Sometimes it is the whole market that crashes and sometimes it is one or two share prices. To limit the damage, we need to diversify and have some investments not associated with the market. Then a big drop in the part of your portfolio that is invested in the stock market isn’t quite so damaging. I have an investment in peer-to-peer lending through Zopa. Surviving a crash emotionally is a different matter. People get excited about making money and upset when they lose money but you can get used to seeing it as numbers on paper or on a computer screen. There has been a lot of excitement on the forums recently about Solo Oil and the price soared from around 0.3 up to 0.8 more than doubling the value of my investment and then this week the news from NT2 wasn’t quite what some investors expected and the market makers slashed the price.
Most people understand the basics of economics. Recently there has been a worldwide glut of oil and so there was competition among producers that led to the oil price falling to below $50 a barrel which meant many producers were selling at a loss. Supply and demand largely dictate prices but in the case of oil, we also had to look at how much oil was stored. It will take a while before those stocks are deleted. When oil stocks are low then the oil price could soar to new heights again.
Peer to peer lending as part of an investment strategy reduces risk. I’m still lending through Zopa at an interest rate of 4.2% through Zopa Classic. There are three different types of account including an access account paying 3.5% which beats the accounts offered by the banks easily. You don’t get FSA protection with Zopa though. I’ve been investing through Zopa for 5 years now and have accumulated a nice return.
Yesterday the Bank of England announced a QE boost with another 60 billion of quantitative easing and a cut in the base rate to 0.5%. There will be no prizes for guessing who will benefit from this boost. The stock market surged by 1.5% yesterday and the trend continues today. The base rate cut will see mortgages cheaper and so stoke the London housing bubble a little more while there is stifling of the supply side.
The government is in favour of staying in the European Union and is at pains to tell us that the City of London is at the centre the global finance industry and makes shed loads of money for ’Britain’. You might think they make their money on the stock market spreads and on commissions. (more…)
Market makers seem to trade with no goal except to make money. On the AIM market, they often increase spreads to as much as 20% for no apparent reason. Trying to figure out what they were doing this week was a challenge as usual. (more…)
You might think that the government, the banks and the global business community know what they’re doing with all the supercomputers and experience they have. You only look at government and the banks and you will know that they can mess up big time and we the people pay for it. (more…)
It’s too early to predict the full result of the general election, but it seems likely that the Conservatives will have a thin majority. We can expect more austerity and cuts, so how will that affect investments? (more…)
I used to have the odd afternoon betting on horses on Betfair and trying to not only place bets, but to lay bets too. Now I watch the stock market instead. Some would say I’m still gambling, but we gamble all the time anyway. Life has it’s risks and we have to avoid dark alleys, but not allow fear to stop us taking risks altogether. We have to be brave and live life. (more…)
Last August Mark Carney governor of the Bank of England issued his ‘forward guidance’ on interest rates. He told the market that he intended to keep the Bank rate at its current historically low 0.5%, at least until the unemployment rate fell to 7% or below. Can we rely on that? (more…)
It’s Good Friday and so the stock market is closed for 4 days. It’s sunny where I am so it could be a nice weekend. Will traders and investors forget the market through the long weekend? I doubt it. (more…)
Differing investments have different risks. The higher the risk the bigger the return investors expect. A savings account at a bank in the UK is protected by a government guarantee up to £85,000 and so there is little risk. The returns though are often less than inflation, which is a negative return in real terms. (more…)
Interest rates are still very low in the UK. The bank rate is still 0.5% and so banks are offering meagre returns on their accounts. They try to make them acceptable with bonuses, but most people find the rates unacceptable and are looking for a better return on their money. Peer to peer lending has become safer and more popular. Leading the peer to peer lending movement is Zopa. (more…)
I have some qualifications in electrical science, but you don’t really need to understand electricity to switch a light on. Press the switch and the light comes on. You don’t even think about what’s happening inside the switch, cables or power station. You take all that for granted. We take too much for granted in economics and that’s why we don’t understand it. (more…)
I used my credit card last month, when the bill arrives I’ll pay it off. If you pay interest to the bank that’s money you can’t spend on those little luxuries that make life more bearable. Paying extra for goods so you can get ‘interest free’ credit is the same or paying extra for monthly instalments.
Today’s photo was taken by Simon James and I’ve cropped it and added the text to it. It looks like a postcard! This is my usual ramble on a Sunday, when I have little to write about and so ramble on about whatever is on my mind. At the moment that’s lunch! (more…)