Help! I'm Dithering...

donshale

I have a lump sum which I wanted to put into a FTSE Index Tracker. I was going to put the money in a couple of weeks ago, but I read about the index being overvalued, and due for a correction after the run for the last few months. I keep reading this, and the market keeps surging ahead day after day. I read a few forecasts for when the market will top and reverse - and even these seem to be getting revised upwards every week! Does anyone think there will be a real correction - big enough to keep holding out for? Or am I waiting for a big correction that may never happen - should I just jump in now?

gozomark

how long are you planning on investing for ?

Rollinghome

Chucknorris said:

Exactly! It should be a long term investment so they should just invest and virtually forget about it for a long while, rather than worrying about having missed out on recent rises.

I'd tend to disagree.

The return you get over any period, no matter how long, depends on the price you buy at. For example, those who bought in 2000 when the FTSE stood at nearly 7000 are still looking at an index that's 25% lower even after 9 years.

So the OP is asking exactly the right question, the problem is knowing the right answer. Looking at it another way, if he asked, will he at any time in the future be able to buy the index more cheaply than now, then I would say he probably will.

gozomark

if he asked, will he at any time in the future be able to buy the index more cheaply than now, then I would say he probably will. - well, thats true any time - the chances are the index will be lower at some point in the future no matter when you ask the question. The issue is how much lower, with what probability, and at the risk of missing how much upside. If the OP is looking to invest on a 10 year view of making 100%, then waiting for say a 5% pullback is non-sensical - it will probably happen, but if it doesn't then he misses out on the 100%. If the OP is looking at making 10% over the next year, then waiting for a possible 5% pullback is more sensible. Its all about probabilities and risk/reward.

cashbackproblems

Long term i.e. 2-5yrs the only way for the ftse is UP, it is at all time lows and every day you stay out your missing out! personally i would invest in individual firms but if you dont have the motivation for this go for a tracker and it will beat bank rates at least

chucknorris

gozomark wrote: »

if he asked, will he at any time in the future be able to buy the index more cheaply than now, then I would say he probably will. - well, thats true any time - the chances are the index will be lower at some point in the future no matter when you ask the question. The issue is how much lower, with what probability, and at the risk of missing how much upside. If the OP is looking to invest on a 10 year view of making 100%, then waiting for say a 5% pullback is non-sensical - it will probably happen, but if it doesn't then he misses out on the 100%. If the OP is looking at making 10% over the next year, then waiting for a possible 5% pullback is more sensible. Its all about probabilities and risk/reward.

That's more or less what I was trying to say, but you expressed it so much better.

chucknorris

Rollinghome wrote: »

Chucknorris said:


I'd tend to disagree.

The return you get over any period, no matter how long, depends on the price you buy at. For example, those who bought in 2000 when the FTSE stood at nearly 7000 are still looking at an index that's 25% lower even after 9 years.

So the OP is asking exactly the right question, the problem is knowing the right answer. Looking at it another way, if he asked, will he at any time in the future be able to buy the index more cheaply than now, then I would say he probably will.

Read Gozomark's response he explained the logic behind my statement.

gozomark

cashbackproblems wrote: »

it is at all time lows

it wasn't at all-time lows earlier this year, and is now 40-50% up from then, so frankly your comment is utter balls.

cashbackproblems wrote: »

Long term i.e. 2-5yrs the only way for the ftse is UP

more sphericals - no, the only way is forward, and that could be up down or flat. Plus, 2-5 years is not long term

cashbackproblems wrote: »

it will beat bank rates at least

the word you are looking for is may, or probably, not will. Anyone who talks of certains in financial market forecasts is asking for trouble. All outcomes are possible

donshale

Thanks for the feedback. I can see I need to put some figures to my question! Here goes...

I'm looking to maximize the return over the next 2 years. I have other longerterm investments. But the FTSE this summer looked like a buying opportunity to me.

I did put in a similar sized lump sum in the summer and have managed a much quicker than anticipated 20% return.

But I'm wondering if the FTSE is going to fall back shortly or whether at least until the end of the year it will trade generally flat or slightly upwards.

So for my second lump sum I've been sitting on it the last 2 weeks, and missed out on another sharp rise. Every day the market just keeps on moving up - and every day I keep thinking "this can't continue, can it?"

So do I buy now, or is there a real chance of buying in, say 10% or more cheaper between now and Christmas?

Rollinghome

gozomark wrote: »

The issue is how much lower, with what probability, and at the risk of missing how much upside. If the OP is looking to invest on a 10 year view of making 100%, then waiting for say a 5% pullback is non-sensical - it will probably happen, but if it doesn't then he misses out on the 100%.

Sorry I really don't understand your logic.

What is the value of "upside" unless you sell at that particular point? If the chosen time period is 10 years as you state of what interest are the peaks in between? The only thing that matters is the price that you buy and the price that you sell.

There's no point in buying any investment if good judgement indicates you could buy more cheaply before the point when you intend to sell. The idea that the price doesn't matter over the long term is just sales patter from intermediaries to overcome objections and which too many tend to believe.

gozomark

I never said the price doesn't matter

There's no point in buying if you think you could buy lower before the point when you intend to sell.

yes there is, because your "think" isn't "know" - you might be wrong