This didnt age that well...
Buying Shares
- Thread starter Spiderweb
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This didnt age that well...
Notafettler
Guest
Alas no, people have very little bonds in a retirement portfolio. The only way you can live off a bond when you retire nowadays is to buy junk bonds. Interest rates are just to low.
I will now give an example of what is happening/happened in the bond market.
This is an example based on all things being equal. Company specific will also have an effect. An example of company specific. Carnival (cruise ships) has just borrowed a vast sum of money.....at 11.5% interest?!
So a bond is sold/issued at £100 and 5% interest. The bond pays £5 a year NOT 5%. If the bond goes up in price to £200 the company/government will not pay £10 it will only pay £5. Therefore it is actually trading at 2.5% interest (if you are a buyer). If you're seller and you bought it at the issue price you will still be getting £5 but you have 100% capital gain if you sell.
The Bond will always be called a 5% bond no matter what it costs to buy.
Now if the bond moves up and down in direct relationship to Bank of England interest rates then that will be reflected in the price of the bond. So bank of England interest rates are 3% and the bond is trading at par £100 and £5 a year interest. If the bank of England lowers interest rates to 2%. The 5% bond will rise in price so the actual interest rate is 4%. IE the bond will trade at £128.
£5 ÷ 128 = 4%
If the Bank of England lowers to 1% it will trade at 3% and £165
£5 ÷ 165 = 3%.
And of course everything is reversed if bank of England raises interest rates from 3% to 4%
The bond now must trade at 6% therefore its price falls to £80 (roughly!)
£5 ÷ £80 = 6%
This is meant as an example. There are many variables to take into account ie company specific and redemption date etc. Another for instance!! if the bond is redeemed next year at £100 then there is no chance of it tading at £80 as you are going to get £100 in a years time...a 25% gain if bought at £80.
Bank of England interest rates are 0.1% at the moment any increase interest rates will mean bond prices will fall and the bond holders will be getting exactly the same return but the capital value of the bond will have fallen.
Bonds = shite.
The higher the interest rate the higher the risk
The lower the interest rates the lower the risk.
As stated earlier if you want to live on the return from a bond then see if Carnival the cruise ship company has any on the stockmarket...and say goodbye to your money!!
As a further aside the return on bonds don't rise with inflation. Company dividends over the long run always (on average) beat inflation.
RoadRider400
Some bloke that likes cycling alone
Strongly suggest you stick to companies with strong balance sheets and low debts that have been oversold. Perhaps look into oil companies with low extraction costs because they are struggling due to both low demand and the breakdown in the OPEC deal. Both I expect to be resolved this time next year.
Notafettler
Guest
Faultless except for the expectation of when it will be resolved. Who knows. And as Saudi and Russia can hold out for sometime I am not sure your right....or wrong! In fact for them not to sort out there difference soon will cost them a lot of money, which they have but do they want to spend it?? I am going to guess at ..... within 4 months.
Notafettler
Guest
You quoted yields? Yields are dividends not share price increases. The yield on city of London is 12 times that of Scottish mortgage.
Using HL
https://www.hl.co.uk/shares/shares-search-results/p/perpetual-income-and-growth-inv-tst-ord-10p
And
https://www.hl.co.uk/shares/shares-search-results/s/scottish-mortgage-it-ordinary-shares-5p
Based on exactly one month ago
Scottish mortgage investment Trust share price has increased by 9.8% and it pays 0.52% dividend
Perpetual income and growth investment Trust share price has decreased by 13.24% and is paying 6.25% dividend.
I bought on the 27/03/2020 and paid 184.6285p giving me just short of an 8%dividend and a share price increase of 18.77% (including costs).
At the time it was trading on 26% discount which means I paid 74p for every 100p worth of assets.
Presently trading on an unusually high of 12.6% discount. So paying 87.4p for 100p worth of assets.
On the 27/04/2020 it will show my share price increase of 18.77%.
Double Scottish mortgage.
The lower they fall the higher they can rise to get back to peak price......in theory!!
As stated much earlier growth companies (techs etc) have unusually stood well compared to previous bear markets.
Also, approaching death...sorry retirement you should be looking for high dividends and not growth shares as the latter are far more volatile.....well normally!
Of course if you are after a regular income you ain't going to get it from a growth companies.
PS the long term growth (5 year) in perpetual and income share price is shite. Investment trusts have a board of directors they sacked the manager 2 days ago.
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RoadRider400
Some bloke that likes cycling alone
Thats the question we dont have an answer for yet. I am content in the belief that these low prices are not in any of the producers interests (obviously). There will be a bit of negotiation and a couple of dented egos but at the end of the day money talks so I expect within a few months or a year at the absolute longest. As long as you dont need to cash in your investment for a year then oil is a reasonable bet. Plus quantitative easing will always find a way into the markets and bolster share prices. The money printing machines governments worldwide are currently operating are on a scale seldom ever seen.
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Notafettler
Guest
Interesting facts?? on the crash
https://www.hl.co.uk/news/articles/how-coronavirus-has-changed-the-way-we-look-at-shares
https://www.hl.co.uk/news/articles/how-coronavirus-has-changed-the-way-we-look-at-shares
gavroche
Getting old but not past it
- Location
- North Wales
Well, after reading your very interesting posts, I have decided that capitalism is not for me and my money will remain in the building society ISA, even if it is not making anything. It is there if I want it and that's good enough for me. I am not striving to be a wealthy man ,so long as I can pay my bills and have a bit left over, that's good enough for me. The more money you have , the more you worry about losing it so I am happy the way I am. Good luck to you all with your investments and I wish you well but not for me. 
Notafettler
Guest
As you live in a capitalist country you have little choice. If your firm goes bankrupt and you lose your job that's capitalism. If you have a pension you are investing in a capitalist society, As is putting money in a building society.
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Notafettler
Guest
https://www.moneyobserver.com/news/...l&utm_campaign=MOwin5k230420 (1)&utm_content=
Interesting for those seeking an income
Interesting for those seeking an income
nickyboy
Norven Mankey
- Location
- You want hills? We got hills
I am often asked for share tips and general share trading/investment advice (my business is closely connected to the corporate finance sector)
My advice, without exception, is don't do it unless you're happy for it to be a hobby where you expect to lose a bit of money in the long run (like most hobbies). About 80% of all retail investors lose money. The 20% that make money either are very experienced (having probably lost money in the past) or have access to inside information (which is illegal but happens regularly).
The reason (apart from making stupid investment decisions) is that the spread works against you. The spread is the difference between the price someone will sell you the share to you and the price someone will buy the shares from you. This is largely a function of how liquid the share is (ie how often it is bought and sold). So shares like HSBC have a very narrow spread; the buy and sell prices are almost the same. But these are traded by thousands of experts. They analyse companies like HSBC all day long. Beating them is all but impossible. Smaller companies aren't researched by big investors so you can find bargains. But the spread on these is large, often more than 10%. So if you buy a share in a smaller company, it would have to increase by 10% just for you to get your buy price back. It's a very tough game
My advice, without exception, is don't do it unless you're happy for it to be a hobby where you expect to lose a bit of money in the long run (like most hobbies). About 80% of all retail investors lose money. The 20% that make money either are very experienced (having probably lost money in the past) or have access to inside information (which is illegal but happens regularly).
The reason (apart from making stupid investment decisions) is that the spread works against you. The spread is the difference between the price someone will sell you the share to you and the price someone will buy the shares from you. This is largely a function of how liquid the share is (ie how often it is bought and sold). So shares like HSBC have a very narrow spread; the buy and sell prices are almost the same. But these are traded by thousands of experts. They analyse companies like HSBC all day long. Beating them is all but impossible. Smaller companies aren't researched by big investors so you can find bargains. But the spread on these is large, often more than 10%. So if you buy a share in a smaller company, it would have to increase by 10% just for you to get your buy price back. It's a very tough game
Notafettler
Guest
Can you provide any evidence to support these views and allegations?
80% of retail investors dont lose money. Specially as the majority invest in etfs. It is highly unlikely that 80% of people with self invested personal pension make losses if they did the government would ban them.
A 10% spread on poorly researched companies? There is no such thing as poorly researched company nowadays. Warren Buffets cigar butt companies dont exist anymore.
The market makers spread (bid to offer or ask) is a based on liquidity AND competition. One market maker no competition....and lots of risk for the market maker. Despite that a 10% spread is very very rare.
Let's look at mj Gleeson, not that small a company but shares are tightly held. Or put another way bought and held longer than the average. I have seen spreads of 600p (sell) 640 (buy) it does vary though. It would appear to be difficult to make a profit on them? But the reason the spread is so wide is people hold for a lot longer than normal for companies of that size implying the opposite of nickyboy ie profitable.
The experts advice is buy and hold. Or put another way you will make losses by panicking.
As an aside I wasn't willing to buy mj Gleeson because of the spread but a bargain is a bargain no matter what the spread. The spread today is 704 sell 736 buy, very large. It could be larger when the market is open.
I Bought at 580 using a limit order. I am up including all buying costs And the spread by 20.8%. A bargain is a bargain and hold long term.
And I have no insider information (I didn't know in advance about the covid19).
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I thought the expert advice was to park money in etfs
https://www.fool.com/investing/2019/09/08/warren-buffetts-investing-plan-for-his-family-why.aspx
https://www.fool.com/investing/2019/09/08/warren-buffetts-investing-plan-for-his-family-why.aspx
Notafettler
Guest
It is and for most rightly so. If you want an investment you don't (Normally) want to keep an eye on that's the way to go.I thought the expert advice was to park money in etfs
https://www.fool.com/investing/2019/09/08/warren-buffetts-investing-plan-for-his-family-why.aspx
But investment trusts are companies on the stockmarket which invest in other companies like funds and essentially like etf.
But investment trusts dont have to trade at the underlying value. Some trade well below there underlying value ( defined as NAV) and some above.
For one or more of 3 reasons (trading below NAV)
1 the trust is doing badly bad stock picking.
2 the investment strategy of the trust is out of fashion.
3 The stock market has crashed.
In the latter case it is supply and demand.
So if the shares are 90p and the net assets values are 100p then you are buying at a discount of 10% .
If the trust has dividend bias you are also getting 10% higher dividend.
Example perpetual income and growth managers strategy not working.
Traded at average discount of 16% over previous 12 month. fell further to 26% discount. Which means that I was buying 100p worth of NAV for 74p with the appropriate higher dividend.
Furthermore dividend bias investment trusts have a dividend reserve built up during the good years. Most will be expecting 30% less income this year but will be increasing there dividend. As per normal. Using the dividend reserves.
etf and funds cannot do this.
As the Bof E interest rates are so low these investment trusts have moved to narrower discounts or higher premiums. Meaning I have decent capital gains and high dividends. None of this is possible with etfs or funds. In fact illegal.
So although etfs maybe the way to go in "normal markets " they are not necessarily always best.
Back to perpetual income and growth
16% discount on average last year.
Fell to 26% during crash (bought)
Now 12%
Another example but in this case non investment trusts
Legal and general fell so far that's dividend fell so far that I was able to buy with a 10% dividend. The PRA suggested insurance companies should cancel their dividends this year L&G and Aviva told them where to go.
Latest news from L&G
L&G TO TAP DEBT MARKET AFTER STRONG QUARTER
(Sharecast News) - Legal & General said it would issue debt to take advantage of business opportunities after reporting strong trading in the first three months of 2020.
The life insurer said business in the three months to the end of March was broadly in line with 2019. All its businesses grew apart from its early-stage investment operation, which was hit by a halt to housebuilding.
"L&G said it intended to issue debt to capitalise on low interest rates to raise funds for business growth. It did not say how much debt it would issue.
The FTSE 100 company bucked the trend for insurers cancelling dividends by saying in early April it would press ahead with its final payout for 2019. It did so despite the Bank of England making it clear it wanted insurance dividends cancelled during the Covid-19 crisis.
In Friday's trading update L&G did not mention its dividend but it stressed the strength of its business and its contribution to wider society.
L&G said it paid 96% of life insurance and critical illness claims in the first quarter - the same level as in 2019. It also said it had kept all its employees on at full pay and was speeding up its ?20m sponsorship of Edinburgh university's research into elderly care. It is offering free accommodation for health service workers at build to rent sites.
Chief Executive Nigel Wilson said: "Legal & General's outstanding frontline staff have continued to help provide more certainty for our millions of insurance and pension customers who we recognise are often under pressure as a result of Covid-19. Our business remains robust and is performing broadly in line with the prior year despite tremendous volatility and disruption. Our current strength underpins our future focus."
I like everything about the company specifically the dividend I will be getting!!
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