Investing for the mid term - what to consider and why?
Discussion
Does some of it depend on what you're saving for and therefore what control you have over when you need the money back?
If you lumped it all in stocks and shares it might be worth twice as much in four years time, but then it could lose 25% another year later. Can you hold on to let it regain some value?
Otherwise, you'd look to spread the risk across several different types of investments and holdings, stocks and shares, some cash, some NS&I bonds maybe - it would depend on your tax implications to a certain extent. Even within stocks and shares you can spread risk - for example you may not wish tot lump 100% on American tech, consider gold, bonds, different geographical markets.
I'm not a financial advisor, just my own thoughts and not too dissimilar to what I'm doing right now with similar slightly vague goals of saving for the mid term, but I don't know what for yet!
If you lumped it all in stocks and shares it might be worth twice as much in four years time, but then it could lose 25% another year later. Can you hold on to let it regain some value?
Otherwise, you'd look to spread the risk across several different types of investments and holdings, stocks and shares, some cash, some NS&I bonds maybe - it would depend on your tax implications to a certain extent. Even within stocks and shares you can spread risk - for example you may not wish tot lump 100% on American tech, consider gold, bonds, different geographical markets.
I'm not a financial advisor, just my own thoughts and not too dissimilar to what I'm doing right now with similar slightly vague goals of saving for the mid term, but I don't know what for yet!
A good reply above…& also not an advisor here.
For investments, broadly & generally, I would suggest one invests in “The World”. A low cost global fund. Have a look at the logic given at https://kroijer.com - I think it speaks sense.
That said, a 4-8 year timeline implies you have a specific target, & that might make me keep some in safer funds or places, such as premium bonds - the question is always can you afford for the capital to drop .
For investments, broadly & generally, I would suggest one invests in “The World”. A low cost global fund. Have a look at the logic given at https://kroijer.com - I think it speaks sense.
That said, a 4-8 year timeline implies you have a specific target, & that might make me keep some in safer funds or places, such as premium bonds - the question is always can you afford for the capital to drop .
Depends whether it's play money or your net worth but on paper it's too short a period to have too much in equities.
Some cautious multi-asset type funds will have a suggested minimum holding period of five years or you have gilts where so long as you can stomach any volatility if you have a known date you have an absolutely nailed on safe (unless the govt defaults) return.
Some cautious multi-asset type funds will have a suggested minimum holding period of five years or you have gilts where so long as you can stomach any volatility if you have a known date you have an absolutely nailed on safe (unless the govt defaults) return.
4 - 8 years - I'd just buy something cheap and popular like VWRL. I would hope for it to double in 8 years. Maybe add some bonds for 'protection' but It does seem like investing is the easiest thing in the world today so probably go full on equity if you can stomach a 2 or 3 day market decline every now and then 
For that sort of time horizon I would just go with a global index fund (accumulation) a low cost (most are low cost anyway). If you have the luxury of being able to withdraw at years 4 up to 8 then realistically it’s going to be monumentally unlucky, unheard of almost, to lose money. And I’m assuming you’re doing this to make money, so for a mid term investment I personally wouldn’t be watering down gains with bonds etc, but that’s just my personal risk appetite.
Fidelity, legal and general, hsbc, vanguard etc all do these index funds.
Fidelity, legal and general, hsbc, vanguard etc all do these index funds.
Lincolnshire said:
For that sort of time horizon I would just go with a global index fund (accumulation) a low cost (most are low cost anyway). If you have the luxury of being able to withdraw at years 4 up to 8 then realistically it s going to be monumentally unlucky, unheard of almost, to lose money.
See 1928-32
29-33
30-34
71-75
99-03
00-04
01-05
05-09
06-10
08-12
Derek Chevalier said:
What does your data show?
My investment decisions are looking at the nearer recent history as they are going to be a better gauge of company performance and political issues than charts from the 1930s, or dot.com busts with companies that no longer exist, with industries and products that are outdated, and presidents who are all dead! And what would those 1930s or even 2000s shares be worth today, had someone decided to change their minds and hang on to them beyond 4-8 years?If someone 4-8 years ago asked the same question, and decided not to go in to equities it would have been a poor decision.
Everyone has a different view, but mine is all in on equities and it has served me well despite some very strong pullbacks in that time. We are of course going to see many more strong pullbacks in the future, but risk is the price to pay for growth. My advice remains - for a 4-8 year window, if the OP was asking me, I d say global equity index all the way!
EDIT - and the data you asked for!
FTSE all world index (I could only find data going back to 2012 - what data source are you using and which index?)
2012-2015: +48.7%
2013-2016: +37.9%
2014-2017: +39.4%
2015-2018: +20.9%
2016-2019: +56.5%
2017-2020: +68.0%
2018-2021: +63.0%
2019-2022: +45.1%
2020-2023: +39.9%
2021-2024: +41.2%
Whatever your data source is, if that is the complete years where there was a loss for 4 year periods between 1928 and today, what is shows clearly is that there were far more periods where there WAS growth, and that’s to be expected as the bear vs bull market ratio is 4:1!
Edited by Lincolnshire on Friday 24th October 10:47
Lincolnshire said:
My investment decisions are looking at the nearer recent history as they are going to be a better gauge of company performance and political issues than charts from the 1930s, or dot.com busts with companies that no longer exist, with industries and products that are outdated, and presidents who are all dead! And what would those 1930s or even 2000s shares be worth today, had someone decided to change their minds and hang on to them beyond 4-8 years?
Why do you think the brightest minds spend an extraordinary amount of money on sourcing clean historical data? Humans don't tend to change their behaviour. Lincolnshire said:
If someone 4-8 years ago asked the same question, and decided not to go in to equities it would have been a poor decision.
Yep, but that's a sample size of one, hence the important of looking further back in time. Lincolnshire said:
Everyone has a different view, but mine is all in on equities and it has served me well despite some very strong pullbacks in that time.
How did you cope with the aftermath of the .com bust, when global equities fell ~50% and took years to recover?Derek Chevalier said:
How did you cope with the aftermath of the .com bust, when global equities fell ~50% and took years to recover?
I wasn’t in equities at the time but survived many other large pullbacks since - and I just shoved more money in, no matter how small.See above for my edits on annual returns! What index were you using?
whenever these topics come up there's broadly 3 replies: conservative, middle road and a bit less middle of the road. Seems that generally there's a view that investing is only about popping money somewhere and leaving it until it's needed - without actually managing it.
i wasn't invested in 2000 or 2008, but even a cursory look at SPY on the weekly shows that pulling monies out when it dips below the 200 day averages gives an opportunity to buy back lower, and those initial drops to the 200 are only 10%'ish.
anyways, surely the answer to umpteen of these Q's is - is it a buy and 'hold' or something that's going to be managed to some degree, is the investor going to stress when there's 4 red days in a row, or not even blink; is it a whole portfolio, what's the impact if things go south etc etc.
whenever folks talk about 'busts' - the assumption seems to be that monies were put in the day before a collapse, not 'x' yrs before, meaning less time to recover to the original position ( breakeven).
as for statements along lines that retail can't compete with the street - how come analysts/the street didn't figure out that there's an energy shortage, or a chip / gpu shortage, or umpteen other things.
to the OP's question: for my circs, in hard on certain equities until macro suggests otherwise, as well as a smattering of crypto related stocks - again with a whether eye to see what/if there's a cycle. No idea what the landscape will look like in 8 years time, so only focused towards the next 1-5.
i wasn't invested in 2000 or 2008, but even a cursory look at SPY on the weekly shows that pulling monies out when it dips below the 200 day averages gives an opportunity to buy back lower, and those initial drops to the 200 are only 10%'ish.
anyways, surely the answer to umpteen of these Q's is - is it a buy and 'hold' or something that's going to be managed to some degree, is the investor going to stress when there's 4 red days in a row, or not even blink; is it a whole portfolio, what's the impact if things go south etc etc.
whenever folks talk about 'busts' - the assumption seems to be that monies were put in the day before a collapse, not 'x' yrs before, meaning less time to recover to the original position ( breakeven).
as for statements along lines that retail can't compete with the street - how come analysts/the street didn't figure out that there's an energy shortage, or a chip / gpu shortage, or umpteen other things.
to the OP's question: for my circs, in hard on certain equities until macro suggests otherwise, as well as a smattering of crypto related stocks - again with a whether eye to see what/if there's a cycle. No idea what the landscape will look like in 8 years time, so only focused towards the next 1-5.
greengreenwood7 said:
i wasn't invested in 2000 or 2008, but even a cursory look at SPY on the weekly shows that pulling monies out when it dips below the 200 day averages gives an opportunity to buy back lower, and those initial drops to the 200 are only 10%'ish.
That's the theory.The reality was that people wanted little to do with US equities after they had been battered for a decade.
Derek Chevalier said:
Which ones?
I know you like your smoke and mirror replies! I have been invested in full since 2004, so any pullback since then.
If the markets dropped tomorrow by 50% I’m ready for it and would buy in the dip. It’s really simple!
You haven’t answered the question - which index were you referring to?
Lincolnshire said:
I have been invested in full since 2004, so any pullback since then.
You were fortunate enough to have skipped the worst of the .com bust.Anything since then hasn't been nearly as bad (in terms of duration and max drawdown)Lincolnshire said:
If the markets dropped tomorrow by 50% I m ready for it and would buy in the dip. It s really simple!
It's not the short, sharp drawdowns that tend to shake people out of their positions, more the multi-year drawdowns, IMO (although I heard some sold during COVID). Some people may struggle to stick with an underperforming asset class.https://www.businessinsider.com/the-death-of-equit...
"All of the growth in the world is expected to be in emerging markets, and nobody doubts their stability anymore (warning!). So why bother with US equities?"
"Baby boomers are terrified for their retirements. The last thing they want is to lose their cash in another market crash. So they're going to fixed-income"
https://www.nbcnews.com/id/wbna32799168
Now that stocks have recovered some losses, advisers say many clients are seizing the opportunity to cash out of equities and invest more cautiously in the future.
Clients come to financial planners like Frank Boucher, based in Reston, Va., saying they want no exposure to the stock market at all. Boucher warns them that, without the chance for equity gains, they might need to work longer, save more, or spend less. "They say, 'That's fine. At least I get to sleep at night,'
Lincolnshire said:
You haven t answered the question - which index were you referring to?
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