Do you keep cash aside to invest after next crash?

mapk

TheShape wrote: »

If I'm understanding this correctly, perhaps the thing to do at present is continue with your regular monthly payments into your chosen stocks and shares fund(s) but now maybe isn't the best time to move the entire balance of your BOS Vantage accounts into stocks and shares?

That's right. The best time will be June 11th 2017

Apodemus

For the last couple of years I have been about 50/50 cash to stock market. This month that is moving to 25/75 because half the cash is going into pension (split evenly between SIPP and additional payment to DB scheme). The 25% remaining as cash is still above my emergency requirements, so there is lee-way to invest if any bargains appear.

However, I do share the nervousness of where the market is at present. The Snapchat IPO and subsequent rise on the market reminds me of previous tech stock bubbles and while it is nice to see my Unilever shares worth so much more than when I bought them a couple of years ago, that, too looks to me like a sign of over optimism. Of course, i am in these for the long-term, I could take a 50% drop and still be not too far off when I bought them and the dividends would (probably) keep rolling in, so nothing for me to be concerned about. But that doesn't mean I would want to buy more at the current price!

economic

if you count your home home in your "portfolio" i am 30-30-40, cash-equity-property split. good to keep cash when markets are high to take advantage of a crash/correction.

Apodemus

economic wrote: »

if you count your home home in your "portfolio" i am 30-30-40, cash-equity-property split. good to keep cash when markets are high to take advantage of a crash/correction.

Ok, then I would also want to include pension value, although I do think that would be getting off topic since I am neither going to sell my house nor cash in my pension to invest during a crash!

I guess my balance sheet would see a current assets split of 56% s&s, 43% cash, but a total assets split of 52% pension, 34% property, 8% s&s and 6% cash.

fun4everyone

Where would a multi millionaire keep even 10% cash though. I always wonder this. There is only so far current accounts and regular savers can go.

Dreaming of rich person problems!

BananaRepublic

jdw2000 wrote: »

A question I asked in a thread today, but wondered if many do this.

I imagine most investors keep the majority of their cash invested and would therefore be unable to invest much after a crash. Are there any keeping money aside for this purpose?

There is at least one study, and probably many, that compare 3 people investing over a reasonably long period, 10 years say, using historical market data and three strategies:

1. Invest regular amounts
2. Only invest after a crash when the market is at a low.
3. Only invest at market peaks.

Obviously 3 does not do so well. But 1 does much better than 2, due to the time in the market factor.



So no, I do not deliberately set money aside for crashes.

Glen_Clark

fun4everyone wrote: »

Where would a multi millionaire keep even 10% cash though. I always wonder this. There is only so far current accounts and regular savers can go.

Dreaming of rich person problems!

Good Question. As I recall Warren Buffet advised his wife to invest 90% in the S&P 500, 10% in bonds. I can only guess that is in case of the possibility (however unlikely) of the S&P500 having an unprecedented crash.

Glen_Clark

jdw2000 wrote: »

You've sold up then?

Problem with selling up is you would be holding it all in one asset class (cash) which doesn't look good value either..
So the advice, as usual, is diversify and chill

MPN

dunstonh wrote: »

You cant time the markets. However, nothing looks value at the moment. Every asset class looks poor value or overpriced. You are almost looking at the least worst option.

I totally agree so why would anyone invest at the moment? The only way would be to drip feed monthly, but even then I think on balance I will risk losing whatever rises in the market that may occur and 'wait and see' for the moment!

bowlhead99

MPN wrote: »

I totally agree so why would anyone invest at the moment? The only way would be to drip feed monthly, but even then I think on balance I will risk losing whatever rises in the market that may occur and 'wait and see' for the moment!

People will still invest because using your capital for something (investing in ownership of profitable companies or providing loans to creditworthy companies and governments) generally produces better long term returns than NOT using your capital for anything, just keeping it in a bank deposit with 100% capital protection but no inflation protection.

So yes, things are more expensive than they could be. In 2009, 2010, 11, 12, 13, 14, 15, 16 and in both January and February this year, people said things were too expensive as equities and bonds had both been going up for a while and it wasn't sustainable. So, for seven years in a row some people have made the "wrong" call, believing there to be a cheaper entry point just around the corner, which didn't come. Now even if there was a 20% crash it would still have been better to be invested rather than not invested for most of the seven years, because having invested then, you could have easily afforded the crash.

At some point there will be a crash and an entry point cheaper than the all time high. We know that. We just don't know when.

Personally I am heeding the comments dunstonh made about a frothy market. When someone who knows nothing about investing wants to move from cash to leveraged equities because "everyone is telling him to, and the rates to renew his fixed cash ISA are a bit rubbish", it is obvious that money is flooding into the sector that won't be there long term.

And you see newbies on this forum all the time, "never invested before but cash rates are crappy, I heard 80% equities mostly overseas like in that VLS product would be a good start, how can I do this when I don't know what an equity is, go easy on me because I don't know what I am doing". That is an example of some of the quality of capital feeding the funds' self-fulfilling prophecy that everyone should just jump on board and it'll take you up to the stratosphere.

It is fine until the party is over and the smart money gradually jumps ship and the people who don't know what they are doing are left in on their own, start getting their fingers burnt and depart in their droves.

You can ride it for a bit, but it is certainly a sign to reduce to more cautious levels of exposure, IMHO.

That doesn't mean stop all your investing, just seek least worst options rather than the options that just spiked up in value the most on the three year chart.