Jump to content
House Price Crash Forum
anonguest

So Does The Stockmarket Really Pay?

Recommended Posts

Exactly 10 years ago the FTSE-100 was at 6015 (or thereabouts).

Today it is, apaprently, at 5125 approximately.

Assuming just one initial lump sum investment, that works out to an average annualised loss of about 1.5%.

Over much of that 10 year period the annual dividend yield has averaged about 3% (?).

Dividends are taxable (10% ?), so leaving you with 2.7%.

Take away typical annual charges imposed by the investment funds of approximately 1.5% (??).

Over that period official inflation rate, never mind real world rate, has averaged 2.5% or thereabouts.

I think you see where this is going...........

After 10 years any gains are likely to be barely positive, probably negative, and poor campared to many other possible investment choices.

I would guess that, if things continue like this for just a little bit longer, Joe and Joanne Public will wake up and realise they have been sold a dud. Knowing their luck (or lack of it) they will probably finally throw in the towel, and cash in what is left, just before the next genuine long term bull market begins?!

Edited by anonguest

Share this post


Link to post
Share on other sites
Exactly 10 years ago the FTSE-100 was at 6015 (or thereabouts).

Today it is, apaprently, at 5125 approximately.

Assuming just one initial lump sum investment, that works out to an average annualised loss of about 1.5%.

Over much of that 10 year period the annual dividend yield has averaged about 3% (?).

Dividends are taxable (10% ?), so leaving you with 2.7%.

Take away typical annual charges imposed by the investment funds of approximately 1.5% (??).

Over that period official inflation rate, never mind real world rate, has averaged 2.5% or thereabouts.

I think you see where this is going...........

After 10 years any gains are likely to be barely positive, probably negative, and poor campared to many other possible investment choices.

I would guess that, if things continue like this for just a little bit longer, Joe and Joanne Public will wake up and realise they have been sold a dud. Knowing their luck (or lack of it) they will probably finally throw in the towel, and cash in what is left, just before the next genuine long term bull market begins?!

Why have you only picked one ten year period? Have you missed off the rest deliberately?

Share this post


Link to post
Share on other sites

How about investing in march when it was 3500

Its all about picking the peaks and troughs..

please less of your nonsense...investing is long term else go be a stockbroker and sell some CDOs

Share this post


Link to post
Share on other sites
How about investing in march when it was 3500

Its all about picking the peaks and troughs..

please less of your nonsense...investing is long term else go be a stockbroker and sell some CDOs

Therein lies the rub. Investing is not the sort of saving that you just put it in and expect slow steady growth, the markets require constant attention, buying and selling quickly when required, not for the ordinary saver.

Share this post


Link to post
Share on other sites
Therein lies the rub. Investing is not the sort of saving that you just put it in and expect slow steady growth, the markets require constant attention, buying and selling quickly when required, not for the ordinary saver.

What is wrong with investing a sum in the markets every month?

Share this post


Link to post
Share on other sites
Take away typical annual charges imposed by the investment funds of approximately 1.5% (??).

1.5% for a fund tracking the FTSE? Are you on something?

How about 0.3% more realistically for this kind of index fund or ETF.

Share this post


Link to post
Share on other sites
What is wrong with investing a sum in the markets every month?

Yes, I think that is way that stock-market investment is supposed to work better. Certainly it is Motley Fool's promoted approach. Is it called "pound cost averaging" or something like that? Does anyone happen to know how investing £100 per month in the FTSE over the last ten years compares to the equivalent investment (£100 per month) into

1) saving accounts

2) property

3) gold

My guess would be property was best, then stock market, then gold, then savings accounts, but I don't know the numbers.

Optobear

Share this post


Link to post
Share on other sites
Yes, I think that is way that stock-market investment is supposed to work better. Certainly it is Motley Fool's promoted approach. Is it called "pound cost averaging" or something like that? Does anyone happen to know how investing £100 per month in the FTSE over the last ten years compares to the equivalent investment (£100 per month) into

1) saving accounts

2) property

3) gold

My guess would be property was best, then stock market, then gold, then savings accounts, but I don't know the numbers.

Optobear

Should be reasonably easy to work out if someone had some time (getting the data is relatively easy)

Share this post


Link to post
Share on other sites

there have been lots of very long-run studies on the returns you get from holding stocks.

the best known recent one, 'triumph of the optimists', showed that the average return from holding stocks in the 20th century was very good indeed - about 5% better than what you got from buying government bonds.

100 years is a very long time, of course. pretty much anything can happen in short periods. stocks have had a dreadful decade because this time ten years ago a speculative bubble meant they were priced far higher than the fundamentals cold support. property in 2007 was in more or less the same place as stocks in 2000.

Share this post


Link to post
Share on other sites
Yes, I think that is way that stock-market investment is supposed to work better. Certainly it is Motley Fool's promoted approach. Is it called "pound cost averaging" or something like that? Does anyone happen to know how investing £100 per month in the FTSE over the last ten years compares to the equivalent investment (£100 per month) into

1) saving accounts

2) property

3) gold

My guess would be property was best, then stock market, then gold, then savings accounts, but I don't know the numbers.

Optobear

the 1999-2009 answer is definitely:

gold

property

savings

mattress

stocks

the 1997-2007 answer is:

property

stocks

gold

savings

mattress

property would be not much better than mattress on a 1990 to 2000 list.

the huge disparity between these three rankings shows you the perils of taking too short term a view.

in the next decade my guess is that property will be bottom [unless the central banks allow high inflation and low interest rates, in which case savings will be bottom], gold probably somewhere in the middle, stocks impossible to call.

Edited by the flying pig

Share this post


Link to post
Share on other sites
Should be reasonably easy to work out if someone had some time (getting the data is relatively easy)

Yes, you'd think that, but I can't find much on the internet. You'd think that people selling tracker ISAs would make that information readily available, the difficult bit is knowing the fees and tax issues, plus finding out what would be available in terms of interest on savings retrospectively is difficult. Also there is the subtle point of what maturity saving accounts to compare?

If you knew the plan was for 10 years out, then the comparison would be against differing tie-in periods on savings accounts. However, given that the stock market pound cost averaging allows for "instant access" that would be a fairer comparison - but having that data on savings on a monthly basis is tricky!

If the calculation were then run over different 10 year starting periods over the last 30 years, and then averaged... you'd get a reasonable idea of the best investment strategy... but I can't find the analysis...

Share this post


Link to post
Share on other sites
the answer is definitely:

property/gold about equal - they've tripled [ish]? maybe gold a bit better?

savings

mattress

stocks

in the last decade.

in the next decade my guess is that property will be bottom [unless the central banks allow high inflation and low interest rates, in which case savings will be bottom], gold probably somewhere in the middle, stocks impossible to call.

the answer is definitely:

mattress

stocks

How confident are you?

Share this post


Link to post
Share on other sites
the answer is definitely:

property/gold about equal - they've tripled [ish]? maybe gold a bit better?

savings

mattress

stocks

in the last decade.

in the next decade my guess is that property will be bottom [unless the central banks allow high inflation and low interest rates, in which case savings will be bottom], gold probably somewhere in the middle, stocks impossible to call.

Do you have data or just prejudice like me? Don't forget the need to include the dividend return on stocks.

Share this post


Link to post
Share on other sites

in reply to the previous posts - i only guessed really, but i'm not too far out. it's slightly facile to compare them given tax differences and that property is almost always very highly leveraged.

but just eyeballing a couple of charts will give you an idea of what i was getting at.

FTSE 100 [obviously not 'total equity returns' as already pointed out by someone - the detailed 100 year 'triumph of the optimists' study obviously is]

Gold (US dollars)

pwoperdee [obviously this drastically underestimates the full returns that all the bulls on here who boast about being able to get a 10% rental yield today, and therefore obviously a 20% return ten years ago will get]

this is very simple but does show you the basic point - don't ever use short run historical data [like 10 years] to take a view of future performance. use 30-40 years+ or, better still, use another indicators.

Edited by the flying pig

Share this post


Link to post
Share on other sites
Still don't understand. I invest in FTSE, not Nikkei.

:lol:

The simple point I was making is if our Western markets hit a patch where they trades sideways or decline (as in Japan) for 20 years investing every month is not such a good plan.

Share this post


Link to post
Share on other sites
in reply to the previous posts - i only guessed really, but i'm not too far out. it's slightly facile to compare them given tax differences and that property is almost always very highly leveraged.

but just eyeballing a couple of charts will give you an idea of what i was getting at.

FTSE 100 [obviously not 'total equity returns' as already pointed out by someone - the detailed 100 year 'triumph of the optimists' study obviously is]

Gold (US dollars)

pwoperdee [obviously this drastically underestimates the full returns that all the bulls on here who boast about being able to get a 10% rental yield today, and therefore obviously a 20% return ten years ago will get]

this is very simple but does show you the basic point - don't ever use short run historical data [like 10 years] to take a view of future performance. use 30-40 years+ or, better still, use another indicators.

The front page graph has 2.9% as the long term property trend line, makes the 3% (is that right) dividend return on shares look less negligible if reinvested.

Share this post


Link to post
Share on other sites

I posted this on another thread, but is relevant here – it shows the growth [and falls] of property and shares on a log scale from about 1980 to the present. The timing of the entry and exit points clearly makes a big difference!

27y9yyr.png

Share this post


Link to post
Share on other sites
I posted this on another thread, but is relevant here – it shows the growth [and falls] of property and shares on a log scale from about 1980 to the present. The timing of the entry and exit points clearly makes a big difference!

27y9yyr.png

Do you have the dividend return included? If not, it is isn't the data that is needed. Also, without resorting to Matlab I can't see an easy way to run the comparison of the monthly strategies in something friendly like Excel.

Share this post


Link to post
Share on other sites
Guest happy?
Exactly 10 years ago the FTSE-100 was at 6015 (or thereabouts).

Today it is, apaprently, at 5125 approximately.

Assuming just one initial lump sum investment, that works out to an average annualised loss of about 1.5%.

Over much of that 10 year period the annual dividend yield has averaged about 3% (?).

Dividends are taxable (10% ?), so leaving you with 2.7%.

Take away typical annual charges imposed by the investment funds of approximately 1.5% (??).

Over that period official inflation rate, never mind real world rate, has averaged 2.5% or thereabouts.

I think you see where this is going...........

After 10 years any gains are likely to be barely positive, probably negative, and poor campared to many other possible investment choices.

I would guess that, if things continue like this for just a little bit longer, Joe and Joanne Public will wake up and realise they have been sold a dud. Knowing their luck (or lack of it) they will probably finally throw in the towel, and cash in what is left, just before the next genuine long term bull market begins?!

There are lots of very rich brokers - their clients don't necessarily do as well. Clearly the money's in running the taxi and not in taking the ride.

Edited by happy?

Share this post


Link to post
Share on other sites

http://gold.approximity.com/since2001/DJIA-Gold-Ratio.html

Stocks have underperformed gold since 2001.

http://gold.approximity.com/since2001/UK_H...es_in_Gold.html

Property outperformed gold until 05, after which gold started outperforming property.

So I'd say the order is

Property (01-05)

Gold (05 - present)

Stocks

Bonds

Whoever sold in 05 and moved into gold is in clover.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   287 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.