Best Cash ISA Savings Account as April 5th 2011 Tax Year Deadline Looms

So Savers feel they may get ahead by earning a 3% return on cash ISA's but the rate of inflation is 5/6% so their financial intelligence is 0 because in effect they are losing money over the medium term as opposed to making it. Best bet, investing in equities over the long term, that means years not weeks or months and with quality stock picks an average of 10% is pretty realistic far better than the negative number offered by the banksters.

Yes, savers in Britain are being ripped off by an estimated 3% per year loss of capital value.

But the stock market is high to very high risk.

Quality stock picks can literally blow up in ones face such as BP did during summer 2010.

Investors will continue to wakeup to top quality companies going bust Enron style, and especially where the emerging market stocks are concerned.

Therefore investors cannot invest more than about 15% to 25% of their portfolio in stocks because the risks are very high, no matter which stock is selected.

Best

NW

re: stocks are high risk

...and any _WESTERN_ stock index plotted again gold since about 2001 or so, show gold outperforming.

Remember in secular cycles of negative REAL interest rates, DJIA/gold ratio returns to 1 (or below). It is now around 9 and has been falling since the secular peak of stocks in 2001.

Diversification into a stock index won't help, just buy gold instead. And if you have a long term frame, silver is even better (silver is not better if you hold short-term, because the volatility can murder you). Traders who think they can trade silver better than a long-term hold of silver, are going to get an education into the value of gambling. One might be able to trade the gold/silver ratio effectively (one trade every year or two), but not the silver fiat price. You can prove this to yourself by comparing the increase of your networth since 2003, as compared to if you had purchased silver and held it with no trades.

Most people in the markets who claim to be investors are in effect really we all know Speculators, they are pure gamblers who in all likelihood never even look at the balance sheet of the company they own, or historic and future earnings, or valuation metrics. Risk can be controlled with stop losses, had an investor invested in BP, and suppose had a portfolio of 10 stocks (diversified), then a fall in BP would have put 10% of their capital at risk, had they been disicplined and had a 20% stop loss, only 20% of the 10% at stake would have been lost, ie 2% loss of capital. This is a business of percentages and risk control.

As i said before, risk comes from not knowing what you are doing, speculators in the guise of investors probably had all their money tied up in BP or say a few other commodities stocks and when they tank they blame and curse the stockmarket, when in reality its their own fault, as said before they never bother reading a book on trading or investing, and learning about valuation techniques, so perhaps Nadeem you are 100% right, it is too risky for most people because from judgement most people don't have a clue about valuations, forget divergences thats just alien talk to them. I would argue that most private investors are gamblers with no strategy, they follow each other like sheep, this month its emerging markets, so they all jump in to those stocks over there, or those funds, next month its commodities so they all jump in there, after that month, its tech,then banks, then bonds, believe it or not many private investors are now jumping onboard currency trading(Thats high risk) because they want to make up for losses during the last crisis( had they stayed the course they could have recouped and made more money). I am amazed at the number of investors who have just loaded up on banks all believing they will make a killing in the future, and then wondering why their shares get trounced during corrections, and why they are stuck in a trading range look at RBS. I see private investors make the same mistakes over and over and over again, most sadly get what they deserve which isn't underperformance, but heavy losses.

The problem with stop losses is the likes of flash crashes either market wide or on individual stocks that occur quite frequently as it is driven by high frequency trading.

Those invested in ultra safe banks such as HBOS have been totally wiped out.

Risk control is portfolio wide, to balance high risk stock positions one needs other lower risk asset classes, that way even a 50% stock market crash won't cripple ones portfolio.

If your going to invest in individual stocks then ones focus should be for the very long term and seek consistent high dividend income payers, because in my experience that is the only indicator of a well run company that is less likely to go bust as opposed to phony financial data pumped out by the boards.

Enron showed you cannot trust the financial statements and balance sheets. There will be many more Enron's to come especially in the Emerging Markets as giant corporations will be found out to be total frauds and all invested monies will be lost.

I agree with your analysis, I am very sceptical of emerging markets, you are right in that like Enron, it is so easy to guise the balance sheets of these companies. I invest in UK equities and so far no company I have invested in has gone bust, and i have been investing for over 8 years. I always check cashflow and gearing, as well as net debt, and read latest company reports and am very cautious in this respect. But you are right in that for most investors a balanced portfolio is optimum to prevent crippling losses.

I will always remain suspicious of emerging markets, as their is no real regulation of these markets, then again who said UK and US markets were ever really regulated.

I agree that dividends are one excellent guage of company health, but in isolation dangerous.

Thanks for all your hardwork and analysis on the markets, your blog visitors and I much appreciate it.

Nasir

I would very much like to hear your comments regarding the Governors statement about much of the inflation being imported. Presumably this is code speak for saying putting up interest rates will not have any impact on inflation so lets leave them alone. Clearly, Andrew Sentance doesn't buy this - what's your take on this - I am intrigued to know.

The Bank of England is engaged in economic propaganda, they have not been tracking 2% inflation since October 2008 when Gordon Brown told them to forget about inflation and instead target 2% GDP, which is where we remain.

Everything the BoE has stated since has been worthless propaganda!

Best

NW

Hi

It's late, and time keeps working against me. But it remains my primary focus where analysis is concerned as without it, I can't look at UK housing.

Best

NW

Nasir

Surely one investors interpretation of risk is different to another? The hard facts present themselves on the corporate books, but the softer facts are subjective. I know of individuals who have invested in nothing more than boiler room stocks with reasons as ridiculous as “I’m certain the Burmese govt will allow them to drill for oil”. By the end of the year they end up doing better than buffet! Likewise, we have the big CFA analysts investing in HBOS and Enron alike which are ultimately the same boiler room stock with a tuxedo.

Investors have certainly forgotten what business is all about. Investing in stock should be a simple set of rules. One man’s investor is another man’s speculator. Soros is known as a speculator and Buffet as an investor; but their diligence is comparable.

I think the bridge which links investment and speculation will never be built.

Hello Nadeem,

You have been so spot on with your DOW analysis, that I am looking forward to viewing the next one you promised us for February. I am sure that many of us would be most interested to hear your analysis for the rest of this year.

All best wishes,

Diane :)

My focus is on uk rates then housing, which is the direction towards which I have been engineering my portfolio. I will try and slip the dow in between this analysis but stocks outlook is not my primary consideration at this point in time,

Best.

NW

Nadeem

How about a Dollar INdex update?

Gold and Silver?

Hi

I am flat on gold, and my last indepth analysis was for Dollar to target a trend to below USD70 by mid 2011.

Best

NW