What's happened to my portfolio in the last 2 weeks?!

masonic

Ryan_Futuristics wrote: »

There's not much optimism around UK and global economic prospects ... QE and some of the lowest interest rates in history have made it very hard to work out whether we've seen much real growth or whether we're just buying at increasingly stretched valuations ... But as long as there are undervalued regions and sectors, there should still be growth to be found (I'm just not confident a FTSE All Share or Developed World-ex-UK tracker will find much of it ... But then I'm a pessimist)

I'm perhaps a little less pessimistic than you, but I tend to agree that returns seen in the past few years will not be easily achievable in future. I guess the options are to (1) move into defensive actively managed equities as you mention above, (2) move into cash and/or bonds, (3) move into sectors/regions with better growth prospects, or (4) do nothing and ride it out. I remain unconvinced in the likelihood of the first option providing sufficient downside protection and sufficient exposure to any subsequent acceleration in growth - both in the case of the fund performance and my own entry/exit timing. Option 2 looks rather unattractive too, with the same timing issues and also the current issues surrounding bonds and interest rates. Option 3 is extremely difficult to achieve while remaining neutral in terms of risk, although some tweaking of current adventurous plays might be worthwhile. So, in all likelihood, I'll opt largely for option 4, hoping that my portfolio is sufficiently diversified that I'll be able to benefit from some of my higher risk plays while my core trackers are suffering.

Glen_Clark wrote: »

I recall Questor in the Telegraph recently saying it was 70%.
But I did not save a weblink.
We have to remember that most of the value of the FTSE is in a few very big companies like Shell, Vodafone, and HSBC, which do a lot of business abroad.

Interestingly, that 70% figure has been thrown around for the past 4 years or so. The data seems to have originated in a market update from the share centre in Feb 2010 and from there it swiftly entered the Zeitgeist. I do wonder whether the "about 70%" figure is still reasonable. I wouldn't imagine it had changed significantly, but it would be interesting to see whether it is still increasing, or if it has started to trend downward.

Linton

Thrugelmir wrote: »

What proportion of the FTSE constituents income is generated from overseas?

The problem I see with the FTSE constituents is not where the income comes from geographically but which industries it comes from. In a fully 100% global economy geography of itself doesnt matter. Different industries do however matter as changes are driven by technological advances and by global availability of raw materials. So I would agree with Ryan F's statement that FTSE investing is a conviction play, but not primarily for the reason he gives.

Some data from Trustnet showing for 3 different index trackers the number of sectors with more than 10% share of the index.

HSBC FTSE Allshare: 3:
Vanguard US Equity: 5
Vanguard LS 100% (Global): 7

Showing that the FTSE is much more focused on fewer sectors.

Where geography does matter is in local events of sufficient importance to invalidate the assumption that the economy operates globally, at least for the largest companies. The only one I can think of off hand as regards the FTSE is the UK leaving the EU. This will impact both the UK economy and possibly, and perhaps more importantly for our purposes as investors, the long term global financial importance of London and a FTSE listing as the EU becomes more dependent on Frankfurt.

Ryan_Futuristics

masonic wrote: »

I'm perhaps a little less pessimistic than you, but I tend to agree that returns seen in the past few years will not be easily achievable in future. I guess the options are to (1) move into defensive actively managed equities as you mention above, (2) move into cash and/or bonds, (3) move into sectors/regions with better growth prospects, or (4) do nothing and ride it out. I remain unconvinced in the likelihood of the first option providing sufficient downside protection and sufficient exposure to any subsequent acceleration in growth - both in the case of the fund performance and my own entry/exit timing. Option 2 looks rather unattractive too, with the same timing issues and also the current issues surrounding bonds and interest rates. Option 3 is extremely difficult to achieve while remaining neutral in terms of risk, although some tweaking of current adventurous plays might be worthwhile. So, in all likelihood, I'll opt largely for option 4, hoping that my portfolio is sufficiently diversified that I'll be able to benefit from some of my higher risk plays while my core trackers are suffering.

Absolutely - I'm still buying shares (because markets have crashed at this level before, but they've also kept rising to twice this level before) but I'm staying cautious, knowing what my portfolio would look like in the event of a 50-60% drawdown, and keeping plenty in cash so I can buy in that event

And agree about marketing timing - what I think we're better at is assessing risk ... So I adjust my asset allocation so I'm underexposed to overvalued regions, and overexposed to undervalued (there is an old rule of thumb "don't ever be less than 25% in the markets, or more than 50%" ... I'm certainly on the more cautious side when it's been QE propping up the markets for so long)

Overall, I try to keep my portfolio's average valuations (on CAPE, P/B and P/E - regionally and by investment) below the global average as much as possible ... So I'm buying mostly peripheral Europe and Emerging at the moment, and while they'll probably crash as bad as anything when it comes, at least you're buying cheap by historical levels (and not expensive)

A_Flock_Of_Sheep

The wheels have come off. It's all heading south from now on folks.

El_Selb

I started investing in March and each pay day since I've put in an extra £350-500 depending on what I could afford. This month (pay day on Weds) I may just step back and leave a bit in cash as PenguinJim suggests. Although how I get these 4-5% rates I'm not sure, last time I checked best I could get was 2.5%.

This does of course mean resisting the voice in the back of my head urging me to buy into JPM India / Woodford / Murray Int IT (not to mention the buy while it's cheaper argument) as I think I'll feel more comfortable sitting it out for a month or two 1. to see where the market's going and 2. to start accumulating some cash (my CSD portfolio of investments are all I have at present).

Totally agree Flock of Sheep - I'm probably more risk averse than I thought! I'm not running scared... but I think I do need to take stock and work out my objectives and how I should try and meet them in the current climate. Perhaps subconsciously I am saving for a house deposit in 2-3 years and I just need to make it explicit and build my investing/saving around that.

masonic

El_Selb wrote: »

I started investing in March and each pay day since I've put in an extra £350-500 depending on what I could afford. This month (pay day on Weds) I may just step back and leave a bit in cash as PenguinJim suggests. Although how I get these 4-5% rates I'm not sure, last time I checked best I could get was 2.5%.

High interest current accounts.

Totally agree Flock of Sheep - I'm probably more risk averse than I thought! I'm not running scared... but I think I do need to take stock and work out my objectives and how I should try and meet them in the current climate. Perhaps subconsciously I am saving for a house deposit in 2-3 years and I just need to make it explicit and build my investing/saving around that.

With any luck this is just a short term drop and we'll see an end of year rally, which will be your opportunity to sell up before any significant falls. Investing without first holding some cash savings (and doing so in equities with money you might need within a decade) is not a great idea.

margaretclare

With any luck this is just a short term drop and we'll see an end of year rally, which will be your opportunity to sell up before any significant falls. Investing without first holding some cash savings (and doing so in equities with money you might need within a decade) is not a great idea.

How on earth does anyone know what money they might or might not need within a decade? I have not got a crystal ball and never had one!

TCA

margaretclare wrote: »

How on earth does anyone know what money they might or might not need within a decade? I have not got a crystal ball and never had one!

I think masonic was probably referring to this below from El Selb.

El_Selb wrote: »

Perhaps subconsciously I am saving for a house deposit in 2-3 years and I just need to make it explicit and build my investing/saving around that.

To El Selb - I think you are correct in re-evaluating your objectives. The current state of the markets is a minor blip in the grand scheme of things, so if you're in it for the long haul, you wouldn't be halting your monthly investments at a time when they are cheaper to buy than when you started. If saving cash for a house purchase is a real consideration, then the stock market is a dangerous place to do it.

grimsalve

Ouch - mine seems to have nose-dived over the last few weeks

Nothing else to do apart from just wait for things to pick up again. For me it's only a paper loss at the moment.

margaretclare

TCA wrote: »

I think masonic was probably referring to this below from El Selb.



To El Selb - I think you are correct in re-evaluating your objectives. The current state of the markets is a minor blip in the grand scheme of things, so if you're in it for the long haul, you wouldn't be halting your monthly investments at a time when they are cheaper to buy than when you started. If saving cash for a house purchase is a real consideration, then the stock market is a dangerous place to do it.

Thanks for this. Obviously, if someone is saving for something specific like a deposit on a mortgage, that's different.

I am saving because we simply do not know what our needs may be in time to come. My savings have grown far better in the last few years in the stock market than they would have done otherwise, even allowing for the ups-and-downs, 2008 etc. We live simply but comfortably, we have all we need, and what else would one do with one's money?