Timing the market

In_For_A_Penny_2

Like many, over the past few years I’ve been drawn to investing as a result of the paltry interest rates on offer from high street banks. Although I have read extensively I still struggle with a few concepts of investing.

Any views from more experienced investors would be very welcome!

Primarily it is the issue of trying to “time the market” which I accept is impossible. Yet every investor inevitably times the market, both when they buy into it and also when they “sell up”. I understand one can “drip feed” but this does not negate the latter.

Also the concept of “investing for the long-term” is a fluid notion. Gradually, as your long-term investment horizon draws closer to a time you foresee yourself “needing” the money – be it for that retirement home, yacht etc. you are by definition invested for the short term.

How do people approach that stage in their investment lives? How does one begin to “draw-down” on investments? Gradual movement into less risky assets classes - bonds (??) for example?

sabretoothtigger

Buy monthly and I think most important is you choose the right market to begin with.
FTSE has more foreign earnings then actual UK business, I believe that is still correct and its also got large amounts of commodities like oil in there.

Could be the best going forward or it might be best to go with Asia pacific as they increasingly manufacture goods we import. That decision is probably most important

N1AK

In_For_A_Penny wrote: »

How do people approach that stage in their investment lives? How does one begin to “draw-down” on investments? Gradual movement into less risky assets classes - bonds (??) for example?

I think there are three fundamentally sound options:

• Take money out as required, over 20+ years the market value should average out ok
• Move gradually out of S&S into bonds/cash/assets for an extended period prior to needing it
• Remove the majority of funds when the value is 'good' prior to needing them

The third option goes against normal advice, and isn't likely to be what I do, but has some benefits. If you were looking to retire in 10 years and your funds are sufficient to provide everything you need, then moving into safer investments could be rational. Odds are that you will get a worse return than if you stayed in S&S but you can 'lock in' the value at a level sufficient for your needs.

Obviously you could combine these options. You could for example immediately swap 30% for safe investments now, transfer another 40% to safe investments over the next 10 years and then withdraw 2% per year of the balance post retirement.

dunstonh

Primarily it is the issue of trying to “time the market” which I accept is impossible.

it is.

Yet every investor inevitably times the market, both when they buy into it and also when they “sell up”. I understand one can “drip feed” but this does not negate the latter.

I dont and you will find most dont.

Also the concept of “investing for the long-term” is a fluid notion. Gradually, as your long-term investment horizon draws closer to a time you foresee yourself “needing” the money – be it for that retirement home, yacht etc. you are by definition invested for the short term.

And you adjust your asset allocation accordingly in the lead up.

Thrugelmir

In_For_A_Penny wrote: »

Primarily it is the issue of trying to “time the market” which I accept is impossible. Yet every investor inevitably times the market, both when they buy into it and also when they “sell up”. I understand one can “drip feed” but this does not negate the latter.

I buy and sell investments not the market. So I'll drip feed into a new holding over a period of time. Likewise I'll sell when my gut instinct tells me too, based of course on hard financial data or a news items that catches my attention. So I'm not adverse to selling at a loss if I consider there to be a better investment opportunity elsewhere. Nor will I panic if a share price drops 15%. If the fundamentals for the business are good, i.e. profit/cash flow / order pipe line etc. There's a high probability that a further investment will be made.

Rob_192

OP

It might be useful to explain my views on this. There is a common misconception amounst people considering investing that you make money by buying shares at a given price and selling them at a higher price (or lose money vica versa). Whilst this is one method of investing, it's one only really suited for those who know what they're doing and are prepared to take the risk.

In my case, I follow an investment strategy commonly known as HYP - High Yield Portfolio and this involves buying high yielding shares and holding them for the long term, primarily to reap the dividends. Obviously one hopes for some capital growth also, but this is secondary.

Using this approach, timing the market is not so critical. I don't ever intend selling the shares I have bought and see myself holding on to them for ever with them paying me an income till I drop. I don't buy funds, merely shares and make sure my portfoilio is well diversified across a wide number of sectors. My costs are therefore purely my initial purchase costs which I try to keep to little more than 1% (by buying a sufficient value in each tranche) and until very recently I paid nothing to hold the shares, although a small platform fee has recently crept in.

Timing is still important to me and I still try to look for value - better to get a few extra shares for your money by buying when the price is lower, but this is incredibly difficult to judge and whilst I firmly believe I get this right more often that I don't, I suspect in truth I am kidding myself!

If however, you are considering value shares and looking to make your money purely on the fluctuation in share prices, then you need to know what you are doing, or be very lucky. For one thing you have to cover your buying and selling costs before you make anything.

If you are considering funds, just remember these are generally speaking just a basket of investments but with somebody doing the buying/selling etc for you and charging you a hansome fee for doing so. If funds is your chosen route then do consider low cost trackers. The reason I actually got into the HYP approach is that when I started analising what was in many of my most successful funds, I kept spotting the same old faithfulls and in the end I thought 'why not just buy these direct' and avaoid all the fees.

R

lozzy1965

Previous post echos everything I believe about shares and funds. If you want to move into safer investments when you approach retirement you will be hard pushed to beat high yield, big company shares for income and safety.