Are markets expensive and about to crash

Linton

talexuser wrote: »

Well the US hedge funds are leveraged with borrowed money to put into shares to a level never seen in history,
http://www.telegraph.co.uk/finance/markets/11066137/Spectre-of-1929-crash-looms-over-FTSE-100-as-traders-take-on-record-debts.html
so yes, a correction will happen.
The only question is when and how much. 10-20% we can recover without that much pain, the problem is if it becomes a major 40 or 50% crash.

Why is this a problem? We have had them in the past. If its a problem to you, I would take that as an indication you are investing beyond your risk acceptance.

A correction will happen, a bubble will happen. The trouble is we dont know which or when or which markets will be affected.

gadgetmind

Linton wrote: »

A correction will happen, a bubble will happen. The trouble is we dont know which or when or which markets will be affected.

A lot of people have been predicting a crash ever since the lows of 2009. They sat on their money/hands through the turmoil of 2011, and the madness of 2012/2013. They are still predicting a crash, but their confidence is waning.

When they finally decide to get back into the market is when we'll see the next big drop. The timers will then move back to cash, and we'll have rinse and repeat.

If you think some markets are toppy, then rebalance to ones that aren't. If you think some asset classes are over-bought, then reduce exposure. But don't overdo it as you're just as likely to be wrong as right.

talexuser

Linton wrote: »

Why is this a problem?

Simply the fact it takes longer to get back to starting point compared to more normal ups and downs, nothing more than that. The idea that it signifies anything about my risk acceptance with zero idea of my investments is quite bizarre.

Sobryma

I would just pick your risk level/asset allocation you feel comfortable with, then stick with it.
Don't try to time market.
Mix active/passive as you see fit, but as Gadgetmind says getting the right active fund in advance is quite a call for a private investor.

If you are confused or concerned get a manager or IFA.

ExMugPunter

As I have 30 years before I need to think about cashing in, I hope there is a large correction just around the corner.

It'd be great to carry on buying the same 'stuff' I am buying now but with a 50% discount.

Drops in the markets should be seen as an opportunity, not a threat.

If you don't think you have the time ride out a 50% drop until recovery, then you have your portfolio mix wrong.

Thrugelmir

Chenner wrote: »

I wonder if the bull markets have some way to run yet despite all the doom merchants.

A bull market driven by investors chasing yield is simply not sustainable. Research, research, research to eek out anything with value. I struggle to find more than a couple of shares a month that are even worth tracking let alone investing in. So a correction would suit me. As I need to find somewhere to reinvest the dividend income I'm generating.

Glen_Clark

I have not yet lost money on a managed fund I have bought because they have all been Investment Trusts on a discount, the bigger discount the better - so the fund managers are a liability that is already priced into the shares. But big discounts on Investment Trusts have become so hard to find I haven't bought any lately - only ETFs

gadgetmind

Templeton was on a discount of about 10% when I bought a few £k each for our SIPPs a few weeks ago. Blackrock World Mining was also well discounted a while back but I haven't checked lately.

I also tend to use ETFs as the backbone of my portfolio and just dabble with ITs and other exotica in a small corner by buying into unloved areas on big discounts.

I actually have too many holdings now in this area, particularly in my SIPP, and should perhaps start a new thread discussing while I should ditch as many have bounced back nicely.

gadgetmind

Thrugelmir wrote: »

I need to find somewhere to reinvest the dividend income I'm generating.

Our portfolios are also throwing off a lot of cash, which is mostly accumulating as cash for now. I'm fairly relaxed about this, but one portfolio is at 10% cash, which is the point at which I should be looking to rebalance.

Linton

Thrugelmir wrote: »

A bull market driven by investors chasing yield is simply not sustainable. Research, research, research to eek out anything with value. I struggle to find more than a couple of shares a month that are even worth tracking let alone investing in. So a correction would suit me. As I need to find somewhere to reinvest the dividend income I'm generating.

If you are investing for the long term rather than trading it cant be too difficult to find something that is better than cash. There are plenty of solid companies paying a reasonable dividend. Or do you believe that a fall is long term compared with your investment needs? In that case investing at all seems foolish. By buying now you might not get the short term notional profit, but I would contend that this is less important than portfolio structure.

So if I had dividend income coming in which I needed to invest rather than spend I would look at using it to keep my portfolio balanced.