Investment & Investing

duplicate post!

Ah sorry about that.

Have contacted them again, still waiting for trading 212 to respond but freetrade sent this:

-link now expired message if you want another one

Thanks for whoever signed up to trading 212, enjoy your Ocado stock!

If anyone else whats a free stock (one pound deposit) then feel free to use the referral link below:
http://www.trading212.com/invite/FMEnZ7W­Y

Vanguard SIPP came out today https://www.vanguardinvestor.co.uk/articles/latest-thoughts/retirement/vanguard-personal-pension-is-here?utm_source=Dave%20@Zude%27s%20RESET%20Brain%20Food&utm_campaign=ff4d788b58-EMAIL_CAMPAIGN_2020_02_19_06_38&utm_medium=email&utm_term=0_6dbfd631c7-ff4d788b58-588463201

the FT yesterday wrote an extremely average piece on indexed funds. Top comment predicts indexed funds will end in tears. Anyone have any thoughts on this comment?

"Like all other widely-adopted trends in financial markets, this will end in tears. Passive investing assumes that there a lot of people out there actively choosing between stocks after doing the analysis, and that therefore one can just piggy-back on the net effect of that. What it doesn’t account for is what happens when there is a high proportion (not even a majority) of passive investment taking place in the market.

The answer is that it creates bubble-like situations. As all stocks are being bought blind, correlations increase. As correlations increase, the relative risk of individual stocks falls on an optical, cosmetic level. That makes these stocks more attractive in portfolio risk models to active investors, meaning that it is more difficult not to invest in them, thereby increasing correlations further via the active investor sector. More broadly, and more dangerously, the increase in passive investing increases the performance of the index against active strategies. As a result, passive investing every day looks even more attractive in past performance. Confidence rises in it as a strategy.

And so the cycle continues. As it does, active investors find it more and more difficult to get any relative movement in the market, and cease their activities. The money they were investing goes into passive strategies. Index member stocks continue to hold their value regardless of any change in company profitability. In the meantime, more dynamic businesses which are not in the index are starved of capital. This brings down growth and productivity in the real economy, making the index even more-overvalued.

At some point, all the passive investing which can take place will have taken place and the index member stocks in which they are invested will be hugely overvalued versus other stocks or businesses. That is when the whole edifice collapses. Index holders at that point will lose huge amounts of money.

If you accept this, then the question from an investment perspective is for how long do you think that the bubble can inflate – are we near the beginning or the end? If you currently think it is near the end, for how long and how far does the market need to move relatively before you are forced into it? If you think it is near the beginning, what strategy do you have if you are wrong – what relative shift tells you that it is all over?"

That seems to be a rather over blown peice. The fundamental concept has some merit, but I think the outcome described is wildly exaggerated.

If you'd owned an index tracker for the past 5 or more decades, you'd be doing ok and would have outperformed active portfolios in aggregate.

Where's the proof that active investing has been key to the success of stock indexes since their conception? I don't see it.

Edit: when I click on your link, I get a different article which starts:

"BlackRock is already the world’s largest asset manager, but it is in touching distance of another crown: becoming Britain’s biggest."

I've got a subscription to the FT.

2nd Edit: apologies, I see you were quoting one of the comments. Obvs, comments are a free for all and largely there for shits and giggles.

Agree that the article was pretty bland and not what I expect for my £50 a month.

What's the difference between Freetrade and Trade212?

I've been using Freetrade for the past 4m - it pretty simple which I like. Overall doing well. Couple of melons but 50% up so far.

I think the outcome described is wildly exaggerated.

FWIW I think the same.

That the guy from Hounslow managed to manipulate the trackers in an index is interesting though.

I don't think he was alone...considering he was given a plea bargain.
A few big whales can shift market. It's the hedge funds that are the real big players.

Big dip in blue chip stocks due to Corona virus... anyone buying? Or still further to fall?

I'm always buying...a little bit....every month :)

I don't think he was alone...considering he was given a plea bargain.

A few big whales can shift market. It's the hedge funds that are the real big players.

The claim was that he did it because he noticed others doing it, reported it (multiple times), and when that was ignored incorrectly took it as confirmation of the legitimacy of fake/ghost orders.

Apparently he also lost all his money to Ponzi scams.

I stick to losing money, that's more my style

Not just blue chip - all over the shop. I’ve bought into some stocks I’d been tracking as they’ve dropped to a price which I like but I think things could get a lot more hairy if the virus spread further especially if some of the challenges with vehicle production in Europe etc become more widespread

Wonder if that's true..perhaps hes hidden it off shore. Still living with his parents as he was before.
Is he banned from trading?
A legend in my book

We were in bubble territory. Probably still are. May well continue to be for the foreseeable.

Is he banned from trading?

Pretty sure he is.

I did think setting up Ponzi schemes to steel and hide your own money would be a good idea. But equally he doesn't seem to have any appreciation or desire for money - living at home, cheap clothes, only ever eating a meal deal (or whatever it was).

Apparently the US sang his praises and were a major factor in his light sentencing.

It's definitely a film in the making.

I think things could get a lot more hairy if the virus spread

It seems likely. Isn't it usually best to wait for these things to play out a little?

Plus for ChasnotRobert 's point makes me think this will be a trigger for a meaningful correction.

Annoyingly I put money in a tracker just before the drop. More annoyingly I was dithering on waiting a little. Oh well it's for a 15-20yr horizon.

Good time to get out of the stock fund game and park the money in interest funds for a while? Looking at the last couple of days it certainly feels like it

How quickly might interest rates be cut to aid businesses?
Will this be reflected in mortgage rates if so how quickly?

Is this the right place to chat ISAs? I'm specifically interested in Stocks and Shares ISAs.

Can anyone explain to me like a 5 year old if they;re any good or high risk? If not where's best to put savings for a mortgage deposit?

Saving with my wife, we already have a help to buy ISA each. We also have a new savings builder account with Natwest.

Any help appreciated.

Don't put your deposit in S&S, too risky. You might decide to buy and then find your £30k deposit has suddenly halved in value. Unless you're not going to buy for years.

You're stuck with shitty old savings accounts like me

I thought as much. Any recommendations for savings accounts? We've got a lump saved we could use to set up direct debits in to various accounts.

I think the best thing to do looks something like this:

• £4k in a LISA for the £1k government bonus. Do this now and you can do it again after tax year ends (Apr. 5th) to turn £8k into £10k in 2 months. But you can't spend it for a year so this won't work if you want to buy in 6 mos, check the terms.

• £2.5k in Nationwide FlexDirect for the 5% interest. I can refer you (and anyone else interested) for a free £100 each.

• Any remainder in Cash ISAs/normal savings accounts/regular savers/etc. I've just opened a Ford Money flexible ISA at 1.27% (but flexible withdrawal) and a Coventry BS regular saver at 2.5%. Savings accounts are all pretty shite though. You actually lose money due to inflation.

Remember to keep some accessible in case you get sacked/need to repair car/etc.

Edit: you said you've got H2B ISAs so depending on how much is in them disregard the LISA bit. But I have both and just use the H2B as a restricted savings account as the interest rate is good at 3.5%. Be warned you can't pay into a H2B and Cash ISA in the same year.

Bit careful with LISA money is locked in until 60 unless your using it for a first time buyer house deposit.