Why is 'Timing' the market bad ?
Comments
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It's also not steady, with likely bear market equity drop of around thirty percent.
If someone just wants VLS then they can buy that. If someone isn't doing that then they should be looking to beat it in some way or it's not worth the extra work. Hence swapping out bonds with poor interest rates and high interest rate rise capital loss exposure for P2P which has quite high interest rates and being normally held to maturity has very low rate increase capital loss potential.
Or maybe getting a bit more creative and using some doubly leveraged tracker ETFs and higher P2P fixed interest to maintain the equity exposure but with the fixed interest increase lowering the volatility.
For those who don't know what that means, it has a target exposure of 6% to UK equities using Vanguard FTSE UK All-Share Index Trust. Someone could move 3% of that into P2P and buy GO UCITS ETF Solutions plc FTSE 100 Leveraged (2X) Fund (LUK2) instead. It's FTSE 100 instead of all share but that doesn't make a huge difference, while the two times leverage keeps the ups and downs about the same (there are tracking error issues to learn about to do it properly). Meanwhile, having the 3% in P2P is cutting the drop potential by about a third because the combination is one third P2P and two thirds FTSE. Plus the benefit of the P2P interest.0 -
It's also not steady, with likely bear market equity drop of around thirty percent.
If someone just wants VLS then they can buy that. If someone isn't doing that then they should be looking to beat it in some way or it's not worth the extra work. Hence swapping out bonds with poor interest rates and high interest rate rise capital loss exposure for P2P which has quite high interest rates and being normally held to maturity has very low rate increase capital loss potential.
So you're criticising it for an imagined 30% equity drop which has not happened to it yet. Also ignoring the fact that it is 40% non-equities (or will be by the time a crash happens).
This portfolio is aimed at beginners. It will beat most investors with minimum effort. You are criticising a dog for not being a cat.
And again: their portfolio lays bare all their investments and numbers for the world to see and pore over. You are telling us how much better your portfolio is without any evidence at all.0 -
Do you think that we won't see another 45%-50% equity drop? When we do, the bond holdings that I didn't ignore will cut that to more like 30%.
I do wonder, though, how you know that there won't be an equity crash for the next four years to give it time to shift from 32% bonds to 40% bonds at 2% a year.
I'm not criticising it for being a dog instead of a cat but for being a dog made out of Lego instead of just buying the actual dog, the VLS. If you want VLS, buy VLS unless you're trying to beat it in some way.
I'm not trying to replicate this or advocate holding what I hold (don't hold what I hold is what I'd recommend to beginners!). Just saying how it can be beaten with straightforward changes in some of the holdings. Unless you'd care to assert say that you can't get 10% in P2P without capital loss due to interest rate rises? Or perhaps that a switch from 100% tracker to 50% doubly leveraged tracker and 50% fixed interest won't roughly match or beat the former but with lower volatility?0 -
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After the Brexit vote the markets dipped by about 7% and my wife insisted I move her S&S Isa investments into the Cash Park! I tried to explain that this is probably a nervous jerk reaction and that things would calm down, however she insisted to go ahead and move into cash!
9 months later and she is still waiting for a time to reinvest whilst my investments have gone great guns! I don't actually know when she will enter the market again but I do know she's lost out big time in the last 9 months by moving into cash!
I personally agree with your particular view, however, a good friend very recently(this week) sold her investments because she was ecstatic about the money she had made over the past 6 years. She is fully aware that she may 'miss out' on future growth in the immediate future but she was more than happy to take her profits out now and will wait to reinvest at a later date!
It's all a matter of opinion and personal preferences but I can't really blame her for making this decision, although as I said it wouldn't be my choice.0 -
Do you think that we won't see another 45%-50% equity drop? When we do, the bond holdings that I didn't ignore will cut that to more like 30%.
I do wonder, though, how you know that there won't be an equity crash for the next four years to give it time to shift from 32% bonds to 40% bonds at 2% a year.
I'm not criticising it for being a dog instead of a cat but for being a dog made out of Lego instead of just buying the actual dog, the VLS. If you want VLS, buy VLS unless you're trying to beat it in some way.
I'm not trying to replicate this or advocate holding what I hold (don't hold what I hold is what I'd recommend to beginners!). Just saying how it can be beaten with straightforward changes in some of the holdings. Unless you'd care to assert say that you can't get 10% in P2P without capital loss due to interest rate rises? Or perhaps that a switch from 100% tracker to 50% doubly leveraged tracker and 50% fixed interest won't roughly match or beat the former but with lower volatility?
Slow and Steady pre-dates VLS. It commenced at the beginning of 2011. And for beginner investors, it still serves the same purpose: to break down exactly how to assemble a diversified, global portfolio and how to allocate assets.
It's a brilliant resource and reference point. And it also makes it very clear, at the end of EVERY update, that VLS is an all-in-one alternative.
Beginners should not be looking at P2P or trying to beat VLS/Slow and Steady.
You are not Slow and Steady's target audience.0 -
Do you think that we won't see another 45%-50% equity drop? When we do, the bond holdings that I didn't ignore will cut that to more like 30%.
I'd ignore bonds unless you need access to the money in the next few years. They serve to reduce short term volatility at the cost of reduced gains. So you bonds might cut the loss at the time of the crash to 30%, but they might have gained much less, so in the long term their net result is reduced gain. And if you are not taking money out, your stockmarket funds will recovery pretty quickly anyway (going by the past).I do wonder, though, how you know that there won't be an equity crash for the next four years to give it time to shift from 32% bonds to 40% bonds at 2% a year.
Crashes tend to happen as a result of long term exuberance where they ignore gravity, followed by a precipitation event which they cannot ignore. Many of us knew the markets pre-2008 were exuberant but few of us foresaw the cause of the mighty crash. Odd really, you'd think places like the Bank of England would have enough clever eco-wonks that they would have foreseen it with ease.0 -
grey_gym_sock wrote: »are you kidding? hussman has been giving these dire warnings for many years.
And in 1999 he was spot on, predicting the 2000 dotcom crash. Were you?Free the dunston one next time too.0 -
BananaRepublic wrote: »Odd really, you'd think places like the Bank of England would have enough clever eco-wonks that they would have foreseen it with ease.
Well they had someone who was clever enough to be deputy governor and write the transparency rules, yet forgot for 3 years to tell them her brother was a senior Barclay's bod. :rotfl:0
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