What To Do For 2022?

[The Mad Monk]

Sorry about the rhyming title.

What shall I do for 2022?

S&P500?
FTSE100?
Vanguard Life Strategy 40% Equity Fund?
Cash?

I am really not sure, perhaps leaning toward the Vanguard?

I am not interested in individual shares. What would you do?

[Benbay001]

Global equity index?

[The Mad Monk]

Benbay001 said:

Global equity index?

Something like this, do you mean?

https://www.vanguardinvestor.co.uk/investments/van...

[Jawls]

The Mad Monk said:

Sorry about the rhyming title.

What shall I do for 2022?

S&P500?
FTSE100?
Vanguard Life Strategy 40% Equity Fund?
Cash?

I am really not sure, perhaps leaning toward the Vanguard?

I am not interested in individual shares. What would you do?

These are all very different options. Only the first two seriously compete with each other.

Do you believe that mega cap US stocks will continue to outperform? Or do you believe that mega cap UK with will outperform? Do you believe that laypeople are able to make these judgements? Do you want to significantly dampen volatility?

And so on.

[montyjohn]

The Mad Monk said:

S&P500?
FTSE100?
Vanguard Life Strategy 40% Equity Fund?
Cash?

Based on the examples you gave, I gather you are looking for long term low risk, low hassle investments?

I know historic data is a very poor way of predicting the future, but with my limited financial forecast skills it's the best I can do.

This is the FTSE 100.
It's averaged 4.7% over the last 37 years. and pretty reliably also.
This ignores dividends which probably bumps the return up to maybe 7% (ish)


S&P seems to be doing a lot better
The red line averages 9.4% ignoring dividends, and if the yellow line continues, it will be much much higher.


In March 2020, I went with FTSE100, and it's done really well since then as it caught the "dip". Just wish I put everything in. Never-mind.
I'll probably leave that money in the Vanguard index fund, but moving forward, the S&P seems like a good bet. Maybe?

The big question is what wins the race?
Slow and steady like FTSE100, or guns blazing like the S&P?

Do let me know please.

Do note that the amount of money pumped into the economy recently due to Covid means buying power has been quite high, leading to shortages and inflation. For this reason, I assume cash is a bad call.

I don't know anything about Vanguard Life Strategy 40% Equity Fund so can't comment.

[Burwood]

montyjohn said:

The Mad Monk said:

S&P500?
FTSE100?
Vanguard Life Strategy 40% Equity Fund?
Cash?

Based on the examples you gave, I gather you are looking for long term low risk, low hassle investments?

I know historic data is a very poor way of predicting the future, but with my limited financial forecast skills it's the best I can do.

This is the FTSE 100.
It's averaged 4.7% over the last 37 years. and pretty reliably also.
This ignores dividends which probably bumps the return up to maybe 7% (ish)


S&P seems to be doing a lot better
The red line averages 9.4% ignoring dividends, and if the yellow line continues, it will be much much higher.


In March 2020, I went with FTSE100, and it's done really well since then as it caught the "dip". Just wish I put everything in. Never-mind.
I'll probably leave that money in the Vanguard index fund, but moving forward, the S&P seems like a good bet. Maybe?

The big question is what wins the race?
Slow and steady like FTSE100, or guns blazing like the S&P?

Do let me know please.

Do note that the amount of money pumped into the economy recently due to Covid means buying power has been quite high, leading to shortages and inflation. For this reason, I assume cash is a bad call.

I don't know anything about Vanguard Life Strategy 40% Equity Fund so can't comment.

Yep-as an index the FTSE is dead and has been for ever. It's averaged 1.5% annually for the last 20 years which is under inflation so in effect you would have lost money buying the FTSE. It's the US or go home. That is not to say that there are some good companies in the UK index. Daily FTSE $ 1B. Nasdaq $310B.

[NowWatchThisDrive]

Burwood said:

Yep-as an index the FTSE is dead and has been for ever. It's averaged 1.5% annually for the last 20 years which is under inflation so in effect you would have lost money buying the FTSE. It's the US or go home. That is not to say that there are some good companies in the UK index. Daily FTSE $ 1B. Nasdaq $310B.

On a total return basis it's 5.4% annualised, so not quite as bad. Though that's not to defend it as such, as I agree entirely on the sentiment! It's a crap value trap of an index, with mostly uninspiring companies, overly weighted towards low margin capital intensive sectors.

[Phooey]

NowWatchThisDrive said:

Burwood said:

Yep-as an index the FTSE is dead and has been for ever. It's averaged 1.5% annually for the last 20 years which is under inflation so in effect you would have lost money buying the FTSE. It's the US or go home. That is not to say that there are some good companies in the UK index. Daily FTSE $ 1B. Nasdaq $310B.

On a total return basis it's 5.4% annualised, so not quite as bad. Though that's not to defend it as such, as I agree entirely on the sentiment! It's a crap value trap of an index, with mostly uninspiring companies, overly weighted towards low margin capital intensive sectors.

Always makes me laugh when i see headlines like "The FTSE is cheap.. etc etc". Yep, it's "cheap" for one reason

[Burwood]

Phooey said:

NowWatchThisDrive said:

Burwood said:

Yep-as an index the FTSE is dead and has been for ever. It's averaged 1.5% annually for the last 20 years which is under inflation so in effect you would have lost money buying the FTSE. It's the US or go home. That is not to say that there are some good companies in the UK index. Daily FTSE $ 1B. Nasdaq $310B.

On a total return basis it's 5.4% annualised, so not quite as bad. Though that's not to defend it as such, as I agree entirely on the sentiment! It's a crap value trap of an index, with mostly uninspiring companies, overly weighted towards low margin capital intensive sectors.

Always makes me laugh when i see headlines like "The FTSE is cheap.. etc etc". Yep, it's "cheap" for one reason

It's dragged down by telco and energy companies which don't grow a lot. BAT (tobacco) is a big component. I don't see much growth in ciggies, pays a good dividend but big morale issues and no doubt they are diversifying into Electric options and other things, possibly weed(legal). Without even looking I suspect their foreign brands are doing well but it's a dying business that needs transformative shift. And to see the issues with telco look at BT. Yes it's recovered around the pandemic but it's a terrible business. Terrible consumer service, a reputation for gauging, enormous capital drag and broader technology slowly becoming redundant. Pay a crappy dividend due to their enormous debt pile. Avoid

[millen]

There was a really clear Economist podcast a few weeks ago on why the UK market has performed so direly https://www.economist.com/podcasts/2021/10/06/lond... Interesting points are the tiny % UK equity holdings by the big pension funds and the tiny number of decent new issues choosing to list in London relative to a decade or two ago. Fintech seems to be a small ray of hope.

Also watched a compelling (if fawning?) biography of Mr Musk on my Amazon recently. Dates back to 2018 so omits latest antics. That said, I find it inconceivable that the UK could nurture an entrepreneur of such drive, vision and passion. The whole culture of society, media, government and industry conspires against it.

[NickCQ]

At least with the FTSE100 you get a side helping of a short GBP position, which has helped mask the anemic performance of the underlying companies over the last 10-20 years.

[vulture1]

millen said:

There was a really clear Economist podcast a few weeks ago on why the UK market has performed so direly https://www.economist.com/podcasts/2021/10/06/lond... Interesting points are the tiny % UK equity holdings by the big pension funds and the tiny number of decent new issues choosing to list in London relative to a decade or two ago. Fintech seems to be a small ray of hope.

Also watched a compelling (if fawning?) biography of Mr Musk on my Amazon recently. Dates back to 2018 so omits latest antics. That said, I find it inconceivable that the UK could nurture an entrepreneur of such drive, vision and passion. The whole culture of society, media, government and industry conspires against it.

We protest, stop, complain and obstruct every new building , mine, road, forrest, solar plant , wind turbine. Makes it very hard to start something that will turn into something big

[montyjohn]

Burwood said:

It's averaged 1.5% annually for the last 20 years which is under inflation so in effect you would have lost money buying the FTSE.

This would only be true if you are so unlucky to have put all your money in on one highs like in early 2000, but usually people pile money in when it's low or drip feed money in such that you earn well through the dips.
For example according to Vanguard I've had a rate of return of 33% from FTSE100 from putting money in in March 2020 (Although I can't quite replicate this value as Vanguard calculates it in a weird way, I think it's a bit less, but still not bad, S&P would have been better).


Back to the original question

The Mad Monk said:

What shall I do for 2022?

S&P500?
FTSE100?
Vanguard Life Strategy 40% Equity Fund?
Cash?

So looking at Vanguard averages over the last 5 years

S&P500 = 17.5%
FTSE100 = 5.3%
Vanguard Global Equity Fund = 13.9%
All World FTSE100 as a baseline = 13%
Cash (based on Inflation) = - 2.5% (note the minus!)
(for a bit of context, 15% annual would double your money over 5 years)

I think all markets will do well in 2022 as we recover from the pandemic.

For 2021 alone (recovery year) we had

S&P500 = 27.4%
FTSE100 = 16.7%
Vanguard Global Equity Fund = 16.3%
All World FTSE100 as a baseline = 20.3%

Based on the last 5 years, the Vanguard Global Equity Fund seems to do well at beating the World index when we have steady growth. But under performs when there is rapid change (decline or improvement).
So whilst we are still in recovery mode, I'd guess (and it really is a guess) that S&P500 is the way to go.
When things stable (haha, funny) then switch to Vanguard Global Equity Fund or similar.


Please note, I know nothing about financial investments and markets

[NowWatchThisDrive]

millen said:

There was a really clear Economist podcast a few weeks ago on why the UK market has performed so direly https://www.economist.com/podcasts/2021/10/06/lond... Interesting points are the tiny % UK equity holdings by the big pension funds and the tiny number of decent new issues choosing to list in London relative to a decade or two ago. Fintech seems to be a small ray of hope.

People have been saying for years that London just needs to become a more appealing place to IPO tech companies (and companies that pitch themselves as such, in order to try and gloss over their lack of profitability or narrative failure), because US investors "get" tech better and have greater tolerance for mercurial founders. What that really means is that you can IPO almost any old rubbish in the US with the tech/growth label attached.

There's a few factors at play and London certainly isn't helped by its herd of closet tracker fund managers stealing a living, but most of these companies just aren't great businesses to begin with.

[NickCQ]

montyjohn said:

This would only be true if you are so unlucky to have put all your money in on one highs like in early 2000, but usually people pile money in when it's low or drip feed money in such that you earn well through the dips.

I remember reading a study of retail investor behaviour that said almost exactly the opposite, and it was the same on this forum back in March 2020. The instinctive emotional reaction after a crash can be to sell out to cut losses and sit in cash until you call the bottom, which leads you to buy high and sell low. It's why the average retail investor underperforms the proverbial monkey throwing darts at a dartboard.

[The Mad Monk]

I was giving more serious thought to one of these in an endeavour to keep it simple

https://www.vanguardinvestor.co.uk/what-we-offer/l...

Long term? I haven't got long term!

[NickCQ]

The Mad Monk said:

I was giving more serious thought to one of these in an endeavour to keep it simple

https://www.vanguardinvestor.co.uk/what-we-offer/l...

Long term? I haven't got long term!

This is the right answer for most. You can argue about the equity percentage but something like (1 - (current age - 21)/(75 - 21)) works as well as anything

[montyjohn]

NickCQ said:

I remember reading a study of retail investor behaviour that said almost exactly the opposite, and it was the same on this forum back in March 2020. The instinctive emotional reaction after a crash can be to sell out to cut losses and sit in cash until you call the bottom, which leads you to buy high and sell low. It's why the average retail investor underperforms the proverbial monkey throwing darts at a dartboard.

That's very unfortunate mentality.
I'm really basing what I assume most do based on what I would do.

If there's a sudden downturn (whether I saw it coming or not) that's my opportunity to throw more money in, not take it out. If it continues to fall, keep button more money in if you can. You can never know you're at the bottom so by pulling money you risk missing it.

Downturns are great, yes your value is low, but stocks are cheap and so far, indexes have always returned high again. If you miss the bottom when throwing money in, no big deal, as long as it's in the dip, you're still winning.

For novices like me, the only way to win is to make decisions that work in the long term. If I tried to move money around to make money in a short period, avoiding crashes etc I'd certainly make mistakes due to nerves.

[Mr Whippy]

vulture1 said:

millen said:

There was a really clear Economist podcast a few weeks ago on why the UK market has performed so direly https://www.economist.com/podcasts/2021/10/06/lond... Interesting points are the tiny % UK equity holdings by the big pension funds and the tiny number of decent new issues choosing to list in London relative to a decade or two ago. Fintech seems to be a small ray of hope.

Also watched a compelling (if fawning?) biography of Mr Musk on my Amazon recently. Dates back to 2018 so omits latest antics. That said, I find it inconceivable that the UK could nurture an entrepreneur of such drive, vision and passion. The whole culture of society, media, government and industry conspires against it.

We protest, stop, complain and obstruct every new building , mine, road, forrest, solar plant , wind turbine. Makes it very hard to start something that will turn into something big

Might turn into something big.

And plenty of big stuff does ok in the UK.

And all the ‘stopping stuff’ generates at least some sustainability on our densely populated island.
The USA has bags of land in comparison.

[The Mad Monk]

NickCQ said:

This is the right answer for most. You can argue about the equity percentage but something like (1 - (current age - 21)/(75 - 21)) works as well as anything

If I understand your equation correctly, does it mean that nobody over the age of 75 should have any money in equity based investments?