Crash Bang Wallop

gadgetmind

jabba42 wrote: »

But if you are brave enough to sell you might be able to buy your favourite stocks back at a lot lower prices.

Or more likely, not know whether the next up is a long-term trend or just a tiny bounce, and then keep sitting on cash for month/years waiting for "the inevitable correction".

jimjames

atush wrote: »

I was in France w/o internet access so heard about it, but could do nothing.

But, generally, I don't sell in crashes, I buy. So if I had cash, I would have bought when I got home (and may have). I did a LOT of buying when the markets opened after 9/11.

Apart from some shares I held like lloyds, everything I held went back up.

Same here.

There is some statistic that shows that your returns drop markedly by missing the best days of the market. These are most likely come just just after a crash. There was a good graph shown by dunstonh some time ago that showed the psychology of an investor and how most time completely wrong.

If you are investing long term then buy & hold is the best idea rather than timing the market.

You only have to look at the people 6 months ago saying the market was too high to buy into, its now up over 15% since then.

Glastoun

I can see all of that, and I understand it, but if someone had £10k in a FTSE 100 tracker in March 2000, over the next 3 years of gloomy news it would have dropped to £5300.

And in 4 years time it would have climbed back to £10k, but over the next 18 months it would have dropped back down to £5300 again.

Today it would be approaching £10k again. Surely someone who's already been through that would be getting nervous? And surely there are things they could have done to end up in a better situation.

I guess the key is to plan for collapses, not try to react to them when they happen - diversification and rebalancing, and maybe moving a proportion of funds around rather than buying/selling the whole thing.

gadgetmind

Glastoun wrote: »

Today it would be approaching £10k again. Surely someone who's already been through that would be getting nervous? And surely there are things they could have done to end up in a better situation.

Yes.

1) Do not invest absolutely everything into the market in one huge lump. Or at least if you do, only do it when p/e ratios and dividends are telling you it's probably a good time. Drip feeding would have let the investor sleep much better.
2) Do not take all your dividends out every year as cash and set light to them. If you didn't do this, and instead reinvested them, then you'd be 50% up even during one of the most torrid periods you could have chosen.

Glastoun

Ah yes, I always forget about dividends - one of the symptoms of being a new short-sighted investor. Although having said that, all of my funds have been accumulation funds so I don't see dividends separately in that respect.

The initial £10k could have been drip fed up to the point of the collapse, I'm not suggesting someone put £10k on the FTSE in March 2000 - although I'm sure somebody somewhere must have. Wonder if they ever did it again?

gadgetmind

Glastoun wrote: »

Ah yes, I always forget about dividends - one of the symptoms of being a new short-sighted investor

We've all been there!

The initial £10k could have been drip fed up to the point of the collapse, I'm not suggesting someone put £10k on the FTSE in March 2000 - although I'm sure somebody somewhere must have. Wonder if they ever did it again?

I'm sure someone did, somewhere, maybe, but the press seem to like working from peaks so as to make the troughs look worse than they were in reality.

redbuzzard

Glastoun wrote: »

I can see all of that, and I understand it, but if someone had £10k in a FTSE 100 tracker in March 2000, over the next 3 years of gloomy news it would have dropped to £5300.

And in 4 years time it would have climbed back to £10k, but over the next 18 months it would have dropped back down to £5300 again.

Today it would be approaching £10k again. Surely someone who's already been through that would be getting nervous? And surely there are things they could have done to end up in a better situation.

I guess the key is to plan for collapses, not try to react to them when they happen - diversification and rebalancing, and maybe moving a proportion of funds around rather than buying/selling the whole thing.

Are you ignoring dividends? The point stands I suppose.

I certainly held some FTSE tracker funds through that period and never gave it a thought. But I had a habit of putting money into things and forgetting about it, for which I am now mostly glad.

I'm with jimjames, and the Sage of Omaha basically agrees IIRC. Trying to time the market means you miss rises too. A good pal told me in December he was staying away from equities as he thought the market was high...

But I'm a lot twitchier now, when I am living on savings and contemplating broaching the SIPP. My fear is that being more likely to react could cost me money. The human tendency to sell cheap and buy dear is well documented.

So I agree with your idea that preparation is better than reaction, but even that could be costly.

I am frankly fearful of a drop in values but also need growth, long term as I will use drawdown. For now I have reduced to about 50% pure equities, and switched out of some of the full index funds some into defensive funds, and some in those funny index etfs - minimum volatility and dividend plus. The rest is in mixed funds, AR funds including Newton and GARS, a few shares - I've also binned the Euro index fund as it's recovered earlier losses and the whole eurozone thing will go bang at some point IMO. I do not intend to panic sell anything. If there is a crash I'll hang in and re-risk at a lower level.

I'm feeling silly already - in principle I favour buying markets and staying with it, but I don't want my SIPP on the floor when I am deciding when to crystallize some. Neither do I want to be sitting in cash for any length of time.

It's not perfect but I'll find it easier to rationalise staying calm if a major reversal comes.

jimjames

Glastoun wrote: »

Ah yes, I always forget about dividends - one of the symptoms of being a new short-sighted investor. Although having said that, all of my funds have been accumulation funds so I don't see dividends separately in that respect.

The initial £10k could have been drip fed up to the point of the collapse, I'm not suggesting someone put £10k on the FTSE in March 2000 - although I'm sure somebody somewhere must have. Wonder if they ever did it again?

The press conveniently forget the other investors who drip fed money in over the last 10 years through peaks and dips and are substantially ahead even without dividends. It is always quoted against 2000 but 13 years isn't a standard holding period and over 10 years the FTSE is almost doubled.

Focusing only on the FTSE isn't sensible either. Just been reading the best 10 investment trusts over the last 10 years. Some have turned £100 into over £1000 in that time and 7 of them were Asian funds. Unless your only investment was FTSE 100 tracker then it is likely you've done fairly well over the last 10 years or so.

merlingrey

You don't want this market to collapse, that would mean all the bailouts, QE1 QE2 + operation twist (to twist the yield curve buying insane amounts of bonds) and lowering interest rates would have failed.

This market is forced to go up, stay the same or drop to nothing.

You can have dips of maybe 5-10% and rebounds and so on but you cannot have a proper systemic market drop like 2008 that would mean the whole thing is kaput.

edit: i say you don't want it to happen but that might not stop it happening anyway.

MoneySaverLog

They have built a house of cards. QE was never going to work and it will just now be a matter of time.