Investment & Investing

I don't disagree in substance, but this entirely relies on an assumption that the conditions for that equity growth will continue so your investment doesn't plummet.

All you've said about equity markets being inflated due to PE, low interest rates etc could be taken as a reason why overpaying is a safer choice as you're taking a guaranteed return with zero capital risk instead of a hope of an increase (which, if shares are all overvalued right now, might wipe out and also take a chunk of your capital)

I kinda like my job

I used to - things can change. Quickly.

That's why I paid off my house. No mortgage to worry about if I chuck it in. :)

your investment doesn't plummet

Spot the global catastrophe

If there is a real financial melt down that the hedging you pay funds to implement can’t deal with and you ‘lose’ a lot of money then you’ll have bigger things to worry about - your job will be gone and there will be no petrol in the tanks. Zombies will walk the streets!

(And - if you look at long term historical returns from ‘safe’ investments you’ll see that on a long enough timeline it’s pretty good money. There will be ups and downs along the way but stay in long enough and you do well.)

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What chart are you looking at?

FTSE shows a massive tank due to Covid

https://www.lse.co.uk/share-prices/indices/ftse-100/charts.html

7500 somethings dropped to 5000 somethings and are now back to 6700 somethings.

ihavenoideawhatimdoing.gif

FTSE 100? Yeah it’s shit because the companies that form it are pretty outdated and have either suffered from the effects of the pandemic or have had no upside from it. And theres some Brexit effects in there. For contrast look at the s&p500 or Nasdaq.

But - You don’t pick your own shares. You don’t spend any time looking at shares. You pay a small fee to others to do that for you so that risk and return is balanced to give you the best chance of getting what you need.

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Funds shouldn’t be that exposed in the medium term - see vanguard example below.

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I've just logged into my share thingie and it seems I am also doing well, so I'll just shutup. To be clear though, I paid off my house BEFORE opening this thing.

My worst stock is a weed grower in Oz and is -50% (but -50% of 16AUD isn't much, it was a joke buy)

My best is a biopharma company a friend told me about and it's up 88% of quite a bigger number.

Then there's also the boring tracker funds and shit and they're mostly in the 20-40% range

Basically, I'm Warren Buffet (pronounced "buff eh" obviously, because #hippyisfat)

I do get all that. That doesn't actually deal with the point I made though - that you yourself acknowledge there are big economic factors inflating the markets at the moment. If those change, that's when you'd see the correction. That's not a remote risk, to my mind.

The question is whether you should buy in now, when markets are already inflated. Will they keep growing? Maybe, but loads of signs are out there that valuations are already too high. If you believe that is true, is investing your sum right now in that market with that risk (and an aim to get maybe 4% growth) better than an absolutely guaranteed, no capital risk c.2%?

Sensible approach might be to do a bit of both, and take the guaranteed return vs. pre-existing mortgage debt on some plus some share investment in the hope it doesn't crash.

Most people say don't rush to pay off the mortgage because you should be able to make more than the interest in the market, but also most people pay off the mortgage anyway because it's attractive psychologically.

It may or may not be better. You guarantee having a roof over your head, but maybe the value of that roof drops like crazy and the drop coincides with you needing to move.

I think that people should look at their property as another investment, ie when you look at the spread of all your assets Inc property, are you happy with how they're balanced and if you want to over pay how do you feel about moving that balance further towards property.

I agree with that! I am just a bit resistant to the view that people give out that it is never a better idea to pay down mortgage at current interest rates because shares on average give a better return.

If you've already bought the property, then what you do with paying the mortgage is a guaranteed return / saving. That's not something to be sniffed at, particularly if (as at present) you might worry about whether equities are overvalued.

As above, in a high inflation low interest rate situation paying off your mortgage of 1%-2% is not a return.

If your mortgage rate is 5% then knock yourself out.

I think it’s a lose-lose situation tbh - paying down debt gets you nothing, and investing feels riskier than it should. Do your research and roll the dice.

I know what you mean and it's often true, but it's not a guaranteed return if the price of the property falls (relative to inflation) and you have to sell.

Maybe that's less likely or more likely than the stock market crashing, I don't claim to know but it will depend on a lot of things personal to you like where your property is and if your partner is about to divorce you.

Agree, but if it's a pre-existing mortgage, then the debt is already there. You've already bought the ticket that exposes you to the up / down of the property market, and that's unaffected by how much of the mortgage you pay down - so for anyone who already has a mortgage, the return is more or less guaranteed (barring bankruptcy, death etc)

It is a return - that it isn't a gain in real terms is a different point. It's still a way that money can be used that is better than leaving it in cash, and you're locking in that benefit (even if all you should really describe the gain as is avoiding the loss of value that you'd get by holding actual cash).

I agree with your last part and am not trying to come across as saying investing in shares is dumb. I have regular share investment as well as mortgage repayment. I just think that describing stock returns as a 5% gain Vs a 1 - 2% gain from overpaying a mortgage is a misleading way of describing things as the risk profile is so different, particularly right now (and part of that caution is exactly because I have done my research).

I think a lot of it comes from when ppl are saying they will have a bit more liquidity and what should they do with it. If they were risk averse they would probably be overpaying their mortgage as standard practice or should do that. So if you’re coming to a thread like this I would assume that you’re looking for advice about how can I make that money grow but have some level of access to it and X profile risk.

As a question why is pumping it into pension never given as a good idea?

Also another question I’ve switched pension provider at work and have a sum with old pension provider - was thinking of moving it to Vanguard. Anyone done something similar?

Yes. In process of moving to ii.co.uk as cheapest platform for my situation. A few forms to fill in and it will take time but they're responsive and have been helpful so far.

Have a look on the Monevator website for SIPP comparisons.

I've just moved my entire pension (2 pensions, really, but both with the same provider) to a SIPP with Hargreaves Lansdowne.

It was entirely painless and automated - I just gave my pension details (HL already have my personal details) and then the transfer is automatic.

There was a period of a few days when the second pension didn't exist anywhere, as it was being transferred by BACS (too much for a Faster Payment, too little to justify £20 for a CHAPS payment, apparently), and took 5 days to settle.

Then I just chucked it into cheap index trackers and YOLO trades.

As a question why is pumping it into pension never given as a good idea?

I guess when we say ‘invest’ that could include stuff that’s wrapped in a pension.

Problems with pensions -

• the law can be dicked about with
  
• Can’t easily get the money back tomorrow
  
• you pay tax on (some) of the income (nice problem to have)
  
• Lifetime allowance (nice problem to have)
  
  

(Also agree with your point about this thread)

I am a n00b, can someone explain the reason of growth behind this fund?

Magnets?

I've just moved my entire pension (2 pensions, really, but both with the same provider) to a SIPP with Hargreaves Lansdowne.

I need to do similar, I have two pensions that I need to consolidate now that I'm not paying into either.

Will speak to my IFA as there can be a timing question on pension transfers (especially older ones).

You mean, why is it up 36% in 12 months?

The top component is their US Equity fund, and that's up 45% in the same time, with half the OCF.

So it's up since last April because basically all equities are, and it's "only" up 36% because it's diversified away from the current best-performing fund, for safety. Does that answer your question?

Are we in a high inflation situation? That's news to me.