Vince Cable suggesting savers should invest in stocks.Is he right?

It depends on whether you are prepared to risk what you pay in, and whether you are prepared to invest for at least five years. If the answer to those two questions is 'yes', then it is worth a punt, in my opinion. You could get 8-9% or more if you buy low and the stock market goes up.

I have a stocks and shares ISA, into which I pay £333 per month. In December

2007 I withdrew most of what was in there when the FTSE 100 was at 6500. As far as I can see, most of what I have paid in since is buying shares at a (relatively) low value, so in five years time, I should see a good profit.

The FTSE could go down to 3000 or even lower, however, I can afford to lose that money, if the worst came to the worst. Like Vince Cable, I don't expect things to go that badly.

John

The average saver can't.

Only "investors" are prepared to lose money.

Advising "savers" to put their money into stocks, in the current market, is dumb, IMHO

tim

Well, of course you could if the stock market goes up. Similarly, you could lose if it goes down.

It's a gamble. At the moment the market is where it is because 50% of investors think it will go up, and 50% think it will go down. That's what makes a market, and because it's a market there's no consensus that it's bound to go up.

Before you run away with the idea, much favoured by IFAs and the like who have a vested interest in selling products and inducing churn, that the stockmarket is almost certain to go up over a five year period, just note that the FTSE 100 index at the end of last century stood at 6930, compared with just 4340 now. So, only a 60% rise needed then to get back to the level 8 years ago. How long is that going to take do you think?

On the other hand, if you don't mind a bit of a gamble, Lucky Jim in the

4.15 at Kempton Park seems pretty good, and you could get your gain today.

I would say that I'm fairly average, but just older than most. I couldn't afford to save in shares until the last 15 years of my career; that paid off with more than 8% gains (mostly tax free - thanks to the ISA). Now living on a pension which is quite a bit less than the 'median income of £25000'. I'm prepared to take the risk over the next 5-10 years. Maybe it helps business too.

John

What the stock market was in 1999 is of zero interest for those investing today, hence your 60% rise point is irrelevant.

It is said in financial circles that it is always a good idea to do what everyone else is NOT doing. At present 2/3 people in this thread are advising against investing in the stock market. I'll see you in five years, and we'll compare winnings! ;-)

John

It is of interest if those advising today are relying on 5 year periods, because it goes to the reliability of what they say.

And it is of interest to anyone who was invested in shares at that time on the basis that 'shares are a good long term investment', and who now see their shares needing to go up by 60% just to regain lost ground, let alone lost interest over that 8 year period.

Or losses.

But I bet you'd have said the same to me eight years ago, or even longer ago than that. And you'd have been totally wrong.

What rates are available at a fixed point in time is not very relevent. You need to look at rates of return for cash, index linked bonds, fixed rate bonds and equities over longer periods. See the Barclays Capital Equity Gilt Study 2007 -

Oh and emotion is about the worst characteristic for successful investing. Objectivity, objectivity, objectivity - and if you havn't got it, then make a long term commitment to invest monthly in a cheap index tracker such as the iShares FTSE 100 Exchange Traded Fund, which is a hard enough target for most private investors and professional fund manager to beat.

Here's the quote in Metro -

"Savers told: Take a punt on the FTSE by JOHN HIGGINSON - CHIEF POLITICAL CORRESPONDENT - Thursday, January

8, 2009

Savers should 'take a risk' and invest in the stock market, the Liberal Democrat treasury spokesman said yesterday. The stock market has fallen so far that many shares and other assets are under-valued, according to Vince Cable, who was once chief economist at Shell.

Savers have seen interest rates fall from up to eight per cent last spring and they will fall even more if, as expected, the Bank of England today imposes a further 0.5 per cent cut to one per cent.

But 'the situation for savers is by no means all over as there are plenty of opportunities to invest', Mr Cable told Metro.

The FTSE-100 has dropped from 6,153 at its peak in October 2007 to

4,578 today.

And 40 of the companies in the FTSE-100 currently have dividend yields of five per cent or more.

'A lot of shares and other assets are under-valued and will reward those willing to take a risk,' Mr Cable said."

The whole economy and the government response is in a mess.

Too many people were buying things they didn't really need but were also buying them on credit. It's obvious that is bad but what has made people stop borrowing (and attempt to pay off their debt) is the fear of losing their homes or going bankrupt due to tighter credit criteria.

The government is now trying to get money into peoples pockets by various means, including encouraging borrowing, in an attempt to increase demand but all people are doing is using whatever spare money they have to pay off debts.

We really need a realignment of production and services towards what people really need and encourage spending in those areas (maybe by discouraging spending in other areas).

If people spent their money on cheap clothes, accommodation, food, and other necessities and their leisure activities were taken up by cheap activities such as watching tv, sport, personal improvement such as learning to play instruments, sex, etc. most people could be happy. It's only the people who cannot be happy unless they are wasting money who will be depressed.

Here's some idead to sort it out!

On Thu, 8 Jan 2009 15:00:50 -0800 (PST), PeterSaxton wrote: most people could be happy.

But that's the whole basis of capitalism. You gotta want more and more. It's just a pyramid scheme innit?

The logical, green thing to do is to make things durable and repair rather than replace, but then where do the jobs come from? And I'm not just meaning things like cars and fridges. Why replace a carpet because of a stain/wear on one part. It's quite possible to make 'em so just that part can be replaced.

And don't get me started on my rant about cookers...

No, it's not the whole basis of capitalism.

Capitalism is about freedom of choice but it doesn't have to be taken to ridiculous extremes unless you think that people can decide not to pay tax.