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  #1  
Old 25-12-2010, 11:47 AM
onq onq is offline
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Default Fingleton should not be criticized for investing his pension in bank shares

moderator note: split from this thread about Fingleton's pension

Back when I had money to invest - a short three/four years ago - my choice would have been similar to Finger's Bank Fund.
Only Anglo was seent as a "risk" back then - BOI and in particular AIB were seen as gilt edged investments.

Most wealthy clients of mine had structured their portfolios to take advantage of the perceived stability of banks shares.
Even those with relatively well-populated portfolios still maintained up to 50% of them in bank shares.

After the crash, one particularly well connected, well-funded and well advised client confided "we have lost half our money".
It is disingenuous for people now to be calling portfolios relying on supposedly gilt-edged bank shares "too risky".
Nobody, not even well-advised people in high society, foresaw the catastrophic fall of the Irish Banks.

Except perhaps creatures associated with Goldman Sachs, whom we all remember with findness.
They're the finance house who engineered the repackaging of toxic debt for their own gain and the world's greatest financial loss.

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http://online.wsj.com/article/SB1000...547871788.html

http://online.wsj.com/article/SB1000...651236446.html

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ONQ.
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  #2  
Old 25-12-2010, 12:29 PM
shanegl shanegl is offline
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Any investment strategy that places your net worth in a handful of companies, in one sector, in one country, is risky by definition.

Reducing the risk of your portfolio is not about trying to guess or "foresee" which company will go bust in order to avoid that stock, but by diversifying to the extent that you need not be worried about individual companies.

Ignorance of these basic facts, or belief in the "consensus" view of a very incestuous Irish finance community (see irish pension funds) is no excuse.
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  #3  
Old 25-12-2010, 12:39 PM
Brendan Burgess Brendan Burgess is offline
 
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Quote:
Originally Posted by onq View Post
It is disingenuous for people now to be calling portfolios relying on supposedly gilt-edged bank shares "too risky".
Nobody, not even well-advised people in high society, foresaw the catastrophic fall of the Irish Banks.

ONQ.
Onq - there was a general view that some companies were gilt edged. This led many people to have all their money in AIB or CRH or whatever. But many advisors often cautioned against this.

In the Askaboutmoney Guide to Savings and Investments (c. 2002?) I advised spreading your money over the top 10 Irish shares, but no more than two of which should be financial services.

So Fingleton should have known better. Many others made the same basic mistake.

I also advised people who had share option schemes to sell off their shares as owning shares in one's employer is against good diversification policy. So Fingleton should not have had any bank or property shares in his pension fund.
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  #4  
Old 25-12-2010, 08:44 PM
onq onq is offline
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(chuckle)

Well no arguments there guys - we're all a lot wiser in hindsight.

Even the doyen of American universities, Harvard, had lessons to learn.

http://www.bloomberg.com/apps/news?p...d=aHQ2Xh55jI.Q

ONQ.
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  #5  
Old 25-12-2010, 08:47 PM
onq onq is offline
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Location: Dublin
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Quote:
Originally Posted by shanegl View Post
Any investment strategy that places your net worth in a handful of companies, in one sector, in one country, is risky by definition.

Reducing the risk of your portfolio is not about trying to guess or "foresee" which company will go bust in order to avoid that stock, but by diversifying to the extent that you need not be worried about individual companies.

Ignorance of these basic facts, or belief in the "consensus" view of a very incestuous Irish finance community (see irish pension funds) is no excuse.
Really?

Let's see...

Given its dividende history, its diversified international holdings which include stakes in companies in China and Israel, would you suggest that CRH plc is a risk?

The markets seem to love them, with its recent issue of bonds over subscribed, its dividends being maintained and its acuisitions strategy steaming ahead.

ONQ.
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  #6  
Old 26-12-2010, 09:23 AM
Brendan Burgess Brendan Burgess is offline
 
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Quote:
Originally Posted by onq View Post

Well no arguments there guys - we're all a lot wiser in hindsight.

ONQ.
Onq -it's nothing to do with hindsight. It was not some genius insight by me. This was the view of almost all financial advisors and commentators. "Don't put all your eggs in one basket." Any article on investing in shares would have said the same thing.

I would go further - there was no dissenting voice on this. No one was suggesting "CRH is a great share - put all your money in it". I got severe crticism for saying that there was no need for overseas diversification and it was sufficient to buy 10 Irish shares because Irish shares were themselves diversified overseas very well.

Whoever did the review of Fingleton's pension funding pointed out in advance to the board that the investment strategy was too risky. But I don't think that they needed an independent report to point this out - Michael Walsh the Chairman should have known. I suspect that the board wanted a diversified strategy but Fingleton probably said "It's my pension - I will manage it the way I like". Of course, the benefit was his. The underlying assets and liability belonged to the Irish Nationwide.
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