“There’s truths you have to grow into.” H.G. Wells
By Alan Steel
While driving in to the office in Linlithgow this morning, I managed to catch about 10 minutes of a phone-in about pensions and investments on one of the Blind and Blinkered Corporation’s (BBC) radio channels.
What a palava!
The host, relaxed in the knowledge that her misleading opinions and bad advice would go unpunished by our near-pulseless financial Regulator (the FCA), had set about influencing her listeners to disregard pensions in favour of ‘alternative’ investments.
It was a continuous loop of, “So you think pensions might not be worthwhile then…?”
The callers, eager to point out the multiple changes to pensions legislation made by each subsequent political party dating back to when paw-deid (quite right), lumped that legitimate complaint into private pensions as well.
So what were the alternatives?
Did you say you can time the market…?
One caller said that he and his cronies had played the safe option, Gold, over the last thirty years, selling up at times and buying back in when the market changed.
That strategy always makes me cringe.
Trying to time the market is not a game for the faint-hearted. You can probably name the number of folks who have managed to do this successfully over any significant period of time on one hand, and probably have a few fingers left over.
So, unless that was Peter Lynch on the line this morning I’m thinking those folks’ results were less than spectacular.
A thirty-year position on Gold would mean that the first 20 years (1988 to 2008) of buying and selling on the mini-dips that occurred during that period probably meant our intrepid Gold-bugs spent more on taxes and commissions than any value received during those two decades (and that precious metal pays no dividends).
See that time frame between the red lines on the below chart:
And unless their collective crystal ball was as accurate as the world class research that comes out of Ned Davis (or the insights of those folks from The Big Short) then I’m guessing that our caller and his friends panic-sold in 2008, just like 99% of the rest of the world. And that was right before gold prices started to rise. In fact they nearly doubled in value over the next three to four years.
So did they watch and wait on the sidelines, only buying back in when they thought the water was safe again? Say about 2011/12? So much for market timing – Gold set about losing circa 40% of the market value it had accumulated post-recession, taking us right up to today.
I left my heart in…Montenegro…?
Another caller mentioned buying an investment property in Montenegro about 10 years ago and watching the price go up six-fold since.
The chart above shows house prices for Montenegro for the past 10 years. I’m not sure where the six-fold rise is, but what I can see is a housing market that hasn’t looked very appealing for the last decade.
An Interesting Compound
Folks, there are a lot of stories out there about money and investing.
Don’t take any of them as true until you’ve checked the facts first.
And the fact is that pensions, and compound investing (which Albert Einstein described as the most powerful force in the universe) are where the value is: The long-term!
Think of everything that’s gone wrong over the last 25 years or so dating back to about 1992. There have been crashes where the market fell twice by 50% or more, currency crises, wars, fiscal cliffs, tsunamis, banking collapses, Greece, etc…
But by sticking with Neil Woodford’s cautious approach, patient investors would have netted a 1,755% return in that time. And that’s after all charges; it hammered the FT Index total return.
And yet, because equity income funds have only been around since the 1950s, according to the Regulator that makes them risky.
In the immortal words of Charlie Brown: “Good grief!”
So, don’t invest your money based on Radio GaGa.
Speak to someone who has a twenty, thirty or forty-year track record of investment success who can look at what you have and what you want, and map how to get you there.
And always remember, it’s your money we’re talking about.