Contigo
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That's called the spread mate!
Advice for Pensions!!
- Thread starter dem maser
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That's called the spread mate!
D Walker
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Really - I thought that was Flora Light!!!
Slowly
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Not wanting to get into a PH style battle (if anyone wants that, the PH finance forum has some gladiators who will rise up to any mention of pensions, or anything financial and I am sure that there are goldbugs there as well) but there seems to have been a riptide of thread drift - sliding from OP's pension advice to hot tip frontier resources or tech stocks.
I posted a couple of weeks ago about diversification and ultra-low cost trackers for equity investments, low cost holding/trading platforms (less important for - generally advisable - infrequent dealing) but deleted it as it seemed too boring - though sometimes boring is good - Berkshire Hathaway for example, not that I am suggesting you buy some shares. Note that BRK.A rose by 2800 USD today... but note that one share, as I'm sure you know, is fairly expensive ($275600 today at close) and the divi isn't good.
I posted a couple of weeks ago about diversification and ultra-low cost trackers for equity investments, low cost holding/trading platforms (less important for - generally advisable - infrequent dealing) but deleted it as it seemed too boring - though sometimes boring is good - Berkshire Hathaway for example, not that I am suggesting you buy some shares. Note that BRK.A rose by 2800 USD today... but note that one share, as I'm sure you know, is fairly expensive ($275600 today at close) and the divi isn't good.
D Walker
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I for one wish you had not, anything that will aid any of us novices is of use. I'm doing lots of reading and research, it must be the only time i've stopped scouring the car sites in ages......
Contigo
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No fun in any of that though!
hoyin
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Should have posted it. Everyone has different ways of creating a pension pot and you need to diversify and do what you think is suitable for you and based on your appetite for risk.
http://www.telegraph.co.uk/pensions...ing/start-investing-50-get-1m-pension-pot-67/
Here is another way.
The other method I have going is long term holdings with dividends and auto reinvesting the dividends in the shares.
So always good to share what your thoughts are. It will never be a battle. I am always interested in learning what others are doing.
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Slowly
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Well, a pension is a pretty serious issue for which one would be sensible to get professional advice, and you should never have all of a pension fund in equities, except perhaps very early on .
Over the years I have moved to a fairly standard, simplistic and boring strategy based on several frequently stated principles.
1. Shelter investments from tax.
2. Keep charges / costs low.
3. Reinvest dividends.
4. Don't try to time the market - the pros are much better at it than you.
5. Don't try to stockpick (same reason) - and ignore hot tips or whatever the adverts are pushing.
6. Deal as little as possible.
7. Spread investments widely - no more single company shares.
Compound interest was said to have been described by Einstein as "the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it". http://www.telegraph.co.uk/finance/...or-10-years-pays-more-than-saving-for-40.html
and the flip side is that compound charges, whether tax, platform charges or fund charges have an equally large adverse effect so:
1) Shelter from tax. Previously PEPs and now ISAs allow all income and capital gains to be sheltered. Not many of us can set aside £20k p.a. of taxed income for savings so there is plenty of scope for most within that annual limit. Take care that the income is kept within the ISA and not paid out or you can't put it back.
2) Keep charges low. Many well known fund / pension platforms charge high annual fees - some a % of your total holdings with them. There are also big differences in the charges per trade. The latter doesn't matter if you trade infrequently. I use my bank's sharedealing and ISA platform - they have brought in a £15/quarter charge and charge £12.50 a trade - the trading fee is higher than many but £60 p.a. plus £12.50 / trade is a lot better than, say 1% or more of total assets. Apart from the platform fee, many active funds in which there are managers picking stocks charge 1% or more p.a. which is fine if they consistently outperform the market but many don't. I now only buy index-tracking funds (which just buy every share in which ever index they track in proportion to the proportion of the index it makes up) with low charges - one can pay 1% p.a. charge with one well-known provider for a simple FTSE tracker or 0.07% with e.g. a Vanguard ETF tracking the same FTSE index - so £1000 p.a. or £70 p.a. charge on £100k for the same thing.
3) Reinvest dividends - you can either buy accumulation funds which reinvest them automatically (but you don't then "see" the income and, whilst it doesn't matter if it is in an ISA, if it is outside the tax shelter it is a pain working out what was income and what was capital gain so you can pay the tax due on the income), or you can get distribution funds which pay out the dividends which you can see and keep in the ISA and add to the amount you are going to invest next time you trade.
4) Don't try to time the market. Google "timing the market" and you will see illustrations of the effects of getting it right or missing the very few key days or times in days on which trading or not trading would have made or lost a substantial amount over time. Nowadays I buy monthly, on about the same day of each month, dripping 1/12 of the annual amount I put into the ISA + any dividend income in equally and steadily over the year. Sometimes the market is low, so you will buy more shares that month, sometimes high when you will buy fewer - it evens out. If you wait until March and then are forced to buy it all in one to beat the end of financial year deadline you may hit a bad (or good!) time to put all your annual investment in, and whether it was a bad or good time is magnified by the fact that you put the whole lot in on that day.
5) Don't try to stockpick - the pros are better and the columnist in the newspaper or tip sites often has a vested interest in the shares they are promoting. Over the years I have noticed that when there are lots of ads for a particular sector it is hitting a peak - tech just before that crash, property funds, renewable energy... all had lots of quarter or half page ads from the big retail funds in the "finance" or "your money" pages shortly before they fell out of favour.
6) Deal infrequently - dealing costs you in terms of fee per trade, stamp duty and the spread between buying and selling prices - and the spread is often high on smaller exotic mining and energy stocks outside the main market. You're also tempted to buy and sell when you shouldn't.
7) Spread the investment - no more single company shares. I have done well in the past with single company shares (Orange, Xstrata/Glencore, Rio Tinto etc) but also had a total loss and some 60% losses on some smaller companies. That was partly because of not being disciplined and setting stop losses - i.e. sell once the share has gone down by x%, no matter how painful and equally, once it has risen take profits. Easier said than done unless you set and stick to stop loss/gain thresholds. Now that one can get cheap trackers for every kind of index you can spread your investments as you wish - for a very simple very broad coverage a global tracker like VWRL or SWDA (the latter is an accumulation fund) - both track the world's biggest companies, so are diversified across all sectors and regions, and charge 0.25% and 0.2% respectively.
One is never going to outperform the index with this strategy (as even a small annual charge will always mean you are behind) but equally you won't underperform by much, whilst the compounding of the dividend income works its magic. Of course stock markets can crash and you have to be prepared for some anxious times, but over decade/s they have generally done well.
GeoffCapes
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I've done a fair bit of share trading, and the old adage still holds true.
It's not a profit until it's banked.
I currently hold zero shares of any kind, apart from what Scottish Widows, Standard Life, LV and the Prudential have invested for me in pensions, however, at some point I am going to stick some money into the good old fashioned safe havens that pay a nice dividend and re-invest that money back into the company to build up a nice little nest egg.
I still watch a few shares and markets, and if I were looking for a nice safe haven right now, it would be in the precious metals.
When you get uncertainty in the market, gold, silver, platinum etc are the place to put your money.
I paid for the deposit on my first house buying gold at $320 oz. on a spread bet. Sold up at $1200.
Ta very much. Should have put it all into the house rather than chucking half on an oil minnow that tanked and lost me a fortune!
Oh well, live and learn.
It's not a profit until it's banked.
I currently hold zero shares of any kind, apart from what Scottish Widows, Standard Life, LV and the Prudential have invested for me in pensions, however, at some point I am going to stick some money into the good old fashioned safe havens that pay a nice dividend and re-invest that money back into the company to build up a nice little nest egg.
I still watch a few shares and markets, and if I were looking for a nice safe haven right now, it would be in the precious metals.
When you get uncertainty in the market, gold, silver, platinum etc are the place to put your money.
I paid for the deposit on my first house buying gold at $320 oz. on a spread bet. Sold up at $1200.
Ta very much. Should have put it all into the house rather than chucking half on an oil minnow that tanked and lost me a fortune!
Oh well, live and learn.
JonW
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Slowly - great post!
My pension approach is similarly dull and boring, and I'm convinced when it comes to pensions that slow and steady is the best way to be.
I think there is definitely a time and a place for investing in equities, and there's probably also a time and place for investing in high risk / high return companies like some of the oil exploration outfits, mining or up and coming technologies. However, if it was anything other than pure speculation, even then I'd be tempted to pay a professional to do it for me, through investing in a fund that is targeted towards those areas, and I would only be doing it with money I could afford to lose.
GeoffCapes
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EME. I Owned at one point 4.98% of the company.
GeoffCapes
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A few years ago they were £1.70!
rockits
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Very similar to me. I had a nice spreadbet running on gold from about $580 oz up to about $1150 oz. Maybe some very nice tax free cash on this then lost half of it on a load of mining stocks.
Learnt a lot though making mistakes. Still got a small portfolio but not active as just don't have the time to monitor/manage/react.
I'm certain I would become active again once I get more time in future years. It suits my character quite well as I'm patient, relaxed, methodical, motivated & disciplined. Those characteristics amongst others certainly help.
hoyin
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Yes all very sensible advice.
For sure a profit is not a profit till you have banked it.
I wouldn't be betting your pension on self trading unless you were very good. It is too easy to lose a lot.
I for sure only put in what I can afford to lose.
And like everyone I have made mistakes and still do.
I.e. Bloody GoPro tanked so bad. It is so bad I might as well hold on and hope sometime in the next 25 years I might get my money back.
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For sure a profit is not a profit till you have banked it.
I wouldn't be betting your pension on self trading unless you were very good. It is too easy to lose a lot.
I for sure only put in what I can afford to lose.
And like everyone I have made mistakes and still do.
I.e. Bloody GoPro tanked so bad. It is so bad I might as well hold on and hope sometime in the next 25 years I might get my money back.
Sent from my iPhone using Tapatalk