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

[Bob2018]

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.

 

[Gordon Gekko]

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

 

[Fella]

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 .

 

[Gordon Gekko]

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?

 

[Bob2018]

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.

 

[Gordon Gekko]

Good man Bob.

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

The S&P isn’t enough for you.

Best of luck.

 

[Sarenco]

@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.

 

[Gordon Gekko]

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).

 

[Fella]

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.

 

[Gordon Gekko]

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

 

[Sunny]

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.

 

[Sarenco]

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?

 

[Sarenco]

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.

 

[Gordon Gekko]

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.

 

[Gordon Gekko]

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.

 

[cremeegg]

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.

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.

 

[Sunny]

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.

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.

 

[Sunny]

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.

 

[Gordon Gekko]

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”.

 

[Sunny]

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.