One of the “main heading” risks that I used to raise with clients when I was an adviser is political risk. I used to say politicians were unpredictable and sometimes irrational but could usually be relied upon to look after their own skins and to a degree that fact is a real control element in free societies, which is where most money gets invested. That was pre a certain Donald Trump, of course!
The FTSE at 7000 (ish) – the passive funds conundrum
I have a copy of a trade newspaper article printed in late 2007 reporting on a pre-Christmas survey of well known investment fund managers, most of whom are still working now. They were asked what they thought the level of the FTSE 100 index would be at the end of the next year. The answers ranged quite widely, but several were above 7000. The then current level was around 6400.
In fact the index fell 28% plus the next year. And 11 years later it is trading in the range predicted by the optimists a decade ago! If you were keen on passive index tracking funds in 2007, you would not have had a brilliant decade if you stuck to your FTSE 100 Tracker fund, although the dividend income would have been some consolation.
Don’t think this post is intended just to take a pop at passive funds – I see them as useful investments, if you know exactly what you are getting, and they are low cost.
The FTSE 100 is what is called market cap weighted, which has two main implications: a minority of large shares influence its performance and the mix of shares in the index changes over time. So the FTSE 1000 index valued at 7000-ish now is a completely different mix of shares to the one being speculated about at the end of 2007.
In fact, buying the index is a certain way of buying the past performace of businesses, which is what has driven up their share values and got them into the 100 highest value listed businesses in the the UK. So it can and does often include some shooting stars that will quickly die and fade. In deference to my football fanatic ex-colleague, I often refer to them as Wimbledons!
It might sound like investing in a list of Britain’s top companies is a straightforward lower risk decsion for beginner investors, but that is yet another investment myth.
Beware of wolves dressed as your kindly wealth manager (m)
Reading a piece this morning where a stock broker was explaining that it was hard to make a case for investing in bonds and in fact concluded with a proposal for an investment in “out of the money” convertibles
Recession coming?
This graphic may get used a lot!
It is meant to reflect the fact that I am tearing out my few remaining hairs after reading or hearing something crass and idiotic. A vast amount of such stuff gets published every day under the guise of investment commentary or analysis.
Morningstar (a great source of data, by the way) report this today:
Economic growth has reached its peak and we are heading for a “significant slowdown in the global economy”, according to Simon Ward, chief economist at Janus Henderson Investors. He predicts there will be a global recession in either 2019 or 2020.
He has a methodology, which is explained, then that is followed by comments from other ‘experts’ contradicting him.
Whoever said (Churchill?) that ‘economists will tell you tomorrow why what they predicted yesterday did not happen today’ summed up the reality neatly.
There may be a recession, I don’t know – they don’t know either. Such speculation is of no use whatsoever in building an investment portfolio
Never judge an investment on recent data only (m)
Work in Progress – not the real thing!
This post is just to let people who may be looking at the currently only part complete ‘test’ version of the website that content is being added virtually every day, broken links that result from me fiddling with the design and so on are being fixed and generally we are getting near to an version that I will be happy to publicise and shortly afterwards make available to any subscribers. If you want to feed back and ideas or notify me of any typos, please email me using my public email address: madblotter@gmail.com