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Old 12.07.2018, 16:51
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Are you happy to lose 50%-80% of your wealth?

I know a lot of you have a lot of your wealth tied up in the stock market.

It's also clear that in the past the stock market has crashed substantially and over a long period of time. e.g. 1929 wall street crash and more recently in japan.

So as many of you are retired or nearing retirement age, how do you manage the risk that 50%+ of your stock market wealth could be erased and stay low for potentially two decades or more?
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Old 12.07.2018, 16:55
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Re: Are you happy to lose 50%-80% of your wealth?

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So as many of you are retired or nearing retirement age, how do you manage the risk that 50%+ of your stock market wealth could be erased and stay low for potentially two decades or more?
Put it into property instead.

Seriously, how many people actually "have a lot of your wealth tied up in the stock market. "?
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Old 12.07.2018, 16:56
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Re: Are you happy to lose 50%-80% of your wealth?

maybe I'm the wrong person to be giving advice here as I'm not very good at this myself, but current wisdom is that you should share he reisk by also putting some of your welath into lower risk and less volatile products such as bonds.
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Old 12.07.2018, 16:59
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Re: Are you happy to lose 50%-80% of your wealth?

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Put it into property instead.

Seriously, how many people actually "have a lot of your wealth tied up in the stock market. "?
Property is nota good place to put your short to medium term retirement funds as a retirement fund is something you want to pay yourself a pension or allowance out of. It needs to be divisible.
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Old 12.07.2018, 17:11
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Re: Are you happy to lose 50%-80% of your wealth?

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Property is nota good place to put your short to medium term retirement funds as a retirement fund is something you want to pay yourself a pension or allowance out of. It needs to be divisible.
It was a joke, based on Phil's inputs to the recent 'buying property as an investment' threads.
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Old 12.07.2018, 17:11
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Re: Are you happy to lose 50%-80% of your wealth?

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Property is nota good place to put your short to medium term retirement funds as a retirement fund is something you want to pay yourself a pension or allowance out of. It needs to be divisible.
Well, that's a blanket statement that I don't agree to. A villa in Spain might be a bad investment as you cannot create any income out of it but just wait and hope that the prices go up. Good luck with that.


An investment property, like rental apartments, do of course create a steady income... and while the housing markets can be nearly as volatile than the stock trade: I think that the right investment property, say close to a popular university in a popular city, will be surely a safer bet than the stock of some blue chip.


Obviously should nobody invest into just one investment but spread the risk.
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Old 12.07.2018, 17:14
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Re: Are you happy to lose 50%-80% of your wealth?

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maybe I'm the wrong person to be giving advice here as I'm not very good at this myself, but current wisdom is that you should share he reisk by also putting some of your welath into lower risk and less volatile products such as bonds.
I think this was the 'classical' method of having a 'balanced' portfolio of 60/40 bonds.

Though perhaps this was in an era when bonds paid substantially higher yields and tended to be inversely correlated to the stock market.

Today bonds, have low yields (and could be argued to be even more over-valued than stocks) and have also moved in line with stocks rather than against them.

I know there are some proponents of using alternatives such as: long/short funds or market neutral funds to stand in the place of bonds, but I don't have any experience of these.

Real estate is obviously another alternative.

Commodities might also be an option, but not sure what would be a good way to get this exposure if indeed it makes sense.
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Old 12.07.2018, 17:27
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Re: Are you happy to lose 50%-80% of your wealth?

One of the finance guys where I work believes that to be truly diversified one should hold at least 60 positions in your portfolio, with a healthy variety of stocks, short-term bonds, longer-term bonds, property, precious metals, etc. Plus of course some cash. He's not bullish on cryptocurrencies, but says having some probably wouldn't hurt.

Ideally hold individual positions as well as funds. Stocks should cover a wide range of industries and not just be the big names that make the news, and not be limited to European and American companies.

Where you find the money to buy 60 separate positions of any noteworthy amount is beyond me, but then maybe that's why he makes the big bucks.
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Old 12.07.2018, 17:31
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Re: Are you happy to lose 50%-80% of your wealth?

No NOT happy at all - exactly what happened due to exchange rates though for us.

Other relatives in UK with pensions tied to stock exchange have also had VERY poor returns.
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Old 12.07.2018, 17:46
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Re: Are you happy to lose 50%-80% of your wealth?

RE: Buying property

Buy a farm where, should the worst happen, you can at least grow enough to feed yourself.

Well, that's what my great-grandmother did in 1925, with her life savings. And a lucky thing she did, as in the early 1930s, after the crash and everyone's jobs disappeared, the whole family came to live at the farm. Once the WPA got going the adult men left to travel to wherever work was to be had, the children stayed at the farm. No one had much money, but no one went hungry.

As I look at the state of the world today, I'm thinking that's not such a bad idea.
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Old 12.07.2018, 17:51
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Re: Are you happy to lose 50%-80% of your wealth?

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RE: Buying property

Buy a farm where, should the worst happen, you can at least grow enough to feed yourself.
Actually, that's exactly what the OH and myself have done. Not in CH but in a country where farms come real cheap. As in 20K. We have a tenant leasing the farm now, but he's getting on in years and we have been thinking that if he finally retires, and if push came to shove we could take it over ourselves. One of our sons is doing agricultural college right now.

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Well, that's what my great-grandmother did in 1925, with her life savings. And a lucky thing she did, as in the early 1930s, after the crash and everyone's jobs disappeared, the whole family came to live at the farm. Once the WPA got going the adult men left to travel to wherever work was to be had, the children stayed at the farm. No one had much money, but no one went hungry.

As I look at the state of the world today, I'm thinking that's not such a bad idea.
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Old 12.07.2018, 17:51
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Re: Are you happy to lose 50%-80% of your wealth?

I have over 90% of my net worth in the stock market, in every crash I loose more than my total net worth before the previous cash, whats not to like? New worth doubles in less than 4 yers if you invest in Fundsmith, every 15 years you may take a big hit, so what.

In 1929 the yield was 14% so you got your money back very quickly, rather than many years that the index shows.
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Old 12.07.2018, 17:53
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Re: Are you happy to lose 50%-80% of your wealth?

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No NOT happy at all - exactly what happened due to exchange rates though for us.

Other relatives in UK with pensions tied to stock exchange have also had VERY poor returns.
If you were invested in the global stock market that would not of happened, being risk averse you have a safe & fixed income, you can't have it both ways.

But Fundsmith & Lindsal train that will give you 50 stocks. Research shows that after 20 positions further diversification makes very little difference.
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Old 12.07.2018, 18:07
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Re: Are you happy to lose 50%-80% of your wealth?

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Actually, that's exactly what the OH and myself have done. Not in CH but in a country where farms come real cheap. As in 20K. We have a tenant leasing the farm now, but he's getting on in years and we have been thinking that if he finally retires, and if push came to shove we could take it over ourselves. One of our sons is doing agricultural college right now.
I wouldn't do that unless I have some ties with such a place...so if you do have, good luck. But of course, I am sure you know it very well and took this decision accordingly.
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Old 12.07.2018, 18:22
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Re: Are you happy to lose 50%-80% of your wealth?

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RE: Buying property

Buy a farm where, should the worst happen, you can at least grow enough to feed yourself.

Well, that's what my great-grandmother did in 1925, with her life savings. And a lucky thing she did, as in the early 1930s, after the crash and everyone's jobs disappeared, the whole family came to live at the farm. Once the WPA got going the adult men left to travel to wherever work was to be had, the children stayed at the farm. No one had much money, but no one went hungry.

As I look at the state of the world today, I'm thinking that's not such a bad idea.
Yes, exactly what we have done. We have space to keep some sheep and chickens, grow all our own fruit and veg, do B&B and residential language course with guiding (wildlife, flowers, mushrooms, walking, architecture, watch making tours, absinte tours) - the loss of income is a pain - but not a disaster for me. And lots of friends too, including many farmers who can sell us meat, milk and cheese direct. Some things you cannot put a price tag on. And no Stock Exchange will ever give you that, for sure.
We are very lucky indeed.
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Old 12.07.2018, 18:24
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Re: Are you happy to lose 50%-80% of your wealth?

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Yes, exactly what we have done. We have space to keep some sheep and chicens, grow all our own fruit and veg, do B&B and residential language course with guiding (wildlife, flowers, mushrooms, walking, architecture, watch making tours, absinte tours) - the loss of income is a pain - but not a disaster for me. And lots of friends too. Some things you cannot put a price tag on.
We are very lucky indeed.
The value of your Swiss assets have increased in £ terms, so you must be broadly even, shame you always cry over spilt milk rather than look at the full picture.
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Old 12.07.2018, 18:27
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Re: Are you happy to lose 50%-80% of your wealth?

I am not crying - read my post.

Yes, of course, if we sell and go back to UK, we will make the 50%+ back- hurrrah, and our appartment in the UK has gone up 50+ % since we bought it in 2009. But who would want to go back to UK at the moment - what a mess.

So glad my children and grandchildren have Swiss nationality, and access to Irish too, pheeeew. More likely that they will join us here or in France- than us go back.
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Old 12.07.2018, 18:28
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Re: Are you happy to lose 50%-80% of your wealth?

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I have over 90% of my net worth in the stock market, in every crash I loose more than my total net worth before the previous cash, whats not to like? New worth doubles in less than 4 yers if you invest in Fundsmith, every 15 years you may take a big hit, so what.

In 1929 the yield was 14% so you got your money back very quickly, rather than many years that the index shows.
You are not concerned that it could look more like the Japan crash where (correct me if my memory is wrong) stocks were still 25% down 2 decades later and around 50% down today?
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Old 12.07.2018, 18:29
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Re: Are you happy to lose 50%-80% of your wealth?

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The value of your Swiss assets have increased in £ terms, so you must be broadly even, shame you always cry over spilt milk rather than look at the full picture.
I don't think it's crying over spilt milk, tbh. Everyone I know that had a decent amount of £ cash and assets got whacked with the shock result of the Brexit vote. One friend had been saving to put a down payment on a house. £20K basically gone in a flash. Okay, it's over now and things have stabilized, but it must still sting to know your hard-earned assets carefully socked away for <insert goal here> simply vanished.
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Old 12.07.2018, 18:32
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Re: Are you happy to lose 50%-80% of your wealth?

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You are not concerned that it could look more like the Japan crash where (correct me if my memory is wrong) stocks were still 25% down 2 decades later and around 50% down today?
No, PE'sin Japan 30 years ago were way higher than anything today with well over 10% interest rates . If companies are make growing profits in CASH, then they are worth buying today with todays nominal interest rates.
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