Equities, why am I so irrational?

chucknorris

You might well laugh at this (I say that because I know that I am being irrational) but at the moment most of my wealth is stored in property, which has performed very well since I first invested in the early 90's. But I am 57 now, and I am looking forward to having a less hassle investment such as shares in my later years. But although I don't concern myself about property crashes (happy enough with the rental income, knowing I'll sell when the market is better, so interim capital value is not a major concern), I can't seem to adapt this carefree approach to shares (funds/ETF's not individual shares obviously). I end up worrying about future crashes, but deep down I probably know that in reality it isn't any different to property crashing, yet on the surface I can't seem to overlook it, like I can with property.

I don't know why this is, maybe it is because shares are more liquid, and I'm 'trapped' in property anyway if a crash does happen (can't really do anything about it, except grin and bear it).

Am I being totally irrational, or is there some merit in my fears?

Nosler

chucknorris wrote: »

You might well laugh at this (I say that because I know that I am being irrational) but at the moment most of my wealth is stored in property, which has performed very well since I first invested in the early 90's. But I am 57 now, and I am looking forward to having a less hassle investment such as shares in my later years. But although I don't concern myself about property crashes (happy enough with the rental income, knowing I'll sell when the market is better, so interim capital value is not a major concern), I can't seem to adapt this carefree approach to shares (funds/ETF's not individual shares obviously). I end up worrying about future crashes, but deep down I probably know that in reality it isn't any different to property crashing, yet on the surface I can't seem to overlook it, like I can with property.

I don't know why this is, maybe it is because shares are more liquid, and I'm 'trapped' in property anyway if a crash does happen (can't really do anything about it, except grin and bear it).

Am I being totally irrational, or is there some merit in my fears?

perhaps you are more in control of property? we've all owned shares that we've "liked" before they were compulsorily taken over


I think getting rid of property investment as you get older is very wise.

Glen_Clark

Perhaps because you can see the price of shares fluctuating by the second?
Wiser heads than mine have said that you should only look at the price of your shares once a year when you have to rebalance and check out the tax position.
Looking more often leads to elation and depression as shares naturally rise and fall, which often leads to bad decisions.

In_For_A_Penny_2

chucknorris wrote: »

Am I being totally irrational, or is there some merit in my fears?

I think its normal human psychology - you have experience with property and in the time you have invested, it has done very well for you. Equally investors in equities who have enjoyed good returns will have more confidence going forward.

I suppose you have to decide what is the best investment for you at this point in your life regardless of how you have got here.

Certainly with retirement looming I would not want the hassle of managing property.

chucknorris

Thanks, all good replies and have replicated what I was thinking myself, but I wanted to see what others thought. Not having much experience with owning shares (apart from ISA's which are only a small part of my portfolio) doesn't give me anything to draw comfort from like property. But as In for a penny said the hassle that can come from property isn't what I want in my hopefully peaceful retirement years. So my plan is to sell up sometime before the next crash, so probably/possibly in about 8-10 years, depending on the market. I don't want to try and sell at the very top because of the danger of waiting too long, so I'll probably do a staggered sell off.

mgarl10024

I suspect it is because you can see/feel a property, whereas shares are more ethereal and less tangible.

ChopperST

Chuck if I recall you are only invested in trackers - correct?

If you are taking a passive approach you need to ignore the noise and stick to your long term plan. If you are panicking then perhaps you are invested above your risk profile and rebalancing more towards defensive assets would be wise?

Also avoid looking at your portfolio except for when you are rebalancing your asset allocations? I personally rebalance 4 times a year and here an excellent article explaining why - http://www.marketwatch.com/story/the-right-way-to-rebalance-your-portfolio-2014-02-18

Another motivational read is the Coffeehouse investor by Bill Schultheis.

I think there are a few PDF copies knocking about online but the Kindle version is not too badly priced and its a short and concise read. I recommend reading the section about "the Dow having a cow."

You've gone from an tangible to an intangible asset so you are out of your usual comfort zone. If I was you I'd just tell myself how well I'd done from holding property over the years!

gadgetmind

Once you've been invested through a few crashes, slumps, and wobbles, you realise that not only aren't they something to be feared but they actually benefit you in the long run. Your ongoing investment and dividend reinvestment buys you more "stuff", and uncorrelated assets give your portfolio and extra kick as and when you rebalance.

Of course, you get less benefit from this effect if not continuing to invest and to withdraw dividends, so you need to be more careful. Many choose income oriented portfolios so they aren't eating into capital, with Investment Trusts being the traditional lazy way for widows and orphans to get income with some growth alongside.

And all of the above assumes diversity among asset classes, territories, sectors and companies.

Thrugelmir

chucknorris wrote: »

Am I being totally irrational, or is there some merit in my fears?

As one gets older you become more risk adverse. As you've seen it all before. Despite the optimism of the younger generation who only ever encountered boom times. Bad times do happen. Economies are cyclical. Irrespective of politicians claims to have magical powers.

The Great Financial Crisis really only impacted the banks. Huge sticking plasters were stuck all over the place in order for the world to continue as normal. There was no real recession.

You like property. I prefer shares. That's a reflection of our (working) backgrounds and what we know really well. Therefore we feel comfortable with investing in these sectors. I've moved from collective funds to single shares. As I like to know what I'm investing in. Akin to you knowing a property that would make a good let.

Stick to what you know. Stick to your principles. Then you are unlikely to go wrong.

gadgetmind

Thrugelmir wrote: »

You like property. I prefer shares.

Both have a place, but I can invest in equities etc. while still doing my full time (and a bit!) job, whereas I'd find rental property to be a hassle.

As a result, I'm about 1/3rd property (home!) and 2/3rd investments.

TheTracker

The endowment effect is possibly part of it. Forgoing (selling) the familiar may feel like a loss, even though you've made money from it.