How do I become investment literate?

[FredClogs]

7.2% pa is what you need to double your capital in 10 years. That seems like a reasonable and achievable goal.

[anonymous-user]

FredClogs said:

7.2% pa is what you need to double your capital in 10 years. That seems like a reasonable and achievable goal.

Yes, although you'll only the achieve doubling if you avoid all tax and reinvest all income - so it needs to be in an ISA. And you'll need to accept quite a bit of risk to target that level so there's a significant chance of falling short.

In a pension you'd essentially double even faster because of the tax relief given on contributions.

[wisbech]

I target 6% returns - 2-3% dividends, 3-4% price increase.

[Derek Chevalier]

bhstewie said:

What do people consider a "reasonable rate of return" if they don't have a fixed goal in mind?

I know if you're chasing greater rewards there are greater risks so it isn't a one size fits all answer - but I'm interested along with any supporting info you're happy to provide.

What rate of return do you need/desire to accomplish your objectives?

[bitchstewie]

Derek Chevalier said:

What rate of return do you need/desire to accomplish your objectives?

A lottery win

In all seriousness I get your point, but equally if that requires 15% (random example) that involves some crazy risk which might mean I dial down the risk and therefore the reward.

Which is why I was asking, I'm simply curious how much thought people put into it unless they're at the point in their life when the "4% drawdown" I keep reading of matters.

[anonymous-user]

Quite a few people on here operate with "sensible" equity risk and achieve compound total returns of 7 to 8% (or even more).

The 4% drawdown (or "spend") level can be rationalised as,

• 4% income
• 2.5% left in to cover inflation
• 1% left in for luck, as a risk premium.

[Derek Chevalier]

bhstewie said:

Derek Chevalier said:

What rate of return do you need/desire to accomplish your objectives?

A lottery win

In all seriousness I get your point, but equally if that requires 15% (random example) that involves some crazy risk which might mean I dial down the risk and therefore the reward.

Which is why I was asking, I'm simply curious how much thought people put into it unless they're at the point in their life when the "4% drawdown" I keep reading of matters.

You could spend a long time analysing reams of historical data showing how markets have performed over the last xx years, but

1. That is historical data - the future could/will give us a wide range of outcomes
2. Your current portfolio may be very differ from the historical market data sets, in terms of asset allocation, volatility (and therefore expected returns), tilts towards value/size etc (equity) and term/credit (bonds).

One thing you definitely can control is to ensure your returns are as close to your chosen benchmark/fund returns as possible. A typical private investor underperforms the very funds (usually those funds that were top performing) they hold by a substantial amount, primarily due to behavioural biases (buy high, sell low).

So going back to my original point, it may be worthwhile identifying your objectives, being very conservative in your growth assumptions, and doing your very best not to let yourself get in the way of getting the results that the market will give you!

[FredClogs]

The above is true and I'm not going to argue it, bit I read an interesting thing the other day...

In 1979 IBM was an exciting tech start up on the cutting edge of the 3rd industrial revolution and would go on to be one of the most successful tech stories over several generations, Imperial tobacco were said to be in a dying industry facing generations of law suits and selling a product which surely couldn't continue to be sold...

Guess which would have been the better investment with historical hind sight?

[Derek Chevalier]

FredClogs said:

The above is true and I'm not going to argue it, bit I read an interesting thing the other day...

In 1979 IBM was an exciting tech start up on the cutting edge of the 3rd industrial revolution and would go on to be one of the most successful tech stories over several generations, Imperial tobacco were said to be in a dying industry facing generations of law suits and selling a product which surely couldn't continue to be sold...

Guess which would have been the better investment with historical hind sight?

I think that's one of the arguments for not thinking you can outsmart the market by buying individual stocks/funds.

[wisbech]

There’s good evidence that share investment returns are actually better in low growth times/ industries

Growth attracts too much investment and competition...

[shopper150]

Hi Harry
Interested to know how you’re getting on with your learning and investment strategy, one year on.

[trowelhead]

shopper150 said:

Hi Harry
Interested to know how you’re getting on with your learning and investment strategy, one year on.

+1 - this was a great thread

[shopper150]

trowelhead said:

shopper150 said:

Hi Harry
Interested to know how you’re getting on with your learning and investment strategy, one year on.

+1 - this was a great thread

Harry?

[Blatter]

shopper150 said:

Harry?

Harry's obviously won the lottery and decided he doesn't need to spend the time on PH as his Personal Financial Adviser takes care of the "grubby details of money" while he concentrates on stocking the garage..........