same way that I do with property.
Yes intermediaries do well from stocks but the costs have dropped dramatically for most . The frictional costs of property transactions remain very high.

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Re: Autumn 2018 stock market drops

#174892

Postby TUK020 » October 19th, 2018, 9:26 am

TUK020 wrote:
Long term, they look fairly predictable - a gradually rising line, with a whole bunch of up/down cycles overlaid on this.


Realise I should have qualified this: Predictable = you know what the chart will look like, but you don't know what happens when

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Re: Autumn 2018 stock market drops

#174943

Postby odysseus2000 » October 19th, 2018, 11:09 am

TheMotorcycleBoy wrote:
odysseus2000 wrote:In my obviously limited experience I have seen more folk make more from property without knowing what they are doing

I guess that's a market timing thing, unless you are actually a builder for a living. When we lived in North Beds. we bought for 110k in 1999 and sold for 240k in 2009. So we made money - although of course we still had to live somewhere and spent all the proceeds on the next place. The point being if we had owned a second property we'd have seen a similar 100% + rise in that time frame.

I'm not too sure that you can rely on that kind of easy-win on property any more, though. About 2 years ago, before Mel and I started stocks and shares private investment, we did wonder upon ways of deploying our savings. The neighbours house was up for 300k: and we toyed with the idea of buy-to-lent. However, the cash (deposit) you need for that type of mortgage is immense these days, and second property ownership is itself an extra risk, and maintenance burden.

I guess the point I'm trying to make is, is that for our (and many other) small-time private investors, 10-20k per year in an ISA is a much more approachable, and less risky, than 100s of k in property.

Matt


You can't rely on anything in the future.

By property I was thinking of investment properties, i.e. ones that are run down and which will take some money to bring up to standards and which can then either be sold or rented. For a starter the lower the price the better, say some run down terrace that one might rent to dhs folk. The advantage of renting is that assuming the entire economy doesn't crash and the house is in a place that folk want there will be rental income a lot of the time, especially if one is getting paid by dhs.

Sure the ISA has attractions but we are now a long way into a great bull market that may or may not last and the income from equities is far from certain. If we hit a recession dividends are the first thing cut, moreover if it is a self directed ISA the chance of buying some real dogs is not zero. Capital value can fall and although in the long term history suggests (no guarantee) that it will do well, there is no certainty in the future.

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Re: Autumn 2018 stock market drops

#174950

Postby odysseus2000 » October 19th, 2018, 11:27 am

Backache wrote:
odysseus2000 wrote:
Every individual has to make his or her mind up.

Sure drip feeding has worked, if someone has the mentality to do it & can do so over prolonged periods of time likely in automatic ways where they don't ever consider the market but just make regular contributions & likely this will continue but certain it is not.

In my obviously limited experience I have seen more folk make more from property without knowing what they are doing & from business where they have done things that are well suited to their personality and interests and where they can more easily evaluate when it is time to buy or sell.

By contrast I have seen many folk burned in equities, selling when they should be buying, buying when they should be selling.

The media & the entire financial industry likes to present equities as a way to wealth and they can be, but the skill set needed is imho not possessed by many & anyone taking their lead from the media is only likely to do well over long periods. By contrast the media writers & the investment funds generally do well what ever happens to the market. Or in more simple terms: Where are the customers yachts?

Regards,

Personally I know far more people who have been burned by property than by the stock market, being a forced seller in a downturn in the property market when you have leveraged to buy which mots people do means losses can and frequently are serious.
By far and away my biggest financial hit was when I was a seller in a downturn when I went to live abroad.I know several people who have been left with major financial problems when a divorce and forced sell has left them impoverished.
I might not know many people who have become truly wealthy purely through stock investment but I don't know any who have been left impoverished in the same way that I do with property.
Yes intermediaries do well from stocks but the costs have dropped dramatically for most . The frictional costs of property transactions remain very high.


You are confusing things here. If you are over committed in anything then you are vulnerable to being forced to sell at a poor time, doesn't matter whether it is property or equities.

It is important with all investments that they are set up such that they can't hurt you if events go against you. It is always heart breaking when a couple split up having thought they would be together for life, or serious illness happens and a house has to be sold at a time that crystallises serious financial losses.

But this is an entirely different situation to an investment property which is bought with either the idea to renovate and sell or rent with capital that the individual can afford to tie up and not need in adverse situations.

It is the same with all investments. If anyone invests more than they can afford to tie up and not need they are vulnerable as folk who had to sell in the market crash of 2008 or who bought stuff that has been dogs will tell you. Shares in ISA historically have done well over very long time periods, but there have always been very bad times to sell and very bad times to buy. The folk who have made out like bandits in equities have done so by either luck or by skill in using the volatility to their advantage.

Regards,

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Re: Autumn 2018 stock market drops

#174963

Postby dspp » October 19th, 2018, 12:00 pm

ap,

I walked down some terraced streets near me this morning to get milk & bread, having been travelling a lot of the last few months.

These properties are extremely popular with the local BTL brigade who owned large swathes of them.

There were a few rashes of SOLD signs, in clusters from various agents. I rather suspect a few landlords have sold batches of property and they have all gone quickly as it is a desirable area for owner-occupied as well.

I don't want to extrapolate from too little data, but a possible explanation for what you have observed is that BTL are selling out, which is reducing the available rental stock, driving up demand for remaining stock. I appreciate this is flawed as new OO are ex renters, but nonetheless it may be going on.

regards, dspp

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Re: Autumn 2018 stock market drops

#174979

Postby TheMotorcycleBoy » October 19th, 2018, 12:53 pm

odysseus2000 wrote:
TheMotorcycleBoy wrote:
odysseus2000 wrote:In my obviously limited experience I have seen more folk make more from property without knowing what they are doing

I guess that's a market timing thing, unless you are actually a builder for a living. When we lived in North Beds. we bought for 110k in 1999 and sold for 240k in 2009. So we made money - although of course we still had to live somewhere and spent all the proceeds on the next place. The point being if we had owned a second property we'd have seen a similar 100% + rise in that time frame.

I'm not too sure that you can rely on that kind of easy-win on property any more, though. About 2 years ago, before Mel and I started stocks and shares private investment, we did wonder upon ways of deploying our savings. The neighbours house was up for 300k: and we toyed with the idea of buy-to-lent. However, the cash (deposit) you need for that type of mortgage is immense these days, and second property ownership is itself an extra risk, and maintenance burden.

I guess the point I'm trying to make is, is that for our (and many other) small-time private investors, 10-20k per year in an ISA is a much more approachable, and less risky, than 100s of k in property.

Matt


You can't rely on anything in the future.

By property I was thinking of investment properties, i.e. ones that are run down and which will take some money to bring up to standards and which can then either be sold or rented. For a starter the lower the price the better, say some run down terrace that one might rent to dhs folk. The advantage of renting is that assuming the entire economy doesn't crash and the house is in a place that folk want there will be rental income a lot of the time, especially if one is getting paid by dhs.

Sure the ISA has attractions but we are now a long way into a great bull market that may or may not last and the income from equities is far from certain. If we hit a recession dividends are the first thing cut, moreover if it is a self directed ISA the chance of buying some real dogs is not zero. Capital value can fall and although in the long term history suggests (no guarantee) that it will do well, there is no certainty in the future.

Regards,

You missed my point. Which was, that the entry level into "property as an investment" is in the 100s of k, not 10-20k as per the stock and shares ISA. So property just isn't up for debate for me and Mel, or a great many other small time investors: it is prohibitively expensive to even start, without taking on a massive risk, i.e. a loan for start-up capital.

Sure, I used to have a work mate back in the very early noughties, and he got into property i.e. a bit of development, a bit of renting, and after a few years gave up his day-job, and got into property full-time. In those days, you could get into property, with much less entry capital. Not now. Which is why I made my earlier remark.

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Re: Autumn 2018 stock market drops

#175004

Postby odysseus2000 » October 19th, 2018, 1:55 pm

TheMotorcycleBoy
You missed my point. Which was, that the entry level into "property as an investment" is in the 100s of k, not 10-20k as per the stock and shares ISA. So property just isn't up for debate for me and Mel, or a great many other small time investors: it is prohibitively expensive to even start, without taking on a massive risk, i.e. a loan for start-up capital.

Sure, I used to have a work mate back in the very early noughties, and he got into property i.e. a bit of development, a bit of renting, and after a few years gave up his day-job, and got into property full-time. In those days, you could get into property, with much less entry capital. Not now. Which is why I made my earlier remark.


It is entirely up to you as to what you do, but let us for interest compare the two possibilities.

If you are prepared to put 10k to 20k into an ISA you could if you wished instead use that money as interest cover on a loan and then buy an investment property with it. What are the risks of the two options?

You need the money back, in both cases you are at the mercy of the volatility. The size of your volatility depends on your skill as picker of equities or property.

You buy a bad property, the survey misses some serious trouble and the cost to put it right goes up and the time to rent increases and/or the builder you employ rips you off.
You buy a stock and afterwards there is an issue and the share price collapses.

Income, with the ISA you can likely do better than a bank if you buy a good dividend payer , or if you go for growth there may be no dividend or it may get cut if the business gets into trouble. With the property you have only outgoings till you can begin to rent and then if the rental market softens you may have no rent.

Long term: No one can make more land such that property is likely going to keep pace with inflation baring some global pandemic which might make money the least of your worries. With the equity markets then similar considerations apply, less so with individual stocks.

Both options have risks and rewards. It all comes down to what you want to do. Some folk should never touch property, others should never touch equities. The investors who have skill in either will do well. Imho the equity route requires a lot more skill than the property one.

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Re: Autumn 2018 stock market drops

#175021

Postby Backache » October 19th, 2018, 2:50 pm

odysseus2000 wrote:
TheMotorcycleBoy
You missed my point. Which was, that the entry level into "property as an investment" is in the 100s of k, not 10-20k as per the stock and shares ISA. So property just isn't up for debate for me and Mel, or a great many other small time investors: it is prohibitively expensive to even start, without taking on a massive risk, i.e. a loan for start-up capital.

Sure, I used to have a work mate back in the very early noughties, and he got into property i.e. a bit of development, a bit of renting, and after a few years gave up his day-job, and got into property full-time. In those days, you could get into property, with much less entry capital. Not now. Which is why I made my earlier remark.


It is entirely up to you as to what you do, but let us for interest compare the two possibilities.

If you are prepared to put 10k to 20k into an ISA you could if you wished instead use that money as interest cover on a loan and then buy an investment property with it. What are the risks of the two options?

You need the money back, in both cases you are at the mercy of the volatility. The size of your volatility depends on your skill as picker of equities or property.

You buy a bad property, the survey misses some serious trouble and the cost to put it right goes up and the time to rent increases and/or the builder you employ rips you off.
You buy a stock and afterwards there is an issue and the share price collapses.

Income, with the ISA you can likely do better than a bank if you buy a good dividend payer , or if you go for growth there may be no dividend or it may get cut if the business gets into trouble. With the property you have only outgoings till you can begin to rent and then if the rental market softens you may have no rent.

Long term: No one can make more land such that property is likely going to keep pace with inflation baring some global pandemic which might make money the least of your worries. With the equity markets then similar considerations apply, less so with individual stocks.

Both options have risks and rewards. It all comes down to what you want to do. Some folk should never touch property, others should never touch equities. The investors who have skill in either will do well. Imho the equity route requires a lot more skill than the property one.

I would point out that in the property example if you are putting up the money to cover interest payments you are highly leveraged, a rise in interest rates combined with a fall in property prices means that you could lose far more than the money you put up.
In a realistic sense it is simply not true that land is not made, go to somewhere like Hong Kong where land is in short supply and they generate more by building up the sea bed.In this country change of use creates a lot more land that is valuable, conversely major employers leaving an area can leave the land and buildings on them in some areas worthless for prolonged lengths of time.
Lastly you simply do not need skill to invest in an ISA for stocks as long as you recognise it
My sister has done perfectly satisfactorily by asking me where to put her ISA money and sticking it in Vanguard life strategy funds.
Choosing individual properties is a far greater skill than following low cost funds, though the outcome of either is uncertain and I am not trying to say that stocks will necessarily be a better investment, no one knows that.

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Re: Autumn 2018 stock market drops

#175038

Postby odysseus2000 » October 19th, 2018, 3:38 pm

Backache wrote:
odysseus2000 wrote:
TheMotorcycleBoy
You missed my point. Which was, that the entry level into "property as an investment" is in the 100s of k, not 10-20k as per the stock and shares ISA. So property just isn't up for debate for me and Mel, or a great many other small time investors: it is prohibitively expensive to even start, without taking on a massive risk, i.e. a loan for start-up capital.

Sure, I used to have a work mate back in the very early noughties, and he got into property i.e. a bit of development, a bit of renting, and after a few years gave up his day-job, and got into property full-time. In those days, you could get into property, with much less entry capital. Not now. Which is why I made my earlier remark.


It is entirely up to you as to what you do, but let us for interest compare the two possibilities.

If you are prepared to put 10k to 20k into an ISA you could if you wished instead use that money as interest cover on a loan and then buy an investment property with it. What are the risks of the two options?

You need the money back, in both cases you are at the mercy of the volatility. The size of your volatility depends on your skill as picker of equities or property.

You buy a bad property, the survey misses some serious trouble and the cost to put it right goes up and the time to rent increases and/or the builder you employ rips you off.
You buy a stock and afterwards there is an issue and the share price collapses.

Income, with the ISA you can likely do better than a bank if you buy a good dividend payer , or if you go for growth there may be no dividend or it may get cut if the business gets into trouble. With the property you have only outgoings till you can begin to rent and then if the rental market softens you may have no rent.

Long term: No one can make more land such that property is likely going to keep pace with inflation baring some global pandemic which might make money the least of your worries. With the equity markets then similar considerations apply, less so with individual stocks.

Both options have risks and rewards. It all comes down to what you want to do. Some folk should never touch property, others should never touch equities. The investors who have skill in either will do well. Imho the equity route requires a lot more skill than the property one.

I would point out that in the property example if you are putting up the money to cover interest payments you are highly leveraged, a rise in interest rates combined with a fall in property prices means that you could lose far more than the money you put up.
In a realistic sense it is simply not true that land is not made, go to somewhere like Hong Kong where land is in short supply and they generate more by building up the sea bed.In this country change of use creates a lot more land that is valuable, conversely major employers leaving an area can leave the land and buildings on them in some areas worthless for prolonged lengths of time.
Lastly you simply do not need skill to invest in an ISA for stocks as long as you recognise it
My sister has done perfectly satisfactorily by asking me where to put her ISA money and sticking it in Vanguard life strategy funds.
Choosing individual properties is a far greater skill than following low cost funds, though the outcome of either is uncertain and I am not trying to say that stocks will necessarily be a better investment, no one knows that.


Good points, and you could also add changes in demographics, such as a lower birth rate, can have dramatic effects on property prices.

Nevertheless in my experience of studying investment, property has done well even though all the caveats that you raise have existed in various forms all the time but I do not know the future.

Yes, if you stick to low load investments and are happy with that then there is very little skill required and given favourable circumstances the returns can be better than what one could get in a bank, especially over a long period.

It always comes down to what an investor is happy doing and how much return he or she wants.

In a forum like this most folk, at least to my belief, are trying to do better than market returns and to do that requires skills that many do not have. One can say the same about property, it is just that in my experience most of the folk I have known who have dabbled in property have done a lot better than the folk I know who dabbled in equities.

Regards,


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