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What makes me nervous now is making large lump sum investments in all these areas....Syphoned off 25K of the ISA transfer into a market leading easy access interest bearing savings account....and then lump some of it back in if there is a big market drop on any of the tracker funds.
Presumably an attempt at market timing JohnRo? Have to say that although I'm persuaded by passive investing (and pound cost averaging via monthly contributions), I still have trouble with lump sum investment into trackers. Which is where I'll be shortly.
I can't help but think that I'd be better in cash waiting for a market dip, than being in sideways moving equities markets and maybe picking up dividends equal to the rate on an easy access account. Complete guesswork of course, but I keep thinking that even if markets dropped 10% (may not ever happen of course), then that would be the time to lump some money into trackers. Difficult one for me to get my head round.0 -
The markets could drop 10% but would that be enough for you?
Lots of people sat in cash when the FTSE was below 5000 and I'm pretty sure they'll do it next time too!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Presumably an attempt at market timing JohnRo? Have to say that although I'm persuaded by passive investing (and pound cost averaging via monthly contributions), I still have trouble with lump sum investment into trackers. Which is where I'll be shortly.
I can't help but think that I'd be better in cash waiting for a market dip, than being in sideways moving equities markets and maybe picking up dividends equal to the rate on an easy access account. Complete guesswork of course, but I keep thinking that even if markets dropped 10% (may not ever happen of course), then that would be the time to lump some money into trackers. Difficult one for me to get my head round.
That's why I'm sort of doing both, I've left a small lump ISA wrapped and ready to pile in and moved the bulk of that part of the portfolio out to earn a half decent if somewhat unexciting interest rate (3.2% gross).
While I wait for any fall that might never happen I'll continue feeding modest monthly investments into the predominantly passive ISA portfolio.gadgetmind wrote: »The markets could drop 10% but would that be enough for you?
Lots of people sat in cash when the FTSE was below 5000 and I'm pretty sure they'll do it next time too!
It certainly would be for me personally, the bigger concern would be reducing trading costs to relatively insignificant levels which obviously requires larger investment chunks and a cheap platform such as IWeb.
That decision, about what percentage of the total pot I'm prepared to use in this way, whether that amount is enough to be efficient and whether the market conditions are right, are what stand in the way.
At the moment I see 10K as an amount I'd require for this to be reasonably efficient and one I'm prepared to "play" with, for starters, in that sort of investing/trading.'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB0 -
gadgetmind wrote: »The markets could drop 10% but would that be enough for you?
Lots of people sat in cash when the FTSE was below 5000 and I'm pretty sure they'll do it next time too!
10% was just a figure plucked from the air. Obviously it would depend on the timing and strength of any dip versus the opportunity cost of keeping cash. But if your instinct was for a significant-ish market dip before a significant-ish market rise, then would it not pay to stay in cash so you could take advantage?
All hypothetical, but at extreme levels the FTSE100 was at 3,500 in March 2009. If we're talking about investing a significant portion of my (or your) personal wealth, would you invest that lump sum now with the FTSE100 at 5900 or keep in cash at 3% and be ready to pounce when markets fell? That's my quandry. Obviously we're talking more global investments here (not just FTSE100) but you get the gist.
Markets will inevitably fall at some point (by how much nobody knows), so what is the benefit of being in them now as opposed to waiting it out?0 -
Markets will inevitably fall at some point (by how much nobody knows), so what is the benefit of being in them now as opposed to waiting it out?
To take advantage of the inevitable rises (by how much noone knows) at some point.
It isn't or doesn't have to be an all or nothing proposition.'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB0 -
But if your instinct was for a significant-ish market dip before a significant-ish market rise, then would it not pay to stay in cash so you could take advantage?
I keep about 10% in cash (mostly index linked) but this isn't really an "opportunity fund" more a cash buffer.
As to my instinct, I've been investing for long enough to know not to trust such things and not to skew my portfolio too much in either direction.at extreme levels the FTSE100 was at 3,500 in March 2009.
I know and I greatly reduced my cash back then to buy equities. I rebuilt my cash pretty sharpish afterwards as TBH I scared myself a little, which isn't a good thing.Markets will inevitably fall at some point (by how much nobody knows), so what is the benefit of being in them now as opposed to waiting it out?
Because 1) you'll get dividends in the mean time, 2) who knows if/when markets will dip, 3) if/when they do, it will be because something scary has happened, and how do you know that you'll have the nerve to invest against that backdrop?I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »Because 1) you'll get dividends in the mean time, 2) who knows if/when markets will dip, 3) if/when they do, it will be because something scary has happened, and how do you know that you'll have the nerve to invest against that backdrop?
All good points gadget. I suppose "instinct" is the wrong word to use. I just think logically markets will at some point be lower than they are now. When of course, nobody can tell. As you said, it would take great nerve to invest after an almighty crash but I'd be sitting on a pot of cash specifically for that purpose, perhaps over many years, so would like to think I wouldn't bottle it when the times comes. Again, I've never been in the situation so who knows.
Being devil's advocate again, let's just say out of interest that markets don't move significantly in any direction for the next 2 years. Then drop by 10%-20%. If you had a new source of cash right now, amounting to say a quarter of your total wealth, would you add this to your existing cash buffer (and earn say 3%) awaiting the imminent crash, or would you invest in equities now?
All supposition but just interested to gauge where you'd draw the line if you had an accurate crystal ball.0 -
All good points gadget. I suppose "instinct" is the wrong word to use. I just think logically markets will at some point be lower than they are now. When of course, nobody can tell. As you said, it would take great nerve to invest after an almighty crash but I'd be sitting on a pot of cash specifically for that purpose, perhaps over many years, so would like to think I wouldn't bottle it when the times comes. Again, I've never been in the situation so who knows.
Being devil's advocate again, let's just say out of interest that markets don't move significantly in any direction for the next 2 years. Then drop by 10%-20%. If you had a new source of cash right now, amounting to say a quarter of your total wealth, would you add this to your existing cash buffer (and earn say 3%) awaiting the imminent crash, or would you invest in equities now?
All supposition but just interested to gauge where you'd draw the line if you had an accurate crystal ball.
Isn't the answer to that darned obvious? If we knew the future then of course you'd pile in at the bottom before a meteoric rise. Well actually I'd pile it all on the 33-1 winner of the 4:50 at Doncaster instead with my accurate crystal ball, or even better still pick the euro-million numbers every week.
Problem is the crystal ball doesn't exist does it?0 -
If you had a new source of cash right now, amounting to say a quarter of your total wealth, would you add this to your existing cash buffer (and earn say 3%) awaiting the imminent crash, or would you invest in equities now?
I'd look at my overall asset allocation and decide how much of the cash needed to be moved into other asset classes.
As it happens, I just used this year's CGT allowance to sell down some tech shares and I'm currently sitting with the cash in my wife's dealing account. It will all be invested over the next 1-2 weeks. This, of course, means that the markets will have a major wobble immediately afterwards, so perhaps you should wait until then?
All supposition but just interested to gauge where you'd draw the line if you had an accurate crystal ball.
A what!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Here are a couple of articles regards holding cash, and you may also like the comments.
http://monevator.com/making-the-case-for-cash/
http://monevator.com/plunge-protection-fund/I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0
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