FTSE100 tracker

[putonghua73]

Ari said:

So close to breaking even!

Personal rate of return -0.01

Currently £4.87 down.

The temptation now, having run it for over a year, seen it slip to over £800 down and finally stagger back to having recovered all my losses is to cash out with all my money (bar £4.87) while I can.

Which would of course be a stupid idea as the whole point is a long term investment. On the basis that it's at (close to) zero, I'm actually in the same boat as if I'd just put all the money in today, what it's done historically is, at this point, irrelevant. The past has no bearing on where it goes from this point in time.

Whether it still seems 'stupid' (cashing back out now) in six months or six years remains to be seen!

Anyway, sticking with it, not putting any extra in at the moment over my £250/month currently though.

I did wonder when we would start to see people's faith in passive trackers start to waiver on the back of very choppy economical waters. The psychological aspect has not been given enough considered attention in that although we may be rationally aware that markets - and returns - fluctuate and that there is a high probability of growing returns over the long-term (10+ years) to allow compound interest sufficient time to work, people's faith starts to waiver on the back of paper losses.

This is why I was attracted to Dremen because he focuses on the psychological aspect re: red and green rooms of the casino. This will become increasingly more relevant if / when a slow-down becomes a full-on bear market. When people have had a relative benign investment period (similar to the UK housing market) over a long period of time, any kind of slow-down, becomes worrying - especially if we enter into a proper bear market.

One of the hardest things to do psychologically speaking is to sit on one's hands either when one gets fidgety out of boredom or anxious in turbulent periods - provided that nothing has materially changed in terms of one's investment strategy. With a passive index tracker, absolutely nothing changes during a bear market - you keep on making regular contributions and you buy into the market at a lower price. The time to become anxious is when you transition from an accumulation period [contributions ] and enter into a withdrawal period [retirement], and the global outlook turns bearish. The latter scenario requires prior understanding [sequential risk] and planning e.g. 1-2 years cash reserve to avoid withdrawing during a bear market and allow compound interest a couple more years to do its work, and hopefully you mitigate yourself against the worst.

Needless to say that there are other options to consider [withdrawal period], but you - nor I - are set to retire anytime soon!

One other thing to point out, Ari, is that you have had an extra year in the market than if you invested the same amount now i.e. more units. They may be worth less at this moment in time, but the more time in the market w/ a passive index tracker - irrespective of the price now - the more your investment will grow [compound interest]. The more that you begin to understand compound interest and returns over longer investment periods (10, 20, 30 and 40 years), you'll soon start wishing that you hadn't been so frivolous with your money in your 20s, and stuck it in a passive index tracker.

It just isn't as exciting as dreaming of that lottery win or blackjack and hookers.

[bitchstewie]

putonghua73 said:

One other thing to point out, Ari, is that you have had an extra year in the market than if you invested the same amount now i.e. more units. They may be worth less at this moment in time, but the more time in the market w/ a passive index tracker - irrespective of the price now - the more your investment will grow [compound interest]. The more that you begin to understand compound interest and returns over longer investment periods (10, 20, 30 and 40 years), you'll soon start wishing that you hadn't been so frivolous with your money in your 20s, and stuck it in a passive index tracker.

Could you explain that part a little more please?

I'm not sure how he has "more units" or you mean simply because he's been buying them through the regular contributions?

I'm probably being thick

[Derek Chevalier]

[quote=putonghua73
[/quote]

I did wonder when we would start to see people's faith in passive trackers start to waiver on the back of very choppy economical waters.
[/quote]

But is this any different to active funds?

[Ari]

Dr Mike Oxgreen said:

Ari said:

I have a World Tracker, 31st Dec 2017 - 31st Dec 2018, -6.67%

And since then you’ll have seen significant gains through Jan and Feb. I’m betting it’s in positive territory now.

I currently have just under £1,000 in it, much of which was put in in August and September when it was high. Currently I'm £8.21 down, but it's paid £10.95 in dividends so actually I am ahead, just.

[putonghua73]

bhstewie said:

Could you explain that part a little more please?

I'm not sure how he has "more units" or you mean simply because he's been buying them through the regular contributions?

I'm probably being thick

Regular contributions. Ari is still purchasing £250 worth of units with each contribution, the only difference is the quantity that Ari purchases with each contribution, which may change based upon the price. A simple explanation that is frequently used is buying fruit and veg from a greengrocer (seems very quaint now). You buy a pound (lb) of apples a week, and the greengrocer sells you the apples at a price. The amount that you buy [1 lb] doesnt change, but the price that the greengrocer charges for the apples may change.

The difference with the units [contribution] that Ari is buying, as opposed to his apples, is that his units generate a dividend that is either used to buy more units [accumulation] or deposited into his account to allow Ari to withdraw or invest (the same fund, or a different fund - asset allocation).

[Ari]

putonghua73 said:

I did wonder when we would start to see people's faith in passive trackers start to waiver on the back of very choppy economical waters. The psychological aspect has not been given enough considered attention in that although we may be rationally aware that markets - and returns - fluctuate and that there is a high probability of growing returns over the long-term (10+ years) to allow compound interest sufficient time to work, people's faith starts to waiver on the back of paper losses.

This is why I was attracted to Dremen because he focuses on the psychological aspect re: red and green rooms of the casino. This will become increasingly more relevant if / when a slow-down becomes a full-on bear market. When people have had a relative benign investment period (similar to the UK housing market) over a long period of time, any kind of slow-down, becomes worrying - especially if we enter into a proper bear market.

One of the hardest things to do psychologically speaking is to sit on one's hands either when one gets fidgety out of boredom or anxious in turbulent periods - provided that nothing has materially changed in terms of one's investment strategy. With a passive index tracker, absolutely nothing changes during a bear market - you keep on making regular contributions and you buy into the market at a lower price. The time to become anxious is when you transition from an accumulation period [contributions ] and enter into a withdrawal period [retirement], and the global outlook turns bearish. The latter scenario requires prior understanding [sequential risk] and planning e.g. 1-2 years cash reserve to avoid withdrawing during a bear market and allow compound interest a couple more years to do its work, and hopefully you mitigate yourself against the worst.

Needless to say that there are other options to consider [withdrawal period], but you - nor I - are set to retire anytime soon!

One other thing to point out, Ari, is that you have had an extra year in the market than if you invested the same amount now i.e. more units. They may be worth less at this moment in time, but the more time in the market w/ a passive index tracker - irrespective of the price now - the more your investment will grow [compound interest]. The more that you begin to understand compound interest and returns over longer investment periods (10, 20, 30 and 40 years), you'll soon start wishing that you hadn't been so frivolous with your money in your 20s, and stuck it in a passive index tracker.

It just isn't as exciting as dreaming of that lottery win or blackjack and hookers.

That's really interesting, thank you. My plan is very much to simply continue 'dripping' £250/month in to the FTSE100 and putting any spare cash into the World Tracker to build that up. Totally agree that if it drops, that's a good thing for me (although it doesn't feel like it) in the short term at least because I'm effectively getting more for my money.

Finding all of this stuff fascinating. (And yes, if only I'd started doing this 20 years ago!)

[bitchstewie]

putonghua73 said:

Regular contributions. Ari is still purchasing £250 worth of units with each contribution, the only difference is the quantity that Ari purchases with each contribution, which may change based upon the price. A simple explanation that is frequently used is buying fruit and veg from a greengrocer (seems very quaint now). You buy a pound (lb) of apples a week, and the greengrocer sells you the apples at a price. The amount that you buy [1 lb] doesnt change, but the price that the greengrocer charges for the apples may change.

The difference with the units [contribution] that Ari is buying, as opposed to his apples, is that his units generate a dividend that is either used to buy more units [accumulation] or deposited into his account to allow Ari to withdraw or invest (the same fund, or a different fund - asset allocation).

Cool thank you

Assumed it was regular contributions but wanted to be sure I hadn't missed something on what was generating more units (other than dividends being used to buy more).

[putonghua73]

Derek Chevalier said:

But is this any different to active funds?

No, but you don't have to be Nostradamus to see people losing faith and rushing into the arms of an active fund that claims to deliver 'absolute returns'.

[putonghua73]

bhstewie said:

Cool thank you

Assumed it was regular contributions but wanted to be sure I hadn't missed something on what was generating more units (other than dividends being used to buy more).

Don't lose sight of those reinvested dividends! They power the performance through compound interest over the investment period.

[Derek Chevalier]

putonghua73 said:

Derek Chevalier said:

But is this any different to active funds?

No, but you don't have to be Nostradamus to see people losing faith and rushing into the arms of an active fund that claims to deliver 'absolute returns'.

Take your point, but with the power of the internet private investors can (if they choose) educate themselves on absolute return funds and make a call on whether they deliver on their promise (typically positive returns over a rolling 3 year period)

[bitchstewie]

putonghua73 said:

Don't lose sight of those reinvested dividends! They power the performance through compound interest over the investment period.

Eighth wonder..

[Mopey]

Very interested. Completely new to this too. Could someone point me in the direction of a tracker but for global or perhaps Africa or Asia if they do specifics.
The other link earlier in did not work.

Thanks.

[GT03ROB]

Mopey said:

Very interested. Completely new to this too. Could someone point me in the direction of a tracker but for global or perhaps Africa or Asia if they do specifics.
The other link earlier in did not work.

Thanks.

Why Africa??

[FredClogs]

Piece in the Times this morning about the unsustainability of current levels of dividends. Quite interesting.

[Mopey]

GT03ROB said:

Mopey said:

Very interested. Completely new to this too. Could someone point me in the direction of a tracker but for global or perhaps Africa or Asia if they do specifics.
The other link earlier in did not work.

Thanks.

Why Africa??

Untapped potential. I don’t know if you can select continents global or individual countries.

[GT03ROB]

Mopey said:

GT03ROB said:

Mopey said:

Very interested. Completely new to this too. Could someone point me in the direction of a tracker but for global or perhaps Africa or Asia if they do specifics.
The other link earlier in did not work.

Thanks.

Why Africa??

Untapped potential. I don’t know if you can select continents global or individual countries.

Depending on what geographic location you are looking at you can find funds investing on continents or individual countries. Generally you will only find country specific funds where the countries have exchanges which are quite large & the stocks have a ready market. What you are more likely to find is that "African" funds will be US / Uk / European stocks which may benefit from Africa or have large investments in Africa. You will need to look behind the funds to see what you are actually investing in

[emicen]

Article just landed in my inbox talking about FTSE being a good buy at the moment:

https://www.ii.co.uk/analysis-commentary/three-rea...

Been thinking about putting some funds in to a FTSE tracker in the run up to Brexit, with the pound strengthening the unit cost has gone down but I still feel the political climate is deflating the underlying prices as well.

[FredClogs]

emicen said:

Article just landed in my inbox talking about FTSE being a good buy at the moment:

https://www.ii.co.uk/analysis-commentary/three-rea...

Been thinking about putting some funds in to a FTSE tracker in the run up to Brexit, with the pound strengthening the unit cost has gone down but I still feel the political climate is deflating the underlying prices as well.

It's a win win as far as I can see at the moment. We brexit well and the European markets in general will see an influx of money but the ftse in particular. We have a bad brexit the pound will crash again and the ftse earnings will be boosted again.


The FTSE100 below 7000 is a real steal.


P. S don't take financial advice of half drunk numbskulls on motoring forums.

[Derek Chevalier]

emicen said:

Article just landed in my inbox talking about FTSE being a good buy at the moment:

https://www.ii.co.uk/analysis-commentary/three-rea...

Been thinking about putting some funds in to a FTSE tracker in the run up to Brexit, with the pound strengthening the unit cost has gone down but I still feel the political climate is deflating the underlying prices as well.

Why focus on the FTSE when it's only 6% of global cap? Good luck with picking which countries/regions outperform going forwards

[Ari]

Derek Chevalier said:

emicen said:

Article just landed in my inbox talking about FTSE being a good buy at the moment:

https://www.ii.co.uk/analysis-commentary/three-rea...

Been thinking about putting some funds in to a FTSE tracker in the run up to Brexit, with the pound strengthening the unit cost has gone down but I still feel the political climate is deflating the underlying prices as well.

Why focus on the FTSE when it's only 6% of global cap? Good luck with picking which countries/regions outperform going forwards

For the reasons you've actually quoted presumably...