As at March 22nd 2018, I have added much of the content that will be available free, although it will expand slowly. I am now working on the member content
Education
Trade Wars (m)
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