Wealth Management - How to Invest €6M - Where to Get Advice

DK123

Registered User
Messages
100
What if?.Protect the downside[lower the risk] on shares by having for example an automatic selling point or stop loss system in place for when they start falling, but this would apply only for short term equity investment and not for long term equity investment because with long term you would only be turning a temporary loss into a permanent loss and you would likely miss the inevitable upturn by useing this method.P.S.No financial qualifications,but learned a bit from common sense and university of life.
 

Purple

Registered User
Messages
11,947
It is extremely misleading the terminology being used to describe Risk. Nobody reading this forum should think that Equities are a less risky asset class than cash. If you do, then you really need to use the services of a qualified Financial Advisor.
Over the medium to long term holding wealth in cash (deposits) is more likely to lead to an erosion of the real value of that wealth than holding it in equities.
Therefore if you want to minimise the risk of a real loss in the value of your wealth you are better off holding it in equities instead of holding it in cash.

It is extremely misleading to suggest otherwise.
 

Brendan Burgess

Founder
Messages
45,739
Dublin Bay

I wonder if we are all agreed in reality but that you have some technical definition of risk which means something else?
So let's forget the word "risk" for the moment.

I have €100k to invest for 20 years.

1) I think we are all agreed that if I invest that in equities, it is likely to be higher than if I leave it on deposit. (But this has nothing to do with risk)

2) There is a chance that if I invest in equities that it will lose real value. I presume we are all agreed on this?
3) There is a chance that if I leave it on deposit that it will lose real value. I presume we are all agreed on this?

In my opinion, the chance of an investment in equities losing real value is lower than the chance of a deposit losing real value.

Do you agree or disagree with that?
 

Dublinbay12

Registered User
Messages
657
Dublin Bay

I wonder if we are all agreed in reality but that you have some technical definition of risk which means something else?
So let's forget the word "risk" for the moment.

I have €100k to invest for 20 years.

1) I think we are all agreed that if I invest that in equities, it is likely to be higher than if I leave it on deposit. (But this has nothing to do with risk)

2) There is a chance that if I invest in equities that it will lose real value. I presume we are all agreed on this?
3) There is a chance that if I leave it on deposit that it will lose real value. I presume we are all agreed on this?

In my opinion, the chance of an investment in equities losing real value is lower than the chance of a deposit losing real value.

Do you agree or disagree with that?

Brendan,

The fundamental concept that is misaligned is that risk can be viewed without needing to root it in time. Time is an additional variable that can help you decide how risky an investment it, in the same way the specific equity (individual stock vs market indice) is another variable.

In your example above I agree that over 20 years the chance of investment in Equities losing real value is lower than the chance of a deposit losing real value based on todays market conditions.

If I make one change to your above example and ask the same question, how do you answer?
I have €100k to invest for 20 days

1) I think we are all agreed that if I invest that in equities, it is likely to be higher than if I leave it on deposit. (But this has nothing to do with risk)

2) There is a chance that if I invest in equities that it will lose real value. I presume we are all agreed on this?
3) There is a chance that if I leave it on deposit that it will lose real value. I presume we are all agreed on this?

In my opinion, the chance of an investment in equities losing real value is lower than the chance of a deposit losing real value.

Do you agree or disagree with that?

In my opinion you and other posters are hung up on the future real world value of deposits decreasing given the current market conditions, and consider this as risk. However, the value change is the reward (risk premium) for taking risk. The least risky and thus lowest reward is holding money on deposit, unfortunately at the minute that premium is 0% which is not good with inflation rising. The risk premiums increase as you go through different types of assets, e.g. after cash it would be treasuries then fixed income, to equities etc.

This isn't some abstract academic concept that isn't applicable in the real world. These concepts are in place day to day, and if what I was saying wasn't true, I would be extremely worried about the capital position of our banks.
 
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Dublinbay12

Registered User
Messages
657
Over the medium to long term holding wealth in cash (deposits) is more likely to lead to an erosion of the real value of that wealth than holding it in equities.
Therefore if you want to minimise the risk of a real loss in the value of your wealth you are better off holding it in equities instead of holding it in cash.

It is extremely misleading to suggest otherwise.

Hi Purple,

I can suggest some good resources for you to read. I get what you are saying, but that is not risk, and we will continue to go around in circles.

Your point really only works over medium to long term based on historical data of a market index. You can't say the same points for short time horizons or for individual stocks. I've explained how risk is viewed in the market in my response to Brendan.
 

ClubMan

Registered User
Messages
44,547
Brendan,

The fundamental concept that is misaligned is that risk can be viewed without needing to root it in time. Time is an additional variable that can help you decide how risky an investment it, in the same way the specific equity (individual stock vs market indice) is another variable.
Brendan asked some simple yes/no questions and you're responding with jargon. :(
 

Purple

Registered User
Messages
11,947
Your point really only works over medium to long term based on historical data of a market index. You can't say the same points for short time horizons or for individual stocks. I've explained how risk is viewed in the market in my response to Brendan.
I've been clear that I'm talking about the medium to long term and I'm clearly not talking about individual stocks.
 

Dublinbay12

Registered User
Messages
657
Risk is defined in financial terms as the chance that an outcome or investment's actual gains will differ from an expected outcome or return.

If I put 100k on deposit today knowing it earns 0%, the expected return is 0%, so where is the risk per your definition above?

The additional variable is inflation, but the uncertainty of inflation also impacts your return on in Equities.
 

Purple

Registered User
Messages
11,947
The fundamental concept that is misaligned is that risk can be viewed without needing to root it in time. Time is an additional variable that can help you decide how risky an investment it, in the same way the specific equity (individual stock vs market indice) is another variable.
Given that investments are made over time it is correct to say that time is always a variable.
 

Dublinbay12

Registered User
Messages
657
Hi Clubman,

I suggest you reread Brendans post, as the 'jargon' you refer to was in response to Brendans question of whether I have a technical defintion. The only other question he asked, I answered with a Yes. I've asked him the same question, so hopefully he responds.
Brendan asked some simple yes/no questions and you're responding with jargon. :(

I wonder if we are all agreed in reality but that you have some technical definition of risk which means something else?


your example above I agree that over 20 years the chance of investment in Equities losing real value is lower than the chance of a deposit losing real value based on todays market conditions.
 

Dublinbay12

Registered User
Messages
657
Given that investments are made over time it is correct to say that time is always a variable.

What are your thoughts then on what is riskier over a 20 day period Equities or Cash Deposit?

P.s I assumed it was obvious that the time variable is always a consideration.
 

Brendan Burgess

Founder
Messages
45,739
I think we are all agreed.

If I have €100k to invest for 20 days, there is a big chance that I may lose some of it by investing in equities and a negligible chance that I will lose any of it on deposit.

You seem to agree that if it's over 20 years, it is more likely to lose value on deposit than in the stock market.

Brendan
 

Dublinbay12

Registered User
Messages
657
The industry says "deposits are safe and the stock market is risky" and lots of people have lost a lot of money and missed out on making a real return because of that.

Brendan

Lots of people also invested in the stock market and lost lots of money, lets not forget that.
 
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