Want to Invest but worried about Markets

Thargor said:
Id honestly be happy with a 4-5% return even but how to guarantee that?
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You can't. Nobody can. You just have to accept that as a fact of life.

You can't control or accurately predict the markets. Nobody can.

You can have a view. But you have to accept that you could be wrong.

I have spent (literally) thousands of hours studying investment books and scouring data on the historic returns of various asset classes. And I have no better idea than anybody else what's going to happen tomorrow.

There is absolutely no point worrying about things that are completely outside your control. Zero.

I really hope this doesn't sound like a lecture but I would suggest that you need to strike a balance between doing things that add value to your life today and looking out for your future self.

It's a terrible cliche but prizes really aren't awarded to the richest man in the graveyard.
 
Statesavings.ie? 10 year National Solidarity Bond is 2.26% AER, no DIRT, if there's some you won't need for 10 years. If you don't find your purpose in life :)

Also, if you are a single person on 30k, you are probably paying €2.7k in PAYE, so a pension/PRSA may be more tax efficient than just savings.

I left 25k in a credit union for almost 20 years..oops...just didn't know what to do with it! Our government wants us to spend, not save :) But now I have some invested (got 7% after tax in the past 2 years), some in a 10 year bond, and a PRSA to at least get the tax relief. Have some with Rabo but they're cut their rates again so looking elsewhere. Best deposit rates seem to be regular saver accounts. And I'm told there are reasonably low risk (and low return) investment options.
 
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Thargor said:
cant shake the feeling that its a bad time to get into equities though.
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Reading between the lines of your posts I believe your tolerance to risk is very low and if that is the case I would advise you to stay away from the stock market
and look for investments/products that have little or no risk and a guarantied return.
 
Cervelo said:
Reading between the lines of your posts I believe your tolerance to risk is very low and if that is the case I would advise you to stay away from the stock market
and look for investments/products that have little or no risk and a guarantied return.
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Its not that Im intolerant of risk I know you have to speculate its just if you look at any graph of the markets on a long term scale you see the euphoric run up to the dot com crash, then the recovery and bull run up to the financial crisis, and now we're back up again right at the tip of what could be another near identical peak, I just dont want to take a position and watch it crumble in a few months time no matter how much I diversify. Then again with QE continuing how do you know its not going to keep going this time...
 
Sarenco said:
Well, over the last 100 years, or so, cash has only ever produced a real (after inflation) return of around 1% per annum (before tax). Over a sufficiently long time period even that low return compounds into something meaningful.

For reference, equities have produced a real return of around 5% per annum over that timeframe (before tax and investment costs) but with some very significant ups and downs.

Let's play make believe for a moment (bear with me). Say you won the euro millions in the morning and money was no object - what then? In other words, what do want out of life? Travel? Familly? Writing a novel or some other personal project?

In other words, I suggest you try and figure out your answer to that question first and then work out a financial strategy to match it - not the other way around.

Your plans may change so build in some wriggle room.

I hope you don't find that too forward. I usually leave the "softer stuff" to other posters - they are much, much better at it than I am.

Hope that helps.
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Thats very interesting thanks, I always assumed that would have been a negative return...
 
I think most people would be very happy with a 4% return nowadays. So the tax on that is approx 42%. So net 2.4%. Now to get the gross return requires taking a risk. One gets a good return of approx 2.3% net from the 10 year National Solidarity Bond. A long time I know but still pretty secure one would hope. More expert people than I can put exact figures in here as to what I am saying as my figs are approximations. Perhaps the OP should consider putting half the money at least away for the 10 years. Sarenco - you talk a lot of sense.
 
Thargor said:
Thats very interesting thanks, I always assumed that would have been a negative return...
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A lot of people assume that but it's not actually true.

The latest Barclays Capital Equity Gilt Study gives a real (after inflation) return of 0.8% per annum for "cash" (UK treasury bills) over the last 116 years. A retail depositor can usually do slightly better than an institutional investor with precisely the same level of risk (because of State deposit guarantees for retail deposits) by simply shopping around.

Inflation (CPI) is currently -0.1% so a deposit rate of around 0.7% is bang in line with the long term historic average.

Don't get me wrong - there have certainly been pretty long periods in the past where cash has not retained its purchasing power. Over the 10 years to the end of 2015, for example, cash actually lost 1.1% per annum to inflation.

I'm also conscious that I'm ignoring tax (DIRT). I personally think it is grossly unfair that somebody at your income level is required to pay DIRT at its current level but I'm afraid you will have to lobby your local TD on that one.

Finally, I would be slightly cautious about investing too much in 10-year NTMA solidarity bonds, even if you are almost positive that you will not need to touch your savings for the full 10 years. A tax-free return of 2.26% p.a. might look attractive right now but would it have looked attractive (relative to prevailing inflation/interest rates) in 2006? A lot can change in 10 years.
 
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username123 said:
Aside: if you have a pension (OP doesnt, I know), is investing in equities outside the pension considered too focussed on equities, since a pension is probably 70-80% allocated to equities already? Considering people always talk about diversification, I wonder is post tax equity investment going against that?
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I'd like to repeat this question if it's alright - 20% of my earnings go into a pension which is (between the funds) ~70% equities.
Are more equities ok for personal investing, if I chose a different strategy to my funds'? Or what other options are there (aside from getting swept up in BTL mania?)

Thargor, I think you were on the property pin too - you seem frozen in indecision and I think no matter whether you sit on it or invest it you'll be worried.
If I were you, I'd allocate say 20k and invest that monthly over the next 1 or 1.5 years to get comfortable with it, and if the markets tank 50% you're barely down in net worth. At the end of that 1.5 years you can make a more informed decision based on how the world economy looks and your own experiences in following the stock strategy you chose.

You're also thinking about the apocalypse scenario - trust me if THE crash comes, you can say goodbye to your 100k one way or another either through bail-ins (where 100k DGS means nothing to a broke government) or hyperinflation. Basically it's not even worth worrying about that because there's jack all you can do about it!
 
Thanks Thatnewguy, what strategy to choose though? And maybe the big crash isn't coming but overvalued does seem to be a consensus opinion at the minute on world markets, I think Im going to sit on my hands for now until Im more sure about travel/career plans...
 
ThatNewGuy said:
I'd like to repeat this question if it's alright - 20% of my earnings go into a pension which is (between the funds) ~70% equities.
Are more equities ok for personal investing, if I chose a different strategy to my funds'? Or what other options are there (aside from getting swept up in BTL mania?)
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You should look at your financial position as a whole rather than focusing on any particular account (retirement or otherwise) in isolation - anything else is mental accounting.

For example, if you are already maximising your pension contributions, you might consider increasing the allocation to equity funds in your pension somewhat and saving your after-tax money in (tax exempt) State savings bonds.

Outside of investing through tax-deferred pension vehicles, bear in mind that paying down debt (including mortgage debt) is very often the best investment option - guaranteed, tax-free and cost-free return equivalent to the rate of interest being charged on the loan.
 
If you are worried about crashes then long term stock investment is not for you. Buy the stock and leave it alone. Over 30 years + dividends you should see a return.

Buy stock in good solid comanies. Read up on warren B
 
Techhead1 said:
If you are worried about crashes then long term stock investment is not for you. Buy the stock and leave it alone. Over 30 years + dividends you should see a return.

Buy stock in good solid comanies. Read up on warren B
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Arrrrgh, I know that, Im talking about there being an imminent crash or multi-year bear market, look at a chart of the FTSE or some other index, we are at a near identical peak to the dot-com and financial crisis, I do want to build an investment portfolio Im just wondering if sitting on it for a year might be best first...
 
Thargor said:
Arrrrgh, I know that, Im talking about there being an imminent crash or multi-year bear market, look at a chart of the FTSE or some other index, we are at a near identical peak to the dot-com and financial crisis, I do want to build an investment portfolio Im just wondering if sitting on it for a year might be best first...
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Techheads advice is still relevant. If you're in it for the long haul a crash shouldn't be an issue. It's an opportunity to invest more.
 
Thargor said:
Thanks Thatnewguy, what strategy to choose though? And maybe the big crash isn't coming but overvalued does seem to be a consensus opinion at the minute on world markets, I think Im going to sit on my hands for now until Im more sure about travel/career plans...
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yes but the "consensus opinion" has been saying the market is over valued since 2009. Actually I dont remember any consensus opinion ever being enthusiastic about the markets for investing maybe the last time was 1999. Ive made this point in other threads late last year when the markets had a big hiccup . Then the market was worried about the collapsing oil price and china jitters. Oil in january was nearly down to $25 and everyone was betting it would go to $10 with very convincing arguments, that was actually the consensus. Now oil is over $50, in other words doubling in a few months. No commentator predicted that, so oil demand did not collapse.
I think you should take the advice of sarenco and maybe invest in a fairly conservative investment trust,
 
Market timing doesn't work. Period.

Stocks always have a positive expected return otherwise why would anyone ever buy them. Markets go up 70% of the time on an annual basis and about 50% of the time on a daily basis.

If you are concerned about volatility then put less in stocks and periodically rebalance.

If you are worried that YOU might be the problem - i.e. buying or selling at the "wrong time" then you need to work with an adviser who can pull you back from the edge of the cliff and stop you harming your portfolio.

In studies working with an adviser adds between 1.5% and 3%pa to portfolio returns compared to doing it yourself and the vast majority of this is just maintaining an investor's composure during market cycles.

As Ben Graham (Warren Buffett's mentor) said; "the investor's chief problem and even their worst enemy, is likely to be themselves"
 
Thargor said:
Ive been procrastinating over what to do with my savings for way too long now, basically its all cash because I got spooked and got out of everything a while back when it looked like crisis 2.0 was upon us, its 50k Prize Bonds but that might aswell be cash seeing as I only get €50 every 6 weeks or worse. I have 30k in a Post Office account earning feck all and another 15k in my current account.

Now just as I approach 100k it looks like there might actually be another crisis looming, I know the long term amateur shouldn't try to time the market but with Brexit, bad start to 2016, possible end to QE and everything else it does feel like a bit bearish.

Vanguard ETFs were where I should have gone a couple of years ago but are mostly down on the year now same as most of the market.

Im basically frozen with indecision and need advice, any help appreciated. I dont really want to get a mortgage as I dont know if Im even staying in Ireland, Im 31 if that makes any difference.
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This is the best post about the Investment, i like this too muchh,,,,,,
 
Its not easy investing today, what a shock Friday was, the biggest one day move ever. The shock wasnt a result of a dodgy emerging market economy china or russia as you would expect but from europe. It just shows the importance of europe to the global economy. Europe has been stagnant for 10 years now with stock markets basically going no where on average. In my opinion it would be silly to bail out of european etfs and stocks now. I think the drop was exaggerated because markets had rallied in the days before expecting remain to win the referendum. But this is the time to continue to invest in european etfs. In theory thats what people are told to do but nobody does because of the emotion and difficulty in investing more money in investments that are not rising in value
 
joe sod said:
Its not easy investing today, what a shock Friday was, the biggest one day move ever.
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Not even close.

The biggest one day drop in stock values globally was Black Monday - 19 October 1987. The DJIA plunged over 22% in a single day.
 
Prize Bonds not looking so bad now, best investment Ive made lately. Wonder if this is going to be a full bear market...
 
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