What will happen when interest rates rise?

MFW_ASAP

Thrugelmir wrote: »

Risk comes in many forms. Far more than the average investor appreciates. Many investors struggle to distinguish between lady luck and their own investing skills. Given this is one of the longest bull runs in recent history. I suspect many are going to be shocked when volatility finally strikes. Then we'll see how their attitude to risk stands up.

There are so many people who have been driven into the stockmarket by poor savings returns and are way outside their risk levels. I'm convinced that there will be an almightly correction when these people start seeing a reversal of their fortune and bail with their monies. I've also seen my stockmarket investments double since the credit crunch, but I also know that these increased can easily be dented or possibly even reversed by a major correction.

This is why I am out of the market and in cash. I've dipped in and out with various day/week trades on big fallers that I felt were overdone - most notibly on Tesco and Easyjet and I've made a nice sum, but generally I'm happy to stay out while things start to fall apart. The first US rate rise will start the domino effect. Expect FTSE100 at sub 5000 rates within months when the herd start to panic...

Thrugelmir

MFW_ASAP wrote: »

There are so many people who have been driven into the stockmarket by poor savings returns and are way outside their risk levels. I'm convinced that there will be an almightly correction when these people start seeing a reversal of their fortune and bail with their monies. I've also seen my stockmarket investments double since the credit crunch, but I also know that these increased can easily be dented or possibly even reversed by a major correction.

Like buffalo. Retail investors move in herds. Safety in numbers. The correction may be the result of panic. Should provide some good opportunities to add to long term holdings.

mystic_trev

I moved most of my SIPP into cash early Feb. I'm finding nearly all Asset classes overvalued at the moment, and that includes Property. However, I'm not predicting 50% off by Christmas, well not property anyway :rotfl:

chucknorris

mystic_trev wrote: »

I moved most of my SIPP into cash early Feb. I'm finding nearly all Asset classes overvalued at the moment, and that includes Property. However, I'm not predicting 50% off by Christmas, well not property anyway :rotfl:

Obviously I would rather be out than in, but I don't have any major concerns about losing capital, as I won't be getting out for at least 15 years.

midnight_child

MFW_ASAP wrote: »

There are so many people who have been driven into the stockmarket by poor savings returns and are way outside their risk levels. I'm convinced that there will be an almightly correction when these people start seeing a reversal of their fortune and bail with their monies.

Took about 3 pages but we finally got back to the original question posed


Anyone know what proportion of the total value of trades are those by small private investors? If its a relatively small fraction then a load of novice PIs crapping themselves may go unnoticed.


If we do see panic selling by small holders I reckon it wont have a uniform effect. I would imagine small PIs are more likely invested in the big high street name companies that are paying a decent level of dividend. Something that will beat their cash savings rates, but on the face of it would appear to be fairly safe as you'd not expect these companies to go bust.


MC

midnight_child

Oh and before someone starts accusing me of being a creature that relieves itself in the woods.....


I am not adding any more to stocks as they do seem high, but neither am I thinking of selling up (unless a particular stock goes up enough that warrants taking a profit). I am holding for the longer term and a massive sell off would be my cue to top up.


Third rule of investing: You only lose money when you sell (at a loss).


MC

Thrugelmir

midnight_child wrote: »

If we do see panic selling by small holders I reckon it wont have a uniform effect. I would imagine small PIs are more likely invested in the big high street name companies that are paying a decent level of dividend. Something that will beat their cash savings rates, but on the face of it would appear to be fairly safe as you'd not expect these companies to go bust.

Nothing to do with going bust. To pay decent dividends companies need to generate profits. BP was the largest dividend payer in the FTSE until the Deep Water Horizon disaster. Standard Chartered has halved it's dividend. Tesco's has cancelled there's. Centrica slashed early their dividend this year. Glencore reported a half year loss today. Easy picking shares isn't it.

MFW_ASAP

chucknorris wrote: »

Obviously I would rather be out than in, but I don't have any major concerns about losing capital, as I won't be getting out for at least 15 years.

I don't understand this, if you feel there will be a large correction (and you seem to with your 'rather be out than in' comment) then why would you stay in the market and accept losses?

Better to sell out and gain from a 10/20% drop than to stay in and lose from a 10/20% loss? I know your viewpoint is that you're in for the long-term (so am I - another 15 years to go) and that prices will recover, but isn't it better to see the market recover with you having increased your investments by 10/20% than to just get back to where you are now?

chucknorris

MFW_ASAP wrote: »

I don't understand this, if you feel there will be a large correction (and you seem to with your 'rather be out than in' comment) then why would you stay in the market and accept losses?

Better to sell out and gain from a 10/20% drop than to stay in and lose from a 10/20% loss? I know your viewpoint is that you're in for the long-term (so am I - another 15 years to go) and that prices will recover, but isn't it better to see the market recover with you having increased your investments by 10/20% than to just get back to where you are now?

I don't think that there will be a large correction, I said I wish I was out, because I think the current price is a very good price to invest at, and if I was out, it would have been because I had previously sold at a higher price.

mystic_trev

MFW_ASAP wrote: »

Better to sell out and gain from a 10/20% drop than to stay in and lose from a 10/20% loss?

Not if you're stuck with a large CGT bill. It's different if you're doing it with your Pension, which is what we're doing.