# Where to put the money safe if you think a crash is coming



## Tastebuds (8 May 2018)

Of course that nobody has a crystal ball but, if you believed that the stock market will crash soon enough... where would you put your money?
bonds, cash?


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## Gordon Gekko (8 May 2018)

Tastebuds said:


> Of course that nobody has a crystal ball but, if you believed that the stock market will crash soon enough... where would you put your money?
> bonds, cash?



German bunds custodied in Switzerland!


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## Sarenco (8 May 2018)

Yep, German bunds are generally regarded as a safe haven in times of economic turmoil.

Mind you, Germany defaulted on its obligations to bond holders within a few years of the great stock market crash of 1929...


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## dub_nerd (9 May 2018)

I thought the Germans stopped allowing individual non-nationals from buying bunds a few years back when everybody was trying to shift money to safe havens?


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## Leper (9 May 2018)

Never smoke without fire . . . . Is there another crash coming shortly? Did we learn anything from the last crash? Spanish holiday property price increases evident in the past 18 months, surely a sign that all is not right with European economies?


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## Gordon Gekko (9 May 2018)

Leper said:


> Spanish holiday property price increases evident in the past 18 months, surely a sign that all is not right with European economies?



It’s more likely the opposite, i.e. a sign that things are going well. Plus Spanish property prices fell hard and have recovered more slowly.


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## elacsaplau (9 May 2018)

Well, there's definitely a crash on its way.

2 weeks ago, this landed in my inbox......

*A Rare ‘Sell’ Signal on US Equity Markets:* Trying to time markets isn’t a strategy we adopt but we do like to understand when the market appears to be moving from bull market conditions to bear market conditions and _vice versa_. The 120-year old technical indicator we follow, Dow Theory recently gave a ‘Sell’ signal on the US equity markets, raising the probability to about 60% that US markets are now in a bear market. On average, they have declined a further 11-14% from here over a 4-6-month period following such signals.

Yesterday, I received an update from the same organisation!!

*Economic Backdrop Remains Supportive for US Equities: *As we near the end of first quarter earnings season, it is clear that Trump’s tax cuts have given a boost to earnings, with reported earnings for the S&P500 running at a record 25.7% year on year. However, revenue growth, which does not reflect the tax cuts, is up 8.4% and is close to reaching the highest level of growth achieved by the S&P500 since the end of the financial crisis. The recent volatility and sell-off in equity markets seems to indicate a shift in investor’s focus away from the fundamentals as they seek to identify the next trigger that will send equity markets lower. But, this first quarter revenue growth serves as a reminder to investors that fundamentally the economic backdrop remains positive.

So - I think the position is pretty clear.


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## Nickname (9 May 2018)

elacsaplau said:


> Well, there's definitely a crash on its way.


Definitely? But when... and when to sell equities and when to buy back again, that is the question you should answer if you are so certain. Also why sell when the corporation tax has been cut for US based companies, surely this is going to boost EPS?


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## moneymakeover (9 May 2018)

elacsaplau said:


> Well, there's definitely a crash on its way.
> 
> 2 weeks ago, this landed in my inbox......
> 
> ...


What a load of codswallop

Talk about a U turn

I get these as well

gillenmarkets

What a load of rubbish


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## noproblem (9 May 2018)

If one was of the religious variety, the above is exactly what makes This post will be deleted if not edited immediately have a good laugh.


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## Steven Barrett (11 May 2018)

Tastebuds said:


> Of course that nobody has a crystal ball but, if you believed that the stock market will crash soon enough... where would you put your money?
> bonds, cash?



Of course there's going to be a stock market crash, there has to be, markets can't always go one way. If you sailed a boat across the Atlantic, you wouldn't expect calm seas all the time. 

You should keep doing what you are doing and not lose focus on what you long term goal is. Moving in and out of assets will lose you money in the long run. You may get lucky with your timing a few times but overall, you will miss out on growth by being out of the market. 


Steven
www.bluewaterfp.ie


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## DeeKie (31 May 2018)

SBarrett said:


> Of course there's going to be a stock market crash, there has to be, markets can't always go one way. If you sailed a boat across the Atlantic, you wouldn't expect calm seas all the time.
> 
> You should keep doing what you are doing and not lose focus on what you long term goal is. Moving in and out of assets will lose you money in the long run. You may get lucky with your timing a few times but overall, you will miss out on growth by being out of the market.
> 
> ...


So are you saying hold equities regardless?


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## Steven Barrett (31 May 2018)

DeeKie said:


> So are you saying hold equities regardless?



No, I am saying that you shouldn't let volatility or a crash in the short term alter your long term strategy. 

If you have a need for funds in the short term, you shouldn't be in equities anyway. If you don't have a need for the money for a number of years and are already in equities, there is no need to change that plan. Equity markets fall as well as rise. You can't have one without the other. Trying to just get the upside and no downside is market timing and will end in losing money. 


Steven
www.bluewaterfp.ie


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## Sunny (31 May 2018)

SBarrett said:


> No, I am saying that you shouldn't let volatility or a crash in the short term alter your long term strategy.
> 
> If you have a need for funds in the short term, you shouldn't be in equities anyway. If you don't have a need for the money for a number of years and are already in equities, there is no need to change that plan. Equity markets fall as well as rise. You can't have one without the other. Trying to just get the upside and no downside is market timing and will end in losing money.
> 
> ...



Yes if you are trying to time the market to the day and avoid all downside but I have used the free switches that my pension allows to be more defensive at times and more aggressive at others in my choice of funds. I might go three years without doing a switch and I might do two in one year but it has worked out for me. Thinking of going defensive again for the second time this year. Getting to the point where I would be happy to sacrifice lost upside to offset the risk of a major correction. Too many geo-political issues at the moment. Bexit, Italy, Iran, North Korea, Trade wars, Oil prices, rising volatility etc etc.....Doesn't mean that equities will tank in the next 6 months but I don't think the possibility of any potential gains compensates me for the downside risks.

And no, I am not trying to time the market. I accept I will miss out on potential upside and I also accept that I won't call the bottom when I come back in but generally speaking it works out well.


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## moneymakeover (31 May 2018)

What you're saying makes sense

But I think it's still timing the market


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## Sunny (31 May 2018)

moneymakeover said:


> What you're saying makes sense
> 
> But I think it's still timing the market



It is to an extent but I don’t agree with the theory that you put your equities into one fund and then forget about it. I think you are missing an opportunity. Pensions are generally lazy because they will generally track an index. Even so called active managers will do that. However, there are times when I simply don’t want to be 100% in equities for a period of time. I got out of equities at the end of last year. Simply couldn’t understand the valuations considering the political noise. Got back in after the correction. Didn’t get out at the top or back in at the bottom but I did well out of it. Now I want to get again for the same reason but am reluctant to another switch so close because it does look like trying to time the market. I probably shouldn’t have gone back in after the correction so maybe you are right. I am just trying to time the market. Only thing is I refuse to pay for a switch and have three free a year so I am limited!!


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## Gordon Gekko (31 May 2018)

Sunny, you’re displaying all of the worst behavioural traits of private investors when left to their own devices.

You are highly likely to end up materially less well-off as a result of your approach.


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## Sunny (31 May 2018)

Gordon Gekko said:


> Sunny, you’re displaying all of the worst behavioural traits of private investors when left to their own devices.
> 
> You are highly likely to end up materially less well-off as a result of your approach.



Why? I have been doing this for the last 15 years and has worked out I am not talking about daily, monthly or even annual trading. Like I say, I have gone nearly 4 years without touching my fund. I also never stop investing in equities. All contributions and a significant % of my fund will remain in equities. BUT. If i don’t like the macro climate, I will move a sizable percentage to a more defensive fund (not cash). I am not trying to see if equities are undervalued or overvalued. I am simply moving into a defensive view if I think it is appropriate.


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## Gordon Gekko (31 May 2018)

Sunny said:


> Why? I have been doing this for the last 15 years and has worked out I am not talking about daily, monthly or even annual trading. Like I say, I have gone nearly 4 years without touching my fund. I also never stop investing in equities. All contributions and a significant % of my fund will remain in equities. BUT. If i don’t like the macro climate, I will move a sizable percentage to a more defensive fund (not cash). I am not trying to see if equities are undervalued or overvalued. I am simply moving into a defensive view if I think it is appropriate.



What have your returns been?


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## Sunny (31 May 2018)

Gordon Gekko said:


> What have your returns been?



The annualised return of the equity fund I am in for a 10 year period is 6% if I did nothing. I am seeing annualized returns of over 10% for the same period. On a 5 year period, I am more aligned with the fund but still outperforming as I didn’t have any reason to switch as much in recent years. Changing again though.


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## Gordon Gekko (31 May 2018)

What fund is it and are those returns in Euro?

No offence, but I suspect that there’s a flaw in your calculations somewhere.

A single investor who is panic selling and buying back in on foot of geopolitical tremors will rarely if ever outperform.


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## Sunny (31 May 2018)

Zurich global equities. Who is panic selling? That’s not what I am doing. I didn’t sell over Brexit.  I didn’t sell when trump won the election. I haven’t sold on the back of Italy. I don’t care about 1 day movements or 1 month movements or 6 month movements. That’s not why I reduce my holdings in equities. I look at equities now and yes there is still room to go higher for the rest of this year. I personally don’t think that much higher though. I just don’t see stock markets growing 4-5% this year. Ask the same question on the downside and I think there is better than a small chance the equities could fall 4-5% this year. It doesn’t mean I think equities will crash. It doesn’t mean I don’t want to invest in equities but I have seen really strong growth in recent years and I am comfortable locking some of that growth in a more defensive fund for a period of time. Not saying it is scientific. Not saying it will end up doing better than a passive investment after 30 years. But if someone handed me a few hundred thousand tomorrow and said invest, I wouldn’t be sticking it all in equities at the moment. So why would I do it with my pension fund? Could be completely wrong but at the worst I lose out on some potential upside on a portion of my pension fund. I don’t think I will be missing out on much though. 
And I like having some money on the sidelines that I can invest when I choose. Have never sold at the top and never bought at the bottom just to be clear. I just don’t believe that just because you can’t time the market, it doesn’t mean you shouldn’t try and protect some of the gains you make along the way.


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## joe sod (31 May 2018)

Sunny said:


> Ask the same question on the downside and I think there is better than a small chance the equities could fall 4-5% this year.


 There was already a 10 % correction in february in the space of a few days and a nearly 20% correction at the start of 2016 from which there was a rapid recovery, but you want to protect yourself from a measly 5%. Then if you go defensive presumably that means in euros, you protect the value of your fund denominated in euros, but then the euro crashes due to italy or greece wobbles. Then you worry about the euro so you try to switch to dollars or precious metal funds. This was exactly what was happening in 2010 when everyone was really worried about future of euro


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## Gordon Gekko (31 May 2018)

Why is the time that it takes the Earth to revolve around the Sun relevant in terms of how markets perform for someone with a decent time-horizon?

“Time in the market beats timing the market” as the saying goes...


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## Steven Barrett (1 Jun 2018)

Sunny said:


> Yes if you are trying to time the market to the day and avoid all downside but I have used the free switches that my pension allows to be more defensive at times and more aggressive at others in my choice of funds. I might go three years without doing a switch and I might do two in one year but it has worked out for me. Thinking of going defensive again for the second time this year. Getting to the point where I would be happy to sacrifice lost upside to offset the risk of a major correction. Too many geo-political issues at the moment. Bexit, Italy, Iran, North Korea, Trade wars, Oil prices, rising volatility etc etc.....Doesn't mean that equities will tank in the next 6 months but I don't think the possibility of any potential gains compensates me for the downside risks.
> 
> And no, I am not trying to time the market. I accept I will miss out on potential upside and I also accept that I won't call the bottom when I come back in but generally speaking it works out well.



Why don't you use one of Zurich's Prisma funds? You won't have to use any of the 3 free switches and the fund manager will do any of the changes in the fund for you, based on movements in volatility? Save you having to make the changes. 


You should also consider the long term effect of switching in bear markets. When prices go down, you get more units every month for your contribution. As equities are the best performing asset over the long term, the more units you have in equities when you reach retirement, the better. 


Steven
www.bluewaterfp.ie


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## cremeegg (1 Jun 2018)

Gordon Gekko said:


> Sunny, you’re displaying all of the worst behavioural traits of private investors when left to their own devices.
> 
> You are highly likely to end up materially less well-off as a result of your approach.



The worst behavioral traits of private investors are feeling confident and buying when the market has done well and feeling pessimistic and selling when the market has done badly. Thus by definition buying dear and selling cheap.

This is the exact opposite of what Sunny is attempting, (wether successfully or not I do not know) to do.

I don’t know Gordon wether you don’t understand this basic point or are just repeating market insider nostrums without reading Sunny’s posts.


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## Gordon Gekko (1 Jun 2018)

cremeegg said:


> The worst behavioral traits of private investors are feeling confident and buying when the market has done well and feeling pessimistic and selling when the market has done badly. Thus by definition buying dear and selling cheap.
> 
> This is the exact opposite of what Sunny is attempting, (wether successfully or not I do not know) to do.
> 
> I don’t know Gordon wether you don’t understand this basic point or are just repeating market insider nostrums without reading Sunny’s posts.



cremegg,

I understand perfectly what Sunny is claiming.

I don’t believe that it’s possible.

If Sunny can do what’s being claimed, then he/she shouldn’t be wasting time with us and should be off on a yacht in the Bahamas.


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## Sunny (1 Jun 2018)

joe sod said:


> There was already a 10 % correction in february in the space of a few days and a nearly 20% correction at the start of 2016 from which there was a rapid recovery, but you want to protect yourself from a measly 5%. Then if you go defensive presumably that means in euros, you protect the value of your fund denominated in euros, but then the euro crashes due to italy or greece wobbles. Then you worry about the euro so you try to switch to dollars or precious metal funds. This was exactly what was happening in 2010 when everyone was really worried about future of euro



I am not talking about protecting myself from a measly 4-5% fall. I don’t care if equities fall 5% or 20% even. If they fall 20% when I am 100% invested then fine. I know if I wait I will get it back. That’s not the issue. I am not timing the market. The issue is do I want to be 100% invested in equities all of the time? No I don’t.   At the moment, I am 100% in equities. I will probably reduce that to 70% or less for a period of time. My monthly contributions will still go into equities. I then have 30% earning 1% returns for a period of time. I am happy to sacrifice the potential upside on that 30% to allow me the opportunity to buy back and in if and when I think there is an opportunity.

What I am doing is no different to what fund managers do. The equity fund I am in is currently 99% invested in equities but the Fund Manager has discretion to drop down to 80%. But these guys will hardly ever do that because their main target is matching or slightly beating the benchmark. So if the benchmark falls 20%, they don't really care if the fund falls 15%. It is still outperforming. Likewise, they can't afford to have money sitting in non-equities in a rising market as they will under-perform so they are nearly always fully invested. I am not saying I know better than fund managers but there are times when I don't want to be fully invested in equities. I can't call the market and like I say, I have never got out at the top and in at the bottom but the approach works for me.

Stephen, funny enough just starting looking at the Prisma funds to see if it works. Trying to get historical information about what allocations have been since launch but hard to get any information. Curious to know how active it is managed. I take your point about units and selling in a falling market. That's why I can sometimes go for a long time without doing anything. Even if equities are falling, I would prefer to wait it out as wait for the recovery rather than trying to cut losses.


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## Sunny (1 Jun 2018)

Gordon Gekko said:


> cremegg,
> 
> I understand perfectly what Sunny is claiming.
> 
> ...



Ah here. I have an annualized return of just over 10% over 10 years compared to 6% of the fund itself . I am not exactly generating hedge fund returns here.


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## MrEarl (1 Jun 2018)

Sunny,

If you are generating 10% pa over a 10-year period (in Euro), then well done !  

You are definitely in the minority of individual investors, and you probably should be working in investments / wealth management (assuming you are not already doing so).


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## moneymakeover (1 Jun 2018)

Sunny

Did you get out in 2008 before the crash
And when did you go back in?


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## Steven Barrett (1 Jun 2018)

Sunny said:


> Stephen, funny enough just starting looking at the Prisma funds to see if it works. Trying to get historical information about what allocations have been since launch but hard to get any information. Curious to know how active it is managed.



I don't think it's readily available. I certainly don't have access to that history without having to ask Zurich to provide it. 


Steven 
www.bluewaterfp.ie


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## Gordon Gekko (1 Jun 2018)

Sunny,

Is Saxon Warrior going to win the Derby?

I’m tempted to lump on at Evens.

Gordon


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## Sunny (1 Jun 2018)

Gordon Gekko said:


> Sunny,
> 
> Is Saxon Warrior going to win the Derby?
> 
> ...



Is that supposed to be witty? If you want to gamble on horses work away. If you want to invest or gamble in shares work away. If you want to invest in bitcoin go ahead. If you want to spend your money on booze and prostitutes, then go ahead. I have over 20 years financial services experience. I have lost and made my own money and I have made and lost other peoples money. I have yet to discover one system of investing that is a guaranteed winner. I have seen buy and hold investors lost their shirts in the credit crisis. I have had quantitative magicians explain to me why CDO Cubed of residential securities can't fail because they have a model that tells them so until the model didn't work anymore. I have seen technical traders sell on signals triggered by nothing but fat fingers or dealer error. I have had fund managers tell me that their 'Quantitative approach' is much better than traditional fundamental approach and I have other fund managers tell me that their bottom up approach is the best way. I could keep going on and on and on.....Only thing in common is that they all have lost money eventually.  

I am not saying what I am doing is correct. I am not telling other people what to do. There are financial advisors on here like Stephen who people should listen to much more than me. I am not some financial genius but I can read newspapers and broadly understand economic data. That allows me to take a view with my money. You might think it is the same as gambling and maybe it is but so is putting your money in an equity fund and leaving it there because past performance tells you that this is the correct thing to do......


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## Gordon Gekko (1 Jun 2018)

Nobody has ever lost money investing in global equities over any 20 year period since records began. And I’m talking real, not nominal. That should be the starting point for any investor, albeit de-risked depending on his/her risk tolerance.

Now let’s take your approach, Sunny, which is to chop in and out due to (say) the political concerns that you cited earlier. It’s a flawed approach and one that condemns you to poor returns unless you are the Messiah.

A couple of further points, the returns from that fund sound poor. Global equities should have delivered around 10% over those periods.


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## Bob2018 (1 Jun 2018)

Gordon Gekko said:


> Nobody has ever lost money investing in global equities over any 20 year period since records began. And I’m talking real, not nominal.



Hi Gordon - do you have a link to illustrate this please?


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## Gordon Gekko (1 Jun 2018)

I don’t have any charts to hand, but within this article it confirms the position for the US market:

https://www.google.ie/amp/s/www.iri...guarantee-financial-reward-1.2572631?mode=amp


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## Sunny (1 Jun 2018)

Gordon Gekko said:


> Nobody has ever lost money investing in global equities over any 20 year period since records began. And I’m talking real, not nominal. That should be the starting point for any investor, albeit de-risked depending on his/her risk tolerance.
> 
> Now let’s take your approach, Sunny, which is to chop in and out due to (say) the political concerns that you cited earlier. It’s a flawed approach and one that condemns you to poor returns unless you are the Messiah.
> 
> A couple of further points, the returns from that fund sound poor. Global equities should have delivered around 10% over those periods.



Says who? You??? I am delighted if you are investing in a global equity fund that is delivering a 10% annualised return in a 10 year period. Which one is by the way? I presume are you are invested in equities since nobody has ever lost money in a 20 year period??? Because we all know that past performance is a perfect indicator of future performance. Foolproof strategy there. I feel silly now.

And by the way I never said investing long term in equities wasn’t the right idea. That’s exactly what I am doing


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## moneymakeover (1 Jun 2018)

I for one congratulate Sunny for his wisdom and for sharing his experience

It was obvious back in 2008 when p/e was through the roof that equities were overpriced.

What Sunny is saying makes perfect sense and this is a game pension fund managers get paid to do world over


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## Sunny (1 Jun 2018)

moneymakeover said:


> I for one congratulate Sunny for his wisdom and for sharing his experience
> 
> It was obvious back in 2008 when p/e was through the roof that equities were overpriced.
> 
> What Sunny is saying makes perfect sense and this is a game pension fund managers get paid to do world over



Just to be clear, I missed 2008 and had to ride it out until they picked up again which it was always going to happen. I did well in 2015 thanks to China wobble and end of bull run. Missed brexit as well.  I am not advocating not investing in equities. I am advocating that unless you have large sums ready to invest, it is not a bad idea to have some bit of your pension in a more defensive fund until an opportunity arrives.


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## Gordon Gekko (1 Jun 2018)

Sunny said:


> Says who? You??? I am delighted if you are investing in a global equity fund that is delivering a 10% annualised return in a 10 year period. Which one is by the way? I presume are you are invested in equities since nobody has ever lost money in a 20 year period??? Because we all know that past performance is a perfect indicator of future performance. Foolproof strategy there. I feel silly now.



Yes, all of my liquid assets are invested 100% in equities (except for a €60k emergency cash deposit and whatever’s in my current account).

Why? Because over long time horizons, equities are the best performing asset class.

Do I chop and change? Nope. I just buy more on a regular basis, probably circa €5k a month as cheaply and as tax-efficiently as possible.

Feel free to throw out smart remarks about “past performance being a perfect indicator of future performance”; I’ll just draw comfort from the fact that the person who invested the day before Franz Ferdinand was shot, the day before the 1929 crash, the day before Poland was invaded, the day before Pearl Harbour, the day before the Oil Crisis, the day before the Dot.Com bubble burst, or the day before the Financial Crisis has always been up in after-inflation terms 20 years later, provided he/she stayed the course.

Have you ever seen the stats around the US market which illustrate the total returns for (say) 10 or 15 years but then the effect of missing the 5 best days or the 10 best days (which tend to come after bad days)? I don’t have the stats to hand, but it’s something like the average annual return for 15 years was 8% but only 5% if you missed the 10 best days. That’s 10 days out of circa 5,000.

You may or may not have been lucky over the years, but your strategy is bonkers.


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## Sunny (1 Jun 2018)

Gordon Gekko said:


> Yes, all of my liquid assets are invested 100% in equities (except for a €60k emergency cash deposit and whatever’s in my current account).
> 
> Why? Because over long time horizons, equities are the best performing asset class.
> 
> ...



Sigh. Still going on about best ‘Days’ and all the rest. Where have I once claimed that I am looking at a days movement? Or a weeks? Or a months? Or 6 months?I couldn’t care less if someone was assasinated or hitler comes back. I will still be invested in equity market just like you. However I might be 100% invested or I might not be. I am not timing the market. I am not like you. I don’t have 60,000 emergency cash. I can’t invest 5k a month so fair play to you. I need to find another way to have money available for opportunistic buying. Not setting up a cult for you to follow but still want to know what equity fund has returned over 10% annualised  in the past 10 years so I can invest in it and save me the effort. 

And if you are going to criticize smart comments, why don’t you look at your own pathetic comparison to the derby or something. Or calling my strategy bonkers. You are not my wife. I am not looking for your approval. If it all goes pear shape because I just happened to have a % of my fund invested outside equities for a period of time, then I shall just have to come on here and beg forgiveness for my recklessness.


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## Gordon Gekko (1 Jun 2018)

I’ll give you 3 which I’ve been invested in and which I’ve never sold.

Morgan Stanley Global Brand - Circa 10% per annum over the 10 year period

Finbury Growth & Income Trust - Circa 15% per annum over the 10 year period

Zurich International Equity - Circa 9% per annum over the 10 year period

You are timing the market!


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## Bob2018 (1 Jun 2018)

Gordon Gekko said:


> Nobody has ever lost money investing in global equities over any 20 year period since records began. And I’m talking real, not nominal.



I didn't believe this so I questioned it and got



Gordon Gekko said:


> I don’t have any charts to hand, but within this article it confirms the position for the US market:



Why do people make present statements as fact if they can not substantiate them? I agree with Gordon's central philosophy of buy and hold but why do people feel the need to make heroic statements?


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## Sunny (1 Jun 2018)

First one from what I can see is circa 10% since inception, nearly 18 years.

Second one is a trust specializing in UK securities which you have used to back up your assertion that global equities should have returned over 10% annualised  in a ten year period. 

Goodnight......


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## Sunny (1 Jun 2018)

Oh and your last one is less than 8% before charges.


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## Gordon Gekko (1 Jun 2018)

Bob2018 said:


> I didn't believe this so I questioned it and got
> 
> 
> 
> Why do people make present statements as fact if they can not substantiate them? I agree with Gordon's central philosophy of buy and hold but why do people feel the need to make heroic statements?



I’m in a pub...I have seen the figures and the charts...that’s what I could pull whilst talking to people and trying to have a pint. The point stands; none of the investors have lost money over a 20 year period. 

If you want more, try Bloomberg or Morningstar.


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## cremeegg (2 Jun 2018)

The way to outperform the market is to recognize when it is seriously misprinted. Like here. 



moneymakeover said:


> It was obvious back in 2008 when p/e was through the roof that equities were overpriced



For those who cannot find their time machine. Here is something else that will become obvious with hindsight. 

The trade war which began in June 2018 was a really big deal and did serious damage to the world economy. 

Investors took a long time to recognize the seriousness of Trumps sanctions. As the economics of the trade war made no sense investors expected wiser counsels to prevail. 

However as we now know events were driven by politics not logic and a tit for tat downward spiral became unstoppable. 

After an initial wobble Stock markets continued to rise for Many months before going into their most serious decline in over a century.


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## Gordon Gekko (2 Jun 2018)

cremegg,

This is your main issue; you’re behaving as if the last crisis is about to happen again. There was a “trade war” with China a couple of months ago and then they came to an agreement! Paul Sommerville was on Newstalk talking about the end of the financial world 3/6/9/12 months ago. It hasn’t happened. Market climb the wall of bad news, whilst bad investor behaviour means that people don’t participate.


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## Bob2018 (2 Jun 2018)

Gordon Gekko said:


> If you want more, try Bloomberg or Morningstar.



I've done a search on both and can see nothing to substantiate your point. I'd be interested in seeing the data - that's all.


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## spanners (2 Jun 2018)

Having recently been researching and thinking a lot about equities, bonds, asset allocations, the pros and cons of amateur personal investors vs professional investment managers etc and a lot of the talk around the subject seems quite contradictory. This thread is a good example.

It strikes me that if Sunny came on here and said:

_"I am 100% in equities - I am going to sell a portion to put in bonds because I believe that my equity holdings as a % should be no more than 100 minus my age; I am simply more comfortable with that asset allocation"
_
there are those that would laud him as a model example of a wise private investor.

Whereas if he said:

_"I am 100% in equities - I am going to sell a portion to put in bonds because I believe the stock market is way over valued, the current prospects of growth are limited, compared to the prospects of a fall, and I am prepared to lose out on any upside so I can protect myself against the risk of the downside."_

some of those same people would pillory him for being the typical idiotic amateur private investor trying to time the market.

I must admit that it seems to me that the net result is the same thing, the only reason is the decision making criteria.

The criteria in the second example seems to be perfectly valid, dare I say it more valid, than the first.

Am I missing something?


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## joe sod (2 Jun 2018)

the problem with going defensive in the current market is that you either go into bond funds or euros, we have already seen the wobbles in the euro lately with italian elections, also bond funds extremely risky with interest rates starting to rise , in that environment the value of your bond funds go down, presumably the best managed funds can manage that but interest rates have been falling since 1982 effectively, so we wont really know how good they really are. Warren Buffet made a specific warning about bonds recently (albeit he was more concerned that investors were sitting out the potential in the stock markets). He added that he should have invested in bonds in 1982 when interest rates were at their height but that was the only time he would have invested in bonds.


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## PMU (2 Jun 2018)

Gordon Gekko said:


> Nobody has ever lost money investing in global equities over any 20 year period since records began. And I’m talking real, not nominal.


 If  you had invested 20 years ago in the Eurostoxx50 on 1 June 2018 at its close of 3406.82 you were still at a loss  at the end of last month when it closed at 3406.65. If you had invested at its peak of 5450.22 in Feb 2000, i.e. 18 years ago, you've still a long way to go to recover your loss. (Figures for ^STOXX50E from Yahoo Finance). And after 30 years the Nikkei (^N225) is nowhere near its 1989 peak.  This should be, as you correctly point out, the starting point for any investor.


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## Gordon Gekko (2 Jun 2018)

Which is why one shouldn’t invest exclusively in Japanese or large cap European stocks.



Page 8 shows the effect of poor investor behaviour (basically how investors react to bad news by selling). The average investor through poor behaviours earns circa 2.1% per annum. cremegg’s claims that his/her approach has worked, but it does not work for the vast majority of people.

Page 16 shows the effect of missing the best 10 days over a 20 year period (the annualised return drops from 8% to 4.5%). These best days tend to follow poor days.

Here are the probabilities for positive returns:

http://awealthofcommonsense.com/2015/11/playing-the-probabilities/

Nobody has ever lost over a 20 year period.


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## Bob2018 (2 Jun 2018)

Gordon Gekko said:


> Nobody has ever lost over a 20 year period.



Gordon: You can repeat the same thing as often as you like but after a few replies you still have not substantiated the claim that I queried in relation to Global Equities. My belief is that not alone can you not substantiate it but you are not prepared to acknowledge this either.


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## Gordon Gekko (2 Jun 2018)

Bob2018 said:


> Gordon: You can repeat the same thing as often as you like but after a few replies you still have not substantiated the claim that I queried in relation to Global Equities. My belief is that not alone can you not substantiate it but you are not prepared to acknowledge this either.



Bob,

Are you suffering from a bad dose of myopia? It is a bank holiday weekend; I have replied to say that I don’t have access to a whole heap of data right now but I’ve shown you enough to prove that nobody has ever lost on the S&P over any 20 year period. Did you even read the posts? Or do you and your mates just prefer to have a row?

Gordon


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## Bob2018 (2 Jun 2018)

Ah - I see your confusion - you believe the S&P is the same as world equities - silly me.


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## Gordon Gekko (2 Jun 2018)

http://investmentmoats.com/passive-...r-201510-5-years-net-of-dividends-reinvested/

Global Equities, Bob, since the birth of the MSCI World Index in 1969.

So now we know that nobody has ever lost money over a 20 year period in respect of the MSCI World Index or the S&P 500.


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## Gordon Gekko (2 Jun 2018)

Bob2018 said:


> Ah - I see your confusion - you believe the S&P is the same as world equities - silly me.



No, Bob, there’s just truckloads more data available for the largest market in the world, and the MSCI World Index only kicked off in 1969.

But people like yourself prefer to act the pedant and squirm down rabbit-holes with a view to deflecting attention away from the substantive point.

Give us the benefit of your wisdom; do you think that being invested in global equities for any 20 year period has ever led to a loss?


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## Sarenco (2 Jun 2018)

I don't think anybody can legitimately say that nobody who ever invested in global stocks over a 20-year period ever lost money.  We just don't have sufficient data to substantiate that claim.

We know that the Dow (as a proxy for stocks generally) took 25 years to return to its 1929 high point (the S&P500 didn't come into existence until 1957). 

More importantly, there have been 30-year+ periods in all major economies (including the U.S.) where domestic government bonds outperformed domestic equities.

In any event, the past is not prologue.  A balanced approach, as suggested by others, seems entirely sensible to me.


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## Bob2018 (2 Jun 2018)

Gordon - As predicted, you cannot substantiate your statement and also you will not acknowledge this. I note repetition of the falsehood has given way to personal attacks. I have better things to be doing on a bank holiday weekend than this.


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## Gordon Gekko (2 Jun 2018)

Bob2018 said:


> Gordon - As predicted, you cannot substantiate your statement and also you will not acknowledge this. I note repetition of the falsehood has given way to personal attacks. I have better things to be doing on a bank holiday weekend than this.



Bob,

I find your approach to this discussion laughable to be honest. What exactly are you looking for?

Nobody has ever lost on the MSCI World over any 20 year period since its inception 50 years ago:

http://investmentmoats.com/passive-...r-201510-5-years-net-of-dividends-reinvested/

Prior to that, the S&P probably has the longest term, broadest, and most accurate data around it; as previously posted, nobody has ever lost money over a 20 year period either. The probability of being “up” over any 20 year period from 1926 to date is 100%:

http://awealthofcommonsense.com/2015/11/playing-the-probabilities/

Best of luck.

Gordon


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## Fella (2 Jun 2018)

it’s not enough to say “ nobody has ever lost money” if you invest 10,000 and 20 years later your investment is worth 10,000 you have lost money to inflation .

you have to compare stocks investment to something else to say you haven’t lost , the nobody has ever lost money is not a valid argument . Id want to be rewarded for taking extra risk 
if you invest for 20 years and fail to beat state savings I would consider that as money lost .


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## Gordon Gekko (2 Jun 2018)

Fella said:


> it’s not enough to say “ nobody has ever lost money” if you invest 10,000 and 20 years later your investment is worth 10,000 you have lost money to inflation .
> 
> you have to compare stocks investment to something else to say you haven’t lost , the nobody has ever lost money is not a valid argument . Id want to be rewarded for taking extra risk
> if you invest for 20 years and fail to beat state savings I would consider that as money lost .



There’s data for the S&P on that very point; nobody has ever lost money in real (i.e. after inflation terms).

The other salient point is that in virtually every case, you’ve done very well. It tends to be the few extreme cases where it’s borderline (e.g. Mr 1929, Dot.Com Man, or Mrs Bear Stearns) that the position is only marginally positive (but positive nonetheless).

However, it’s all academic unless we focus on today; safe in the knowledge of the historic data, why should a private investor with a long-time horizon (which most of us have) be worried about investing in equities when the past has been so positive and we don’t appear to be on the cusp of a 1929/2008 event? Even in a nightmare scenario where the crash is tomorrow and we’re investing today, our investment should recover.

And why would the private investor with a 20 year time horizon look to chop and change based on economic or political noise? Especially when stats like the effect of missing the 5 best days over a 7,300 day (i.e. 20 year) period are so well known?


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## Bob2018 (2 Jun 2018)

Gordon - I asked you to substantiate an heroic statement which you have been unable to do - in spite of apparently previously having "visions" of "loads of charts" (and presumably you are also no longer in the pub).

I'd actually like to see the data. *I'd like to know what the worst 20 cumulative years for global equities have ever been*. Using the S&P as a proxy for world equities of 100 years ago does not do it for me especially given that the US market had a substantial smaller share of the global equity market back in the day and we know that many other markets had pretty much all-out melt-downs.

Anyway, if you can answer the point in bold - that would be great. By the way, markets did not begin when Morgan Stanley decided to index them.


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## Gordon Gekko (2 Jun 2018)

Good man Bob.

50 years of MSCI data aren’t enough for you.

The S&P isn’t enough for you.

Best of luck.


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## Sarenco (2 Jun 2018)

@Gordon Gekko

The S&P500 index didn't exist in 1926.  It was launched in its present form in 1957.

The MSCI World index was launched on 31 March 1986.

Saying that the MSCI World Index has never shown a loss over any 20-year period since its inception (which happens to coincide with a period of exceptional growth in all developed economies) is quite different to saying that nobody ever lost money by investing in global equities over any 20-year period. 

It's not a pedantic point - even 50 years is a very limited time period from which to draw any conclusions. 

In any event, it's kind of a pointless statement.  It's far more meaningful to compare the real returns on equities with the real return on the other major class of securities (bonds) over different time periods.  Again, there have been 30-year+ periods in all major economies where the real return on domestic government bonds has been higher than the real return on domestic equities (and that ignores the additional cost of investing in equities).

I'm not suggesting that global equities are not a good place to invest money over long time periods.  But it's unwise to make exaggerated claims regarding past-performance (or to extrapolate the future from the past).

As in most things, moderation is often the better approach.


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## Gordon Gekko (2 Jun 2018)

Sarenco, the available data for the S&P post 1925 and the comparable data pre 1925 show that nobody in close on 150 years has ever lost money over a 20 year period.

It is not my fault that the MSCI World Index is “only” 50 years old, but despite the Dot.Com crash and the Great Financial Crisis, nobody has ever lost money either.

Do you not accept that, with a 20 year time horizon, equities are a safe bet?

I’ve shown that for the MSCI and the S&P, nobody has ever lost money.

If that’s not enough, I give up. Let cremegg stick to trimming his long-term portfolio because markets went up 5% from January to March or because Donald Trump fell asleep mid tweet.

The way to deal with this country’s retirement tsunami is to persuade people to invest in equities, not to scaremonger (I am not accusing you of that).


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## Fella (2 Jun 2018)

Gordon Gekko said:


> The way to deal with this country’s retirement tsunami is to persuade people to invest in equities, not to scaremonger (I am not accusing you of that).



Well even people who want to invest in global equities are put off , the tax treatment of investors is disgraceful compared to our nearest neighbours . 
if the government really wanted us to invest in equities they would set up similars ISA’s like uk have . I get the feeling they don’t want people investing in equities.


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## Gordon Gekko (2 Jun 2018)

Sarenco,

I fundamentally disagree with your assertion regarding extrapolating the future. Really long-term past performance IS a guide to future performance.

I would turn the whole thing on its head:
It is foolish to fear what has never happened.

Please note that my sole aim is to get people to invest in a globally diversified manner to secure their future and to ensure that they stay the course. I have no agenda beyond that.

I also disagree with your point regarding 1925/1926; the S&P data covers the period when markets were really getting going and the 1929 crash. I stand by the assertion that a globally diversified investor with a 20 year time horizon will not lose (even if Monday is 1929, 2008, Pearl Harbour, etc).

Gordon


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## Sunny (2 Jun 2018)

Gordon Gekko said:


> I stand by the assertion that a globally diversified investor with a 20 year time horizon will not lose (even if Monday is 1929, 2008, Pearl Harbour, etc).
> 
> Gordon



That is a staggering statement. So global equites with a 20 year horizon is guaranteed not to lose you money. Why the hell don’t fund managers ever tell you these things? Actually why are there even fund managers in existence. We don’t need them.

The statement that it is foolish to fear what has never happened is equally as ridiculous. There are risk management professionals all over the world lying awake at night fearing what has never happened before happening on their watch because their risk models wont have captured it.That tail risk is the real concern and yet you just belittle it. Scary.


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## Sarenco (2 Jun 2018)

Gordon Gekko said:


> Do you not accept that, with a 20 year time horizon, equities are a safe bet?


No, stocks are never a "safe bet" - equities are an inherently risky (volatile) asset class, although historically the dispersion of returns has certainly diminished significantly over longer holding periods.

Again, you seem to be ignoring the fact that there have been 30-year+ periods in every major economy where domestic government bonds have outperformed domestic equities.  I'm not for a second suggesting that folks shouldn't invest in equities - I'm suggesting that they would be well-advised to gradually add less volatile investments (bonds) to their retirement portfolio as their investment horizon shortens.

I gave you the inception dates for the S&P500 (1957) and MSCI World (1986).  Any earlier return figures are based on reconstructed data (ie if the S&P500 existed in 1870 (or whenever) it would show returns of X).  I've studied the data in some detail and I'm unconvinced of its accuracy, particularly as you go further back in time.

Again, I don't think that "not losing money" is a good way of demonstrating investment success.  I'm far more interested in risk-adjusted returns - can I be reasonably confident that I will achieve my financial goals while taking a level of risk that is acceptable to me?


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## Sarenco (2 Jun 2018)

Gordon Gekko said:


> I fundamentally disagree with your assertion regarding extrapolating the future.


Regulators accross the planet insist that investment product documentation carries a clear statement to the effect that past returns are not indicative of future returns.  That is entirely appropriate in my opinion.

Also, we don't have accurate data for the really long-term.  20 years is not really long-term.  Nor is 50 or even 100 years.


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## Gordon Gekko (2 Jun 2018)

Sunny said:


> That is a staggering statement. So global equites with a 20 year horizon is guaranteed not to lose you money. Why the hell don’t fund managers ever tell you these things? Actually why are there even fund managers in existence. We don’t need them.
> 
> The statement that it is foolish to fear what has never happened is equally as ridiculous. There are risk management professionals all over the world lying awake at night fearing what has never happened before happening on their watch because their risk models wont have captured it.That tail risk is the real concern and yet you just belittle it. Scary.



In my view, from today’s starting point, an investor in global equities will not lose money. 

Fund managers have benchmarks and parts of the market that they have to look at (or cannot look at).

I worry for you if you subscribe to the view that as private investors we should be chopping and changing our portfolios as a result of political or economic events.

But we appear unlikely to agree.


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## Gordon Gekko (2 Jun 2018)

Sarenco said:


> Regulators accross the planet insist that investment product documentation carries a clear statement to the effect that past returns are not indicative of future returns.  That is entirely appropriate in my opinion.



I agree.

But I don’t agree that it’s appropriate to look at the overall market which has done extraordinarily well over very long time-horizons and fear the opposite happening.


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## cremeegg (2 Jun 2018)

Gordon Gekko said:


> cremegg’s claims that his/her approach has worked,.



I knew you weren't reading the posts Gordon, I have made no claim nor outlined any approach.

I have said that the trade war will turn into a bigger deal than the market believes at present.




Gordon Gekko said:


> cremegg,
> 
> This is your main issue; you’re behaving as if the last crisis is about to happen again. There was a “trade war” with China a couple of months ago and then they came to an agreement!



The last crisis ? The trade war crisis is only beginning. That is a political prediction, and it will happen for political reasons. The effects on markets will be far reaching.


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## Sunny (2 Jun 2018)

Gordon Gekko said:


> In my view, from today’s starting point, an investor in global equities will not lose money.
> 
> Fund managers have benchmarks and parts of the market that they have to look at (or cannot look at).
> 
> ...



 Frightening. Hope you won’t be offended if I don’t take advice from someone who says an investor in global equities will not lose money. 

Thanks for worrying about me but at least I understand I can lose money. I sincerely hope you never have a rude awakening.


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## Sunny (2 Jun 2018)

Gordon Gekko said:


> I agree.
> 
> But I don’t agree that it’s appropriate to look at the overall market which has done extraordinarily well over very long time-horizons and fear the opposite happening.



Of course you should fear it!!!!! Nobody here is saying don’t invest in equities but at least have your eyes open when doing it.


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## Gordon Gekko (2 Jun 2018)

Sunny said:


> Frightening. Hope you won’t be offended if I don’t take advice from someone who says an investor in global equities will not lose money.
> 
> Thanks for worrying about me but at least I understand I can lose money. I sincerely hope you never have a rude awakening.



It would be some awakening alright if something that has never happened happens; that a bit of sabre rattling by Donald Trump will somehow morph into something that makes the money that I put into global equities today worth less in 2038.

Thanks for your concern though, I’m just so naive to think that investing today won’t be worse than investing the day before the Wall Street Crash, Pearl Harbour, the Oil Crisis, 1987, 9/11, the Dot.Com crash, or the Great Financial Crisis.

I would venture that the naive ones are the people who think that investing in equities today with a 20 year plus time horizon is “risky”.


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## Sunny (2 Jun 2018)

My God. Every investment is risky!!! That’s the whole point. 6 months. 1 year. 20 years. It changes the risk profile but it doesn’t make risk disappear. 

You have missed the whole point of this thread. I am not reacting to news. I don’t reduce equity exposure because Donald trump has a new idea. I never stop investing in equities. I never sell after a sharp fall off. I never sell when the market is volatile. I simply change my allocation once or twice a year or I might do it every few years. It’s not timing the market. It’s not trading on news. It’s not even trading. It’s simply managing the allocation of my money. I have never stopped putting money into equities. I have never moved below 60% holding in equities. But at times, there are other asset classes that I like the look of. Call me reckless if you like but at least I understand risk.


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## Gordon Gekko (2 Jun 2018)

Sunny,

You got out of equities completely and then went back in. You’re doing this off your own bat. You are attempting to time the market, whether you deny it or not.

You don’t seem to understand risk at all; you are making the classic mistake of running with herd and conflating risk and volatility.

You seem to think I’m making a massive call by claiming that an investor in global equities won’t lose money over the next 20 years; I’m fine with that.


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## Sunny (2 Jun 2018)

Gordon Gekko said:


> It would be some awakening alright if something that has never happened happens; that a bit of sabre rattling by Donald Trump will somehow morph into something that makes the money that I put into global equities today worth less in 2038.
> .



Seriously??? You think the only risk is Donald trump because you are investing today??? What about the guy in the Oval Office in 5 years, 10 years, 19 years and 6 months and the decisions he makes??? What about war, climate change or 200 different things that might happen. That doesn’t impact your investment or you think there is nothing he can do to wipe out the ‘gains’ you ‘might’ have made in the preceding 19 years.


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## Sunny (2 Jun 2018)

Gordon Gekko said:


> Sunny,
> 
> You got out of equities completely and then went back in. You’re doing this off your own bat. You are attempting to time the market, whether you deny it or not.
> .



No I didn’t. Where did I say that??? I was never never anywhere near completely out of equities.


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## Bob2018 (2 Jun 2018)

Again Gordon, I notice that you were unable to answer my latest question and had to resort to sarcasm.


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## Gordon Gekko (2 Jun 2018)

Bob2018 said:


> Again Gordon, I notice that you were unable to answer my latest question and had to resort to sarcasm.



I’ve answered all of your question.


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## Gordon Gekko (2 Jun 2018)

Sunny said:


> I got out of equities at the end of last year. Simply couldn’t understand the valuations considering the political noise.
> 
> Got back in after the correction. Didn’t get out at the top or back in at the bottom but I did well out of it.
> 
> I probably shouldn’t have gone back in after the correction so maybe you are right. I am just trying to time the market


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## Sunny (2 Jun 2018)

Badly phrased but read the entire thread. How many times did I clarify my position??? As someone said above, you are not even reading posts.


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## Gordon Gekko (2 Jun 2018)

Sunny said:


> Badly phrased but read the entire thread. How many times did I clarify my position??? As someone said above, you are not even reading posts.



I give up. Let’s just leave it there. Enjoy your weekend.


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## KOW (2 Jun 2018)

Well after sitting on the side lines all day  I think the high stool is the place for me. Thanks all a bit of a thriller.


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## TheBigShort (2 Jun 2018)

Gordon Gekko said:


> Feel free to throw out smart remarks about “past performance being a perfect indicator of future performance”; I’ll just draw comfort from the fact that the person who invested the day before Franz Ferdinand was shot, the day before the 1929 crash, the day before Poland was invaded, the day before Pearl Harbour, the day before the Oil Crisis, the day before the Dot.Com bubble burst, or the day before the Financial Crisis has always been up in after-inflation terms *20 years *later, provided he/she stayed the course.





Gordon Gekko said:


> prove that nobody has ever lost on the S&P over any *20 year period*. Did you even read the posts? Or do you and your mates just prefer to have a row





Gordon Gekko said:


> So now we know that nobody has ever lost money over a *20 year period* in respect of the MSCI World Index or the S&P 500.





Gordon Gekko said:


> do you think that being invested in global equities for any *20 year period* has ever led to a loss?





Gordon Gekko said:


> nobody has ever lost money over a *20 year period* either.



Im not sure about anybody else, but Im guessing the Gekko has timed the market?



Gordon Gekko said:


> You are attempting to time the market, whether you deny it or not.



In fairness, who doesn't try time the market?


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## Gordon Gekko (2 Jun 2018)

The person with a long time horizon who invests his or her spare cash as and when it becomes available.


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## TheBigShort (2 Jun 2018)

Gordon Gekko said:


> The person with a long time horizon who invests his or her spare cash as and when it becomes available.



"a long *time* horizon" or in comparison, a short time horizon like a day, week, month or year...is still timing the market.
What you are appear to be alluding to is risk. In general, the stats will back your assertion and investment strategy of low(er) risk. 
But timing the market you are.


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## Bob2018 (2 Jun 2018)

Gordon Gekko said:


> I’ve answered all of your question.



Sir - I think you might actually believe this but from the perspective of the one posing the questions I would hold a polar opposite opinion. Have a nice weekend.


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## Sunny (2 Jun 2018)

Gordon Gekko said:


> I give up. Let’s just leave it there. Enjoy your weekend.



I am still none the wiser and I don’t think anyone else is either. Enjoy.


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## elacsaplau (3 Jun 2018)

I must confess to being a little perplexed by the position adopted by Gordon in this thread.


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## Gordon Gekko (3 Jun 2018)

Which is more risky? Leaving €100,000 on deposit for the next 20 years or investing €100,000 in Global Equities for the next 20 years? In my view, it’s the former.


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## Jim2007 (3 Jun 2018)

Gordon Gekko said:


> Now let’s take your approach, Sunny, which is to chop in and out due to (say) the political concerns that you cited earlier. It’s a flawed approach and one that condemns you to poor returns unless you are the Messiah.



He is just doing a TA, it is not that dramatic, it's fairly common among fund manager, although I have my doubts that it makes much difference to the long term returns of a portfolio.


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## Sunny (3 Jun 2018)

Gordon Gekko said:


> Which is more risky? Leaving €100,000 on deposit for the next 20 years or investing €100,000 in Global Equities for the next 20 years? In my view, it’s the former.



So you now admit that investing in global equities for 20 years is not risk free like you claimed earlier? It is simply ‘less risky’ than other alternatives.


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## Sunny (3 Jun 2018)

Jim2007 said:


> He is just doing a TA, it is not that dramatic, it's fairly common among fund manager, although I have my doubts that it makes much difference to the long term returns of a portfolio.



I agree. Not claiming to be able to generate outrageous returns or beat fund managers or a passive index over the long term. It has worked out for me so far and I have been able to generate return through having money on the sidelines to invest when I think there is an opportunity but I understand that doesn’t mean anything. I simply don’t see what the issue is with deciding not to be 100% invested in equities at certain times if I see fit. Gordon compared it to putting it on a horse and then claimed equities was risk free as long you left them for 20 years. I just don’t understand his stance considering his usual posts.


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## Gordon Gekko (3 Jun 2018)

Sunny said:


> So you now admit that investing in global equities for 20 years is not risk free like you claimed earlier? It is simply ‘less risky’ than other alternatives.



Where did I “admit” that?

Risk is not volatility; Risk is permanent loss of capital. I don’t believe that I will lose money if I invest €100 in global equities today and I’ve a 20 year time-horizon. However, I am almost positive that I will lose money through loss of purchasing power if I leave €100 on deposit for the same period.

I simply disagree with your approach, Sunny, and believe that you’d be better off staying invested rather than chopping and changing in response to noise.

And to reiterate, based on current valuations, and the performance of markets since records began, I see no risk in investing in global equities today with a 20 year time-horizon. You will not lose money.


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## Sunny (3 Jun 2018)

Gordon Gekko said:


> Which is *more risky*? Leaving €100,000 on deposit for the next 20 years or investing €100,000 in Global Equities for the next 20 years? In my view, it’s the former.



Sigh. Gordon no offense but for some reason this thread has you really worked up and your stance is confusing. And it doesn’t seem to be just me thinks it. Fine you disagree so I don’t see any point debating it. I also completely disagree with your definition of risk. If all you at is potential losses without looking at potential losses relative to expected returns, then you don’t know what risk is.

And the fact that you would tell someone that investing in equities that they *will not* lose money over 20 years is frightening.


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## Duke of Marmalade (3 Jun 2018)

There is a fundamental reason why equities, esp. US equities will do well in the long run.  It is called the "Bernanke Put option" after a former boss of the FED.  Basically the argument goes that equities have a purchaser of last resort in the government itself.  Oh they don't actually physically buy the market in a crash - that would against capitalist ideology.  But they do pull out all the stops to support depressed markets.  QE is a case in point.  It is not just a policy of supporting equity investors per se it is a recognition that depressed markets are very mad for aggregate demand and the economy in general.

Though of course we still face the fact that Japan has bucked all these arguments.


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## Sarenco (3 Jun 2018)

Gordon Gekko said:


> Which is more risky? Leaving €100,000 on deposit for the next 20 years or investing €100,000 in Global Equities for the next 20 years? In my view, it’s the former.


I would have thought the stock investment was obviously the riskier choice.

You would certainly expect to be compensated for taking the additional risk but equally you know that there are no guarantees in this regard.

There is an umbilical link between risk and return.  You cannot expect higher returns without taking higher risk.

To say there is no risk in investing in global equities over a 20-year horizon is just silly.  There is always a risk that your expectations will not be realised and, with the benefit of hindsight, you would have been better off investing in lower risk investments.


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## Sunny (3 Jun 2018)

Gordon Gekko said:


> And to reiterate, based on current valuations, and the performance of markets since records began, I see no risk in investing in global equities today with a 20 year time-horizon. You will not lose money.



By the way what does that even mean?? How are you linking current valuations and historical performance to give you a model that produces a *guaranteed* positive return after 20 years.


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## Gordon Gekko (3 Jun 2018)

Sarenco,

That depends on one’s definition of risk.

A cash deposit is pretty much guaranteed to lose money in real terms over the coming years.

Equities are less risky, given the appropriate time horizon, and 20 years is fine on the basis that nobody has ever lost money in real terms when investing in the S&P.

But if you want to make up your own definition of risk, that’s fine.

Cash) Almost certain to lose in real terms
Equities) Have never lost in real terms

Best of luck to all.


----------



## Gordon Gekko (3 Jun 2018)

Sunny said:


> By the way what does that even mean?? How are you linking current valuations and historical performance to give you a model that produces a *guaranteed* positive return after 20 years.



Sunny,

Sarenco is a decent skin, despite our occassional clash, and he/she has the mental capacity for reasoned debate. I fear that you do not, so I won’t be engaging with you any further. Best of luck with your “chop and change” investment strategy. I suggest that you ignore Donald Trump’s Twitter feed for starters. You are akin to a pedant who repeatedly attacks someone for daring to contend that a plane won’t crash. I wish you well, but I fear that your poor investor behaviour will condemn you to poor investment returns.

Gordon


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## Sunny (3 Jun 2018)

Gordon Gekko said:


> Sunny,
> 
> Sarenco is a decent skin, despite our occassional clash, and he/she has the mental capacity for reasoned debate. I fear that you do not, so I won’t be engaging with you any further. Best of luck with your “chop and change” investment strategy. I suggest that you ignore Donald Trump’s Twitter feed for starters. You are akin to a pedant who repeatedly attacks someone for daring to contend that a plane won’t crash. I wish you well, but I fear that your poor investor behaviour will condemn you to poor investment returns.
> 
> Gordon



Maybe you are right I don’t have the mental capacity and I bow to your superior intelligence. Sorry for having having the cheek to attempt to engage with you. I know my place now.

I bow to anyone who defines risk as permanent loss of capital....


----------



## Bob2018 (3 Jun 2018)

Gordon Gekko said:


> ….he/she has the mental capacity for reasoned debate. I fear that you do not, so I won’t be engaging with you any further.



This is grossly offensive.


----------



## Gordon Gekko (3 Jun 2018)

Sunny said:


> Maybe you are right I don’t have the mental capacity and I bow to your superior intelligence. Sorry for having having the cheek to attempt to engage with you. I know my place now.
> 
> I bow to anyone who defines risk as permanent loss of capital....



Sunny,

If you have the asset class that has delivered the greatest return for investors, a 20 year time-horizon, and you’re armed with the knowledge that nobody has ever lost money over that time-horizon, how would you categorise that investment?

Gordon


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## Sunny (3 Jun 2018)

Gordon Gekko said:


> Sunny,
> 
> If you have the asset class that has delivered the greatest return for investors, a 20 year time-horizon, and you’re armed with the knowledge that nobody has ever lost money over that time-horizon, how would you categorise that investment?
> 
> Gordon



I don’t come on this site to be insulted about my mental capacity so I am bowing out of this. 

As for what I would call it, all I will say is that I wouldn’t call it risk free or even low risk. But as you say, people are free to make up their own definition of risk so it doesn’t really matter. 

Enjoy the sun all.


----------



## Sunny (3 Jun 2018)

By the way, can you show me one regulated fund manager that has ever once claimed that investing in global equities for 20 years is risk free. Just one piece of research or marketing material that makes the same claim you are making. There must be loads of examples.


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## Bob2018 (3 Jun 2018)

Gordon Gekko said:


> 20 years is fine on the basis that nobody has ever lost money in real terms when investing in the S&P.



Gordon - are you still confusing the S&P with World Equities? I had thought we'd got over this!


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## Gordon Gekko (3 Jun 2018)

Bob2018 said:


> Gordon - are you still confusing the S&P with World Equities? I had thought we'd got over this!



We’ve done that point to death Bob. Your post wasn’t funny yesterday, nor is it now. Best of luck.


----------



## Sarenco (3 Jun 2018)

Gordon Gekko said:


> That depends on one’s definition of risk.


Not really Gordon.  In this context, I'm really just talking about the possibility (not probability) that your expectations will not be realised.

A fixed-income investment gives you a guaranteed contractual return (subject to default risk).  A partial ownership of a company, in contrast, comes with zero guarantees.  You might have an expectation of a positive return over your holding period, based on historical returns or some other criteria, but there is absolutely no promise, never mind a guarantee, that your expectations will be realised.  There is always a possibility (risk) that the return will fall short of your expectations.


Gordon Gekko said:


> A cash deposit is pretty much guaranteed to lose money in real terms over the coming years.


I don't think it's wise to be so certain about the future.  

I know you are keen on extrapolating the future from the past - did you know that over the long term, cash (TBills) has actually produced a modestly positive real return?

There have been long periods (30 years+) in the past where domestic government bonds have outperformed domestic equities in all major economies.  There is no reason to believe that could not be repeated over your individual holding period.  You may not think it is very likely but you have to admit the possibility - however remote.

Again, nobody is saying that somebody with a 20-year investment horizon shouldn't be heavily invested in equities.  We are simply trying to persuade you of the simple reality that there is always a possibility (risk) that will not turn out to be optimum strategy.


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## Gordon Gekko (3 Jun 2018)

Again, that depends on your definition of risk, Sarenco. I don’t believe that risk is the fact that your chosen strategy mightn’t be the best one. Risk most certainly is not volatility. T-bill delivered negative real for the period 1945 to 1980 by the way, which is analagous to today, with central banks aiming to keep inflation above interest rates.


----------



## Jim2007 (3 Jun 2018)

Sarenco said:


> I would have thought the stock investment was obviously the riskier choice.



Neither option is risk free and being invested is probably the less risky over the long term.  There are several US studies that show how female owned self-directed pensions tend to under perform in the long run, due to their owners being heavily invested in money market type products, including deposits.


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## Sarenco (3 Jun 2018)

Jim2007 said:


> Neither option is risk free


I didn't suggest otherwise.  

Nor did I suggest that anybody should have a significant allocation to cash or cash equivalents over any long-term investment horizon.


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## Sarenco (3 Jun 2018)

Gordon Gekko said:


> I don’t believe that risk is the fact that your chosen strategy mightn’t be the best one.


Nor do I and that wasn't what I suggested.  I was very clear what I meant by risk in this context.

You can't say with certainty that the future will be analogous to any period in the past.  That might be your working assumption but you don't know it as a fact.


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## elacsaplau (3 Jun 2018)

Sarenco said:


> You can't say with certainty that the future will be analogous to any period in the past.  That might be your working assumption but you don't know it as a fact.



That's ridiculous Sarenco!! - that's akin to saying that past performance is somehow not a reliable guide to future performance!


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## Gordon Gekko (3 Jun 2018)

elacsaplau said:


> That's ridiculous Sarenco!! - that's akin to saying that past performance is somehow not a reliable guide to future performance!



Hilarious stuff.

A statutory warning to stop people thinking that an asset’s performance over recent times will be repeated going forward.

Pretty different to looking at all available data for 20 year periods.


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## Sarenco (3 Jun 2018)

Gordon Gekko said:


> Pretty different to looking at all available data for 20 year periods.


The data you have pointed to is pretty limited.  

In any event, the future has no obligation to mirror the past.

That's really the key point that you're missing for some strange reason.


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## Bob2018 (3 Jun 2018)

elacsaplau said:


> That's ridiculous Sarenco!! - that's akin to saying that past performance is somehow not a reliable guide to future performance!



Brilliant, Elacsaplau…….note Gordon's desperate attempt to characterise past performance as recent past performance


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## Fella (3 Jun 2018)

What Gordon doesn't seem to grasp is that without risk there would be no return , risk is what makes the return , to say investing for 20 years is risk free makes no sense . Return and risk go hand in hand , you are rewarded for taking risk but there is a risk that you will lose some or all of your investment , anyone that doesn't understand this shouldn't be investing at all.

Also looking at 20 year periods over 100 or 200 years is pointless as far as statistical analysis goes , its can never be used to prove a point.


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## Gordon Gekko (3 Jun 2018)

You boys are gas.

You dismiss data from 1870 or thereabouts to the present day.

You think that it’s unreasonable to assume that things that have never happened won’t happen.

And you dress it up with the bastardised mantra of “past performance”...

It hasn’t rained blood over the last 150 years either...is it wrong to conclude that it won’t rain blood prospectively?


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## Gordon Gekko (3 Jun 2018)

Fella said:


> Also looking at 20 year periods over 100 or 200 years is pointless as far as statistical analysis goes , its can never be used to prove a point.



Why?

An S&P investor with a 20 year time-horizon has never lost over the 150 years of available data (backfilled pre-1926). Even the poor guy who invested the day before every major shock.

Yet you’re disputing that people are safe from permanent loss of capital over 20 years from today.

I would venture that it is you guys who do not understand risk.


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## Duke of Marmalade (3 Jun 2018)

A typical financial model would posit that equities enjoy an average risk premium over cash of c.3% p.a. but with an annual volatility about this long term trend of c.15% p.a.   On this model there is an 18% risk that equities will under perform cash over 20 years and there is a 82% risk that cash will under perform equities over the same time frame.  So over 20 years which is the riskier?

As mentioned before, I think the model actually overstates the risk of equities versus cash as there are systemic checks and balances to help equities out of crashes.  I don't know whether the criticisms of GG are because of his absolutist statements but putting absolutism aside I think he is substantially correct.


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## Bob2018 (3 Jun 2018)

Sarenco said:


> In any event, the future has no obligation to mirror the past.
> 
> That's really the key point that you're missing for some strange reason.



Agreed


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## Sunny (3 Jun 2018)

Duke of Marmalade said:


> A typical financial model would posit that equities enjoy an average risk premium over cash of c.3% p.a. but with an annual volatility about this long term trend of c.15% p.a.   On this model there is an 18% risk that equities will under perform cash over 20 years and there is a 82% risk that cash will under perform equities over the same time frame.  So over 20 years which is the riskier?
> 
> As mentioned before, I think the model actually overstates the risk of equities versus cash as there are systemic checks and balances to help equities out of crashes.  I don't know whether the criticisms of GG are because of his absolutist statements but putting absolutism aside I think he is substantially correct.



That’s not the argument Duke. Absolutely nobody is arguing about the benefits of equities over cash over a long horizon. The argument is that investing in equities is risk free over 20 years.


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## Duke of Marmalade (3 Jun 2018)

Okay, the absolutist statement obviously does not hold.  I also think we have extremely sparse data on the experience over 20 years.  MSCI is going 50 years.  That is 2.5 independent 20 year periods.  I also think further back is of diminishing relevance in informing us about current geo/socio/economic/financial conditions.  We have historically low interest rates especially at the long end.  So we are in a historic G.S.E.F scenario; that points to us putting less credence on history as to where we go from here.


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## Fella (3 Jun 2018)

Gordon Gekko said:


> Why?
> 
> An S&P investor with a 20 year time-horizon has never lost over the 150 years of available data (backfilled pre-1926). Even the poor guy who invested the day before every major shock.
> 
> ...



20 year blocks out of 150 year data is absolutely tiny . 

I’m well aware of what risk is I made a lot of money from understanding risk and return.  If there was genuinely no 20 year risk then the stock market return would be much lower , just because the stock market has a positive expected return doesn’t mean it will over any X period , i would argue that its impossible to tell if someone is lucky or clever even Warren Buffet over his career as a lifetime is too short for statistical reasons.


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## Bob2018 (3 Jun 2018)

Duke of Marmalade said:


> Okay, the absolutist statement obviously does not hold.



Agreed - makes no sense - still you got to hand it to Gordon for his conviction, however, misguided.


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## Bob2018 (3 Jun 2018)

Sunny said:


> That’s not the argument Duke. Absolutely nobody is arguing about the benefits of equities over cash over a long horizon. The argument is that investing in equities is risk free over 20 years.



That's the key point here


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## elacsaplau (4 Jun 2018)

I've re-read this thread and in fairness to Gordon his key message that a long-term buy and hold approach has been successful in stock market investing history is valid. In saying this, I do not wish to diminish the points made by other posters which I understand and appreciate and I don't agree with everything Gordon has said.

However, on a relative scale his position is certainly far more appropriate than the moon is in the third phase of Shani Sade Sati approach that I derided way back in post 7 of this thread.


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## Sunny (4 Jun 2018)

elacsaplau said:


> I've re-read this thread and in fairness to Gordon his key message that a long-term buy and hold approach has been successful in stock market investing history is valid. In saying this, I do not wish to diminish the points made by other posters which I understand and appreciate and I don't agree with everything Gordon has said.
> 
> However, on a relative scale his position is certainly far more appropriate than the moon is in the third phase of Shani Sade Sati approach that I derided way back in post 7 of this thread.



Again nobody is arguing against that. The issue is the Gordon thinks that unless you are 100% invested in equities all of the time then that is the same as gambling on horses. Or that if you invest in global equities for 20 years it is a risk free investment. I 100% agree that people should not sell in a falling market out of fear if they have a long term objective. They shouldn’t react to newspaper reports about 10% correction in the Dow like it is some sort of end of world scenario and sell out of all equity holdings. However there might be times when I think other asset classes look attractive versus equities at a particular period of time. I might be looking at the general situation and not be 100% sure which way the market is going to react so yes there are times when I want to move a minority % of my holdings out of equities. I am not claiming I will outperform the market over 20 years. I am not claiming I can generate alpha returns to make hedge funds blush. I can’t manage my pension per se. I am limited to what I can do within the confines of the scheme set up. The fund manager will reallocate my assets based on my age which is considered sensible but sometimes there are other reasons other than age that reallocating assets for a period of time makes sense to me. I don’t do it on the back of daily price movements or Donald trumps tweets. I can read economic news and I work with fund managers every single day. I am comfortable making my decisions. Gordon can question my mental capacity all he likes but he has yet to provide one example of a regulated fund manager publishing marketing material guaranteeing equity investors a positive return after 20 years. I would love to see it because I know a couple of central bankers who would like a look at their risk models. And if it was true, fund managers would be shouting it from the roof tops.


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## PMU (4 Jun 2018)

Gordon Gekko said:


> An S&P investor with a 20 year time-horizon has never lost over the 150 years of available data (backfilled pre-1926). Even the poor guy who invested the day before every major shock..


But you are ignoring risk. Over the 20 year period your annual returns fluctuated. Take, for example, a “made up” index that lost 54% in 1998 and its subsequent returns were those of the S&P500 for that period. By the end of 2017 your capital sum has returned to its original amount, but in the period concerned your returns have fluctuated with a standard deviation of about 21%. This is real risk you have taken on and for which you have not been rewarded. If you assume a risk free rate of about 2.75% on a long duration bond, you've a negative Sharpe ratio of about -13%. You have not made a wise investment as you have not been rewarded for the market risk you have taken on. It's not just that you get your capital sum back , it's that you get your capital sum back and also are rewarded for taking on market risk. Otherwise you put your savings directly in government bonds or analogues.

But let's assume what you say is correct, and that investing for 20 periods does not result in a capital loss. This implies long duration investing is equivalent to buying a bond that will deliver a capital sum equal to your original investment after 20 years (or whatever your selected time period). If this were true, it has happened only because at the start of the 20 years period, stocks were priced to deliver returns the sum of which are equal to your initial investment over the period concerned. If the price at purchase is higher you have a longer duration to wait for the accumulated returns equal your initial investment and if the price is lower your duration is shorter. The 'price' of a stock market is its price/dividend ratio. If you assume the dividend rate is constant, the price of the index must also grow at the same rate as dividends over the period concerned. Currently, for the S&P the dividend yield is 1.84% (end 2017) http://www.multpl.com/s-p-500-dividend-yield/table, so the price/dividend is about 42, which implies a holding period of in excess of 40 years as of today. So those starting out investing today, and only  these people, should be totally invested in US stocks, as current prices imply a risk free investment, if you hold until you retire.  [If the USD is not your functional currency you are, however, also taking on exchange rate risk.]


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## elacsaplau (4 Jun 2018)

PMU said:


> But you are ignoring risk. Over the 20 year period your annual returns fluctuated. Take, for example, a “made up” index that lost 54% in 1998 and its subsequent returns were those of the S&P500 for that period. By the end of 2017 your capital sum has returned to its original amount, but in the period concerned your returns have fluctuated with a standard deviation of about 21%. This is real risk you have taken on and for which you have not been rewarded. If you assume a risk free rate of about 2.75% on a long duration bond, you've a negative Sharpe ratio of about -13%. You have not made a wise investment as you have not been rewarded for the market risk you have taken on. It's not just that you get your capital sum back , it's that you get your capital sum back and also are rewarded for taking on market risk. Otherwise you put your savings directly in governtemn bonds or analogues.
> 
> But let's assume what you say is correct, and that investing for 20 periods does not result in a capital loss. This implies long duration investing is equivalent to buying a bond that will deliver a capital sum equal to your original investment after 20 years (or whatever your selected time period). If this were true, it has happened only because at the start of the 20 years period, stocks were priced to deliver returns the sum of which are equal to your initial investment over the period concerned. If the price at purchase is higher you have a longer duration to wait for the accumulated returns equal your initial investment and if the price is lower your duration is shorter. The 'price' of a stock market is its price/dividend ratio. If you assume the dividend rate is constant, the price of the index must also grow at the same rate as dividends over the period concerned. Currently, for the S&P the dividend yield is 1.84% (end 2017) http://www.multpl.com/s-p-500-dividend-yield/table, so the price/dividend is about 42, which implies a holding period of in excess of 40 years as of today. So those starting out investing today, and only  these people, should be totally invested in stocks, as current prices imply a risk free investment, if you hold until you retire.



PMU,

I disagree with your math, logic and conclusion. Got to do other stuff now so hopefully others will have the time to explain why.


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## LoveTrees (4 Jun 2018)

Tastebuds said:


> Of course that nobody has a crystal ball but, if you believed that the stock market will crash soon enough... where would you put your money?
> bonds, cash?



Is there a risk that EU governments will cancel the 100K deposit guarantee with each big banks? 

I rely on such guarantee in case of economic recession...

I was reading FT and it looks like the crisis on the way for next year.

That's why I suggest spreading amounts around in less than 100K-chunks in Banks that are independent from each other. Even if I invest in shares I wouldn't leave more than 100K with the same broker but I would keep diversifying. I would suggest a best buys on shares-brokers if possible. I love my 3: degiro, Interactive Investors and IG.com.


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## joe sod (5 Jun 2018)

Just to highlight the point again that the majority of Irish people that got wiped out in the financial crash did so because of bad investments in property not in stock markets. Even people who lost out through investing in bank shares are a small proportion of the wealth that was permanently lost through property investment. Yet people are still overly cautious and suspicious of the stock markets and everyone is back gung ho into property investment . You rarely see people on the property investment threads now talking about a risk of a big fall in property prices


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## LoveTrees (5 Jun 2018)

joe sod said:


> Just to highlight the point again that the majority of Irish people that got wiped out in the financial crash did so because of bad investments in property not in stock markets. Even people who lost out through investing in bank shares are a small proportion of the wealth that was permanently lost through property investment. Yet people are still overly cautious and suspicious of the stock markets and everyone is back gung ho into property investment . You rarely see people on the property investment threads now talking about a risk of a big fall in property prices



I agree. At the same time I pray the guarantee on deposits stays please... When I read the title I panicked... Something I am not aware of?


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## cremeegg (5 Jun 2018)

joe sod said:


> You rarely see people on the property investment threads now talking about a risk of a big fall in property prices



Anyone who invests wisely in property is not too concerned about price falls. Property is a long term asset, as long as the yield holds up investors make a return.



joe sod said:


> Just to highlight the point again that the majority of Irish people that got wiped out in the financial crash did so because of bad investments in property



Who are these people who lost out on property investments. Anyone who bought at the height of the market on a sustainable yield has seen their interest costs fall and their rental income rise.

Can you identify a single property investment, not a speculative development punt, something with a yield purchased at a price commensurate with that yield that lost money.

People like Brendans friends whose repayments were a multiple of his rental income day one were speculating pure and simple, thats not property investing.


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## tecate (29 Jul 2018)

An interesting discussion.  Is it right to conclude then that by and large, the best approach to take is to ignore any potential 2008 event and carry on regardless - so long as you're prepared to stick with it long term and ride out any black swan events?

Is there no value in gearing down equity percentage a little so that if the market crashed, you would have a pile in a less risky class (eg. bonds) to invest in those firesale stocks post-crash?


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## opexlong (24 Aug 2018)

moneymakeover said:


> It was obvious back in 2008 when p/e was through the roof that equities were overpriced.



It is even more obvious that equities are overpriced right now - the markets are in a classic bubble. Stock valuations are too high. A reversion-to-the-mean event would necessitate a 40-50% plunge just to get back to historical 'normal'.

The markets will crash on November 29th, 2018 at 11.02am...just joking. But I give it 0-24 months before we're in severe correction territory.

This post isn't investment advice.


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## Nickname (24 Aug 2018)

opexlong said:


> The markets will crash on November 29th, 2018 at 11.02am...just joking. But I give it 0-24 months before we're in severe correction territory.


What are you using to determine that equities are overvalues? And how long do you think that the markets have been over valued for? The price earning ratio of the S&P500 is approximately 24.75. Te P/E of the S&P500 has been a lot higher in the last 20 years.


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## opexlong (24 Aug 2018)

Nickname I'd look at Buffett indicator and also Price to Sales ratio as it is now compared to previous years. PE ratio has been higher three times* in the last twenty years, twice during bubbles in 1999 and 2009 followed by steep falloffs. Corporate share buybacks and insider sellofs are a huge red flag also.

* By three times I mean three contiguous upward spikes - look at a S&P PE ratio historical chart.


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## Nickname (29 Aug 2018)

My question was what you are using to determine that the "stocks valuations are too high"? And when did the valuation become too high? 

Re PE valuation I am just using this as an an example, you are right that by itself it is not a good metric. 

In 1999 the S&P PE went from about 25 to 32 in the space of a year - then dropped off then went back up higher two years later. 2007/2008 was something different drastic increase followed by a drastic drop also relative to the entire history of the S&P500 PE it is so out of proportion - this is not what has happend in 2018 it has been a gradual increase over several years and the PE is no where near 2007/2008 levels.
https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart (Link to chart - 2018 value is a little low than actual, but set this to 20 or 30 years and doesnt seem like 2018 S&P PE is that different to historic values)

Agree re share buy backs increasing the price of shares artificially, but the reason there is so much share by backs is because of such large profits being posted.
Re "classic bubble" - it may be a bubble what is driving the bubble?

If there is a crash it will be psychological, "longest ever bull market - SELL, SELL, SELL!!!". For buy and hold investors I think there is no reason to panic.


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## letitroll (29 Aug 2018)

opexlong said:


> Nickname I'd look at Buffett indicator and also Price to Sales ratio as it is now compared to previous years. PE ratio has been higher three times* in the last twenty years, twice during bubbles in 1999 and 2009 followed by steep falloffs. Corporate share buybacks and insider sellofs are a huge red flag also.
> 
> * By three times I mean three contiguous upward spikes - look at a S&P PE ratio historical chart.



Best Buffet indicator is what he said 12 weeks ago - "Stocks are not in a bubble"

47 seconds in for the impatient  - https://www.youtube.com/watch?v=uGSHJaVbRrE


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## LoveTrees (29 Aug 2018)

letitroll said:


> Best Buffet indicator is what he said 12 weeks ago - "Stocks are not in a bubble"
> 
> 47 seconds in for the impatient  - https://www.youtube.com/watch?v=uGSHJaVbRrE



87 years old... What a genius...


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## opexlong (29 Aug 2018)

letitroll said:


> Best Buffet indicator is what he said 12 weeks ago - "Stocks are not in a bubble"



Fair enough. I respect Buffett's opinions greatly.

Note that Buffett turned his investment portfolio into cash in 1969. After the 1973-4 crash he went back into stocks.


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## Sarenco (29 Aug 2018)

letitroll said:


> Best Buffet indicator is what he said 12 weeks ago - "Stocks are not in a bubble"


The S&P500 is up around 7% from where it was 12 weeks ago - that's a pretty big jump.


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## LoveTrees (30 Aug 2018)

opexlong said:


> Corporate debt and consumer debt.
> 
> However in the Buffett video that someone linked to below he says he doesn't believe stocks are in a bubble. For balance I'll mention that Ray Dalio doesn't believe we're in a bubble either. Nor does the Financial Times.



I keep believing that the crisis of 2008-9 changed the game forever. Until then the Banks were seen as safe nest for the savings. After that, and with the rates so low, everyone started building more courage into investing long term. I really don't see a huge bear on the way, but a strong correction/bearish lowering of values next year and then a new cycle starts again...


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## opexlong (30 Aug 2018)

> About the bubble being caused by Corporate and Consumer debt this may be true but i would like to see data to back it up and see how the increase in equities correlates to corporate or consumer debt.



I don't have this data to hand. I'll see if I can find this or compile it myself maybe. Many articles been written on these topics in recent years.


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## letitroll (30 Aug 2018)

Sarenco said:


> The S&P500 is up around 7% from where it was 12 weeks ago - that's a pretty big jump.



https://youtu.be/9kke_CGNpFE

Here's his take today August 30th - 55secs in for the impatient


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## Marc (30 Aug 2018)

The market can stay irrational, longer than you can stay solvent - JM Keynes

The only issue that matters is how a market crash (and one will occur, we just don’t know when) might impact you personally in the short term.

So let’s break that down into its constituent parts with an example.

A Colleague in their late 20s started her first pension today. Contributions from salary plus tax relief over say 35 years.

Starting value nil
Market exposure nil
Risk from market fall nil

Correct investment strategy 100% equity

Why, because a market crash would be awesome for them. The best thing that could happen. Bring it on 1987, 1929! Would be wonderful news.

Let’s wind into the future say a year and let’s say they have paid in €5000 and let’s say that the maket drops 50%

Loss €2,500. But they can’t retire for 34 years so not really too much to worry about. How does this impact them personally in the short term? Emotionally maybe but not really financially.

Market then does what markets do and goes back up again.

Still saving, still adding every year

If you save consistently the order in which the investment returns arrive has no real bearing on your final investment value.

However, if you are aged 60 with a €250,000 pension fund and nothing else  and you’re 100% invested in equities then yes, you would be impacted very significantly by a market fall. You do need to be more diversified.

Let’s say you’re aged 60 with a €2m pension fund, your spouse has a defined benefit pension with a guaranteed income of €80,000pa and you both have full state pension entitlements. You have savings of €500,000 and a house worth €1m with no mortgage.

A market fall might set you back a little but would it really impact you in the short term? Not really. You could afford to defer the pension and wait it out.

This is the concept of risk capacity.

The first investor, is real and happened this morning, has the capacity to load up on risk because it would have no material impact on their financial position.

Likewise, the last example had the capacity to bear investment risk simply because it would not have a material impact on their short term position.

The middle example lacks the capacity to take on high levels of market risk, even if they thought they wanted to. It doesn’t make sense objectively for them to do so.

So, if you are worried about the next market crash, think about how it would impact your short term financial position and use that to make your decisions rather than worrying about if the market is too expensive.

The maket climbs a wall worry...

The 4 most expensive words in the English language “this time it’s different”

“Nobody knows nothing” jack bogle

“The only value of stock forecasters is to make fortune-tellers look good."

"My favorite time frame is forever."

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves."

“I can't recall ever once having seen the name of a market timer on _Forbes_' annual list of the richest people in the world. If it were truly possible to predict corrections, you'd think somebody would have made billions by doing it."

“What to do when the market goes down? Read the opinions of the investment gurus who are quoted in the WSJ. And, as you read, laugh. We all know that the pundits can't predict short-term market movements. Yet there they are, desperately trying to sound intelligent when they really haven't got a clue."


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## opexlong (31 Aug 2018)

I can't produce a chart with consumer debt overlaid directly onto market cap but you can compare them nonetheless.

Consumer debt:
[broken link removed] 

Now compare this to the Nasdaq for the same period:

Nasdaq Market Cap 2006-2018

Now take a look at the Fed funds rate from 2010 to 2018:

[broken link removed] 

News on this front:

Fed's Powell defends policy of gradual interest rate hikes


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## opexlong (1 Sep 2018)

The Buffett indicator is the U.S. stock market capitalization-to-GDP ratio (the total value of the U.S. stock market divided by the GDP), which Buffett called “probably the best single measure of where valuations stand at any given moment."







Another user has posted a video interview with Buffett where he's asked if stocks are expensive and he carefully says that they are inexpensive relative to 30-year bonds at 3%. That statement doesn't contradict a bearish view, since he's just saying you can use long time horizons in stocks to get to gains of 4% or more. Fair enough if that's your investment strategy (and it seems to be almost a consensus view around here), but it doesn't directly contradict the opinion that stocks are overvalued right now.

It's also not the last word on how Buffett sees investing. He applied the Grahamian value investing method to stocks in the 1960s. In the late 60s it had stopped working for him because the stock valuations had gotten so high that there were no more "value stocks" (i.e. undervalued stocks). So he closed down his investment portfolio in 1969 and turned it into cash. After the 1973 oil crisis and market meltdown he got back into stocks, buying up bargains.

Warren Buffett--In 1974


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## joe sod (1 Sep 2018)

@opexlong but if you look at your graph of buffet indicator it was below 0.6 until the mid 90s, then it has always been above that even during the two once in 60 year crashes we have had since then, it touched off 0.6 briefly in 2009 when buffet was out aggressively buying stocks. If you extrapolate your graph taking out the big peaks of 2000 and 2007, the buffet indicator should be at 1.0 as it has been rising anyway. Anyway 2007 was not a big peak in stocks, it was the housing crash that did the harm, it was much better then to have been invested in stocks than in property (although banks were also really part of the housing market so they also did not recover). The stock market recovered very quickly whereas the housing market took a decade and many people with big housing debt never recovered. At least stocks are most bought with real money whereas property is mostly bought with debt which explains why 2008 was so devastating for most people but not really for the stock market investors. Even the 2001 crash was only really devastating for investors in the dot com companies everything else recovered quickly. Therefore invest in areas that are not overvalued, stay out of technology, invest in Europe and emerging markets and even there I say Irish banks.


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## Sue Ellen (1 Sep 2018)

*Mod Note:

Posts over the last number of days have been temporarily removed and are being reviewed by the Mods.  Please refrain from discussing individual shares which is in breach of posting guideline 11:*


*11 We don't discuss individual shares
*
You won't find any messages suggesting investing in _CRH_ or asking if _AIB_ is a good investment. It is not the purpose of _Askaboutmoney_. We don't facilitate stock tipping or speculation about the future performance of individual shares. There are other forums which discuss individual shares such as The Investments and Markets Forum of boards.ie

This guideline does not restrict you from discussing
1) the mechanics of buying or selling shares in a flotation
2) Rights issues - pricing and mechanics
3) Dividend Reinvestment Plans - pricing and mechanics


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