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

Freecall

dunstonh is right, every bit of information in the public domain is already priced into investments. So, unless you have some critical piece of information that the rest of the world doesn't.......................

Linton

Woggy67 wrote: »

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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.
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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?
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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.

It seems you are mainly investing for the long term - 20 years. An undemanding average 6% return per year will triple your investment in cash terms.

There will be many drops and recoveries during that time period. You wont be able to predict them - neither the drops nor recoveries. The chances are that if you try you will lose out by being late, selling after a major fall and buying when the market has already significantly risen. How else will you know the change is real?

If you take profits what do you do with them? Keep them in cash? Or re-invest after the market has risen even further?

In my view you need to force yourself to take the long view. With say 200% return in your sights the occasional 20% or even 50% fluctuation doesnt matter. Buy a wide range of investments you believe have a long term potential and stick with them unless presented with indisputable evidence that you chose wrong.

bowlhead99

Linton wrote: »

In my view you need to force yourself to take the long view. With say 200% return in your sights the occasional 20% or even 50% fluctuation doesnt matter. Buy a wide range of investments you believe have a long term potential and stick with them unless presented with indisputable evidence that you chose wrong.

That's a very good way of looking at it.

Whether you're 25 and wanting money aside for your future kids' university fund at 50, or you're 40 and looking to retire at 65, or 65 and not looking to spend your very last pound until 90+, there are a hell of a lot of people that should be trying to play the long game of INVESTMENT for their future needs rather than using cash SAVINGS account as if their goal is just to literally save the money somewhere secure from theft for when it is needed on a rainy day.

With that timeframe, and assuming inflation can be kept somewhere near government target at maybe 2.5%, and assuming you have a modest goal of a blended average return of "inflation plus 4%" which has traditionally been available from balanced portfolios in the past, you might be looking for 6.5% a year total return. This 6.5% return compounded for 25 years turns your £100 into £483 for a 383% overall return.

If my goal is to make 383% then sure it's annoying if I lose 45% on equities from 2007 to 2009, but trying to stash my assets in cash to hide them away from the evils of the market means I miss out on the 100+% rise that follows over the next 3-4 years and gets me back on track. We would all love to avoid the fall AND get the rise by timing things perfectly but being greedy risks avoiding the rise and getting the fall. So try not to worry.

And in the non-extreme years, when you're just plodding away towards your 383% target, it doesn't really matter if you make 5% or lose 6% or make 20% or lose 17%, because the individual years stop being important when you are trying to invest over a timespan in excess of an entire generation. You just need to chip away at the target and advance towards it rather than going back towards (or below) zero too many times.

While everyone has their own comfort level around the different types of risk and volatility that they can stand while still being able to sleep at night, many of them would perhaps be able to adjust their risk tolerances upwards if they would just look past the temporary loss events which threaten to psychologically scar them for life and instead focus on the projection that tells them they will get there in the end.

Clearly if you lose 80% one year and need to make 400% just to get back to where you started, you are going to have trouble getting back on track. So if you have a feeling that certain markets are looking high, then maybe you would weight your portfolio away from those markets if you were confident in your own judgement.

BUT if you have a truly diversified portfolio, you are already weighting your portfolio away from UK equities, US equities, European equities, Asian equities, emerging market equities, private equities, smallcap equities, largecap equities, income stocks, growth stocks, UK long dated gilts, short dated gilts, inflation linked gilts, greek government bonds, australian government bonds, hedge funds, precious metals, commodities, global high yield bonds, North american corporate investment-grade bonds, developed world global residential property, UK commercial property. And so on.

Most of your money is not in these sectors. What? Then where is it?! It is in these sectors.
-But most of it is not in UK equities.
-Most of it is not in US equities.
-Most of it is not in UK short dated gilts.
-Most of it is not in gold.
-Most of it is not in real estate funds.
-Most of it is not fully exposed to emerging markets.
-Most of it is is insulated from the effects of a Japanese earthquake or a change of government in Syria, Egypt, Australia or the UK.
-When oil goes up your oil companies make money even though the people burning oil lose money.
-When people send tweets instead of letters you make money on twitter shares to offset the decline in royal mail shares.
-When people get their groceries from Amazon rather than Tesco you make money on Amazon and on Royal Mail shares.
-When Amazon sells the books as a download rather than warehousing and mailing you a physical book, Royal Mail shares and commercial property shares take a hit but internet service providers and telecoms companies serve more data and the makers of microchips for e-readers, tablets and smartphones love it.

Embrace the fact that the world changes and gets more productive and experiences economic growth and the best two ways for the average person to participate in this are:

1) get some skills and a job which pays you for being a productive member of society ;

2) When you have cash proceeds from that job that you don't want to squander on excess consumption today, invest in equity and loan finance for a large number of different types of businesses in different parts of the world to take a slice of their profits, and also lend money to governments to receive a return as a thank-you for helping them finance their societies and infrastructure.

Sure, it's hard to know which are the relatively better times to invest. So invest all the time and then you will never miss out.

Buy the whole farm.
- Have some cash cows that produce milk year in year out.
- If you want something with a shorter lifespan but more excitement, get some veal calves for the tasty tasty meat and accept you will get some criticism.
- Buy adult hens, because they throw out lots of free eggs and you can always cash them in for a nice chicken dinner.
- Don't just buy chickens, buy eggs which can grow into chickens.
- Buy lots of eggs in case you accidentally bought one or two that have an alligator or a snake inside.
- Keep the eggs in more than one basket.
- In planning your smallholding, take advice from the experienced farm hands who have been there since it was all fields
- But don't ignore the new guys who are fresh out of agricultural college, not set in their ways, and can find more reward for less risk by hooking you up with the next big thing in GM crops which the old guys are too stubborn to acknowledge
- In shepherding your flock, go up on the hills to get a good vantage point and see the big picture of everything you have and how other people are doing it.
- In looking at how others are doing it and how they might be able to help you, try not to take too much advice from wolves who might not have your best interests at heart.

Excuse the long post. I am running out of them as I've decided I spend way too much time on this forum and have given myself a completely arbritrary limit of 750 posts before I give it up in pursuit of more healthy and productive endeavours. I am kidding myself if I think I have more than 750 facts, opinions or perspectives that people really need to hear.

TL;DR: Relax, it will all be fine if you give it 25 years and make relatively sensible allocation decisions along the way. And I agree with most other replies in this thread, so mine probably wasn't really needed anyway. Cheers.

AlwaysLearnin

bowlhead99 wrote: »

Excuse the long post. I am running out of them as I've decided I spend way too much time on this forum and have given myself a completely arbritrary limit of 750 posts before I give it up in pursuit of more healthy and productive endeavours. I am kidding myself if I think I have more than 750 facts, opinions or perspectives that people really need to hear.

I think your thank count may suggest otherwise.

Hopefully after a bit of time away you'll find it within yourself to perhaps pop back at least occasionally to continue to share your knowledge. I for one have found many of your posts very helpful. Thank you.

Please don't waste one of your five remaining valuable posts responding to this either....:D

elantan

always love reading Bowelhead's posts ... i learn so much from them ... and others of course