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Post by Financial Thing on Jun 15, 2016 16:24:43 GMT
Why not do a world equity tracker then? Ok, so the US is 60%+ of it but it would add a few more stocks into the list? (I do have some US exposure via a tracker though) Because world trackers have under-performed historically. The US S&P has averaged close to 12% annually since inception. I trust US companies far more than companies in other countries. I think the US will likely always be a country of growth and high consumer spending.
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james
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Post by james on Jun 15, 2016 19:09:24 GMT
Now all you need to do is read the description of what he did and cringe. You might also want to correct the 96% of the time since 1995 error in your post, 96% is what he found for 14 year periods between 1995 and 2016, not since 1995. The period you pick matters with a smallish date range, according to him: 11 years: cash better 52% 12 years: cash better 59% 13 years: cash better 76% 14 years: cash better 96% 15 years: cash better 94% Among other things he: 1. pretended that interest was tax free 2. used a UK FTSE 100 index tracker fund that had costs of about 1.3% a year based on the difference between its performance and the Equity Gilt Study performance 3. used one year term deposit accounts available for amounts less than £2,500 where possible and not exceeding £10,000, so you couldn't put much money in and get the rates he was using. 4. still came up with cash being beaten by FTSE 100 equities by about 1% a years so at the end equities were worth £34,098 vs £28,105 for the cash accounts. 5. used a perfect interest rate picking person but didn't do things like choosing good funds or better markets or use rebalancing between bonds and equities, so he was assuming an uninformed investor. In essence he compared a poor investment person with a perfect savings person with little money to save or invest so he cut a percentage point or three from the investing returns vs cash.
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jonah
Member of DD Central
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Post by jonah on Jun 15, 2016 19:37:12 GMT
Why not do a world equity tracker then? Ok, so the US is 60%+ of it but it would add a few more stocks into the list? (I do have some US exposure via a tracker though) Because world trackers have under-performed historically. The US S&P has averaged close to 12% annually since inception. I trust US companies far more than companies in other countries. I think the US will likely always be a country of growth and high consumer spending. Fair enough. I would agree with most of that. At some point the US debt mountain has to fall over (as does the UKs!) but when that happens I suspect it won't be an event which can be avoided with any equities.
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Post by Financial Thing on Jun 15, 2016 21:58:41 GMT
Because world trackers have under-performed historically. The US S&P has averaged close to 12% annually since inception. I trust US companies far more than companies in other countries. I think the US will likely always be a country of growth and high consumer spending. Fair enough. I would agree with most of that. At some point the US debt mountain has to fall over (as does the UKs!) but when that happens I suspect it won't be an event which can be avoided with any equities. Absolutely the debt mountain will crumble and one day the stock market will crash again, and again, and again (I look forward to it from a fund buying perspective, not a p2p one). But if you were to buy and hold you would benefit from the valleys, the troughs, dividends and compounding interest. Of course if you try to time the market as most amateur investors do, you will likely lose money over the long through mistiming and emotional decisions. The 12% annual return I mentioned presumes a buy and hold strategy and includes such crashes as the 1930's, 80's. 2000's etc.
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james
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Post by james on Jun 16, 2016 6:12:44 GMT
Of course if you try to time the market as most amateur investors do, you will likely lose money over the long through mistiming and emotional decisions. There is always the option of doing that sort of timing with Guyton's approach of using the Shiller cyclically adjusted price/earnings ratio. Since the ratio has been shown to be well correlated with future returns in all markets studied that suggests that it's a useful tool for adjusting the equity portion of the investment mix.
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