Good or Bad time to invest

Jellybaby_1

I've no knowledge of investment but recently had a financial review with a well known company and was advised to invest a five-figure sum for five years. With the world at it is at the moment, looming recession, war, etc., would I be mad to invest such a large amount now? They gave me no other information about type of investment or risk, that information will be available if I decide to do it. Sounds scary to me.

57 views so far. Maybe I asked a forbidden question but as I said, I don't know anything about the subject and I'm in a quandary over this. Doesn't look like I can delete this so if there is a Mod around, please delete.

If money has been sitting in a bank account for the last year, 10% has evapourated and more will follow through inflation. The money will never be worth what it was a year ago.

If money has been sitting in S&P 500 ETF for the last year, 20% has evapourated through falling stock values. But it is pretty much inevitable that over time the value of that fund will exceed the value of the money which was put into it a year ago after accounting for inflation. But if you need access to that money today, you've lost twice what you would have by putting it in the bank.

Maybe you'll double your money (or better) by the time you chrystallise your investment, or it may plummet 50% (or worse). No risk, no reward. But in general, stock market index tracking exchange traded funds over 5+ years are relatively safe statistically speaking.

Jellybaby_1

Appreciate your reply. Many thanks. I don't know what 'S&P 500 ETF' is though?

walterking

If your money was in the s&p 500 etf the drop would have been about 6%.

It dropped almost 20% in dollar terms, but the dollar has strengthened almost 15%, so in EUR terms the drop in the market has been very cushioned.

Once the fed starts to talk of stabilising/dropping interest rates, the market will start moving up again.

Jellybaby_1

https://www.boards.ie/discussion/comment/119839325#Comment_119839325

I'm still lost, but thanks anyway for replying.

Neames

https://www.boards.ie/discussion/2058270335/good-or-bad-time-to-invest

Have you cleared all high interest debts and your mortgage?

Have you maxed out pension contributions?

Jellybaby_1

No debts. Full pensions.

Ush1

What's the investment this company has advised?

No you shouldn't invest because you don't even know what you're investing in.

Jellybaby_1

https://www.boards.ie/discussion/comment/119856056#Comment_119856056

I agree, that's why I made my mind up to do nothing.

Good time to invest.

https://www.boards.ie/discussion/comment/119858887#Comment_119858887

You should do your research in my opinion— exchange traded funds, long term performance of the various markets etc. There's plenty of information online. Your decision will be informed by how risk averse you are.

Bear in mind though that the only way to avoid making a mistake is to do nothing— but doing nothing is also an action, and can often be a mistake all of its own. Every action and omission of action has an associated cost, whether financial or an opportunity cost.

My long term investments are monthly payments to (Zurich) funds based on NASDAQ 100 & S&P 500. Average return over the past 3 years is about 2% or so after this year's hammering (it was running at about 26% a year ago). That's not much, but it's still much better than anything I'd get from any bank account or GILTS. Also, it'll be another decade before I touch them, so it would be amazing if the average return hadn't gone up a lot by then.

Neames

https://www.boards.ie/discussion/comment/119862305#Comment_119862305

Would you mind sharing the name of the Zurich Fund please?

https://www.boards.ie/discussion/comment/119862916#Comment_119862916

-- Top Tech 100

-- 5 * 5 North America

In the long run (10 years) you should be fine. But 2023 will probably be worse than 2022 so in the short run your investment might lose value but so long as you don't sell and ride out the storm you could see a return in the long term.

Jellybaby_1

https://www.boards.ie/discussion/comment/119959832#Comment_119959832

Speaking for myself, there isn't much long time left at my age!

https://www.boards.ie/discussion/comment/119961578#Comment_119961578

The next five years could be volatile. Very difficult to predict.

If you choose to invest, I would play it safe.

Jim2007

https://www.boards.ie/discussion/comment/119858887#Comment_119858887

Doing nothing is actually doing something, it failing to invest which means you have actually chosen to loose money.

There is no good time to invest and there is no bad time to invest, there are just different approaches and strategies to accumulate wealth over time. None of these approaches involve trying to time the market because that is a fools game which you will loose!

You you have provided your advisor with a lot of personal information and presumably paid a fee to obtain their advice. If you are not going to take advice from someone in command of all the information then for heavens sake don’t seek advice from random individuals on the internet.

https://www.boards.ie/discussion/comment/119962172#Comment_119962172

"don’t seek advice from random individuals on the internet"

Completely agree, but feel the need to add that I analyse economic/financial risk professionally. I don't believe I've ever met anyone in Economics or similar who is "in someone in command of all the information".

There is data and inference. A heavy emphasis on the latter. Command is too strong a word, imo.

Jim2007

https://www.boards.ie/discussion/comment/119962264#Comment_119962264

And I spent 30+ years working in Swiss banking and I have heard every single dumb idea out there at one presentation or another.

And if you revisit what I wrote, I was referring to the personal data of the client, I don’t give a toss what the economic analysis of the next five years is, it will not change a thing for me.

https://www.boards.ie/discussion/comment/119965883#Comment_119965883

Revisited. Still think the notion that anyone has a "command of all information" is laughable.

dxhound2005

Doing nothing, as in leaving it on deposit, should not be dismissed either. If someone is able to live their life comfortably, without ever having to deplete the savings entirely. Someone will inherit it, as happens with vast amounts of such assets.

It gives the security of having the funds guaranteed, either by the financial institutions participating in the guarantee scheme, or by the State in the case of State Savings. And generally instant access, and no anxiety about how the stock market or crypto etc is performing. And certainly no fees to enrich the intermediary. Horses for courses.

Saudades

https://www.boards.ie/discussion/comment/119966854#Comment_119966854

I read it that he was referring to the financial advisor having a 'command of all the clients information' - age, planned retirement date, risk profile etc.

Not a command of all information in the financial market.

daithi7

Ok some basic rules of thumb for investing:

-Pay down debts first

- invest in yourself as your first priority (education, job, business, welfare, health, etc)

- invest in your network 2nd

- with any further investments , only invest what you can afford to lose

- 1/3 in equities,(passive etfs or investment trusts (cos of Irish tax laws), 1/3 in property & 1/3 in cash is a pretty good rule of thumb imho.

- don't invest in anything you don't understand

Is it a good time to invest in equities? Well it's certainly a much better time than 12 months ago, it may not be as good a time as 6 months hence (but nobody can be sure of this, and if they are, they're total spoofers), but given that long term real returns are now forecast to be ~4.5-6.5% after this 12 month correction period , it's probably not a bad time , considering everything....

Good luck.

TomJohnJimGer

https://www.boards.ie/discussion/comment/120033201#Comment_120033201

Hello,

In somewhat of a similar situation to OP, where I have come into some money (low 5 figures)

My first quandary is should I invest or pay down mortgage. Current mortgage is ~60k, <3% interest - so it’s not onerous.

Second quandary then is where to invest, if I was to do so. I think I would be looking at some sort of managed fund? I’m not a financial expert in any way… (Appreciate the comments that I need to speak to a financial advisor, and I will do before I do anything)

As for the ‘can afford to lose’ - it would annoy me to lose it, but I’d still manage away if it did disappear.

But interested to hear opinions here - especially as to the pros and cons of invest or put money into mortgage

Thanks in advance folks…

Oh, yes, this is my first post on boards. Would love to be able to trot out the “first time poster, long time lurker” line but to be honest, that would be a total lie 🙁

https://www.boards.ie/discussion/comment/120033201#Comment_120033201

Max out pension contributions also before investing.

No point using money that you have paid ~50% tax on to invest in shares when you can get 40% tax relief on gross earnings.

It's basic, but the amount of people that don't factor it in is astounding.

Donald Trump

https://www.boards.ie/discussion/comment/120034767#Comment_120034767

Depends on the years to retirement and the tax you will be paying when taking it out too.

MyStubbleItches

https://www.boards.ie/discussion/comment/120034789#Comment_120034789

Not to mind that most will be considering relatively small sums to invest which might not make a massive difference to a weekly pension.

Jim2007

https://www.boards.ie/discussion/comment/120034789#Comment_120034789

The key is to take the tax savings and invest that as well. That will give you a very big jump start on the annualized return. Instead most people blow the savings on something they can’t even remember 18 months later.

Jim2007

https://www.boards.ie/discussion/comment/119977361#Comment_119977361

Exactly.

Donald Trump

https://www.boards.ie/discussion/comment/120036651#Comment_120036651

My point was to the example of someone close to retirement who is going to retire on an income which will be above marginal tax rate anyway. Yes they will still benefit from the return on the delayed tax portion, but if they are close to retirement then that factor won't be as beneficial.

The people it is really beneficial for are those with a long time to retirement and who might be paying top marginal rate now but would not be paying it after retirement.

doubledouble

Has anyone looked at this ? Morgage just paid off end of 2022. Have some cash sitting in the back earning zilch. https://www.zurich.ie/corporate/company-pensions/master-trust/?PPCCorporate&gclid=CjwKCAiAh9qdBhAOEiwAvxIok3XWgTf-VI_0NxZyqzW4CPv1E2fecbjNWJxxTHf55t_IL24wkwWypRoC1aAQAvD_BwE

homer911

My FA indicated if you have a diversified portfolio and are happy with modest returns on additional investments, the returns on short-medium term bonds are good at the moment, but do your own research on that..

runswithascript

https://www.boards.ie/discussion/2058270335/good-or-bad-time-to-invest

Firstly, I am an amateur student of global macro, not a professional, but my understanding is that your instinct was right, unless they were planning to invest your money in short term treasury bills to earn yield which is probably not the case. The recession has been looming since the first yield curve inversion April 22 and every additional inversion since only makes the 100% hit rate of presaging recession likely to continue.

The inversions of both US Government Bonds yields and the Eurodollar Futures curve are historic which makes it more likely it will not be a moderate recession.

Personally I am waiting, there is nothing wrong with sitting things out in cash, and you also do not need to catch the very bottom of the market to be successful. With inflation now seeming to really be transitory and just a product of the global supply shock from the pandemic, and with growth metrics indicating the economy is steadily deteriorating there is a good chance the Federal Reserve will at least pause soon. I am trying to discipline myself to resist the wave of FOMO we will see when this happens, and instead only start looking for signs of recovery after they have already started cutting, which they may be forced to do due to a crisis event like an issue with the collateral or the housing markets.

Also worth considering that the environment after a bottom is found may be very different to the last few decades, where for instance commodities offer much more return than equities.

AnF Chuckie egg

I always take a long view with investing, is now a good time to invest? who really knows. For me I see lots of good companies down between 50-80% from the ath's, can they go lower, yes. Either way I'm taking money out of cash and reinvesting in those companies. I do think the valuations of some of these companies is now too low for the amount of inflation we are seeing. There is just too much money floating about after all the quantitative easing. I believe the value of cash is down over half since 2017 yet many of those companies are at valuations below the 2017 levels.

My Father use to tell me about how he and his brother bought the 2 houses back in the 1970s. His brother bought first in 1975 and paid £6500, my father paid £10500 for the same type house 3 years later much to his brothers amusement at the Bargain he had got.

Roll on to 2022 and the same houses now sell for over €400k. So over the long term did any of the two brothers pay too much!!

daithi7

https://www.boards.ie/discussion/comment/120081477#Comment_120081477

Hmm, not at all sure about your analogy example tbh i.e. The initial price and hence valuation you pay does actually determine your final returns .

Re your analogy re your dad & his brother paying 6,500 & 10,500 for similar houses in the 70s, now worth ~400,000. Did the initial price greatly affect their returns?

I guess it depends on what the real value of 10,500 - 6,500 is in today's terms? It's probably fairly significant !!

Nearly all studies show your return from equity investments is heavily dictated by the price you initially pay for earnings also.

Shedite27

Listened to two fund managers give outlooks this week, one is very bullish and at the top end of its equities range, the other the complete opposite and at an all time low of equities. Big difference of opinions at the moment from the "experts"

AnF Chuckie egg

https://www.boards.ie/discussion/comment/120190635#Comment_120190635

True but I was only trying to point out that with a long term view time in the Market will still give returns even if you thought you over paid, plus how quickly inflation can erode the value of money.

Value of £6500 in 1975 when factoring inflation is about £40k today

Value of £10200 in 1978 would be about around 40k too!!