Do you exit the market after a bull run?

Reaper

edinburgher wrote: »

I'd been reading about this of late, but didn't understand why you'd want to move gains from a strong fund into a weaker performing fund? Hopes of future growth/stability, or just trying to stick to an investing style/ratio?

Real life example: my Aberdeen Emerging Markets Acc units are thrashing my Schroder US Mid Cap Acc units and there will likely be a real imbalance by the end of the year. Why would I buy more units of the Schroder fund?

Instead of Emerging Markets let's use the example mentioned above of Tech stocks. A while ago there was the DOT COM boom and people piled in to companies not because they were making a profit (they weren't) but just because the market was going up. If you had a rebalancing strategy at the time then you would have effectively "locked in" some of those gains. If not you might have found by the time the crash happened DOT COM stocks made up, say, 80% of your portfolio and the crash would have been very painfull.

If you were only willing to invest a certain percentage in that sector to start with, why let the market distort it?

Sectors tend to go in cycles as problem ones sort out their problems and booming ones overheat and fall back. Rebalancing is a simple method of reducing volatility in your portfolio.

Pachira

Wobblydeb wrote: »

Just wondering what strategies people on this forum employ?

Pretty much always in the market. Use fundamentals to identify stocks to invest in and technicals to time entry and exit and set profit targets. Aim is to try to roll stocks, but doesn't always go to plan - miss opportunities to reinvest, usually because of work commitments.

cloud_dog

sabretoothtigger wrote: »

If you sell shares then you are buying british currency, there is no way not to own something or possibly lose money by holding it

The main advantage to being in cash is it doesnt change value very much, less then 1% a day and some shares move 10% so you are reducing risk by going to cash usually

If the bull run meant the price of shares rose 10% and the british currency fell 10% while you held the share, you havent gained anything and theres no reason to sell because the company hasnt risen in value since you bought.

The problem is all that is very confusing and its hard to keep track of what is the worth of anything. Every day there is inflation, alot of companies arent even in this country so how can you know whats happened in Australia or wherever

BP isnt really uk, its all over the world. At least a third of BP is in russia, I havent a clue whats happened in russia this month
8.6% of the ftse 100 is hsbc and most of their company is in asia, so whats their worth. no idea


I think selling shares to buy another share is often best, if they are similar its easier to compare. I sold Bradford and Bingley to buy standard life, I thought SL was too cheap (it was a forced sale) and b&B had already risen more then I expected it to

They are both finance companies with risk (and profits) in the money markets, one looked a better bargain so thats how I suggest people should weigh up their choices

Sabre, nice post. Its a pitty most people do not understand the significance.

sabretoothtigger wrote: »

buffet is rich because he has almost never lost money. So thats 50 years of compound gains with no deductions

For a minute there I thought you were comparing my wisdom with Buffet :rotfl:

Loughton_Monkey

cloud_dog wrote: »

For a minute there I thought you were comparing my wisdom with Buffet :rotfl:

I am sure it is perfectly reasonable to compare your wisdom with Buffett. But would we get a different answer if we compare your wisdom with the wisdom of Buffett?

Another comparison could be made between my own wealth and Buffett's wealth. I can tell what my wealth is to about the nearest £1. Bet Warren can't!

Another thing. If I were as rich as him, I'd actually be richer. [Because I'd still keep up the window cleaning round].

nrsql

With shares if you invest in the best performing company from the previous year you are likely to do very badly - haven't seen it calculated recently but it used to be just about break even and big loss after inflation.
Similarly for funds I guess. If you have a fund that does well it's likely to do badly at some point. Rebalancing will take those funds and reduce the amount invested so reducing the downside.
Of course if the upside is over a longer time than your rebalancing period you lose out on gains but the idea is that once something has shown gains it is more likely to show a sharp loss than a sharp gain (unless a bubble) so potential downside is greater than potential upside.
So rebalancing likely to do better than leaving it but worse than choosing funds and getting it right.

You could split into two portfolios if you are willing to spend the time. One cautious which gets rebalanced and one aggresive that you take positions in and is monitored frequently - when the aggresive does well lock in profits by moving to the cautious - means you get to have fun and potential for large gains.