Are markets overheating & correction imminent? Views & investment advice sought plse

Woggy67

Hi All,

I am an ‘amateur’ investor who through reading articles, listening to useful advice and some good fortune has managed to build up a reasonable investment portfolio, for just an ordinary guy. About 3 years ago I posted here when I was looking to review what funds I held and wanted to try and regain some of the losses some funds had made. I got some helpful replies which I used to revise my investments and I now find myself at another point where I would like to request the views of others.

I should say that I have enough money in a building society account to cover most events, so I am not totally reliant upon the investments and I do not need any income at present as I am some 20 years from retiring.

Anyway here goes.

1. I keep hearing a lot about markets overheating again, for example talk of a ‘bond bubble’ and potential ‘housing market bubble’ and the likely dip following reduction of QE in the USA etc. In addition to these articles whilst browsing some financial webpages recently I was directed to a video clip which was a very pessimistic interview declaring another dip into recession, correction of housing prices by huge price drops and hyperinflation. At the end of the video clip it recommended reading the book – Aftershock by David Wiedemer. Whilst I realise it may have been all hype tosell a book that has just been revised and updated, it didn’t paint a very good scenario at all and got me thinking.

Hence my first question is: Do people think we are really coming out of a recession and investment will continue to grow or is it a false dawn again, with a further correction imminent as some are predicting?

2. I presently hold a pretty adventurous portfolio, with Asia, Emerging Markets, Corporate Bonds, Specialist as well as North American, Europe and UK funds. I have been fortunate in a rising market and in general the funds have performed well and recouped some of the losses from earlier years. However, with my present situation I figure that now may be the time to take some of that profit rather than risk losing it if those predicting market corrections are accurate.

Hence my second question is: If the answer to Question 1 is ‘Yes, we are heading for a major correction of markets’ and the smart are moving out of certain stocks, what funds are they moving out of, why and where they are moving their investments to, as deposit accounts offer security but such poor interest rates? There is always a lot of talk about taking profit, but there is little advice out there as to where to invest whilst the markets correct and still get an inflation beating return on your money. Should I be looking at ‘Absolute return funds’, moving out of corporate bonds, or moving away from equities into something different altogether?

Once again thanks in advance to anyone who takes time to comment or offer ideas and advice.

kidmugsy

The values of q and CAPE suggest that Wall St is substantially overvalued. That won't necessarily stop it getting even more overvalued though.

http://www.smithers.co.uk/page.php?id=34

I'm waiting for better value, knowing that I might well be wrong. Meantime I'm reflecting on this.
http://earlyretirementextreme.com/wiki/index.php?title=Permanent_Portfolio

Good_Goose

I see no signs of overheating yet, if anything UK FTSE100 companies are still "cheap" by historical standards IMO/

IronWolf

The US looks to be priced quite highly in my opinion, but it isn't in some crazy bubble. Bond prices are high due to the interest rate environment but any good bond manager can mitigate this by having a sensible selection of bond maturities. The returns will be low but in the long run it should be better off.

Im almost fully invested in stocks at the moment, there are some areas which seem overvalued but there are other sectors which are imo undervalued so its a mixed bag.

I dont think you have to worry about a 2001 style stock market bubble burst, at least not in the UK.

cinderfella

The bubble that worries me is the one created by the government.
We now have increasing London house prices caused by the 95 percent new buy mortgage scheme.
All done to help kick start the economy.
The problem is that bubbles tend to burst.

As for the UK stock market it has a lot higher to go in the next year or so.

BLB53

Nobody can know the answer to Q1. Over the longer periods, the better returns are provided by equities, so with 20 yrs to retirement, this is probably the best place to be.

One thing you can control, is the charges paid on your investments and these can have a detrimental impact on returns so my advice, FWIW would be to have a look at the charges on the various investments you hold and if they are over 1% maybe consider exploring low cost alternatives like Vanguard trackers or some of the lower cost investment trusts like City of London, Bankers etc.

Finally, some of the articles on diy investors basics may be worth a read http://www.diyinvestoruk.blogspot.co.uk/p/basics.html

Good luck!

dunstonh

Do you think that any of us here really know what is going to happen next?

All we know when we invest is that there will be periods of loss and periods of gain. We dont know when either will occur. Just that they will. Any attempt that tries to time the markets inevitably ends in lower returns than just punching through it with a defined multi asset strategy and rebalancing.

robotrobo

Woggy67 wrote: »

Hi All,

I should say that I have enough money in a building society account to cover most events, so I am not totally reliant upon the investments and I do not need any income at present as I am some 20 years from retiring.

in advance to anyone who takes time to comment or offer ideas and advice. [/QUOTE

hi woggy.
Like you i was in the same position some 25 years ago & i invested everywhere from investment trusts, unit trusts,shares in b/society floatations & in a few countrys.
Yes i lost out in the dot com boom & bust, not big time , but i lost & its the most horrible feeling in the world.
I also put safe money in your pearls , & norwich union endowment policies which was allways known to be reasonably safe investments, but no , they dropped the returns drastically & even not enough money to pay the mortgage off , luckily i paid it up 10 years earlier , so all money came back to me, but all the projected value had been lost.
The last big drop i had was in 2008 & all my investments were 50% down , & like i say its a awful feeling , & i have experienced quite a few big drops in the 25 years of investing, so in 2008 i pledged myself that i will bale out when they come back to the previous levels that i had written in my book.
So yes the rest is history , now i have the problem of putting it in the best available interest rates going , which is not good at the moment , but with help from this site i have achieved the best i can.
our next big problem looming this december is all our cash isas are maturing & no one is paying any good money, we have been in them since 1990, so i am looking around now.
Would i do the same again?, im not so sure & i am sure there are some good winners , im not so sure that i was one of them!, oh well i have enough to last my short stay on this planet , with a bit for the kids i suppose.
on a finishing note i recieved £25 from the premium bonds for the second month in a row only this morning, infact i think i am going to buy some more as my bonds are also maturing from bank of baroda & close bros.
best regards.
mr bean

Linton

robotrobo wrote: »

Woggy67 wrote: »

Hi All,

I should say that I have enough money in a building society account to cover most events, so I am not totally reliant upon the investments and I do not need any income at present as I am some 20 years from retiring.

in advance to anyone who takes time to comment or offer ideas and advice. [/QUOTE

hi woggy.
Like you i was in the same position some 25 years ago & i invested everywhere from investment trusts, unit trusts,shares in b/society floatations & in a few countrys.
Yes i lost out in the dot com boom & bust, not big time , but i lost & its the most horrible feeling in the world.
I also put safe money in your pearls , & norwich union endowment policies which was allways known to be reasonably safe investments, but no , they dropped the returns drastically & even not enough money to pay the mortgage off , luckily i paid it up 10 years earlier , so all money came back to me, but all the projected value had been lost.
The last big drop i had was in 2008 & all my investments were 50% down , & like i say its a awful feeling , & i have experienced quite a few big drops in the 25 years of investing, so in 2008 i pledged myself that i will bale out when they come back to the previous levels that i had written in my book.
So yes the rest is history , now i have the problem of putting it in the best available interest rates going , which is not good at the moment , but with help from this site i have achieved the best i can.
our next big problem looming this december is all our cash isas are maturing & no one is paying any good money, we have been in them since 1990, so i am looking around now.
Would i do the same again?, im not so sure & i am sure there are some good winners , im not so sure that i was one of them!, oh well i have enough to last my short stay on this planet , with a bit for the kids i suppose.
on a finishing note i recieved £25 from the premium bonds for the second month in a row only this morning, infact i think i am going to buy some more as my bonds are also maturing from bank of baroda & close bros.
best regards.
mr bean

But what happened between the dot com crash and the credit crunch? With a sensibly diversified portfolio you should have made it all back and more. Again, many investments are now higher than before the 2008 crash. As long as you understand that a crash is going to come around every 5-10 years and just stay in the market, in the long term you should do much better than with any other investment.

billchecker1

That sounds like really bad luck more than anything else as markets have seen a terrific rise since 2008.

I know hindsight is a great thing but it still stands that if you simply held through all the troubles you would undoubetdly be in profit.

robotrobo

billchecker1 wrote: »

That sounds like really bad luck more than anything else as markets have seen a terrific rise since 2008.

I know hindsight is a great thing but it still stands that if you simply held through all the troubles you would undoubetdly be in profit.

I am in profit , got all my money back , i think, after 25 years i now do not want the worry side of investing i suppose, & just to be content now with the bit that i have with some good pension money coming in every month & no debts.