Timing the market

Bravepants

capital0ne wrote: »

And of course pay more in dealing - say you're buying 4 funds, thats 48 buy fees as opposed to 4 - quite a bit that could be earning for you

It depends on your platform and funds, I don't pay dealing fees.

Even if I did pay dealing fees then the comfort/security I get from drip-feeding is worth more than the cost of the fees.

A bit like paying your mortgage off early. I derive more security from being debt free than having a low interest mortgage and etimating that my funds would be worth more to pay it off in the end.

ruperts

Personally I would drip feed it in over a year on a platform with no dealing costs. I know what the stats say about lump sum vs drip feeding, but the strong psychological comfort from drip feeding would outweigh the likelihood of slight underperformance for me.

coastline

ruperts wrote: »

Personally I would drip feed it in over a year on a platform with no dealing costs. I know what the stats say about lump sum vs drip feeding, but the strong psychological comfort from drip feeding would outweigh the likelihood of slight underperformance for me.

I was caught out years ago with my first lump sum so I know how it feels just weeks after the event.
Nothing wrong with spreading your money over a few years or basically drip feeding.

http://business.financialpost.com/business-insider/are-you-worried-about-a-stock-market-crash-heres-the-best-way-to-start-investing-right-now

Bravepants

coastline wrote: »

I was caught out years ago with my first lump sum so I know how it feels just weeks after the event.
Nothing wrong with spreading your money over a few years or basically drip feeding.

http://business.financialpost.com/business-insider/are-you-worried-about-a-stock-market-crash-heres-the-best-way-to-start-investing-right-now

Yes, interesting in there that they were talking about people worrying about the S&P 500 being top of market 4 years ago!

Thrugelmir

eskbanker wrote: »

This seems contradictory to me - drip-feed if you feel that you can time the market, but if you don't (and accept the usual 'time in the market' view) then, starting with a lump sum, stats show that it's better on average to get it all invested rather than drip-feeding it.

Not at all. You can drip feed over days , or a few weeks or a couple of months. I wasn't referring to an extended period.

capital0ne

Anyone who drip feeds shouldn't be any where near stocks and shares. It's a sign of 'I'm not sure about this and I'll sell as soon as I start losing money' syndrome.

If you have any doubts and cannot stomach your portfolio dropping in value by say 40% DON'T DO IT!

For example you have £100,000 in your portfolio, not that large a sum in reality. and there's a slump, at the end of the week it's £60,000 would that bother you?

If yes stick to banks and building socs where you you would your £100,000 would have buying power of only £98,000 assuming 1% interest.

Good luck folks

Thrugelmir

capital0ne wrote: »

If you have any doubts and cannot stomach your portfolio dropping in value by say 40% DON'T DO IT!

How often has the market fallen 40% in a single day? :think:

Bravepants

capital0ne wrote: »

Anyone who drip feeds shouldn't be any where near stocks and shares.

I'm assuming this is some sort of joke, or at least I'll give you the benefit of the doubt. Let's just forget the people who do not have huge lump sums to start with, but invest as the money comes in...let's forget all about those people shall we, because they should be nowhere near stocks and shares, as they don't have the cash. Sounds like a case of "And the rich shall inherit the stock market!"

The main issue is the concern that shares are above some limit or benchmark or below it. People might be worried to dump cash in when above a certain limit. However, lets look at that a little shall we?

The best way of deciding whether your funds are higher or lower than a particular benchmark is to create your own benchmark. How to do that? Well, for example, if your funds are designed to be part of your future retirement income and you are a few years off retirement, and hence drawdown, and you know what income you will need in drawdown for retirement, then create a spreadsheet that illustrates/estimates your returns on the month of your birthday for upcoming years, perhaps assuming a fairly pessimistic return, taking into account fees etc. Each birthday estimate is your benchmark. Someone could drip feed monthly, and each year on his/her birthday, determine whether real-life matches the spreadsheet value.

If real-life fund values on your birthday are lower than projected in your spreadsheet, then top-up (yes with a lump sum!) to your target value. This way you are still buying units cheaper than you anticipated. This recalibrates real-life to your spreadsheet model.

If return is higher than spreadsheet anticipates then keep going and congratulate yourself for potentially doing better in retirement. Or, possibly better, sell some of the funds and keep as cash, either for next year's top-up if needed, or if not needed and rolling forward, as part of retirement funds incase, during drawdown, fund values are down. (Another common and well thought of strategy on these forums!)

All in all the person would be safely drip feeding, and applying lump-sums when required and appropriate considering the set benchmark, and potentially amassing a cash lump sum for use during drawdown for leaner returns of funds.

Now, what's wrong with that for an investment strategy for someone who is cautious with their retirement funds, knows what they want/need in retirement, is playing the "steady as she goes" game, does not wish the stress and faff of checking funds daily, weekly or even monthly, and is not massively greedy for returns?

DairyQueen

With your investment horizon I would just bung it into your chosen global funds and park it. It will come good over that period of time but you will simply cause yourself stress if you keep checking it every day - especially so at times like this week when the markets are bumpy.

Forget trying to time the market - a mug's game.

Alexland

I don't see the harm in spreading it over a few months if it makes the OP happier. I agree it might be pretty pointless but whatever it's nobody else's business.

There are lots of different ways of getting into the swimming pool. The most important thing is that if you have decided to go swimming that you do get into the pool and only go down the deep end as far as your volatility tollerence.

I never attempted the highest diving board but I am sure it's safe enough but that's not for me.