The Investment thread

[Sammysmiths]

I’ve never been comfortable with S&S and trading. I’m scared of the gamble. I put some inherited money into premium bonds and nearly got the full allocation allowed. Last 2 months I’ve won £600 and £750 . Most months I win £75 as an average. Not sure if this is good or bad but I’m comfortable in the fact I’m not going to lose my money.

 

[Andy_W]

I’ve never been comfortable with S&S and trading. I’m scared of the gamble. I put some inherited money into premium bonds and nearly got the full allocation allowed. Last 2 months I’ve won £600 and £750 . Most months I win £75 as an average. Not sure if this is good or bad but I’m comfortable in the fact I’m not going to lose my money.

I don't have any bonds, they seem low risk and low return, so not really suited to myself or younger folk, but bonds should play a big part for older folk or those not wanting to take risk.

I think premium bonds average about 3% return, so if you got 50k in (which I think is the max), then you should maybe hope to average £1500 a year, or around £125 a month.

This is paid out though I think (tax free, which is good), but it won't compound (which is bad, unless you save the payouts elsewhere) and inflation is currently high so inflation is basically eroding that away, like it's eroding anything else. To beat inflation you need to take risk really, but beating inflation as it is now is quite high risk in itself though, so most older folk will just take that on the chin, which is fair enough.

You might get a better return, and less variable return with a cash ISA, and letting it compound, they're currently about 3-5% and effectively low risk and no tax either.

 

[Nano]

Low cost trackers are all you really need. Day trading and having big years in tech sounds great but on average individual investors perform worse than the market itself. You don't win as big with trackers and they are boring because you don't do anything but in the long term they are your lowest risk bet to beat inflation (in the long term, there are no guarantees in the short term). Sometimes you are up and sometimes you are down but the important thing is being in.

Changing markets and going from S&S one year to cash the next year means you are attempting to time the market (being in for the ups and out for the downs) but the likelihood is you get in and out at the wrong time and you miss recoveries which can happen really quickly.

 

[Redwurzel]

I would be wary investing significant amounts in the stockmarkets while interest rates are rising. Stockmarkets tend to do well when interest rates are falling. I don't see any chance of this in 2023.

 

[Andy_W]

I would be wary investing significant amounts in the stockmarkets while interest rates are rising. Stockmarkets tend to do well when interest rates are falling. I don't see any chance of this in 2023.

Yeah, I agree with this, for those who don't want to take much risk etc, which is probably most people.

I wouldn't put money on anything UK based, as we know our rates still have a fair bit to go up, before coming back down, but other areas are probably nearing their peak, as most places have seemed to have turned a corner with inflation. When inflation drops interest rates will likely get cut to try and get the economies going again.

My thoughts are I would rather be in the market early (or all the time), to take advantage of changing times etc.

 

[SuedeDenimSecretPolice]

If you're looking at funds then I understand passively managed funds beat actively managed funds the vast majority of the time once fees and the like are taken into account. And as someone said earlier time in the market is more important than timing the market.

I'm a fire and forget type of investor by the way.

 

[Borotommo]

Here’s the tough truth.

if you hold £10,000 today, and put in a cash isa @ say 2.5%
In 10 years you have £12,800
At 10% annual inflation, that is effectively worth £4,800

The WORST EVER performance of the (US) stock market was a loss of 3% per year over a 10 year period. That would equate to a loss of £2,600 over that period, and (after 10% inflation per year), that would effectively be worth £2,853

The BEST EVER performance of the (US) stock market was a gain of 20% per year over a 10 year period. That would equate to a gain of £52,000 in that period, and (after 10% inflation per year), that would effectively be worth £23,900

Average performance, over 10 years is around 10% per annum, which would counteract the impact of (current) inflation.

If you buy good companies, reinvest dividends etc, and stay in the game long term, you’ll win…….eventually

 

[Redwurzel]

I can see inflation dropping in the UK to 6% by the end of September (diesel is now £1.40 from £2 per litre a year ago - think its dropped 10p per litre in a week and diesel is used to transport everything). Skipton Building Society is offering an interest rate of 7.5% on regular saving account - its a long while since I have seen real interest rates of 1.5% and I can see it later this year.

Many people in the City are righting off the UK stockmarket - its valued at two thirds the value of similar stock markets, but it still has some good quality businesses look at Diageo (best alcoholic spirits producer in the World with some massive brands).

 

[Sammysmiths]

I don't have any bonds, they seem low risk and low return, so not really suited to myself or younger folk, but bonds should play a big part for older folk or those not wanting to take risk.

I think premium bonds average about 3% return, so if you got 50k in (which I think is the max), then you should maybe hope to average £1500 a year, or around £125 a month.

This is paid out though I think (tax free, which is good), but it won't compound (which is bad, unless you save the payouts elsewhere) and inflation is currently high so inflation is basically eroding that away, like it's eroding anything else. To beat inflation you need to take risk really, but beating inflation as it is now is quite high risk in itself though, so most older folk will just take that on the chin, which is fair enough.

You might get a better return, and less variable return with a cash ISA, and letting it compound, they're currently about 3-5% and effectively low risk and no tax either.

Im not quite at the full limit so have just been reinvesting the winnings into more bonds.