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Financial Guidance Thread

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View JRW2's Profile JRW2 Online Flag Dulwich 28 Apr 20 10.04am Send a Private Message to JRW2 Add JRW2 as a friend

Originally posted by Goal Machine

For those not familiar with the concept of ‘compounding’, its best explained with an example: You invest £1,000 which gets 5% growth per year. After 1 year, the value is £1,050. Year two, you get 5% growth on £1,050 which totals £1,102.50. By the end of year 10, the initial £1,000 would be worth £1,628. This is an increase of 62.8%.


I don't know whether your 5% refers just to capital growth, but one shouldn't forget that shares in the FTSE 100 Index are currently on average giving a dividend yield of 4.75%, so that at the end of year 1 the total return is 9.75%. Of course, in practice most people cash their dividend cheque and spend the money. But if the dividend is reinvested every year, then the return over 10 years will be far, far greater (I can't do the maths) than 62.8%. Many companies offer shareholders a scheme for reinvesting dividends, known as a DRIP (Dividend Reinvestment Plan), whereby the dividend is used to acquire more shares for the shareholder. This is great for younger people.

 

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View Rudi Hedman's Profile Rudi Hedman Flag Caterham 28 Apr 20 10.10am Send a Private Message to Rudi Hedman Add Rudi Hedman as a friend

Sell all your shares within 10 years, no matter how you feel about it. Buy shares after the inevitable crash in the economic life cycle.

 


COYP

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View mezzer's Profile mezzer Flag Main Stand, Block F, Row 20 seat 1... 28 Apr 20 10.13am Send a Private Message to mezzer Add mezzer as a friend

Originally posted by JRW2


I don't know whether your 5% refers just to capital growth, but one shouldn't forget that shares in the FTSE 100 Index are currently on average giving a dividend yield of 4.75%, so that at the end of year 1 the total return is 9.75%. Of course, in practice most people cash their dividend cheque and spend the money. But if the dividend is reinvested every year, then the return over 10 years will be far, far greater (I can't do the maths) than 62.8%. Many companies offer shareholders a scheme for reinvesting dividends, known as a DRIP (Dividend Reinvestment Plan), whereby the dividend is used to acquire more shares for the shareholder. This is great for younger people.

Dividends are becoming rarer than a Benteke hat trick after this latest crash. They're one of the first things to be cut when there's a crisis.

 


Living down here does have some advantages. At least you can see them cry.

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View PalazioVecchio's Profile PalazioVecchio Flag south pole 28 Apr 20 10.59am Send a Private Message to PalazioVecchio Add PalazioVecchio as a friend

a robber can steal more money with a suit & briefcase than he could with a balaclava & shotgun.

 


from the Etihad, Emirates, Molyneux, London Stadium, the Vitality, turf moor & Anfield to Old Trafford.....Raptors on the Road

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View Goal Machine's Profile Goal Machine Flag The Cronx 28 Apr 20 11.05am Send a Private Message to Goal Machine Add Goal Machine as a friend

Originally posted by PalazioVecchio

financial guidance :

never marry a lunatic just cos she has a nice @rse

never buy a new car

overseas sun property investments are for mugs

Gym membership is daylight robbery

beer with an obscure brand-name is cheaper and often better than the p1ss with all the adverts on the telly

never buy anything from anybody who sells door to door

you cannot beat the Casinos

a drunken evening out in the West End is probably not worth it.

Wise words indeed.

 

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View Rudi Hedman's Profile Rudi Hedman Flag Caterham 28 Apr 20 11.17am Send a Private Message to Rudi Hedman Add Rudi Hedman as a friend

Gym membership depends on how much and what you use there. For a lot of people it probably is a waste of money, especially years ago when people joined in January, didn’t go beyond February and were locked in for a full year.

You could of course buy all the equipment but decent stuff isn’t cheap and you need the room. There are gyms that are very sociable places so an added value and motivation.

 


COYP

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View Goal Machine's Profile Goal Machine Flag The Cronx 28 Apr 20 11.53am Send a Private Message to Goal Machine Add Goal Machine as a friend

Originally posted by Tom-the-eagle

Always found the stock market a mugs game.

A wise man once told me how to invest money. He told me to ‘buy Litecoin, bud’.

I would agree that unless you know how to read company balance sheets and accounts and understand the mechanisms behind how the company operates, buying individual company stocks could be perceived as a mugs game. If you don't know what you're investing in, it is a gamble.

My view on litecoin, or any cryptocurrency, is that it is unregulated and extremely volatile. It is common financial behaviour to have herd mentality and simply buy an investment because everyone else is. The reality is that the horse has already bolted and 99% of investors have no idea what they're actually investing in. For those who spotted it early, knew what they were doing and sold at the right would have done very well.

To challenge your perception on stock market investing, I would encourage you to look at a very basic, low cost passive fund. Try the Vanguard LifeStrategy 100% equity fund. This is a no frills tracker fund which simply mirrors the global stock markets and has 100% equity content (no bonds, cash or property).

[Link]

Prior to the recent crash, this had grown 60% in less than 5 years. Since this launched around 10 years ago, the total growth has been around 160%. Short term, this would be very volatile and most likely unsuitable, but long term the growth is likely to be enormous.

The 'mugs' (to use your term) are those who keep their long term savings in cash. Most people are not aware that the rate of inflation (approx 2.5% per year) exceeds the low interest rates (currently 0.1%), so the spending power of cash is gradually decreasing (by around 2.4% per year).

Cash is ideal for short term saving/rainy day fund, but it is guaranteed to lose you money long term.

Edited by Goal Machine (28 Apr 2020 11.59am)

 

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View JRW2's Profile JRW2 Online Flag Dulwich 28 Apr 20 11.56am Send a Private Message to JRW2 Add JRW2 as a friend

Originally posted by mezzer

Dividends are becoming rarer than a Benteke hat trick after this latest crash. They're one of the first things to be cut when there's a crisis.

Good point, but slghtly overstated I think (though your comparison made me smile). BP this morning announced that it was maintaining its dividend, which I gather wasn't universally expected, and which has led to a 1.4% rise in the share price.

And I see that a firm of stockbrokers has suggested that on the basis of what it regards as realistic assumptions the FTSE 100 Index will yield 2.7% in 2020. And there must be at least a chance that dividends will be restored/increased in 2021. So potential total returns still in my opinion look attractive.

 

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View Tom-the-eagle's Profile Tom-the-eagle Flag Croydon 28 Apr 20 12.10pm Send a Private Message to Tom-the-eagle Add Tom-the-eagle as a friend

Originally posted by Goal Machine

I would agree that unless you know how to read company balance sheets and accounts and understand the mechanisms behind how the company operates, buying individual company stocks could be perceived as a mugs game. If you don't know what you're investing in, it is a gamble.

My view on litecoin, or any cryptocurrency, is that it is unregulated and extremely volatile. It is common financial behaviour to have herd mentality and simply buy an investment because everyone else is. The reality is that the horse has already bolted and 99% of investors have no idea what they're actually investing in. For those who spotted it early, knew what they were doing and sold at the right would have done very well.

To challenge your perception on stock market investing, I would encourage you to look at a very basic, low cost passive fund. Try the Vanguard LifeStrategy 100% equity fund. This is a no frills tracker fund which simply mirrors the global stock markets and has 100% equity content (no bonds, cash or property).

[Link]

Prior to the recent crash, this had grown 60% in less than 5 years. Since this launched around 10 years ago, the total growth has been around 160% (I can't find confirmation of this figure as its difficult to find past performance for more than 5 years). Short term, this would be very volatile and most likely unsuitable, but long term the growth is likely to be enormous.

The 'mugs' (to use your term) are those who keep their long term savings in cash. Most people are not aware that the rate of inflation (approx 2.5% per year) exceeds the low interest rates (currently 0.1%), so the spending power of cash is gradually decreasing (by around 2.4% per year).

Cash is ideal for short term saving/rainy day fund, but it is guaranteed to lose you money long term.


I was taking the p@ss regarding Litecoin - a joke regarding our dearly and recently departed TUX.

I do believe with absolute certainty though that the stock market is a mugs game for 95% of people and am happy to explain why.


So i'm in property, and If I compare the two:

I have 100k which I want to invest.

I take this to the bank and they sell me 100K of mutual funds which they then charge me for the pleasure of managing, regardless of whether they go up or down in value.

Now with that same 100k I could put this down as a 20% deposit on a buy-to-let mortgage and buy myself a property worth 500k, I now have assets worth five times the original stake!

My buy-to-let will pay me rent each month whereas a mutual fund will pay hardly anything in dividends, certainly nowhere near as much as rent, this is even after I factor in a percentage for void periods and maintenance.

Over time and with natural inflation, my 500k asset will appreciate at 5 times the rate of a 100k asset.

I can also borrow against property so I can additional property No one (as far as I know) will lend you monies against shares.

I'm sure you are a good guy etc however I DO NOT believe in financial advise. Nobody can invest my money like I can. Financial 'advice' in my opinion is all smoke and mirrors, just a way to rip people off whilst the only people who make money are the people selling the products and making the commissions.


Its like the gold rush, most of the people who made money were not the prospectors, but the guys who sold the shovels.

 


"It feels much better than it ever did, much more sensitive." John Wayne Bobbit

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View Goal Machine's Profile Goal Machine Flag The Cronx 28 Apr 20 12.13pm Send a Private Message to Goal Machine Add Goal Machine as a friend

Originally posted by JRW2


I don't know whether your 5% refers just to capital growth, but one shouldn't forget that shares in the FTSE 100 Index are currently on average giving a dividend yield of 4.75%, so that at the end of year 1 the total return is 9.75%. Of course, in practice most people cash their dividend cheque and spend the money. But if the dividend is reinvested every year, then the return over 10 years will be far, far greater (I can't do the maths) than 62.8%. Many companies offer shareholders a scheme for reinvesting dividends, known as a DRIP (Dividend Reinvestment Plan), whereby the dividend is used to acquire more shares for the shareholder. This is great for younger people.

Hi JRW2, my example is based on the unit price of buying into a collective fund, and reinvesting the dividends (choosing the 'acc' version rather than the'inc').

Using my example, the calculation for compounding is £1,000 x 1.05 to the power of 10 = £1,628

For 9.75% per year, it would be £1,000 x 1.0975 to the power of 10 = £2,535

I'd suggest that average returns of 9.75% over a 10 year period is unlikely.

 

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View cryrst's Profile cryrst Flag Chatham 28 Apr 20 12.29pm Send a Private Message to cryrst Add cryrst as a friend

Originally posted by Tom-the-eagle


I was taking the p@ss regarding Litecoin - a joke regarding our dearly and recently departed TUX.

I do believe with absolute certainty though that the stock market is a mugs game for 95% of people and am happy to explain why.


So i'm in property, and If I compare the two:

I have 100k which I want to invest.

I take this to the bank and they sell me 100K of mutual funds which they then charge me for the pleasure of managing, regardless of whether they go up or down in value.

Now with that same 100k I could put this down as a 20% deposit on a buy-to-let mortgage and buy myself a property worth 500k, I now have assets worth five times the original stake!

My buy-to-let will pay me rent each month whereas a mutual fund will pay hardly anything in dividends, certainly nowhere near as much as rent, this is even after I factor in a percentage for void periods and maintenance.

Over time and with natural inflation, my 500k asset will appreciate at 5 times the rate of a 100k asset.

I can also borrow against property so I can additional property No one (as far as I know) will lend you monies against shares.

I'm sure you are a good guy etc however I DO NOT believe in financial advise. Nobody can invest my money like I can. Financial 'advice' in my opinion is all smoke and mirrors, just a way to rip people off whilst the only people who make money are the people selling the products and making the commissions.


Its like the gold rush, most of the people who made money were not the prospectors, but the guys who sold the shovels.

Your morphing into tux, tom

 

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View PalazioVecchio's Profile PalazioVecchio Flag south pole 28 Apr 20 12.40pm Send a Private Message to PalazioVecchio Add PalazioVecchio as a friend

Originally posted by Goal Machine


My view on litecoin, or any cryptocurrency, is that it is unregulated and extremely volatile.

Edited by Goal Machine (28 Apr 2020 11.59am)


true. But i would argue that the same holds true for the Dollar/Euro/Sterling.

and dont even get me started with the currency of Third World Banana republics.

For example, On the evening of the Brexit vote, Sterling dropped 30%.

The Gold Standard did make a lot of sense. Yet still idiots with no understanding of economics will laugh at it as outdated.....with all the worthless bits of paper in their pockets.

 


from the Etihad, Emirates, Molyneux, London Stadium, the Vitality, turf moor & Anfield to Old Trafford.....Raptors on the Road

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