what the blazes is going on in the markets today and yesterday

dunstonh

My preference is sticking with sector allocation but re-balance it periodically. i.e. if you had 10 funds with 10% in each, over the course of time they would lose sync and some may grow by more than others, some may go down. You may end up with 8% in one, 14% in another and so on.

By re-balancing, you bring the portfolio back to 10% across the board. This means you take money out of those that have grown the most and put it into those that have grown the least or lost money. With some of those funds being property and fixed interest/bonds etc, you balance the risk and allow gains to be moved to safer funds and when there are losses on the higher risk funds, money is moved out of the safer funds to go back into the riskier funds. In effect, you are moving some out when its high and reinvesting when its low.

Obviously you don't have 10% in 10 funds. The percentages and spread would depend on your personal risk profile but once those percentages have been chosen, you stick with them until a risk change comes along.

Sector allocation has more to do with where the money is invested than individual performing funds. Only when a risk change or fund manager change happens do you then need to consider making alterations.

[Deleted User]

This is a healthy and necessary correction. The long term trend is still bullish according to the daily and weekly charts

I have been taking the opportunity to add to and complete, my HYP portflio

moneytroll

"we have seen this pattern before: the market reaching a (near) high; followed by a substantial dip; followed by the market attempting to scale the previous high it never quite reached; followed by the proper and real correction - a bloodbath."

why would the markets do exactly the same as they did before? i am not sure they work like this...nobody knows how they work.
there will be more pessimism from now on and none of the steep gains i think, but there's no particular reason why there should be a bloodbath. market is not overvalued (the uk one anyway).

"My preference is sticking with sector allocation but re-balance it periodically. i.e. if you had 10 funds with 10% in each, over the course of time they would lose sync and some may grow by more than others, some may go down. You may end up with 8% in one, 14% in another and so on."

I like rebalancing myself with funds, but sometimes I wonder what is the point of having your money in certain areas at a certain point in time at all (like gilts!) which you know for sure are no good at the moment (most of the time you don't, but with gilts it's quite obvious for the time being and near future). Same might be true for property funds at some point in future, or emerging markets during nervous times... but that sort of flexibility is uncomfortably close to market timing...

free4440273

no i disagree. the bloodbath will be with us soon. interest rate increases will (hopefully) 'kill' this market once and for all. for me, fair value on the ftse is 3000; on the dow 6500. [also, i never claimed to know how the markets worked - i simply made a 'call' on the markets, like everybody else here .

dunstonh

but sometimes I wonder what is the point of having your money in certain areas at a certain point in time at all (like gilts!)

in a word, safety. It may not come in with much a year but you its more or less going to be there. When utilised in a rebalancing portfolio, thats when the low risk funds do their job.

Say you invested 3 years ago and each year has seen growth, you would be taking money out of the equity funds into the low risk funds each year. Then when the drop comes, the money that is in the low risk funds doesnt suffer that drop, then the rebalancing works the opposite way by taking money out of the gilts and into the equity funds. You are not investing money in gilts etc to make lots of money. You are investing in them to counterbalance the other investment areas of higher risk and act as a lever to protect what you make and then invest when it drops. How much you have in the low risk funds as a percentage compared to the higher risk funds is dependent on your personal risk profile.

cheerfulcat

free4440273 wrote:

no i disagree. the bloodbath will be with us soon. interest rate increases will (hopefully) 'kill' this market once and for all.

Why " hopefully "? Only a short-seller would hope for a crash ( I assume that's what your " bloodbath " comment is about ). If you are short then I think that you should make a declaration to that effect, so that your remarks may be read in context...

free4440273

cheerfulcat wrote:

Why " hopefully "? Only a short-seller would hope for a crash ( I assume that's what your " bloodbath " comment is about ). If you are short then I think that you should make a declaration to that effect, so that your remarks may be read in context...

i never said i was short, nor long, nor anything in between. my original post was indeed 'within context'; that is blindingly obvious. i simply believe the markets are way over-pric£d. if you want to go long, then go long - nothing wrong with that

moneytroll

"i simply believe the markets are way over-pric£d"

on what measures? the latest correction is simply a change of sentiment/worries that are coming from the weak dollar etc. the p/e of the ftse is around 17 which is sort of ok. unless several major events occur simultaneously, it doesn't suggest that the correction is going to take the market more than a few hundred points down. (hardly 2000 points)
but of course, everyone's opinion is valid.

free4440273

moneytroll wrote:

"i simply believe the markets are way over-pric£d"

on what measures? the latest correction is simply a change of sentiment/worries that are coming from the weak dollar etc. the p/e of the ftse is around 17 which is sort of ok. unless several major events occur simultaneously, it doesn't suggest that the correction is going to take the market more than a few hundred points down. (hardly 2000 points)
but of course, everyone's opinion is valid.

which correction? a short-term correction? a long-term correction? we can't even decide which correction we talking about. indeed, everyone's opinions are valid (so much for the consensus).

Deemy

It may well turn into a bloodbath, but at this point in time, the probability favours a significant correction, it all depends on how it corrects and where it tries to make a base, if it is substantially below major support than that would imply that the 'correction' is only the first leg of something far worse !

Its better (for me anyway) to be sat on the sidelines until the market makes its intentions known ! On how much to plow back into the market in the initial stage if any or wait for further confirmation. You have to view investing in terms of protecting your capital.