Stocks etc over priced due to overleveraging which is now too expensive, im 50 50, my cash is sitting earning interest whilst stocks do nothing or go down, in a year or so i will reasess and maybe go more stocks, but im old and drawing on my funds already so cautious , if i was a youngster id just keep buying stocks but worldwide not just uk.
For some, short term investment in floating rates is just a default position cause they find valuation to be pretty rich everywhere in equities, which means perfection is often priced in and increase the risk for some thoughtful investors. It is not necessarily a timing thing. For others, it can also be a way to construct a neutral portfolio since they's a lot of uncertainties out there.
@@PrinciplesPersonalFinance Well, I guess people are trying to market time just a little bit. We've not seen inflation (and central bank base rates) like this for years so now is a good a time as any for a little market timing :P
Why wouldn't you hedge, 5.5% cash isa for 1 year, and invest into the stock market, when the rates drop transfer the cash isa to a stocks and share isa, actually think cash isa will hit over 6% its a no brainer really for guaranteed returns
Thanks for the video, it's always good to keep the long term in mind and keep investing. Still find it hard to describe / explain to anyone else though!
Thanks for watching Neil. Yes, it's a personal thing and often as much about the feeling as the rational decision. As you say, investing well is investing through all market cycles!
That's fair enough. Appreciate the feedback. Sometimes this type of financial data isn't straightforward and I appreciate it's not for everyone. The takeaway is - when inflation spikes, asset prices struggle and cash rates increase. That is completely normal and not a reason to exchange a long-term investment strategy for a short-term cash strategy. When inflation comes down after these spikes, asset prices often do very well. Therefore, it becomes a question of - do you think you can time the market and get in an out at the right time? (Spoiler - no one can) Thanks for watching.
Great Vlog . Yeah complete no brainer. I had 20k in a stocks & share isa that dropped to just over 18 k . 5 % with zero risk or risk the lot. Whos to say it wont drop by more ?
Thank you. Some things to bear in mind 👇 No one, but that's always the case with investing. 5% at 'zero risk' remains sub-inflation returns. If you can't stomach a 10% decline, you can't be a successful investor.
Respect your viewers time, telling me that what grabbed my interest in the video in the first place and then telling me to find out at the end? Come on, treat us better than that - tell us and then trust your content after that to add value for people's time and your channel will thrive, you've clearly put in a lot of work but this current strategy makes me think twice
Interesting comment, appreciate your feedback (genuinely.) Do you think the video would have been better if I'd said the conclusion first? I understand everyone wants things quicker, but would that have made the message just a meaningless opinion? To be clear, asking out of curiosity, not defence.
@@PrinciplesPersonalFinance I've re-watched the intro part again and on reflection I think it's not so much the content and ordering of it which made me feel to write my original comment but maybe more so the way it phrased. Specifically "So wait around to the end to hear about this", I think this whether intended to or not, kind of hints at downplaying the content in between, content you've undoubtedly put a lot of effort in! I think if you had said something which kind of hints towards a high level answer but then invites the viewer to go through the details with you it would be better (in my opinion) - E.g. the line before says "when you're considering the trade off yourself", maybe could have said "Let's take a closer look at what this means" I'm honestly trying to be constructive as I can it's a win/win for me and you (assuming this is useful), subtle ways in which things are said get interpreted and signalled to different users in different ways I suppose :)
@@sospirited yea, I think you're right. Solid feedback so thank you. Could have been much better at scripting there. Can see how that sounds and it could sound like the wrong side of foreshadowing. Very grateful for you watching the channel and also giving feedback. Appreciated 🙌
We do live in strange times. The majority of UK pensions are invested in the default fund the provider has, which is likely a lifestyle fund which increases the percentage of your fund which is allocated to bonds as you approach retirement. Most of them are also over-exposed to the UK stock market - perhaps 30% as opposed to the 4% that would be appropriate for a global fund. A perfect storm, where bond prices collapse as interest rates rise, and the lack of performance from the UK means that people who are risk averse now find that their pension fund is falling while their retirement date is approaching. Investment, especially for a pension, should always be a long term project, but the issue comes when your fund is collapsing at the end of that long term, despite following the advice of your financial advisor.
Very true. My pension provider did just this as I’m approaching (early) retirement. I moved into some global index tracker and money market funds instead and pleased I did.
@@stevegeek So, a little about my background, and maybe an indication of why I'm skeptical of the stock market producing returns in the medium to long term. My first career was as a life assurance underwriter. At that time, insurance companies sold a product called an endowment mortgage (sometimes called a mini mortgage). The customer would pay for an insurance policy and would also pay interest on the full amount of the mortgage. The insurance policy would normally consist of term assurance (which is cheap and provides a cash payment on death to pay off the mortgage) and an endowment policy (which was the investment which would pay off the mortgage). House prices were much smaller than now, perhaps £30,000. The customers were given quotes that, if the endowment grew by 8.5% per year, they would not only pay off the mortgage, but there would be a surplus of, say £10,000 which would be paid out at the end of the mortgage, so you'd pay off your house and have some extra money. In fact, what happened was that there was a shortfall, so that after 25 years the customer still had £10,000 or more to pay on their mortgage. You will often hear online that the S&P 500 will give you an average of 8%+ per year over the long term. So, I wonder why these endowment mortgages failed, given that it should have been very easy for the investment managers to invest the endowment money in an index such as the S&P 500 over 25 years and easily return what they promised. Incidentally, this issue was industry wide - it wasn't restricted to one or two insurance companies.
@@MattMcQueen1 Stock market investments are for the long term, buy and hold. Market timing is a losing game. And also there have been periods where the US market has done very poorly. From, about 2000 up until 2009 the US market return was negative for that entire period even with dividends reinvested. If you had invested money in the S&P 500 index in 2000 up until 2009 it would have been worth less than your initial investment in 2009 even with dividends reinvested. So obviously you need to cast your net wider. Also during that same period bonds did very well. US treasuries would have provided a very reasonable return for that same period with very little volatility. So obviously something like a ftse all world index fund combined with at least some bonds would be advisable. A very popular bond index for UK investors is the Bloomberg barclays global aggregate bond index Stirling Hedged to cut out the currency fluctuation risk . Vanguard does a low cost index fund for that, or there are other suitable etfs . It all depends on what you are trying to achieve, your time frame and risk tolerance. You only lose money in low cost, cap weighted broad market based index investments if you sell at a loss. Those mortgages you are referring to were a scam, people were able to claim compensation over them later on when it all came out. Obviously the people that sold them and the insurance companies were making a lot of money out of them, maybe not very well invested, not passing on the returns to the customer. Also I did post a comment explaining how those Default pension funds, that are aimed at people who want to buy an annuity at retirement actually work. But someone appears to have deleted it
Money markets are great right now though in terms of a short term home for your cash. What are your generic thoughts regarding investment grade commercial bonds? Thank you I really get tons of value from your videos .
Thanks for watching and I'm very pleased you find the videos useful! 🙌 Money markets are offering some potentially very decent rates compared to the last few years anyway! Especially for short-term cash holdings. Commercial bonds are priced off the risk-free rate so likewise are looking more attractive than they were previously. Diversification though is important to consider when making that assessment, depending on how you put the money to work. We've changed from an environment where the expected return from the bond portfolio has become much higher than it was a few years ago but I'd maintain it all boils down to the goal and the intention of the money. Whether the funds are being used for short-term liquidity or for a longer-term time horizon where a standard risk premium will likely play out. I know that's a basic thing to say, but in the noise of rising rates and the markets that can often get lost. Very grateful for your support and taking the time to comment. 👍
Thanks for watching and taking the time to comment. I think that's the thing, it's all about being intentional and remembering the purpose of the money. No one knows what will happen over the short term Fortunately for disciplined investors, that doesn't matter. 👍
@@PrinciplesPersonalFinance The short term is the problem. I hit state retirement age in the UK in seven years. Coincidentally, I have a lump sum to invest (through sale of shares of a company I used to work for). I and my wife have maxed out our ISAs with this money for this tax year, (with money left over) but we're pretty fearful of investing in the stock market (even by pound cost averaging), when the S&P 500 seems to be very overvalued and likely to fall significantly at some point before we retire. As such Money Markets seem to be the solution at the moment.
Depends where you Invest. Given that the FTSE is an absolute Dog that has done basically nothing for 20 years I’d say 5% MM rates doesn’t seem that bad.
The FTSE 100 has underperformed the US market, no question about that. However, it's not true to say the market as gone nowhere as the mistake many make is comparing the index values which misses out the structure of the FTSE 100 which is mainly dividend payers. So the index comparison alone is a misleading comparison as it doesn't show total return. The below gives a reasonable overview 👇 www.fool.co.uk/2023/05/30/if-id-bought-a-ftse-100-tracker-20-years-ago-heres-what-id-have-now/
Thanks, Principles Personal Finance. Isn't it interesting how our bias toward seeing a higher number and thinking it is a good thing blinds us to the reality of the situation? Similar to getting a C.D. rate of 15% and thinking it's a wonderful thing even though inflation is running hot at 17% and we are being taxed on that 15% C.D. interest.
@@PrinciplesPersonalFinance It is nice getting a jolt of creativity from across the pond which reminds me of two of my favorite books on creativity: “ A Kick in the Seat of the Pants” and “ A Whack On the Side of the Head.”🎯
Stocks etc over priced due to overleveraging which is now too expensive, im 50 50, my cash is sitting earning interest whilst stocks do nothing or go down, in a year or so i will reasess and maybe go more stocks, but im old and drawing on my funds already so cautious , if i was a youngster id just keep buying stocks but worldwide not just uk.
For some, short term investment in floating rates is just a default position cause they find valuation to be pretty rich everywhere in equities, which means perfection is often priced in and increase the risk for some thoughtful investors. It is not necessarily a timing thing. For others, it can also be a way to construct a neutral portfolio since they's a lot of uncertainties out there.
I love 'economics' . So much theory and axioms.
Great video and explanation.
People aren’t moving money into MM funds forever. It’s a short term thing.
Thanks for watching. I guess my sceptical view is - how do we know 🤷♂ and why would short-term moving to cash be a good thing? 🤷♂
@@PrinciplesPersonalFinance Well, I guess people are trying to market time just a little bit. We've not seen inflation (and central bank base rates) like this for years so now is a good a time as any for a little market timing :P
@@jasonburford2013 there are none so blind as them that will not see 😂
Yeah because they are more liquid if you loose you job that why
Why wouldn't you hedge, 5.5% cash isa for 1 year, and invest into the stock market, when the rates drop transfer the cash isa to a stocks and share isa, actually think cash isa will hit over 6% its a no brainer really for guaranteed returns
Great, nice explanation, thank you.
You're welcome, thanks for watching Jeff. 🙏
Thanks for the video, it's always good to keep the long term in mind and keep investing. Still find it hard to describe / explain to anyone else though!
Thanks for watching Neil.
Yes, it's a personal thing and often as much about the feeling as the rational decision. As you say, investing well is investing through all market cycles!
I had a hard time understanding this video. The credit suisse chart was especially confusing. I never did get the point.
That's fair enough. Appreciate the feedback.
Sometimes this type of financial data isn't straightforward and I appreciate it's not for everyone.
The takeaway is - when inflation spikes, asset prices struggle and cash rates increase. That is completely normal and not a reason to exchange a long-term investment strategy for a short-term cash strategy. When inflation comes down after these spikes, asset prices often do very well. Therefore, it becomes a question of - do you think you can time the market and get in an out at the right time? (Spoiler - no one can)
Thanks for watching.
Great Vlog . Yeah complete no brainer. I had 20k in a stocks & share isa that dropped to just over 18 k .
5 % with zero risk or risk the lot. Whos to say it wont drop by more ?
Thank you. Some things to bear in mind 👇
No one, but that's always the case with investing.
5% at 'zero risk' remains sub-inflation returns.
If you can't stomach a 10% decline, you can't be a successful investor.
Great video George!
Cheers bud, appreciate you watching.
Grateful for the support from a fellow creator. 🙌
Subbed
Thanks 🙌
Liked and subscribed. ❤
Why is everyone comparing 5% now with equities returns which are all about the increase decades from now?
Because some of us will retire in less than a decade.
Respect your viewers time, telling me that what grabbed my interest in the video in the first place and then telling me to find out at the end? Come on, treat us better than that - tell us and then trust your content after that to add value for people's time and your channel will thrive, you've clearly put in a lot of work but this current strategy makes me think twice
Interesting comment, appreciate your feedback (genuinely.)
Do you think the video would have been better if I'd said the conclusion first? I understand everyone wants things quicker, but would that have made the message just a meaningless opinion?
To be clear, asking out of curiosity, not defence.
@@PrinciplesPersonalFinance I've re-watched the intro part again and on reflection I think it's not so much the content and ordering of it which made me feel to write my original comment but maybe more so the way it phrased. Specifically "So wait around to the end to hear about this", I think this whether intended to or not, kind of hints at downplaying the content in between, content you've undoubtedly put a lot of effort in! I think if you had said something which kind of hints towards a high level answer but then invites the viewer to go through the details with you it would be better (in my opinion) - E.g. the line before says "when you're considering the trade off yourself", maybe could have said "Let's take a closer look at what this means"
I'm honestly trying to be constructive as I can it's a win/win for me and you (assuming this is useful), subtle ways in which things are said get interpreted and signalled to different users in different ways I suppose :)
@@sospirited yea, I think you're right. Solid feedback so thank you.
Could have been much better at scripting there. Can see how that sounds and it could sound like the wrong side of foreshadowing.
Very grateful for you watching the channel and also giving feedback. Appreciated 🙌
We do live in strange times. The majority of UK pensions are invested in the default fund the provider has, which is likely a lifestyle fund which increases the percentage of your fund which is allocated to bonds as you approach retirement. Most of them are also over-exposed to the UK stock market - perhaps 30% as opposed to the 4% that would be appropriate for a global fund. A perfect storm, where bond prices collapse as interest rates rise, and the lack of performance from the UK means that people who are risk averse now find that their pension fund is falling while their retirement date is approaching. Investment, especially for a pension, should always be a long term project, but the issue comes when your fund is collapsing at the end of that long term, despite following the advice of your financial advisor.
Very true. My pension provider did just this as I’m approaching (early) retirement. I moved into some global index tracker and money market funds instead and pleased I did.
@@stevegeek So, a little about my background, and maybe an indication of why I'm skeptical of the stock market producing returns in the medium to long term. My first career was as a life assurance underwriter. At that time, insurance companies sold a product called an endowment mortgage (sometimes called a mini mortgage). The customer would pay for an insurance policy and would also pay interest on the full amount of the mortgage. The insurance policy would normally consist of term assurance (which is cheap and provides a cash payment on death to pay off the mortgage) and an endowment policy (which was the investment which would pay off the mortgage). House prices were much smaller than now, perhaps £30,000. The customers were given quotes that, if the endowment grew by 8.5% per year, they would not only pay off the mortgage, but there would be a surplus of, say £10,000 which would be paid out at the end of the mortgage, so you'd pay off your house and have some extra money. In fact, what happened was that there was a shortfall, so that after 25 years the customer still had £10,000 or more to pay on their mortgage. You will often hear online that the S&P 500 will give you an average of 8%+ per year over the long term. So, I wonder why these endowment mortgages failed, given that it should have been very easy for the investment managers to invest the endowment money in an index such as the S&P 500 over 25 years and easily return what they promised. Incidentally, this issue was industry wide - it wasn't restricted to one or two insurance companies.
@@MattMcQueen1 Stock market investments are for the long term, buy and hold. Market timing is a losing game. And also there have been periods where the US market has done very poorly. From, about 2000 up until 2009 the US market return was negative for that entire period even with dividends reinvested. If you had invested money in the S&P 500 index in 2000 up until 2009 it would have been worth less than your initial investment in 2009 even with dividends reinvested. So obviously you need to cast your net wider. Also during that same period bonds did very well. US treasuries would have provided a very reasonable return for that same period with very little volatility. So obviously something like a ftse all world index fund combined with at least some bonds would be advisable. A very popular bond index for UK investors is the Bloomberg barclays global aggregate bond index Stirling Hedged to cut out the currency fluctuation risk . Vanguard does a low cost index fund for that, or there are other suitable etfs . It all depends on what you are trying to achieve, your time frame and risk tolerance. You only lose money in low cost, cap weighted broad market based index investments if you sell at a loss. Those mortgages you are referring to were a scam, people were able to claim compensation over them later on when it all came out. Obviously the people that sold them and the insurance companies were making a lot of money out of them, maybe not very well invested, not passing on the returns to the customer. Also I did post a comment explaining how those Default pension funds, that are aimed at people who want to buy an annuity at retirement actually work. But someone appears to have deleted it
Money markets are great right now though in terms of a short term home for your cash. What are your generic thoughts regarding investment grade commercial bonds? Thank you I really get tons of value from your videos .
Thanks for watching and I'm very pleased you find the videos useful! 🙌
Money markets are offering some potentially very decent rates compared to the last few years anyway! Especially for short-term cash holdings. Commercial bonds are priced off the risk-free rate so likewise are looking more attractive than they were previously. Diversification though is important to consider when making that assessment, depending on how you put the money to work.
We've changed from an environment where the expected return from the bond portfolio has become much higher than it was a few years ago but I'd maintain it all boils down to the goal and the intention of the money. Whether the funds are being used for short-term liquidity or for a longer-term time horizon where a standard risk premium will likely play out. I know that's a basic thing to say, but in the noise of rising rates and the markets that can often get lost.
Very grateful for your support and taking the time to comment. 👍
Superb vlog - Thanks.
Thanks Kevin, very grateful for your support and watching. 🙌
Thanks for that. Great video, very informative. 1st comment too :)
Thanks Dave, very grateful for you watching and taking the time to comment. 🙌
Great video and answers what I have been thinking about! My time horizon is 15 years plus so just need to keep intentional!
Thanks for watching and taking the time to comment.
I think that's the thing, it's all about being intentional and remembering the purpose of the money. No one knows what will happen over the short term
Fortunately for disciplined investors, that doesn't matter. 👍
@@PrinciplesPersonalFinance The short term is the problem. I hit state retirement age in the UK in seven years. Coincidentally, I have a lump sum to invest (through sale of shares of a company I used to work for). I and my wife have maxed out our ISAs with this money for this tax year, (with money left over) but we're pretty fearful of investing in the stock market (even by pound cost averaging), when the S&P 500 seems to be very overvalued and likely to fall significantly at some point before we retire. As such Money Markets seem to be the solution at the moment.
Depends where you Invest. Given that the FTSE is an absolute Dog that has done basically nothing for 20 years I’d say 5% MM rates doesn’t seem that bad.
The FTSE 100 has underperformed the US market, no question about that. However, it's not true to say the market as gone nowhere as the mistake many make is comparing the index values which misses out the structure of the FTSE 100 which is mainly dividend payers. So the index comparison alone is a misleading comparison as it doesn't show total return. The below gives a reasonable overview 👇
www.fool.co.uk/2023/05/30/if-id-bought-a-ftse-100-tracker-20-years-ago-heres-what-id-have-now/
Excellent advice and a timely sanity check, thank you 😂
Thanks, Principles Personal Finance. Isn't it interesting how our bias toward seeing a higher number and thinking it is a good thing blinds us to the reality of the situation? Similar to getting a C.D. rate of 15% and thinking it's a wonderful thing even though inflation is running hot at 17% and we are being taxed on that 15% C.D. interest.
Agreed David, it's all about the real return!
As always, very grateful for you watching and taking the time to comment. 👍
@@PrinciplesPersonalFinance It is nice getting a jolt of creativity from across the pond which reminds me of two of my favorite books on creativity: “ A Kick in the Seat of the Pants” and “ A Whack On the Side of the Head.”🎯
cash doesnt compound