Market Collapse

Chrismaths

Well, it's better to be lucky than good!

baldbloke_2

Chrismaths wrote:

I think this correction is the best thing that could have happened to the market - it gets rid of some of the people who think 'oh, this investing business is easy money', and provides a great buying opportunity for the rest of us.

All the best, chris

I know that what you say is correct but ... as someone who only in March of this year took the plunge into investments from basic high interest savings this has come as a bit of a shock. I now have £7k from 2 years ISAs invested in a range of L&G Tracker Funds which are probably doing about average for the type. To have 'lost' £400 in a week or so is startling to a novice like myself. I realize that I am in for the long haul and will see this through to next year when I shall be looking to compare returns to the interest on a Fixed-Rate Bond paying 4.9% or thereabouts. It has certainly opened my eyes. It is not so easy with an ISA to opt in and out of stocks in the way that some of the more knowledgeable and capable investors suggest. I do feel a little trapped but assume all will be well. I have a monthly purchase of £100 set up but of course it is only if the markets stay low that I shall benefit from low purchase prices. That is not a scenario I look forward to.

I only write in order to temper your enthusiasm a tad. Cheers

margaretclare

Chrismaths wrote:

Well, it's better to be lucky than good!

My DH has a saying that 'it's better to be born lucky than to be born rich'.

And would you believe, we got our roof replaced just before the gales over the weekend!!

As his side of the family would say: 'You should only be so lucky!'

Margaret Clare

Chrismaths

baldbloke wrote:

I now have £7k from 2 years ISAs invested in a range of L&G Tracker Funds which are probably doing about average for the type. To have 'lost' £400 in a week or so is startling to a novice like myself. I realize that I am in for the long haul and will see this through to next year when I shall be looking to compare returns to the interest on a Fixed-Rate Bond paying 4.9% or thereabouts. It has certainly opened my eyes. It is not so easy with an ISA to opt in and out of stocks in the way that some of the more knowledgeable and capable investors suggest. I do feel a little trapped but assume all will be well. I have a monthly purchase of £100 set up but of course it is only if the markets stay low that I shall benefit from low purchase prices. That is not a scenario I look forward to.

I only write in order to temper your enthusiasm a tad. Cheers

Next year is not long haul. 10 years hence is long haul. If you were investing for less than a year, you should never have invested in equities unless you were prepared to take the risk of a loss. I assume if your trackers make less than 4.9% you will decide that it is not worth investing in them anymore? It's when things fall that they become cheaper (and therefore more likely to go up in future) rather than when they rise. Your regular investment will benefit from pound cost averaging - in other words the average cost of your units will be less than the average price of those units over the period of your investment.

As you have a FTSE tracker, you have around 40% of your money in 2 sectors (banking and oil/gas). A tracker therefore has an above average risk of losing you money.

Thank you very much for you concern - my enthusiasm is not huge at the moment - I've only invested small amounts for my clients recently, and they have around 15% in cash. Just waiting for the knife to stop falling!

baldbloke_2

Chrismaths wrote:

Next year is not long haul. 10 years hence is long haul. If you were investing for less than a year, you should never have invested in equities unless you were prepared to take the risk of a loss. I assume if your trackers make less than 4.9% you will decide that it is not worth investing in them anymore? It's when things fall that they become cheaper (and therefore more likely to go up in future) rather than when they rise. Your regular investment will benefit from pound cost averaging - in other words the average cost of your units will be less than the average price of those units over the period of your investment.

As you have a FTSE tracker, you have around 40% of your money in 2 sectors (banking and oil/gas). A tracker therefore has an above average risk of losing you money.

Thank you very much for you concern - my enthusiasm is not huge at the moment - I've only invested small amounts for my clients recently, and they have around 15% in cash. Just waiting for the knife to stop falling!

I'm sorry that my comments came across as critical of your post - strangely enough that was not the intention.

I realize that investments need to be left for 5 to 10 years to achieve their potential and I only mentioned the 4.9 % Bond interest rate as a marker to myself. I do need something to compare my investments with. I intend investing the £4k allowed under mini-ISA rules for each of the next 3 or 4 years at least and will consider alternatives to Trackers as the next financial year approaches.

I have only dipped my toe in the investment waters and have - probably unwisely - kept back the remaining 85% of my savings in bonds and high interest accounts. I earn just above the minimum wage and have saved very hard from any excess income over recent years - it was a difficult decision to move into investments after so many years of just putting money by and I was inspired to do so primarily by threads on this forum.

I really only meant to convey the disappointment I felt at seeing a modest sum suddenly reduced - I knew it could happen and accept it as a risk I have taken.

I did however feel that your final paragraph was a bit triumphalist and probably failed to appreciate how those novices and amateurs amongst us are affected by the sudden turn of events.

I shall try to remember to look for this thread in 6 months time when the present difficulties have settled.

I wish you well.

Alan

EdInvestor

Alan

May I suggest you look at the category "Equity Income funds" when you next come to invest?

This type of equity fund is considerably less risky than trackers, which as Chrismaths says, expose you overwhelmingly to banks/financials and oil/resources.The recent events, which have hit those two sectors hard, demonstrate exactly the problem with FTSE trackers.

They may have low charges but they are quite high risk.They are too risky for me, and I am not a novice investor.They expose you to all the market volatility.IMHO novice investors shouldn't be directed to trackers.

Check out the website below, look under "IMA" funds and you'll see the various categories listed there,including Equity income funds and trackers. Click on the category to get the top performing funds.

https://www.citywire.co.uk/Funds/Home.aspx

Don't worry too much about the present correction though, this kind of thing is an annual event, the last one was October last year. There's nothing fundamentally wrong with the market now - nobody expects another tech/dotcom crash.

This correction will just get rid of a few speculators who are borrowing money to buy assets and pushing prices up too high, too quickly. It's all quite normal really.:)

baldbloke_2

EdInvestor wrote:

Alan

May I suggest you look at the category "Equity Income funds" when you next come to invest?

This type of equity fund is considerably less risky than trackers, which as Chrismaths says, expose you overwhelmingly to banks/financials and oil/resources.The recent events, which have hit those two sectors hard, demonstrate exactly the problem with FTSE trackers.

They may have low charges but they are quite high risk.They are too risky for me, and I am not a novice investor.They expose you to all the market volatility.IMHO novice investors shouldn't be directed to trackers.

Check out the website below, look under "IMA" funds and you'll see the various categories listed there,including Equity income funds and trackers. Click on the category to get the top performing funds.

https://www.citywire.co.uk/Funds/Home.aspx

Don't worry too much about the present correction though, this kind of thing is an annual event, the last one was October last year. There's nothing fundamentally wrong with the market now - nobody expects another tech/dotcom crash.

This correction will just get rid of a few speculators who are borrowing money to buy assets and pushing prices up too high, too quickly. It's all quite normal really.:)

Thank you. I very much appreciate your comments.

For a large investment one would naturally consult a professional but for a basic mini-ISA investment that seems inappropriate for some reason - IFAs would surely raise an eyebrow at being asked for an interview to discuss an investment of £4000 I imagine.

For all the reading I did - including the articles on Motley Fool regarding the Tracker as the sensible option - I'm not sure how clear I am on the basics. Yet the £4k ISA figure is clearly intended to attract people just like me.

I am not seriously worried about the current adjstment or correction or whatever. I understand the need to invest long term - and I have 10 years to Retirement. I shall look much more carefully at your suggested option of Equity Income Funds and thank you again for your advice and reassurance.

Alan

dunstonh

For a large investment one would naturally consult a professional but for a basic mini-ISA investment that seems inappropriate for some reason - IFAs would surely raise an eyebrow at being asked for an interview to discuss an investment of £4000 I imagine.

Whilst most wouldnt be interested, you would get some. It depends on whether there is an existing relationship or not much of the time.

Whilst Ed suggests equity income funds, which are lower on the risk scale than the FTSE tracker funds and usually better suited to volatile markets, I would also suggest you investigate fund of funds. These give greater diversification and an asset spread which is perfect for smaller amounts. One major one, for example, has a spread of 15 funds across the sectors. Something you cannot achieve yourself with 4k without using a fund of funds. You can get fund of funds, in cautious, balanced or adventurous forms. Indeed, you can get all sorts of FoFs nowadays.

baldbloke_2

dunstonh wrote:

Whilst most wouldnt be interested, you would get some. It depends on whether there is an existing relationship or not much of the time.

Whilst Ed suggests equity income funds, which are lower on the risk scale than the FTSE tracker funds and usually better suited to volatile markets, I would also suggest you investigate fund of funds. These give greater diversification and an asset spread which is perfect for smaller amounts. One major one, for example, has a spread of 15 funds across the sectors. Something you cannot achieve yourself with 4k without using a fund of funds. You can get fund of funds, in cautious, balanced or adventurous forms. Indeed, you can get all sorts of FoFs nowadays.

Thank you for that. Interestingly I was looking at the Hargreaves Lansdown FoFs yesterday after reading one of your answers to another thread. I can see how attractive they are but will need steel myself to overcome the initial shock of the charges made at purchase. I take your point - well made elsewhere - that first and foremost one must find the most appropriate fund for one's own needs and not see nil or low charges as the main criteria.

I have probably invested to date as a 'partially sighted' investor. Still I can swap funds or managers as the year goes on and no doubt my future investments will be better informed. It is a steep learning curve for a new boy!

dunstonh

I can see how attractive they are but will need steel myself to overcome the initial shock of the charges made at purchase. I take your point - well made elsewhere - that first and foremost one must find the most appropriate fund for one's own needs and not see nil or low charges as the main criteria.

Yes, this and the other thread are quite similar. As I said in that one, you invest to make money and not save money. My FoF of choice has an initial charge of 0.25% at HL. When you compare the limitations of FTSE trackers and the poor performance against sector allocated FoFs, that 0.25% (or even 5.25% at full cost) is insignificant.