FTSE: How low will it go?

Caudle

I'm sitting here with about £275,000 in cash deposits. I've had detailed advice from an experienced IFA, and I know what I'm going to be putting the money into. But I'm waiting for the market to fall through the floor, so I can dive in!

So, how low will it go? Although I will be investing globally, it seems to me that the markets pretty much follow each other these days. I guess it because we have computers trading with other computers!

Taking the FTSE: below 5000, maybe as low as 4500? Or could we even see it reaching down to the March 2009 low of about 3500.

What is your best guess for (say) the next 3 months or so, and why?

Xbigman

Generally, timing the market is a fools game. In this market I'd be feeding that sort of money in gradually, maybe over the next year.

What are you going into? It would make a huge difference.






X

dunstonh

But I'm waiting for the market to fall through the floor, so I can dive in!

When will that be?
Who is to say it hasnt already happened?
Who is to say it may be up and down like this for the next few years.

Although I will be investing globally, it seems to me that the markets pretty much follow each other these days.

Trends maybe but not levels of volatility.

What is your best guess for (say) the next 3 months or so, and why?

Having gone through multiple stockmarket crashes and corrections, i have found its best not to even speculate. You know what can happen but you cant tell when and how much.

Caudle

What are you going into? It would make a huge difference.

Going into two products:

(1) MetLife Protected Growth Bond (90% protection) - £100k

(2) Sterling Investment Account (£115k) and ISA (£60k)

Metlife is basically a tracker which tracks various equity indexes around the world but has a substantial amount, about 60%, in fixed interest.

Sterling Inv A/c and ISA are both based on 5 underlying unit trusts and I am free to switch money around these trusts at will, without charge.

When will that be?
Who is to say it hasnt already happened?
Who is to say it may be up and down like this for the next few years.

Well yes, but it seems to me with all the nonsense going on at the moment - US credit downrating, Eurozone crisis etc - for the next few months it may be a downward trend with various "dead cat bounces" along the way.

97trophy

The truth is nobody knows how far this decline will go and guesses are worthless.

dunstonh

(1) MetLife Protected Growth Bond (90% protection) - £100k

Which uses the blackrock class D index trackers and charges you about 5 times more on top for paying for the protection. Plus, its in the investment bond tax wrapper (which may or may not be suitable). Personally not a fan. Cheaper and longer established versions available which can also be held unwrapped and on platform (which means easier trading as well).

(2) Sterling Investment Account (£115k) and ISA (£60k)

A smaller investment platform. Doesnt have much to offer nowadays unless you are after the death protection. Why sterling?

Well yes, but it seems to me with all the nonsense going on at the moment - US credit downrating, Eurozone crisis etc - for the next few months it may be a downward trend with various "dead cat bounces" along the way.

Studies have found that timing over the long term only equates to under 5% of contribution towards the total return. Sometimes you will get it right, sometimes you will get it wrong.

Caudle

charges you about 5 times more on top for paying for the protection

Actually no. And my IFA has negotiated reduced charges anyway which has in effect wiped out the protection charge.. I have to option to switch to 70% or 50% protection. That will put more into equities and less into fixed interest.

As I understand it there are no direct competitors for the MetLife Bond just at present. So I think you may be a bit off-beam. Sorry.

Why sterling?

My IFA has chosen both my investments on the basis of my circumstances... including the possible need to pull money out to invest in property some time within the next 2-5 years. It is only a possibility but I have to have that flexibility.

Anyway, I've not posted this to discuss my future investments (thanks all the same!), just how low people think the FTSE 100 will go.

Studies have found that timing over the long term only equates to under 5% of contribution towards the total return. Sometimes you will get it right, sometimes you will get it wrong.

Sometimes studies get it right and sometimes wrong. It is ridiculous to suggest it would make little difference if someone invests when (say) the index is 5200 and when it is 3500. That's an almost 50% difference.

"Long term" for me is a maximum of 5 years. I am sure if you look over a much longer term - 25 years or 100 years, or whatever, the starting level for investment diminishes in importance accordingly.

Caudle

The FT100 fell to about 3500 in 2009.
Doubt it will go that low but I would not be surprised to see it go below 5000, a 5% drop would do that.

Why do you doubt it will go that low, as a matter of interest?

Is that just a hope or do you think things are not anywhere near as bad as they were perceived to be in March 2009? (Note the word 'perceived').

[Deleted User]

Hi,

Caudle wrote: »

(2) Sterling Investment Account (£115k) and ISA (£60k)

Do you already have this in a cash ISA, or spreading it over 5 years?

Jegersmart

Watch the 5070 area and subsequently 5000 level for clues on FTSE, if we break 5000 the retest of the 47xx could be on the cards. We can only use the price action to try to make some sense, no one can just give you a number......^^

chrismac1

I have two things to add to this, like you I have a pile of cash waiting to be invested in selectively chosen shares, which are all solvent companies paying dividends.

The first is that a panicky week like last week is almost never the final bottom. This feels more like October 1987 than any week since then bar the Lehmann crash. The US non-farm payrolls were really good and the market rallied strongly - for about 10 minutes. Then crashed again. Bull markets can ignore all manner of bad news, bear markets see the bad even in good numbers.

Jack Schanepp is probably the best Dow Market theorist the US has produced in about the past 25 years. He has a really good indicator - the capitulation indicator - which has called the bottom of the market 90%-plus of the time since 1960. It is quite simple:

When the S&P 500 and DJI both close more than 10% below their 10 week exponential moving averages (EMA) (I appreciate you might not know what this is, google it!) then this is a BUY signal. But we are not there yet, just very close. It is 1179 on the S&P which is currently within 1% of this level, however, the 10 week EMA is itself guaranteed to fall just on the way it is calculated.

Moving on, when the markets fall in June, July and August on high volatility, it normally means we are in for a pasting. This is from a book called "Trading Secrets" by Simon Thompson - in a nutshell the most profitable book I have ever read, it cost me £20 and has made me thousands.

The UK market fell 45 in June, 130 in July and 568 to Friday's close in August. Volatility has been high. This is a clear sign of a bear market. However, my long term buying method begins with a few measures such as market value to sales ratio which are Absolute - i.e. simply a measure of how that share is doing, not how it is doing compared to other shares. Hence in times of market euphoria there can often be less than 10 shares on that list because all shares are expensive. Right now the list runs to more than 50 shares which is very unusual and in the past has been a strong indicator that it is a good time to buy.

So my policy in the short term is to short sell the rallies until the market bottoms, then use my method to start buying in quality shares.