Is a Crash Likely (2015-ish)? Should a New Investor Wait a While to See?

arbster

Damage wrote: »

I'm currently regretting my stocks and shares ISA choice, which I made before I started reading up on all this. If I can get out of it with minimal losses and keep my ISA in cash for the moment, then I'll probably do that. That's another thing I have no idea how to do, so I need to read up on how to do that as well.

Depending on the platform, you can usually just sell all your funds and leave it in cash, but typically with no interest. I probably wouldn't suggest you transfer out to a Cash ISA and back in again, as these things seem to take weeks to achieve (for no good reason). If you simply want to get out of "high-risk" active funds and don't feel ready to get back in to an index-tracker, then selling and holding cash is probably the best option. Then do what I'm doing and finish reading the book as quickly as possible!

Personally, I figured that I know enough to know I want to be in tracking funds, and the best option available to be was L&G MI5, so I moved everything over to that. I'll finish reading the book and drip feed the remaining £12k of my 2015/16 ISA allowance into the appropriately balanced set of funds between now and March.

Damage

Thanks, yes, I've found an article on the Telegraph website which looks helpful:

http://www.telegraph.co.uk/finance/personalfinance/investing/isas/10923281/New-super-Isas-How-to-transfer-safely-from-stocks-and-shares-to-cash.html

Yes, same here regarding tracking funds. If I hadn't experienced that problem with the M&G website that I was going on about in my other thread then I'd have the ISA I wanted to start with. I only ended up with my current ISA after ending up at Hargreaves Lansdown's website, then (with zero knowledge - my own fault) followed their suggestion in the investment ideas section!

Random47

Correction anticipated but what and when will activate the trigger point, only history will answer that.
Though fear predictions could accumulate and end up being cause.
See interesting article here:
http://www.hussman.net/wmc/wmc150615.htm

Damage

Thanks for the article link. I'll have a look at that in a moment.

From reading articles recently it seems that the EU situation with Greece is a potential problem, then I have been reading that the US stock market is overvalued, and the Chinese stock market is massively overvalued. I really don't know enough about any of this as I'm only two weeks into reading about investing, when beforehand I had absolutely zero knowledge and no prior involvement in anything to do with it!

Glen_Clark

Greek default... possibility of Britain leaving the EU... rising interest rates.. everything I can see on the horizon looks negative for share prices, although some of the bad news is already priced in.
But if Britain's National debt keeps rising at the current rate then hyperinflation looks inevitable. In that situation those who lose the least will be those holding assets including shares in companies. Those who lose the most will be holding cash. Or am I missing something here?

atush

Damage wrote: »

Thanks, it's interesting to see an example of how one might react to the level of an index.

I have been looking at investment trusts and a few of the same names keep cropping up, so that is something I will look into when I have finished reading my book.

I think it is interesting too, but I dont do it.

As i drip feed and am still int he accumulation phase, I just keep putting money in regardless of the ftse. I may change funds/markets sometimes, but dont follow the ftse index slavishly.

fairleads

Hi Damage

"Another study (1981 to 2003) showed that to miss the ten best days of trading means that you miss out on 40% of the returns. To miss the best fifty days (less than 1% of the study period), would mean missing out on over 85% of the returns - and that's without accounting for costs and taxes "

Where is the logic/reason/ evidence to support this statement?

Damage

fairleads wrote: »

Where is the logic/reason/ evidence to support this statement?

It's on page 62 of 'Smarter Investing: Simpler Decisions for Better Results' by Tim Hale (2006 edition), and the source he gives is 'Dow Jones Industrial Average'.

jamesd

Damage wrote: »

Another study (1981 to 2003) showed that to miss the ten best days of trading means that you miss out on 40% of the returns. To miss the best fifty days (less than 1% of the study period), would mean missing out on over 85% of the returns

That's simultaneously true and grossly misleading. Some of my best days had gains across a dozen or so funds of 5.5%, 3%, 9.3%, 4%, 4.2%, 3.6%, 3.5%, 4.9%, 4.8%, 3.0%. Strong support for the argument? Not quite. Here's the more complete picture, with days of movements under 3% skipped:


05/09/2008 -4.55
10/09/2008 -3.70
18/09/2008 -3.77
19/09/2008 5.49
30/09/2008 -3.91
01/10/2008 3.18
03/10/2008 -5.77
06/10/2008 -4.20
07/10/2008 -3.28
08/10/2008 -4.31
10/10/2008 -5.50
14/10/2008 8.29
16/10/2008 -6.35
21/10/2008 3.96
23/10/2008 -6.78
29/10/2008 4.20
30/10/2008 3.64
06/11/2008 -4.13
10/11/2008 3.53
14/11/2008 4.86
17/11/2008 -3.73
20/11/2008 -3.88
25/11/2008 4.76
09/12/2008 3.00

For the whole period there was a drop of 31.85% across the dozen or so funds involved. Should I be happy about the ten excellent days and ignore the large overall drop? Nope. It's misleading because the big gains tend to come as reactions to big drops in highly volatile times.

The real long term gains tend to come in steady non-spectacular increments as the market climbs the usual "wall of worry". Not the high volatility times that make the headlines.

jamesd

Damage wrote: »

So, to the experienced investors in here, considering the above, if you currently had little or no money invested at the moment, would you hold on for a little while to see if a crash happens this year?

You're using too narrow a view. Investing is not just shares.

Today I invested a few thousand Pounds at 14% annualised interest rate for five months via Ablrate. Normally 10-12% is available there. Investing, so not risk free, but always secured on physical property. there are many others. The P2P ISA hasn't arrived yet but it'll get even more attractive when it does.

Earlier this year I invested in a range of VCTs, mostly the Albion VCT. That's secured on physical property, much of which was banned for new VCTs because the risk is too low. It pays around 10% tax free a year and I got 30% of my purchase price back in tax relief from HMRC (capped at the income tax actually payable in the tax year of purchase). In effect this eliminated almost all of my income tax bill last tax year.

So when you think "crash", also think "where" and "what will be least or not affected".