This correction-type thingy...

Glen_Clark

Damage wrote: »

Does anyone currently think that the market has actually bottomed out and is now going to go up? The impression I get is that most people think the opposite

My understanding is that if most people thought the FTSE was going to fall to 5000 it would already be there because most people would have sold. Wheras if most people thought it was going to rise to 8000 it would already be there because most people would have bought. So its already where the average person thinks it should be.

Glen_Clark

colsten wrote: »

I have concluded that those who are for active investments invariably have ulterior motives, which are often very difficult to detect. IMO, for people who don't have the time/inclination for trading and who just want to invest, passive is - as Tim Hale says - smarter. There is no evidence that active investments produce better results than passive ones, and there is no evidence that the vast majority of the public has any appetite for trading.

Tim Hale appears to have missed, or at least not mentioned, the fact that actively managed Investment Trusts can be bought at a discount, so the Fund Managers are a liability that is already priced into the shares

atush

Damage wrote: »

Because, as I acknowledged earlier, I acted a bit prematurely, before I knew what I was doing. Once I started reading up on investing I realized I should have waited before I set up my ISA. The intent wasn't to do anything short-term, but that's just how things turned out as I have backtracked a bit in order to start again when I have learned more.

My timescale is 15 to 20 years.

You need to read up a bit more.

As selling (even after admitting your impetuousness) was a bad move for a long term investor.

And maybe you aren't ready for lump sums, you need to look up (and understand) pound cost averaging and invest monthly?

atush

badger09 wrote: »

@ atush and Gadfium

If you have a look at some of Damage's earlier posts, you will see that he/she was rather impetuous and leapt into investing through HL without much basic knowledge. He/she very soon acknowledged this and has embarked on substantial research.

I hope I'm not misrepresenting, but he/she has opted to get back as soon as possible to where he/she was before the 'blind leap', in order to make a fresh start armed with some more knowledge. I have every sympathy with their thought process, even though I chose a very different route, but was in grave danger of paralysis by analysis

Sorry, but back reading other posts of a member isn't my style. I comment on the post at hand.

Lots here like to research what other people say, to castigate them, make fun of them or debunk them. I dont have that much free time to devote to it?

As I said before, if you are a new investor and likely to sell in a panic, you are better off investing monthly instead of lump sums. that way when drops occur you get more shares/units for your monthly investment which will boost your returns when the market goes up again (as it always does in the end).

TheTracker

Glen_Clark wrote: »

Tim Hale appears to have missed, or at least not mentioned, the fact that actively managed Investment Trusts can be bought at a discount, so the Fund Managers are a liability that is already priced into the shares

Nope, my 2nd edition has it covered in 13.3 and it seems in the 3rd edition he mentions it in 9.3. In fact he says almost exactly the thing you said that he doesn't mention. Check your copy, if you actually have one.

But it doesn't really matter whether the fund management is factored into the cost or aside from it, as you say it's a liability either way.

2010

The Ftse 100 touched 3840 in 2008.
At the moment it stands at 6187, so still plenty of blood to hit the carpet yet.
Lot to be said for cash.

Glen_Clark

TheTracker wrote: »

Nope, my 2nd edition has it covered in 13.3 and it seems in the 3rd edition he mentions it in 9.3. In fact he says almost exactly the thing you said that he doesn't mention. Check your copy, if you actually have one.

Just Testing I have just found it on page 165 of my 3rd Edition.:o Thanks for pointing it out.

TheTracker wrote: »

But it doesn't really matter whether the fund management is factored into the cost or aside from it, as you say it's a liability either way.

It matters to the investor whether the fund managers or any other liability is factored into the price you pay for the shares when you buy them. My theory is that active fund performance is far more a matter of luck than judgement. So you can sometimes pick one up at a wide discount because its just gone through a bad period. But the management and prospects are no worse than a fund that has just had a good period so is trading at a premium. It has worked for me ii the past.

Glen_Clark

2010 wrote: »

The Ftse 100 touched 3840 in 2008.
At the moment it stands at 6187, so still plenty of blood to hit the carpet yet.
Lot to be said for cash.

That was before they had printed another £375bn.
My biggest worry with 100% cash would be holding it all in Sterling.
Most countries have their own idiocy-of-choice. Ours is that high house prices are a good thing. One aspect of this is that inflated housing equity makes people more relaxed about taking on more consumer credit – and current official projections assume (and require) a big surge in household borrowing which is already at alarming levels. Housing is a capital sink tying up - uselessly - vast sums that could otherwise have been invested profitably to bring down the current account deficit.

chucknorris

Damage wrote: »

Because relative to the possible eventual extent of the downturn, it could well constitute having sold at (or near) the top of the market. That remains to be seen. I bought it at what appears to be right near the top of the market, so to sell further into a downturn would be buying high and selling low, wouldn't it?

If you buy now, then the market falls by another 10 or 20%, how mad will my sale and 1.3% shortfall look like compared with your 10 or 20% loss? If that happens, then how would my re-investment at the lower level look madnesswise, compared with your early-downturn investment?

But as I said earlier, I'm not going to lose any sleep over being down 1.3%. My ISA is only just over 13% of my total capital, the rest of which is (effectively) in cash, and I won't be risking any of that until I know a lot more about investing.

Obviously it isn't pleasant when you invest and then watch your investment fall, but that is part and parcel of the game. I've seen my shares value drop too (most of us have), but the thing annoying me most isn't that it has dropped, it is that I can only invest a few more thousand to take advantage of this current buying opportunity. You might say, but it might still fall further, yes it might, but I am confident that sometime in the next 5 years, the current price will look cheap. Only luck allows you to buy at the very bottom and sell at the top, and no one is lucky all the time. So I'm satisfied if I can buy cheaper than I eventually sell at. In 2008 our property portfolio was over £1m down from the 2007 peak (still well up overall), today it is about £2m up from that point. It only matters when you sell, so the thing to do is DO NOT SELL.

Pincher

Dumping and buying again incurs dealing charges and stamp duty.

I bought some HSBC shares, for £12.90, plus 0.5% stamp duty.
If I sold now, that's £12.90 dealing charge again.
Buying again say in three months time incurs £12.90, plus 0.5% stamp duty again.

So, the panic reaction will cost me £12.90 x 2 + 0.5%.

If the deal is for £1,000, that is £25.80 + £5 = £30.80
HSBC would have to drop down by 3.08% for this reaction to make sense.

If the deal is £10,000, the difference is £25.80 + £50. = £75.80
So HSBC has to drop by 0.758% for this to break even.

As the annual dividend is around 5.6% based on my purchase price, the shares will have to drop by 6.4% (~ 0.758% + 5.6%) for me to declare a loss after a year.

Blind faith that it will bounce back, and a continuous stream of dividend in the mean time, means that I will not be selling. If it drops to £4, I think I will borrow money to buy some more.