Strategy for a downturn

NotSkint

If your s&s ISA is maxed out for the current FY and the market drops to create a buying opportunity what are your strategies for benefitting from the lower valuations. Do you just purchase outside of the ISA wrapper, ready to transfer next FY, do you tend to hold off using the full ISA limit in case such a downturn occurs, do you just average your purchases throughout the FY, or do you do something completely different. Interested in people's strategies, please share.

masonic

I drip feed, but I do that mainly because that's how I get paid. I'm not in the habit of holding back money to wait for dips because I never know how long I'll have to wait.

Your_Hero

You rebalance your portfolio to sell the higher performing ones and buy the lower valued ones.

NotSkint

Thanks Masonic. Drip feeding is obviously good for averaging and like you say you never know when the market is going to dip. I've used my full allocation, without really thinking about averaging, so if there is a dip I would want to purchase more of the same funds to bring my price down and benefit earlier from the market recovery. Then again it might not dip before next FY or beyond anyway.

NotSkint

Thanks Your Hero, that works if some of your portfolio has done well, but what if it has all dipped. I haven't been investing for very long, so it is more likely that if there is a dip in the near term, I wouldn't be in the position to rebalance as maybe all my funds would dip to different degrees. I would be looking to purchase more to compensate, but would have lost the ISA allowance.

masonic

NotSkint wrote: »

I've used my full allocation, without really thinking about averaging, so if there is a dip I would want to purchase more of the same funds to bring my price down and benefit earlier from the market recovery.

If you are lucky, the next dip will be a major crash and last well into the next tax year.

NotSkint

Yes, I was thinking of a big dip/crash rather than the usual volatility. I suppose it would take a while to recover, so the opportunity to buy at a low would be present for a while. :rotfl:

jimjames

Last time the dip was from 2007 to 2010 so you'd have plenty of time. It's only with hindsight we know the low point.

planteria

agreed. & just thinking that, over the longer-term even investing the full ISA allowance in one lump sum each tax year is still a 'drip feeding' of sorts. i have generally been investing my ISA allowance when my finances made it most convenient. at the moment i am fairly comfortable hanging off from putting this year's allowance in, and may leave it until early next year.

lozzy1965

But if, and while, the market rises, you are missing out on gains.
It's impossible to predict exactly when the next downturn will be, my view is, ride the waves - up and down - whilst looking for value wherever I can.

RickyC_IFSWP

Regular savings/drip feeding and regular rebalancing are the best you can do if you wish to reduce exposure to market timing risk.

To answer your question, to benefit from market gains, then yes you should invest outside the ISA wrapper with a view on moving them across once you have new allowances.