Poll: Invest in equities now or wait
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C_Mababejive wrote: »I know,but then if you do continue to pump money in and run DRIPs when the market is perceived to be high,well then if it deeps significantly, you take a big haircut unless you have your stop losses set,,and then,,well,,what do you set your stop losses at !
If you are investing broadly into the stock markets you don't need to set stop losses, as the entire global market is not going to go bust and cease to exist. Long term, thinking broadly enough, there is no permanent "losses" to stop. The "markets" as a whole, are winners, and you should run your winners.0 -
moneyfoolish wrote: »The problem I have is that of my 4 children (30 and 40 year olds) only 1 has a house and the other 3 have zero chance of every being ably to afford one and only 1 has any pension at all.
It is very tricky to know what to do with any assets such as savings and house equity once you're retired and feel OK(ish) about your pension income. We're in a similar (though slightly less "generous") position. We feel very lucky to have managed to retire early with enough to spare, but the biggie is (as you point out) what to do about the children.
Although our two are adult and self supporting they are unlikely to be able to get house and pension sorted as easily as we did. For this reason we have taken the decision to gift them the majority of their inheritance now (including house equity - we're in the process of selling up to downsize). We've taken care to read up on the taxation responsibilities when giving away large sums of money (as the rules stand at the moment we don't have enough to trigger any inheritance tax implications) and we feel that this is the way to make the money "work" at the best time for everyone, rather than it sitting in low interest accounts, a house that is too large for us in an expensive area, or giving us sleepless nights invested in the markets. So it seems like the sensible option to us. Sorry - I know this post is off topic but your comment just struck a chord. Good luck.
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Easy enough. For many markets the 10 year cyclically adjusted price/earnings ratio is at a high level and showing anticipated negative future returns (use private mode browsing to read that, it sets a cookie that will block you later). In addition the Guyton sequence of returns risk management strategy that uses PE10 is saying be underweight in US equities (and would be for many other markets) at the moment. Since I already had reduced equity weights starting more than a year ago I didn't have anything to do but if I had, I would have acted, since sequence of returns risk is a big deal for anyone close to retiring.
Well, if you were considering buying an annuity, learn about state pension deferral instead, because it pays about twice as much as the most comparable annuity does to those in normal good health. Or do some deferring and learn more about managing drawdown.Newly_retired wrote: »Am already retired but could live another 30 years. Not sure what to do.
Opinions vary and investment management firms will almost always say that it is time in the markets that matters because they make their money by managing your money and want as much of it as they can get. Others will assert that it is not possible to time markets in any way because there are always uncertainties.IS it time in the market is to buy when you think it is low ?? If so how do we know that ????
Then there are people who actually looked and found that while short term market timing is dominated by randomness, the bigger picture isn't:
1. If you buy when markets are at much higher cyclically adjusted 10 year price/earnings ratios (PE10) you are likely to make less money or lose money, depending on how high.
2. If you buy when markets are at much lower PE10 than average you're likely to make more money than average.
3. In between you get something closer to average and are still likely to make money, just less of it.
Since PE10 has been found reliable for all markets studied, including all of the major world equity markets, I'm not inclined to ignore it. What it doesn't do, and what Shiller himself says it doesn't do, is help you to make short term market timing decisions, because it is showing anticipated future returns, not when the events will happen. You could easily sell or wait to buy and see prices double or buy and see them halve again before the eventual outcome happens.
So for example in an interview about a year go he both gave that caution and when asked what he'd done said that he'd cut his equity holdings but that other people shouldn't necessarily do the same because other factors like age matter, and a young person might as well just get on with it due to their long time horizon.
Now, I'm not a young person, so I'd have acted anyway if I hadn't already. Much the same as without considering PE10 I acted in early 2009 to buy equities and borrowed money on credit cards to buy more because that was a great time to be buying, maybe the best time I will see in my whole investing life. I didn't need Shiller to help with that, there was the usual advertising of a large price reductions for shares making them a better deal than usual: lots of doom and gloom in the papers and other news.
I'll happily and enthusiastically switch more money back into shares when the conditions are more favourable. Until then I've no shortage of other excellent options to use for my investing and I'm certainly not entirely abandoning equities, just paying attention to having a relatively lower exposure than usual.0 -
Opinions vary and investment management firms will almost always say that it is time in the markets that matters because they make their money by managing your money and want as much of it as they can get.
I fully aware about this that is the reason why I never just believe in what they are saying. I will always look for other opinionOthers will assert that it is not possible to time markets in any way because there are always uncertainties.
Then there are people who actually looked and found that while short term market timing is dominated by randomness, the bigger picture isn't:
1. If you buy when markets are at much higher cyclically adjusted 10 year price/earnings ratios (PE10) you are likely to make less money or lose money, depending on how high.
2. If you buy when markets are at much lower PE10 than average you're likely to make more money than average.
3. In between you get something closer to average and are still likely to make money, just less of it.
Since PE10 has been found reliable for all markets studied, including all of the major world equity markets, I'm not inclined to ignore it. What it doesn't do, and what Shiller himself says it doesn't do, is help you to make short term market timing decisions, because it is showing anticipated future returns, not when the events will happen. You could easily sell or wait to buy and see prices double or buy and see them halve again before the eventual outcome happens.
So for example in an interview about a year go he both gave that caution and when asked what he'd done said that he'd cut his equity holdings but that other people shouldn't necessarily do the same because other factors like age matter, and a young person might as well just get on with it due to their long time horizon.
Now, I'm not a young person, so I'd have acted anyway if I hadn't already. Much the same as without considering PE10 I acted in early 2009 to buy equities and borrowed money on credit cards to buy more because that was a great time to be buying, maybe the best time I will see in my whole investing life. I didn't need Shiller to help with that, there was the usual advertising of a large price reductions for shares making them a better deal than usual: lots of doom and gloom in the papers and other news.
I'll happily and enthusiastically switch more money back into shares when the conditions are more favourable. Until then I've no shortage of other excellent options to use for my investing and I'm certainly not entirely abandoning equities, just paying attention to having a relatively lower exposure than usual.
Thanks think is what I am thinking. While people do not have crystal ball we do know about the cycle when the cycle is at about their peak and when the cycle is about on the bottom.
More importantly this cycle last for years, so there is more than enough time to know where we are and make decision to enter the market.
What I am thinking is that it is quite similar to buying property, foreign currency. Those who bought their property after the credit crunch around 2010 – 2012 will make more profit then those who bought their property when the property is booming. Those who bought their property recently and those just a few years before credit crunch especially in central London will see the value of their properties are declining and might be in the situation where they have negative equity before they will finally bounce again. But they will definitely make less profit then those who bought their property around 2010 – 2012. We do not need to buy when they are at their peak but it is good enough to buy where they are on the cycle.
We now see the value of property is decreasing and it is definitely better to buy property now then a few month ago. Even better when you could wait a few month if you could.
Of course some people do not want to wait or can not wait for personal reason but many are more flexible because their money sit in secure and relatively still good interest rate above inflation.0 -
What money do you have in good accounts that are paying above inflation, at least for amounts that would be significant amount to buy a London property?0
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Well it is not for significant amount. But it is good for some people who need to play a waiting game to enter the market ...
That's the issue, those accounts are fine for an emergency fund, but with the current round of cuts to current account rates then any cash will soon be yielding less than inflation, given the latter will appear to rise.
The problem with using PE10 is that we are in totally different economic environment than that which the theory has been developed. We've seen 'no more boom and bust' and may well be in a new paradigm, but most economic theory has been developed and is based on the twentieth century, Barclays equity gilt study for example goes back to 1890.
We currently have historic low interest rates, not for 125 years, but for 300 years and arguably for millennia. There are few alternatives to equity at the moment and unusually equities are also yielding more than most alternatives, it could be a long time waiting for a correction or buying opportunity as things sit.
I wouldnt say property is any different, massively over valued in the uk at least on the basis of a multiplier on earnings but there's no prospect of a crash anytime soon.0 -
"This time it's different" investing has a success rate of approximately 0% vs 100% for PE10.The problem with using PE10 is that we are in totally different economic environment than that which the theory has been developed. We've seen 'no more boom and bust' and may well be in a new paradigm, but most economic theory has been developed and is based on the twentieth century, Barclays equity gilt study for example goes back to 1890.
Just go and read the this time it's different posts about the commodity super-cycle and ever-increasing oil process, say those about one of the most popular ways to invest in it, the JPM Natural Resources fund:
20-12-2013: 566.40
21-11-2008: 297.10
4-1-2011: 1194.00
The 2008 low was 52% of 20-12-2013 price and 24.9% of the 4-1-2011 price.
The poor person who started that discussion bought in at a price that put them 57% down by the time they did post and wrote "I still believe that commodities will rise in 2014 as China etc continue to pick up pace". Current price for the same unit type is 509.80. Price at the time of the post? About 556.40, having halved again before recovering to that 509.80 as I cautioned it could. So much for that belief. If they wait long enough they will eventually get back to the near the market high price which they bought at.
It certainly could be a long wait but I'm quite content to take 10% or so after some allowance for bad debt, or 12% before on secured P2P lending while I wait, in part because I know that this is above the long term UK or US stock market average return, let alone the negative or low positive returns PE10 is currently projecting.There are few alternatives to equity at the moment and unusually equities are also yielding more than most alternatives, it could be a long time waiting for a correction or buying opportunity as things sit.
You're way too optimistic about that. There have been massive outflows from UK property funds, including before brexit, because many have recognised that the business cycle which led to say a 100% price gain between august 2011 and April 2015 has already ended. It's why I stopped suggesting commercial property as an alternative to bond funds a while back: it was time to exit not get in. That'll change in a while, just not today.I wouldnt say property is any different, massively over valued in the uk at least on the basis of a multiplier on earnings but there's no prospect of a crash anytime soon.0 -
It's why I stopped suggesting commercial property as an alternative to bond funds a while back: it was time to exit not get in. That'll change in a while, just not today.
Would you please elaborate about this.
I have seen the property price has been falling consistently and It will keep falling down, so the next few years might be good to buy property ?0
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