Newbie question: Pensions and declining share values

Baz_2

purch wrote: »

Unless you are very clever, or very lucky the first rule of investing should be:

Don't buy when the market is falling, and don't sell when it is rising.

That really refers to lump sums, rather than monthly or periodic investing over a sustained period, but it is relevant to a degree.

Unless you are comfortable with what you are doing, you shouldn't be considering investing either a lump sum or monthly. It's very easy for people to recommend the old pound cost averaging stuff, but that only really works in a broadly rising market. Pound cost averaging into a broadly falling market won't make you sleep any easier.

Thats just as easy to say than it is about the average cost though.

You are assuming you can spot the end of the fall. When exactly do know the end of the fall and therefore pay in at the right time without a crystal ball? How many days/weeks/months of rises does it take before the market is rising again and therefore ok to pay into?

You have to assumed that over a long period, i.e 10 years that the market will recover to what it was. Therefore paying in now may lose something short term, but long term will gain. If you forever try to second guess the very bottom you will never pay anything in. Surely a six or seven year low may be a good time to assume we are near the bottom or as close to it as we have a reasonable chance to estimating?

If we cannot assume the market will recover then what on earth is the point anyway. We may as all go home now.

dunstonh

It also assumes 100% investing into equities and that is not usually a good move. By the time you build your portfolio you may range from 25-75% in equities with the rest in property and fixed interest sectors. Plus, you have the diversification of different markets in your equities. Look at Japan for the last 12 months. Gains of 50% whilst the FTSE was dropping 40% all thanks to currency.

purch

You are assuming you can spot the end of the fall

No I'm not

Quite the opposite in fact..............only a fool would try to do that

I am assuming that I can spot the start of an uptrend though. and buy into that.

When exactly do know the end of the fall and therefore pay in at the right time without a crystal ball? How many days/weeks/months of rises does it take before the market is rising again and therefore ok to pay into?

Surely a six or seven year low may be a good time to assume we are near the bottom or as close to it as we have a reasonable chance to estimating?

Which is it to be ??

How do you know without a crystal ball ?? OR Assume the seven year low is the bottom ??

They can't both be right.....make your mind up !!

Baz_2

purch wrote: »

No I'm not

Quite the opposite..............only a fool would try to do that

I am assuming that I can spot the start of an uptrend though.

Same thing. End of the fall, start of an uptrend different words, same thing.

purch

End of the fall, start of an uptrend different words, same thing

To you maybe.

Not to someone who trades for a living it isn't

I'm not clever enough or lucky enough ever to pick the bottom, so I would never try.

I can spot an uptrend a mile off !!!!

Baz_2

Does it matter if its the bottom or not, you have to think that in the next 10 years the market will be worth more than it is today? Therefore surely investing now. based on a long term aim cannot never be a bad thing surely?

So when this uptrend comes are you suggesting we should have saved out contributions in a cash isa and then invest it in a lump sum when the start of this uptrend occurs?

If not how do you propose we get the required number if units into our pension plans?

If you do mean that, then that is a really risky thing to advise people is it not.

purch

If you do mean that, then that is a really risky thing to advise people is it not

It is not advice.

I only post my thoughts and opinions. If they in any way help others better understand things they didn't previously, then all well and good, and if by posting and reading others thoughts and opinions, I get to understand things better, then it's even better.

Back top the OP, he specifically refers to the Stockmarket, and my posts are my opinion on that currently. I am assuming that the OP is wary of Investing into this market in it's current state.

In my opinion the Stockmarkets still have to be considered to be a Bear market, and buying into it under those conditions, whether in a lump sum or phased over time, can only be bad for your nerves and peace of mind unless you are fully confident in what you are doing.

Baz_2

purch wrote: »

It is not advice.

I only post my thoughts and opinions. If they in any way help others better understand things they didn't previously, then all well and good, and if by posting and reading others thoughts and opinions, I get to understand things better, then it's even better.

Back top the OP, he specifically refers to the Stockmarket, and my posts are my opinion on that currently. I am assuming that the OP is wary of Investing into this market in it's current state.

In my opinion the Stockmarkets still have to be considered to be a Bear market, and buying into it under those conditions, whether in a lump sum or phased over time, can only be bad for your nerves and peace of mind unless you are fully confident in what you are doing.

But your thoughts, as far as I can tell are basically buy low, sell high. :rotfl:

If it was as simple as you are trying to make out then we would all be doing it.

What I was saying, is given we don't have crystal balls, buying into the stock market today, is the best chance any of us normal investors have of actually buying stocks very cheaply. It may not be the bottom but given a long term view it has a very very good chance of looking like a sensible thing to do in 10 years time.

If you are looking for short term gain, which as a trader I am sure you are more interested in, then that's another matter. But investing in pensions cannot be short term.

hozepipe

purch wrote: »

Back top the OP, he specifically refers to the Stockmarket, and my posts are my opinion on that currently. I am assuming that the OP is wary of Investing into this market in it's current state.

That is correct. I understand that over the long term the shares will rise and so will the fund, but while the market is still on average falling (not fluctuating) then anything paid in will be losing money in the initial period so why not just chop that first bit off, pay into an ISA or whatever and then reinvest it when things look a little brighter? I know there's no crystal ball, but its pretty easy even for me to see that things are not looking too good right now. As I understand it you don't need to buy at the absolute bottom, but there will be an optimum time to start that maximises the period in which the average trend is upwards, and for long term investments isn't that easier to spot than for short ones?

hozepipe

@Dunstan
Your advice is helpful, but I'm keen to be as well informed as I can be and that means asking questions. So diversification or equities helps ameliorate things?