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Weekend reading: Doomed and boomed

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What caught my eye this week.

A year or so has passed since global stock markets began to recover, resuming their age-old tradition of making smart people look like idiots.

  • Tech stocks rallied first, which was blamed on 20-something traders and lockdown mania.
  • Later in the year, small cap stocks joined the party. Just more retail madness, we were assured.
  • Finally, cyclical and value stocks and the share prices of companies smashed-up by the pandemic began to soar. The Fed had euthanized the market, screamed the talking heads.

Well, not so much.

What really happened was tech stocks rallied as it became clear that economic life would go on, mediated by the Internet.

As the extent of government support was revealed, riskier companies that had been hit hardest in the crash began to bounce back.

Lastly, confirmation of the (always-predictable) vaccine success suggested a boom was around the corner.

All this was aided and abetted by lower for longer interest rates, no doubt.

You hate to see it

All this is clear enough in retrospect. It wasn’t at the time.

Nevertheless, the level of nonsense going around last March was off-the-scale.

Some savvy bloggers I like earnestly discussed how start-ups were dead for a generation.

When Robin Hood suffered a couple of outages (due to the sheer volume of trades it was handling) others bizarrely concluded the platform was done.

We weren’t in a recession, apparently. It was a once-in-a-generation depression.

People might never fly again! It had been revealed as forever unsafe. Would you ever go into a cinema again? Not even if vaccinated.

Oh, FIRE1 was finished – how often did we hear that one?

Most perplexing of all: how could the stock market go up when people were losing their jobs, and everyone was shopping on Amazon?

I got a lot wrong in 2020. Suffice to say I haven’t missed my calling as an epidemiologist. It was a truly strange situation, even if it wasn’t your first rodeo.

Still, I’m glad I kept my head where investing was concerned.

As I wrote around the bottom on 22 March 2020:

There’s too much panic and gloom out there. This is very bad, but it’s not the end of the world. It’s not even the end of the equity market […]

I have been increasing equities and risk all last week. Nobody knows. But there’s a lot in the price already.

I say this 100% partly to blow my own trumpet. (I’m fed up of US bloggers writing “nobody thought it was good time to buy in March 2020”).

But more as a reminder that it really is possible not to run with the herd.

You have to assess what has changed and what has not.

I was pleased to notice one person listening in amid the market scrum:

Look forward, not down

You should always try to remember two things in times like early 2020.

Firstly, the market in the short-term reflects people’s emotions and best guesses. It does not reflect reality, as such.

When everyone is scared and their guesses are made in the dark, expect that to show up in prices.

Secondly, in the longer-term the market is a discounting mechanism. This means it looks forward.

Every time people met rising share price last year with incredulity, it was because they were comparing where the market said we were going with what they were seeing in the day’s news.

That’s the same as getting hysterical on a flight over the middle of the Atlantic because you’d bought a ticket to New York, but all you see out of the window is the ocean.

Things can only get better

Everyone is happier now, of course. Things are looking brighter by the day.

From the Financial Times:

“It’s remarkable how quickly the consensus has shifted in only six months,” said Neil Shearing, chief economist of Capital Economics, a consultancy.

It is now becoming clear that the pessimism last autumn about the longer term outlook for advanced economies was an “intellectual failure”, he said, because most economists “reached back to the financial crisis and applied the lessons from that period, but this crisis is different”.

This change in mood is very evident to somebody like me who eats and drinks this stuff all day long.

Some of those previously panicking pundits now opine that the market “will never be allowed to crash again – the Fed won’t allow it.”

Even if it does, they believe index investors will always buy-in and so shares will always quickly bounce back.

These propositions may well have some truth to them. But it’s easy to see they’re made on the back of all-time highs. We’ll see how fast they hold the next time there’s a dip.

The truth is it’s often better to buy when investors are gloomy, rather than when they are whacked-out on happy juice.

I wrote in February 2020 – just before Covid properly hit us – that:

Every year the global bull market in equities and bonds continues, it gets harder to convince people that investing isn’t always so breezy.

Nobody paid me much mind, except to say they didn’t want to own government bonds.

A couple of months later some were writing obituaries for capitalism.

Now the global economic output is bouncing back and with it optimism about investing.

Yet as Sentiment Trader pointed out this week, buying when manufacturing has been in a slump has actually been the better guide to stronger market returns:

Human nature tells us that we should be happiest when this index is at a high level – thereby indicating that manufacturing and by extension, the economy is strong.

One might intuitively assume that this is when the stock market performs the best.

And one would be wrong. Very wrong as it turns out.

The full article has some persuasive charts and tables.

Charlie Bilello made a similar point on the back of the same strong growth figures. But he sensibly cautions against reading too much into this:

Does that mean manufacturing activity is unimportant to the economy?

No, just that using it to time your exposure to stocks does not appear to be an effective strategy.

The fact that the best performance from stocks has actually come after the worst manufacturing readings tells us as much.

And it provides another instructive reminder that the stock market is not the economy.

Any way you cut it, most stock markets look expensive right now. Even the junky stuff has rallied.

That is rational, but it isn’t a cue to go crazy.

Stay slow and steady and sleep at night

Indeed, rather than charging in and out of shares, it would be hard to think of a better 12-month advert for a passive investing strategy.

Or, in short, do not sell.

That’s because this stuff is hard. You can be battle-tested and alert to people panicking and still be too cautious (as even I was in March 2020) or sell your fast-growth stocks picked up in the slump after they’d doubled in a few months, only to watch them go on to double again. (Yep, I did that, too).

Investing only looks easy in hindsight. But it’s not quite so difficult as emotionally flighty pundits make it sound in the midst of the highs and lows.

p.s. We had several dozen substantive responses – far more than I expected – to our call for new writers. At least ten could be a good fit for Monevator. I need to set aside a day to consider everyone properly. Will be in touch soon!

From Monevator

No more years: I FIRE’d work – Monevator

What are Enterprise Investment Schemes? – Monevator

From the archive-ator: Risk/return: nothing ventured, nothing gained – Monevator


Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!2

Port problems and stockpiling surge give British businesses higher container costs than Europe – ThisIsMoney

Women could be owed ‘lottery-winning’ pension sums – BBC

British Land deal a ‘vote of confidence’ in the London market – ThisIsMoney

Nest seeks lower private equity fees in return for regular pension cash flows [Search result]FT

Cryptocurrency Ethereum hits new high after Visa agrees to allow crypto-payments on its network – ThisIsMoney

As 800 new pavement licenses are granted, is café culture set for a boost? – BBC

After a decade of pension reforms… [Research, PDF, slightly old]ISF

Is it cheaper to own or rent a home? – Which

Products and services

Products to help first-time buyers onto the property ladder – Guardian

How to pay off ‘buy now, pay later’ bills – Which

Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade

Trolley price comparison finds Waitrose 32% more expensive than Lidl – ThisIsMoney

Grayscale Bitcoin Trust assailed by investor over discount – Yahoo Finance

When it comes to index funds, the devil is in the details – Morningstar

Homes for first-time buyers, in pictures – Guardian

Comment and opinion

Your pension, your risk, your choice [Search result]FT

Taxes and happiness – Klement on Investing

Why you should bet on London [Search result]FT

Risk less to make more – Humble Dollar

The growth-value cycle – A Wealth of Common Sense

Is it time to revisit ‘liquid alts’? – BPs and Pieces

Historic pandemics data provides warning for owners of capital [Search result]FT

What kind of (would-be) retiree are you? – Humble Dollar

[I’m shocked – shocked – to learn that…] the NFT bubble has burst – The Irrelevant Investor

Larry Swedroe: the only right way to view an asset – TEBI

The long game – Indeedably

Another reason not to pick individual stocks – Of Dollars and Data

Naughty corner: Active antics

JP Morgan CEO Jamie Dimon’s letter to shareholders – JP Morgan

Why a passionate stock picker shouldn’t set up as a fund manager – Neckar

More accuracy – Robert Vinall

The changing nature of momentum – Validea

A Q1 investment trust portfolio review – IT Investor

Assets have tanked at two of the world’s biggest short sellers – Institutional Investor

Covid corner

‘A small, sanitised existence’: what effect will the pandemic have on today’s babies? – Guardian

Returning to the office sparks anxiety and dread for some – New York Times

New Zealand and Australia to restart quarantine-free travel bubble – NPR

How Covid-19 jumps from humans to animals, worrying scientists [Video]WSJ

Kindle book bargains

Never Split the Difference by Chris Voss – £0.99 on Kindle

Rebel Ideas: The Power of Diverse Thinking by Matthew Syed – £0.99 on Kindle

Real Life Money by Clare Seal – £0.99 on Kindle

Blood, Sweat, and Pixels: The Turbulent, Triumphant Stories Behind How Video Games Are Made by Jason Schreier  – £0.99 on Kindle

Buy a Kindle – they’re not just for whiling away the end times!

Environmental factors

Sea-level rise is creating ghosts forests on an American coast – Guardian

Off our beat

The big lessons of the last year – Morgan Housel

How to be (time) rich [Podcast]Rational Reminder

What scares Ken Dychtwald about getting old [Click the ‘X’ top-right to read]Barrons

The Lego black market [Podcast]As It Happens [h/t Abnormal Returns]

And finally…

“A world equity index tracker is the only equity investment a rational investor ever needs to own.”
– Lars Kroijer, Investing Demystified

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  1. Financial Indepedence Retire Early []
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{ 46 comments… add one }
  • 1 FIRE v London April 10, 2021, 12:12 pm

    Do not sell.



    https://monevator.com/weekend-reading-do-not-sell/ was one of your blog’s most memorable posts, ever. I was with you, thank heavens.

    Having said all this, Nasdaq has doubled in 2 years. That is highly unusual market behaviour. Even I am taking some profits right now!

  • 2 jim April 10, 2021, 12:21 pm

    Topped up the LISA beginning of last financial year. Like an idiot waited for the govt bonus before buying more VLS100. Missed out on close to the bottom. How often do troughs align with beginning of tax years?

  • 3 xxd09 April 10, 2021, 1:05 pm

    Sat tight yet again through it all-boring perhaps
    Reading the financial blogs including this one satisfies my my cravings to do something and reinforces my beliefs to do nothing
    Did take out this year’s monies or withdrawal in Jan as I could “smell” a top
    I need not have bothered as all is back to normal and more-as ever !
    As the late great John Bogle said -the commonest saying in investing is “Its different this time”
    After 45 years of investing I have noticed it rarely if ever is!

  • 4 Grff April 10, 2021, 1:33 pm

    Just over a year ago I threw a lump sum into a vanguard tracker and then watched it plummet, it’s now about 0.5 percent down after a year. So, ever the optimist I topped it up last week. I would see that as the top of the market, if anybody is in profit, I would cash out now. I have managed to hit every peak since 1987. Yes I know you should drip feed in, but ever the fool.

  • 5 DMac April 10, 2021, 2:17 pm

    There was an article in the Atlantic this week on index funds and Marxism that wasn’t in the links


  • 6 BillD April 10, 2021, 2:53 pm

    I didn’t do anything with investment in 2020 except some “manual Bed&ISA” in June selling some stocks and buying some back in the ISA and putting the rest in tracker ETFs. A little late because in April 2020 things seemed a bit strange and like what they say to do when you car is aquaplaning – avoid touching the brakes or sudden steering and hope that things will sort themselves out. I went for the hope! I find myself doing the manual Bed&ISA thing again this year because even with a year to figure things out HL still seemed to have suspended this part of their service, they must be raking it in on dealing charges!

  • 7 FullTimeFinance April 10, 2021, 3:13 pm

    The old saying, “nobody knows anything” about the future of the markets or to be honest the economy. Other then some rebalancing band hits I did nothing different during the crash last year from any other investing week. It could very well have been worse, or even better. Hopefully newer investors learned the lesson.

  • 8 Jim McG April 10, 2021, 3:36 pm

    I think the more interesting question is who DID sell in March last year? Nobody on this site by the look of it.

  • 9 Neverland April 10, 2021, 3:41 pm

    Roll forward 12 to 18 months when central banks tighten everyone panics again

    Plus ca change, plus cest la meme chose

    Mostly I did nothing. Government policy made me richer

    Don’t claim to be clever, just lucky

  • 10 Accidentally Retired April 10, 2021, 3:46 pm

    This is why I have had a large sinking fund. It’s allowed me to largely ignore the market and never sell. Last year I tweaked my allocations and pushed well out of bonds at the bottom. I only wish I had done so even more aggressively, but my FA (who i no longer work with) convinced me not to get too aggressive. Now my problem this year is managing capital gains as I divest myself from the high fee funds my FA had me in, so I guess it’s a good problem to have…Anyways, cash cures any volatility stress!

  • 11 The Rhino April 10, 2021, 4:10 pm

    @JimMcG – haha, if they did then no ones owning up! I bought in over may/june completely through luck as thats when I had some redundancy money to shift. Not sure whether it was good or bad luck, i.e. being out of work vs judicious market timing..
    Paper gains over last FY are about same as my gross income over whole of last job (9ish years) – its crazy really..
    My unwitting entrance into the FIRE category has been largely unpleasant, I’m hoping TA has a totally different experience, but I’m pretty convinced he will as he’s got all his ducks in a row in a way that I didn’t/haven’t.
    Indeedably’s excellent sovereign quest put me on to this site the other day which I thought was really good:
    Particularly I thought the piece:
    was one of the more cogent arguments I’ve seen on the ever-rumbling-on topic of yield vs total return

  • 12 Matthew April 10, 2021, 4:33 pm

    @TI – you say things look expensive now, but in equities things can potentially become cheap again without dropping in price if earnings increase, this is of course fundamentally impossible for fixed income. So being expensive is less of a problem for equities.

  • 13 SemiPassive April 10, 2021, 4:58 pm

    Jim McG, I sold a significant chunk of equities in early March with the intention of buying back in 2-3 months later. I then changed strategy when it started looking as if the crash was going to be much shorter lived, and bought back in starting on 23rd March.

    Unfortunately I didn’t move all my cash back in on that date, and phased in chunks over the next few weeks.
    It could have ended disasterously, and in fact I would have been better off overall just sitting tight through the whole thing, despite some reasonably fortunate timing and temporary use of GBP hedged global trackers when the pound was really weak.

    But on the other hand a good number of people (not Monevator readers) also sold out and never bought back in for the whole of 2020. They may well have wrecked their retirement plans.

    For 2021 I’ve mainly shifted out of global trackers to more of an income/dividend/value bias, as I rebuild into an eventual natural income portfolio.
    The S&P500 will probably outperform yet again but hey ho, I am addicted to dividends. I have more faith in them than index tracking at these levels.

  • 14 Boltt April 10, 2021, 6:50 pm

    Cashed in all my P2P (ratesetter) about 10 months ago, it’s been sat uninvested in my ISA since. I missed the boat at the second ftse100 drop to 5500.

    Current selling a BTL – no idea where to invest both pots!

  • 15 never give up April 10, 2021, 8:07 pm

    Yes it was certainly a crazy year, although you wouldn’t know it by looking at my ISA and Pension graphs that are only updated every quarter and six months respectively.

    If my nerves had been plotted on a daily chart it would have been a bit more volatile though! As always I’m grateful for this site and the wise words of the comments section that saw me through in one piece.

  • 16 Seeking Fire April 10, 2021, 8:37 pm

    I didn’t sell and have bought equities heavily since March but it’s comparatively easy when you are still earning and are in a strong financial position. It’s a much harder gig when you are husbanding your capital I appreciate and for people who are RE this is tricky. Maybe low inflation to people’s daily cost of living is the counterbalance.

    Agreed the volatility and pandemic made for a truly worrying few months but compared to the 1970’s when the DOW moved sideways for the decade with high inflation to boot, this has been comparatively easy – sort of like 2009 a very sharp shock followed by liquidity easing. That’s the regime change since the 70’s I guess. It’s not just with hindsight equity investors / property owners have the FED / BOE in their corner willing to inflate assets. 10 year treasury yields were circa 6% back end of 1999 now they are 1.7% – explains a lot and relatively speaking, relatively being the key word, I don’t think equities are too expensive although what do I know.

    The Rhino – that article is a good one and I find people buying income stocks erroneously think this is a lower risk approach when conversely you are dialling up risk given implicit selection of a few sectors.

  • 17 The Bonce April 10, 2021, 10:02 pm

    I had an interesting year. Although claiming to be a passive investor, I didn’t like the way the wind was blowing and sold just about everything in early March, just before the biggest plunge. This proved to be fortuitous and was probably one of my better decisions in a long history of investing littered with disastrous ones. The markets then plunged further, and I then spent a short time feeling smug, of course followed by a longer time worrying about when and whether I should be buying back in. I finally relented and took the plunge back in at the end of May, long after the bottom when markets were well on their way back. Once again, another rare, good decision for me was to invest around a third of my entire investment pot into a tech based investment trust geared towards the far east, based on the fact that the far east seemed to be already through the pandemic and out the other side. The trust did amazingly well, more than doubling in around 7 months. Once again, a feeling of smugness developed as I drew very close to my FI number. Then trouble hit! The price of the tech fund started dropping, and as I had no real handle on it’s true worth, I decided to impose a limit – if it fell by 15% I would sell. Day after day I watched it drop with trepidation and I could see me moving further and further away from my previously close FI number. Inevitably it finally hit the 15% drop figure, so I immediately put in a sell order. The problem is I had such a shed load of these that they couldn’t be sold immediately, and in order to offload them I actually had to take a figure less than the quoted price. This meant that by the time they were sold they had actually dropped 25% from their previous high. As you can guess, the following day they then started rising and soon had risen by another 20% to compound my misery. From that point onwards, just about all of my investment pot went straight into a global fund (ex-UK), and it has been steady as she goes since then. I am now back to within 3% of my FI number and hope to hit it by the end of this year, when hopefully I can draw on the experience of TI and live a long, happy and stress free future.
    In these last 12 months I have learned first hand that, despite some lucky decisions that sort of paid off for me, Slow and Steady is surely the way to go. I have had more than enough of trying to time the market, and certainly for me it has been a more relaxed and less stressful life since jumping back onto the Slow and Steady path. Many thanks for your guidance, TI!

  • 18 Calculus April 11, 2021, 12:14 am

    Just when you think it cant get any better – you go and get liked by Paulie! From an Ireland rugby and Monevator fan, well done sir.
    For the record I held through March – although I’ve just sold off a fair portion of my Sipp technology fund. I’m still long on global tech equities, but a rebalance was right for me.

  • 19 Grumpy Tortoise April 11, 2021, 8:14 am

    Boring as it sounds I just kept on with my monthly drip-feed into my VLS60. No stress and a nice annual (unrealised) gain.

  • 20 ex-pat Scot April 11, 2021, 10:23 am

    Another “hold” story from me.
    39% up YOY to 31 Mar 21.
    I did do a little maintenance on the current pension selection, moving out of a series of funds that acted broadly as a global proxy tracker, into an actual global tracker.

    As ever, it’s the trust in the process – dull and unexciting. Low cost, global trackers. Drip feeding the monthly contributions, come hell or high water.

    My guilty secret / “pleasure” is checking the daily value and popping it into my mega spreadsheet. Whilst this is not recommended due to the temptation to tinker, I never vary from the path, and just use it to check off the progress towards FI(RE)

  • 21 zipzapzoom April 11, 2021, 10:49 am

    Ironically, last year proved to be the best year in terms of investment gains for me. In both March and April I topped up my ISA account and invested it straight away in SMT and a cheap global tracker. By June SMT was up 50-60% and I took some profits, but it continued to go up and more than doubled by the end of the year. I halved my holdings and I am drip-feeding it into the global tracker. My portfolio largely constitutes cheap global tracker funds and a small % of SMT. I tried my best to stick to the same allocation and got lucky. People usually say that it is frightening to watch their investment go down rapidly, in my view it is equally frightening to watch it go up so quickly. It puts one in the conundrum of whether to keep riding the wave when you are in touching distance of your FI number or to take some money off the table while you are winning (especially when you are winning due to your luck rather than your skills). The opportunity cost of you doing something/nothing increases significantly.

  • 22 Kraggash April 11, 2021, 10:53 am

    Not writing a blog, I have no proof, but I called it pretty well this time. I guessed we would not be even talking of getting back to normal for 12 months, with market volatility in the meantime. So I took my 12 months ‘income’ (I am in drawdown) from selling a bit of my SIPP, in March (but not withdrawing until new FY) and then sitting tight.
    Fingers remain crossed.

  • 23 Al Cam April 11, 2021, 10:55 am

    @Boltt (#14):
    Fully understand your P2P move.
    Ad hoc buying of equities during periods of “crisis” is IMO never easy.
    If I may, why sell the BTL as it sounds like you will probably end up with even more cash?

  • 24 Rosario April 11, 2021, 11:03 am

    Interesting point on the tracking on values… I managed to stick to plan and kept buying equities without contemplating selling. I did however bury my head in the sand to a certain extent. I didn’t check or record the portfolio value as I usually would. I’m not sure how this would pan out in a longer value decline but it enabled me to stay on course this time without wavering at all.

  • 25 Naeclue April 11, 2021, 11:54 am

    I changed our strategy last May from 60/40 equities/bonds to 90/10 equities/cash. So far that has worked extremely well, with our portfolio up over 20% from that point and our drawdown rate dropping to 1.5%.

    It is however too early to tell whether this move was sensible or not. Maybe I will know in 15-20 years time.

  • 26 Boltt April 11, 2021, 12:16 pm


    I let to my daughters – with the promise of selling to them buy at a discount when they are ready!

    It’s an interesting example of CGT, Interest rate, L2V/deposit optimisation:

    I’ve filled 3 years of LISAx2 over the last 15 months to generate a £30k deposit.
    5 year fixed interest deals varying enormously – the difference between a 15% deposit and 25% was £10k in interest over the 5 years (£180k mortgage)
    As the house value is in the range £210-240 the plan is to sell at £240k to create a notational 25% deposit (£30 Lisa, 30 genuine bargain price)
    This creates about £5400 extra CGT, but worth it on balance in my view
    Yes, they are paying the extra CGT for me!

    If I’ve missed a cunning plan to this in a more efficient way, please let me know ASAP.

    Rather negatively I’m hoping for a temporary dip to but some more equities, around end m
    May should be perfect…


  • 27 Naeclue April 11, 2021, 12:26 pm

    Stock markets are looking expensive, but so are bonds and cash deposits. For long term investors, ie rational investors, there is absolutely nothing that can be done about this. As always, we have to take the risk that long term returns may end up less than the return on cash, but we do that in the reasonable expectation that returns will be better than on cash.

    A tempting, but irrational, approach is to worry too much about market valuations and trade in and out. This is irrational because of the substantial evidence that market timing detracts from long term returns, unless you get lucky. Rational investors don’t trust to luck.

  • 28 Matthew April 11, 2021, 1:34 pm

    Everything looks expensive because there is so much money supply in the system chasing yields that have not increased by the same amount – the money from QE hasn’t filtered through into the economy, just as the inflation that happened in the markets due to QE hasn’t yet filtered into the economy, but any inflationary effect will be massively negated by low yields over many years.

    The road back to less expensive if it were to ever happen wouldn’t be with sharp shocks but a long period of underperformance to follow the period of overperformance already experienced, but maybe this change is more permanent and we have to redefine “expensive”.

  • 29 Al Cam April 11, 2021, 1:56 pm

    @Boltt (#26):

    Very interesting – not at all what I thought you might say.
    I can just about hear Baldrick in the background nattering on about some kind of “cunning plan”!

    The only additional things I can think about off the top of my head are:
    a) did you ever live in the house as your main home;
    b) have/will you remember to offset all applicable fees & costs against CGT

    Lastly – and being a bit of a devils advocate – why not set the sale price lower or at least to a level to totally wipe out the CGT?

  • 30 Boltt April 11, 2021, 4:16 pm


    CGT is payable on the gain v market value, not selling price – too much “fiddling” becomes tax evasion.

    For mortgage purposes lenders calculate LTV on purchase price not valuations, unfortunately. So in my case the extra CGT is the price to pay for saving £10k in mortgage interest.

    We never lived in the property, so no relief there – a couple of other ideas we didn’t pursue were to gift a percentage of the property each year and let them buy the remaining x%. The other was simply pay the extra interest on a 1-2 year deal and then remortgage – then capturing the benefit of a lower LTV

    Not all lenders are happy with gifted deposits and genuine bargain price etc.


  • 31 ZXSpectrum48k April 11, 2021, 4:29 pm

    @TI. I think you underestimate the impact of retail investors here. For a decade, the US private sector has saved at a rate of about a trillion a month (in annualized terms). Since Mar-2020, that savings rate exploded as high as almost $6.4 trillion but never dropped below $2 trillion (https://fred.stlouisfed.org/series/PMSAVE, set it to 10y history).

    This is why I’ve never really agreed with your focus on big GDP falls being an issue. Instead, I could focus on the positive impact of deferred consumption, paying down debt, a massive fiscal transfer from governments, borrowing at negative real rates, and investing in anything (stocks, bonds, property, crypto) and making great returns. It’s arguable that COVID is the best thing, economically, that’s ever happened to the private sector. To borrow a phrase from Macmillan “you’ve never had it so good”!

    An extra few trillion in savings in just 12 months does give people quite a bit more room to invest in anything, whether those assets are good or bad. This is not about valuations.

    The question is what happens when that unwinds (assuming COVID is behind us). When all that deferred consumption starts to feed in the economy, will it will boom as expected and companies do fantastic? Or will those savings will need to be drawn down to pay for it, which means selling of assets? Will that boom result in possibly higher yields? Will govts want to take back that fiscal transfer?

    The current market levels are predicated (quite understandably given past history) on a rise in real yields or fiscal tightening being very modest.

  • 32 Al Cam April 11, 2021, 5:00 pm

    Surely a reasonable market value is somewhat less than the upper valuation; mid point looks like a good “starter for ten”?

    Also – and this is pure speculation on my behalf – is that ” fiddling” really tax evasion or a potential IHT liability. I say this because if you gifted the house in totality would it not be a potentially exempt transfer (PET)?

    Paying extra £5.4k CGT to save 10k mortgage interest just sounds odd to me. How long a fixed rate are you planning for the mortgage?

    Lastly, would not any “saved” extra CGT (by lowering the sale price a bit) provide for a bigger deposit (by your daughters – as they have to pay you less CGT) and thence lower the LTV and possibly lower the interest rate – or is it just one of those pesky edge cases?

    As you said at (#26) an interesting optimisation challenge – and I have thrown IHT into the mix now too!!

    Lastly, one other option that could help you hedge your bets is to do a part-and-part arrangement where you can have multiple mortgages with different terms (but all must be with the same lender) on the property. I used this years ago to good effect, when the prevailing fear was rising interest rates.

    I suspect what ever way you decide to go a few years down the line it will all wash through anyway – as some other [almost certainly unforeseen] changes will come along.

  • 33 Al Cam April 11, 2021, 5:02 pm

    Re (#32)
    Should have started by saying:
    @Boltt (#30):

  • 34 Prometheus April 11, 2021, 10:03 pm

    The FT article was interesting, similar in vein to the Cash flow ladder approach to draw down, secure the first few years in cash/bonds, then mid risk for 5 to 10 years, then chuck the rest into 100% global equities.

    It certainly goes some way to manage the sequence of returns conundrum that is at the heart of fears over managing income in retirement.

    Certainly the approach I am taking, given only a couple of years to retirement I am aligning my asset allocation accordingly, if it works with no income then it works with chucking all your contributions into the 100% far field investment.

    Btw the 8th wonder of the [UK] world is not compounding, it is salary sacrifice!

  • 35 Boltt April 12, 2021, 8:45 am


    My understanding is Gifting may reduce IHT, but the gift itself is treated as a disposal at market value – so CGT is still tested. (I did consider gifting 25% as the deposit, but also wanted the LISA bonus’s and not all lenders like gifted deposits).

    The interest rates (5 year fixed) were around 1.6% with 25% deposit, and 2.2% 2.6% for 20% and 15% respectively (step changes).

    The total “family” cost of interest and CGT were ~£24.5, £26.5, £29.5k for 25/20/15% deposit based on borrowing £180k (£155 purchase cost) and the sale valuation being £240/224/212k as required to hit the LTV limits.


    Ps TI, sorry for the off topic case study

  • 36 JimJim April 12, 2021, 10:17 am

    Another “I did not sell” story here. As I stated in the comments last year, I was a buyer all last year. Drip by drip and then later, a couple of sizable lump sums. Who knows where the market goes from here, the press have as many bulls as bears writing in the pages, I don’t so I doubt I will change tack now. I re-balance by buying. Things luckily worked out O.K. and I am a bit up, no great gains to report here, but I don’t expect them.
    I seem to be a serial buy and hold investor and I doubt I will change much, however, a conversation with a friend who looks at risk in the paper pulp industry nearly had me selling one of my holdings due to his panic. I have since decided that I should weather the storm with that one.
    The Don Ezra F.T article had me re-evaluating my draw-down plans yet again, I am not sure I like his safety margins though.

  • 37 Al Cam April 12, 2021, 11:56 am

    @B (#35):
    Got you – definitely worth securing the lower interest rate.
    Final thought – watch your tax bands and any liability to higher rates.

    I second Boltt’s PS

  • 38 Gizzard April 12, 2021, 12:10 pm

    “For mortgage purposes lenders calculate LTV on purchase price not valuations, unfortunately.”
    A possible problem here is that the lenders require a valuation. So, they may detect that the property is ‘overpriced’ and adjust the mortgage LTV upwards accordingly.

  • 39 Peter April 12, 2021, 6:05 pm

    Last year was my first year as an investor. I’ve obviously got it all wrong. I’ve invested 90% in government bonds and only 10% in equity as I convinced myself that March deep is just the begining of a larger longer lasting deep. Seeing equity rally after March deep was something I could not understand, only to find out later from various sources that economy is not a stock market (has anyone said this one before, I mean said it earlier than last year?) . I’ve experienced my first FOMO and started rebalancing from bonds into equities on a monthly basis way to late. I am now 50% bonds and 50% equities. Why? Because I’ve accepted that I have no idea what is going to happen next, so 50/50 alocation seems about right to me. I now read various blogs, watch other investors portfolios performance on YouTube and see their gains since March deeps. Usually these gains are in a range between 10-20%. And I feel a bit like a sucker seeing this and comparing it with my portfolio being sligtly below -2% at the moment (due to recent increase in bond yelds and to late switch into equity). Feels a bit like I am the only one on this planet who’s portfolio underperformed since March. Anyone else here with similar experience?
    Despite losses, I regret nothing. I’ve learned a lot. I remain invested, as I strongly believe that in 15 years time (time to drawdown) it will pay back.

  • 40 Brod April 12, 2021, 9:03 pm

    @Peter – I wouldn’t worry too much, we’ve all made horrendous mistakes. But the positive is you’ve found your risk tolerance while you only had (I presume) small amounts invested. If you’re comfortable and can stick with it, 50/50 doesn’t seem unreasonable to me. It’ll get you wherever you’re going.

    If you want FOMO, I went from 100% equities to about 40/60 in November 2019, intending to preserve my capital and do a reverse glide path and rebalance back into my favoured de-accumulation asset allocation over the next 7 or 8 years. While I’m still comfortable with that strategy, it must have cost me a pretty penny. C’est la vie!

  • 41 Tyro April 12, 2021, 9:06 pm

    @ Peter: don’t feel too bad! If the markets drop in six months’ time (and who’s to say they won’t?) you might look like a genius.

    Two claims often repeated in investment forums – I assume they are properly backed up with sound research – are: (1) there’s no correlation between stock markets and economies; (2) stock markets move in expectation of where they think economies will be six months into the future. (Though of course they can turn out to be wrong…..)

  • 42 Peter April 12, 2021, 10:12 pm

    @Brod @Tyro thank you for your kind and wise comments. I honestly enjoy this blog and the community.

    @Brod sounds like my fomo is nothing in comparison to yours. My risk tolerance (volotality I can sleep with) is more than that delivered by 50/50 allocation. I am just waiting for another market deep (whenever that might be) to rebalance into more equity, 70/30 to be precised. I hope that when equity will crash, goverment bonds will go up, after all in theory these two assets meant to be negatively corelated. Once I transition into 70/30 I am sticking with it no matter what, untill I am 5 years before drawdown. And if the crash never comes, then I am sure I will be happy with my 50/50 allocation anyway.
    I also continously question and invert this entire ‘idea’ of mine to minimise risk of another financial mistake, which might occur due to my (perhaps even unconscious) biased thinking.

    @Tyro I know these two points you’ve mentioned, but in regards to point 1) I only found out about it last year. If I knew it earlier maybe my investment decissions would be diffrent. Maybe.

  • 43 Naeclue April 12, 2021, 11:40 pm

    @peter “I’ve accepted that I have no idea what is going to happen next”. Great that you learned that early on in your investing career. Fact is, nobody knows what is going to happen next. Those that are convinced they do are delusional.

  • 44 Prometheus April 12, 2021, 11:44 pm

    Peter, you’re doing well…few new investors, or experienced, could come out of the last year and admit their learning curve. I suspect there are many, even followers of Monevator, who are nursing losses and dare not admit it.

    Almost all financial commentators [excepting this esteemed publication] are financial sales pitches selling ‘get rich quick’ or more commonly ‘we’re luckier than other funds’, whereas the truth about investing is maintaining wealth. Most wealth is made through work, as a business owner or through your career.

    Given the above you will almost certainly hear nothing of big losses but only of those that made big. No one sold their products, or massaged their ego, by admitting to failure.

    To go through a year of such volatility and come out of it close to break even is a respectable result.

    To get a return of 4 to 6 % annualised in this era of low interest rates is quite an accomplishment.

    If you want to get rich[er] maximise your income, and savings, then invest it well via a diversified multi asset portfolio. Anything else is BSD talk….

    There will be other corrections, not so big but always an opportunity to rebalance into if that’s your game. Just have a plan and stick to it….

    Bon chance!

  • 45 Brod April 13, 2021, 1:52 pm

    @Peter – seems sensible. But beware of market timing!

    Btw, if you directed your new contributions (assuming there are some) to equity only – wouldn’t you slowly rebalance to 70/30 anyway? JAT.

    70/30 is my target too. And long term (20 years) I’m hoping to get 4% above inflation, which is well below historical returns.

  • 46 Scott April 13, 2021, 8:50 pm

    I avoided all financial news, including this site, for the first few months when the pandemic hit. I knew I had no intention of taking action, so didn’t want to read the doom-monger prophecies!

    I’m a FIRE-ee, so no opportunities for buying at lows. I sold a year’s living expenses in summer when I found out markets were high (i.e. similar to start of year).
    I didn’t need the cash at that point, but was a bit spooked that markets would fall back. I hindsight I should have waited, and sold now, as I’ve missed out on further gains, although thankfully on only a small chunk of my portfolio.

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