Selling everything when the market reaches a new all time high

BananaRepublic · 12 January 2017 at 2:09PM

Ray_Singh-Blue wrote: »

I remember reading a book about investment, where the author was suggesting applying a couple of "meta-rules" to an investing strategy. One was never to buy into a market which was within 10% of a recent peak, and another was to consider selling everything when a market set a new all time high.

It would be quite possible to directly test those metarules, using a simulation and historical market data for an index, and some funds invested in that index. My guess is that the author did not perform any such tests, and my suspicion is that they would fail. Of course you have to have assumptions, but you could assume an investable income of £1,000 per month, and see how it faired, and do the same for a lump sum of £10,000 per year.

Ray_Singh-Blue wrote: »

Here we are with US stocks at an all time high. I am quite heavily invested in US stocks as per the plan, and am wondering if now is the time to start selling.

The hesitation is that this would take me away from my preferred asset allocation of 60% equities. And so I would have to decide on a re-investment strategy. Also I'm aware that holding too high a percentage as cash can have risks too.

Anyone grappled with this sort of decision? How did it work out for you?

I just stay in the market. When the markets drop, I stop looking at my investment, when the markets recover, I look at them. My big regret is only bunging in £40K after the great crash of 2008.

jimjames · 12 January 2017 at 2:34PM

Glen_Clark wrote: »

What funds do you have in mind? With large cap ETFs like S&P500 or world trackers there seems to be no problem at all as far as I know.

I'm assuming the reference was to funds (UT and OEIC) not ETFs. They are only priced/sold once per day and take around 5 days for the proceeds to appear so you don't know the price at the point you hit sell.

coastline · 12 January 2017 at 4:20PM

BrockStoker wrote: »

It does look like a correction is on the cards. If not now, then when the whole Trump fiasco unravels (almost inevitable now I think), which it seems to be doing already. We could be in for a slow-motion train-wreck.

I was cautiously optimistic just 24 hrs ago, but now it looks like more volatility ahead. At least it means an opportunity to buy, which I could use, but it would be nice to see the markets going up more (now that I'm nearly 90% invested) instead of mostly sideways, which seems to have been the case since I first started to take an interest in my own investments 3 or 4 years ago.

The markets go through phases of accumulation and distribution over all time scales from days to weeks and months to years..
When I say there's a likely correction I'm thinking from the recent run up from early November..
The next stage which realistically looks like being within days or weeks will be sideways or down but who knows what in percentage terms..?
A correction could mean anything up to 20% but I'm just looking at a bit of consolidation after recent events..
I linked those charts and indicators as I use them as a guide for nimble trading with shares and ETF's but not really funds.
I'm surprised there's a few posters thinking of selling as this forum tends to be a buy and hold strategy for long term planning.
I've posted my ideas a while ago on the link below and I didn't expect much response to it as its going against the grain..
What I'd also like to add is the media are always trying to link news events to stock market moves which sometimes are true but really I'd say its all about buyers and sellers.When you get rapid moves such as the last month there's always profit taking.

http://forums.moneysavingexpert.com/showthread.php?p=71559354#post71559354

Superscrooge · 12 January 2017 at 4:37PM

Does anyone remember this headline from 12 months ago?

http://www.telegraph.co.uk/business/2016/02/11/rbs-cries-sell-everything-as-deflationary-crisis-nears/

Did anyone take their advice?

EdGasket · 12 January 2017 at 5:17PM

Or this one from 24 months ago:

http://www.dailymail.co.uk/news/article-2932273/Bet-shares-fall-says-City-tycoon-millions-predicting-credit-crunch.html

Malthusian · 12 January 2017 at 5:54PM

BananaRepublic wrote: »

It would be quite possible to directly test those metarules, using a simulation and historical market data for an index, and some funds invested in that index.

I just had a go (because I can't resist stuff like this). I used the FTSE 100 - it's much-maligned but it goes back further than other indices, and rules like this should in theory work better than on better-diversified indices. My data went back to 31/12/1985.

My simulation considered an investor who is investing £1,000 a year - since the metarules treat "new money" differently from already invested money, it makes sense to look at someone making regular investments rather than a one-off lump sum.

On each day, if the FTSE (price return) is lower than 90% of its peak, they add £2.74 to their investment fund, otherwise they add £2.74 to their cash fund. (Although daily drip-feeding is unrealistic, it makes no difference to the result and matches the stockmarket data.) Also if the FTSE is lower than 90% of its peak, they move the entire cash fund to the investment fund. If the FTSE is higher than 100% of its peak, they move the entire investment fund to the cash fund.

The final score after 30 years is that an investor who followed these two rules would have turned just over £30,000 of savings into £90,293. An investor who simply left his money in the stockmarket throughout the entire period would have turned their £30,000 into £127,848. 41% richer.

Which should surprise nobody. Stockmarkets generally go up. It's their raison d'etre. Therefore stockmarkets are usually at their peak. Therefore if you avoid investment just because the stockmarket is at its peak, you are certain to miss out on significant periods of growth. The investor in the above situation would have spent in total 7.6 years out of 31 out of the market completely, with an average cash weighting of 25%.

I didn't attempt to model cash interest but then I also didn't attempt to model the time cost of continuously monitoring the stockmarket and worrying over when you should go back in.

BrockStoker · 12 January 2017 at 6:03PM

Biotech is correcting (again). I might top up with a buy tomorrow, although I'm still in two minds. Tomorrow might already be too late to get the best price, but should still be OK hopefully.

chucknorris · 13 January 2017 at 6:41PM

EdGasket wrote: »

Chuck Norris puts the "laughter" in "manslaughter".

Are you also responsible for putting a certain word in S!!!!horpe?

(LOL it wouldn't even let me type in the town name properly; lol lol lol)

How bravely typed, now why don't you PM me, so that we can arrange to meet up, so you can say that to my face.

EDIT: I'm PMing you now just in case you somehow overlook this post.

Update: can you believe it? After an exchange of PM's he is now taking a step back after calling me a c*nt, and saying it was only a joke, what a pathetic wimp this guy is.

EdGasket · 13 January 2017 at 7:09PM

So you think it's OK to make fun of manslaughter and can't take a joke yourself? I never called you anything in that post anyway; must be the time of the month or something!

stevetodd · 13 January 2017 at 7:09PM

chucknorris wrote: »

How bravely typed, now why don't you PM me, so that we can arrange to meet up, so you can say that to my face.

EDIT: I'm PMing you now just in case you somehow overlook this post.

Update: can you believe it? After an exchange of PM's he is now taking a step back after calling me a c*nt, and saying it was only a joke, what a pathetic wimp this guy is.

Welcome to the internet, where everyone thinks that they are as tough as nails and extremely witty, until they get called out of course.

Selling everything when the market reaches a new all time high

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free