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They Said Shares Were For The Long Term - Not For Long-term Losses

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http://www.independent.co.uk/news/business...ses-872155.html

Those who bought shares last year won't be surprised, amid the economic turmoil, to find they have lost money on paper. But now even people who invested in the stock market a decade ago are looking at a loss. The investment optimists insist equities always come right in the long run, but when shares are below water after 10 years, how long does long have to be?

Most people who bought an individual savings account, contributed to their pension fund or purchased shares directly in 1998 have made no money at all on their investment. And the pain will continue into the next decade unless the bear market turns sharply into a new bull run – and no one is forecasting that. Even if share prices were to fall no further, they would still not be showing any capital gain by the time the Olympics open in London in 2012.

Bob Yerbury, chief executive of fund manager Invesco Perpetual, concedes: "We think about long-term normally being three to five years. Ten years is a long time not to make a profit."

The last time the stock market failed to show any gain over a decade was when the 1974 crash left shares below 1960s levels and prompted small shareholders to abandon direct equity investment.

The privatisations and demutualisations of the 1980s and 1990s brought private investors back to the market, but even now many of those stocks are below their issue price – including British Energy and the former building societies Bradford & Bingley and the Halifax, now HBOS.

The recent steep fall in the blue-chip FTSE 100 has taken it beneath its level a decade ago. Bank shares have dragged down the index, with Royal Bank of Scotland losing nearly 40 per cent of its 1998 value and Barclays almost 50 per cent. But many companies less directly affected by the credit crisis have lost money for their investors too. United Utilities shares are down nearly 20 per cent and GlaxoSmithKline has fallen by 35 per cent. Marks & Spencer has lost 60 per cent of its value and Kingfisher 75 per cent. BT shares have halved.

The Wolseley builders' merchant has just moved into negative territory; it once provided a 250 per cent profit for people who bought in 1998.

There have been gainers during the period too, with drinks group Diageo up 12 per cent, Cadbury Schweppes nearly 30 per cent higher and a profit of almost 25 per cent on Associated British Foods. But shares need to have increased by 20 per cent just to have kept pace with inflation over 10 years.

Shares in the household products giant Reckitt Benckiser have doubled, British American Tobacco has put on 150 per cent and mining groups have soared, with Rio Tinto up 600 per cent. But oil companies have not provided high profits despite the rising crude price: Shell shares are almost back at 1998's level.

In fact, investors holding a range of blue-chip stocks for the past decade have lost even more than the fall in the FTSE 100. Dixons, Telewest and GEC were in the index in 1998, for instance, but were ejected as their market value fell.

A decade ago, though, the market was rising rapidly on the back of the dot-com boom, with the FTSE peaking at 6,930 at the end of 1999. With shares now falling, that means the 10-year deficit will increase steeply for at least the next 18 months.

Mike Lenhoff, chief strategist at stockbroker Brewin Dolphin, still thinks shares are a good long-term investment, but admits: "It depends how distant your long-term really is. Ten years ought to be long-term."

So what is the long term ultimately?

10 years

20 years

30 years

40 years

As with always timing is everything but if you've invested in this for your pension surely each individual accounts need managing according to that persons needs, which at a institutional level is impossible.

The market will provide mantra appears to be hollow and empty. Perhaps that's all the market can provide.

You need luck for it to provide ie retire just as the boom market is about to peak.

Will we be looking at around 2020 before share prices are back to last years levels or could they recover faster than that in a big bullsh*t run?

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Poor article imo, there is more to equities than just the FTSE100 - eg investing in China 10 years ago would have netted massive profits. Also, even if you only invested in the FTSE monthly over the last 10 years you'd still be sitting on a reasonable profit thanks to cost averaging. Finally, the article conveniently forgets about yield which I think is about 3% on the FTSE nowadays.

IMO the poor performance of the FTSE in recent years is all the more reason to take advantage of the current turmoil, just my 2p though

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Sure the index has lost value, but I presume people were re-investing their dividends - right?

Also, while ten years has a certain ring to it, go back another year or two & would still be well above water...

If investing, owning just shares isn't exactly a balanced portfolio.

Gah, slow to post & by the time I've click 'submit' it is already irrelevant :(

Edited by Pedant

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IMO the poor performance of the FTSE in recent years is all the more reason to take advantage of the current turmoil, just my 2p though

I'm wondering whether it'll be worth getting an equity isa soon...

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In a free market, all people are judged equally before the law, but how can this be the case if some people can hide behind the corporate veil and others can't?

The absurdity that is the doctrine of company personhood has given a small minority of the population (namely directors) a much greater power-to-responsibility ratio than everyone else in the country.

It gives a small minority of the population the ability to totally abuse the capital of a company that they do not own, by means of excessive executive pay etc. Shareholders do not get a fair return on their capital. Workers do not get a fair wages for their labour.

And since the company's legal personality can only exist by court enforcement, the entire plc structure is really an extension of the state system.

Inidvidual shares may do exceedingly well, but in general, shares in PLCs as an asset class are a scam.

Edited for clarity

Edited by InternationalRockSuperstar

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the only time it is worth buying shares is

if you have insider knowledge

interest rates are very high and they look like they will be going down

in a bubble if you think you can get out before it pops

the general theme is that investing in shares is good because the company will grow and reinvest and grow and reinvest and ....... in reality some companies cant grow or become more profitable, most companies don't give a shit about the share holders and waste tonnes and tonnes of money on crap, some companies get a spanking from new rivals, ect ect.

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http://www.independent.co.uk/news/business...ses-872155.html

So what is the long term ultimately?

10 years

20 years

30 years

40 years

As with always timing is everything but if you've invested in this for your pension surely each individual accounts need managing according to that persons needs, which at a institutional level is impossible.

The market will provide mantra appears to be hollow and empty. Perhaps that's all the market can provide.

You need luck for it to provide ie retire just as the boom market is about to peak.

Will we be looking at around 2020 before share prices are back to last years levels or could they recover faster than that in a big bullsh*t run?

This buy and hold strategy in my view is sub-optimal. I think it is propaganda fed to us by the investment houses. There have been long periods where if you happened yo buy stocks in a certain period ot could take a very long time to make any money.

The other point is that brokers tell you when to buy. They never tell you when to sell. My father had a reasonbly large portfolio with Merril Lynch, I told them they were crazy, and I would never give money to those guys, or any of them. They always say keep holding it...However, I told my father to get out at 6000. Merril had invested it in 2002 at 5300, when the FTSE was on its way down...they said a bottom was in, and the FTSE would go up again. It went to 3200...then it they advised him to hold it again. This is 6/7 years later...He took my advice and got out, if he didnt get out, this week 8 years later the market was no higher than 8 years ago.

The problem is they never tell you when to sell...

It doesnt matter where the market is, they never say not to buyIt is all fees to them. It doesnt matter if it goes up or down. Imagine all the people who bought in 2000/2001 in those few months at the top. Nearly a decade later and the FTSE looks like it will be another 5-10 years before it will make a new high. That would be 20 years with not growth.

Imagine buying the DOW in 1966. In 1982 you would be no higher. There are lots of periods last century where this buy and hold method just doesnt work. It is sub-optimal and a lazy persons investment strategy. It is also a vested interest strategy, IMO.

I think people need to pro-active and take charge and learn by themselves. At least you can blame no one. And if an investment manager loses your money, it is still your fault. No one forced you to give the money. That was your choice...

DOW_1964_1982.jpg

DOW_1964_1982.jpg

post-13039-1216555115_thumb.jpg

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Also, even if you only invested in the FTSE monthly over the last 10 years you'd still be sitting on a reasonable profit thanks to cost averaging. Finally, the article conveniently forgets about yield which I think is about 3% on the FTSE nowadays.

If you were investing in the FTSE 100 monthly by way of a tracker product over the last decade, you would currently showing a paper loss - and a more considerable loss in real terms.

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It is sub-optimal and a lazy persons investment strategy. It is also a vested interest strategy, IMO.

Agreed. Investment funds make money on annual % charges. The more money they manage, the higher their cut from your pocket, whether they are successful or not. Most funds cannot liquidate 100% or switch to another asset class whenever they choose. Individuals can.

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The FTSE 100 index was started in Jan 1984 at a base level of 1000.

M4 at this time was £176,117m.

On the 30th June this year the FTSE 100 closed at 5625.9

M4 at this time was £1,781,507m

Nominal increase in FTSE 100 was 5.6259 fold

Increase in broad monetary inflation was 10.1156 fold.

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The FTSE 100 index was started in Jan 1984 at a base level of 1000.

M4 at this time was £176,117m.

On the 30th June this year the FTSE 100 closed at 5625.9

M4 at this time was £1,781,507m

Nominal increase in FTSE 100 was 5.6259 fold

Increase in broad monetary inflation was 10.1156 fold.

I like that way of looking at it. The question is are we better off today than 10 years ago...To have a "middle class" lifestyle it takes more money in my view...

A good way of looking at it, would be to calculate how many average weekly salaries it takes to buy the FTSE, pricing it in pounds. So if the FTSE is £5500/average weekly salary, as an example....

the same for houses, how many times salary is average house costing now?

You could do this for each year.

Also how many average hours at average or minimum wage does it take to buy a 5 litres of Heating oil

Gas

Electric

5 litres of petrol

A basket of say 20 of the most popular items in a baslet of shopping,bread, milk,meat, fruit etc

yes electronics have got cheaper...but to have what could be deemed as a middle class lifestyle it takes more. Now we need DVD's and three TV's,mobile phones, boradband,lots more gadgets...

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Ten years is an arbitrary point in time. Try 5 years and even without dividends reinvested the FTSE is up comfortably. It's all about the timing and since the author chooses a point in time where the market was buoyant and compares it with today when ... well when it is extremely volatile, then obviously he finds that there's negative growth.

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I'm not sure I agree with that. With dividends reinvested you'd probably have broken even in real terms. Still very poor though.

Yes and people tend to forget that one of the assumptions in the "equities outperform" assertion is that dividends are reinvested; if they're not the returns are substantially less.

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And the answer is no. (Unless you're in the richest 0.1% or so of the population).

Wages have been falling in real terms since 1978.

In the US real wages haven't improved since 1973 I believe.

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Yes and people tend to forget that one of the assumptions in the "equities outperform" assertion is that dividends are reinvested; if they're not the returns are substantially less.

not if you use the dividends to invest in something that outperforms the equities (which isn't difficult these days).

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http://www.independent.co.uk/news/business...ses-872155.html

So what is the long term ultimately?

10 years

20 years

30 years

40 years

As with always timing is everything but if you've invested in this for your pension surely each individual accounts need managing according to that persons needs, which at a institutional level is impossible.

The market will provide mantra appears to be hollow and empty. Perhaps that's all the market can provide.

You need luck for it to provide ie retire just as the boom market is about to peak.

Will we be looking at around 2020 before share prices are back to last years levels or could they recover faster than that in a big bullsh*t run?

If it returrns 9% pa for the next 20 years as it has done for the last 20, I will be happy. Do the people that write this crap assume that people give their dividends to charity?

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I don't expect shares to do much over the next 10 years until commodities peak as the two are inversely correlated - the FTSE 100 might not go above 7,000 until the 2020's when commodity prices are falling again and a new bull market in shares is under way.

Do you have some links to your analysis please?

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Poor article imo, there is more to equities than just the FTSE100 - eg investing in China 10 years ago would have netted massive profits. Also, even if you only invested in the FTSE monthly over the last 10 years you'd still be sitting on a reasonable profit thanks to cost averaging. Finally, the article conveniently forgets about yield which I think is about 3% on the FTSE nowadays.

IMO the poor performance of the FTSE in recent years is all the more reason to take advantage of the current turmoil, just my 2p though

It is more like 4.5%

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Shares have offered me an excellent vehicle to earn a compound 15% yield... but if you guys want to avoid them then be my guests...

stock markets like any marketplace offer a place for the savvy to take money from the ignorrant and gullible

if anyone wants to outsource their brain and lend me their money I am happy to invest it for them in return for 200basis points of AUM.

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In a free market, all people are judged equally before the law, but how can this be the case if some people can hide behind the corporate veil and others can't?

The absurdity that is the doctrine of company personhood has given a small minority of the population (namely directors) a much greater power-to-responsibility ratio than everyone else in the country.

It gives a small minority of the population the ability to totally abuse the capital of a company that they do not own, by means of excessive executive pay etc. Shareholders do not get a fair return on their capital. Workers do not get a fair wages for their labour.

And since the company's legal personality can only exist by court enforcement, the entire plc structure is really an extension of the state system.

Inidvidual shares may do exceedingly well, but in general, shares in PLCs as an asset class are a scam.

Edited for clarity

"Shareholders do not get a fair return on their capital."

Are they forced to buy shares?

"Inidvidual shares may do exceedingly well, but in general, shares in PLCs as an asset class are a scam."

Eh?

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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