Unsure What Option to Take, Please Help

simonleblank

Thank's once again for all of your help.
I think ma strategy will be to "Drip Feed" my £4k allowance into an S+S ISA over a period of 4 months. I will then not get the Top or the bottom of the market (I hope)

I am thinking China / India is still a good investment, what do you think?
Also, how could I do this? ie what is the best vehicle to do this please?

EdInvestor

jamesd wrote: »

simonleblank, there will be a big fall. About 40-45% drop is usual for big bear markets here.

jamesd, of course, is the possessor of one of the finest crystal balls in the land.

:rolleyes:


The OP may like to look at this chart of the market over the past 2 years:

http://uk.finance.yahoo.com/q/bc?s=%5EFTSE&t=2y&l=on&z=m&q=l&c=

jamesd

simonleblank, have a look at Ok then - How do I choose a S&S ISA to get an idea of what a sector allocation is, particularly the two examples.

I do think that there is more growth in China and the Asia-Pacific region, but also in Latin America and emerging Europe. For these you need to know that what goes up to four times its value in two years can also fall to a quarter of its value in a week. That's the risk you're taking if you go with a pure China fund. You moderate it a bit if you spread it over many emerging markets regions and more if you include developed markets. So, go with a range of unit trusts and OEICs investing in different areas, so a big drop in just one country won't hurt you so much. and be prepared to see 20% value variations in a single day from single country funds like those investing in China, with 5-10% just routine.

It's really easy for someone new to this to go into a very high risk area and lose a lot of money because they don't know what to expect. It's why I'm making sure that you do know what can happen and how you can reduce the ups and downs using many funds in different regions. I'm at the high end of the risk range for fund investing but I certainly won't go for investing solely in China and the Asia-Pacific region.

EdInvestor, no crystal ball needed. Just the ability to look at history and learn from it. For example, see Bear markets: Wall Street's worst that shows some of the US bear markets and how long it took to recover from them. Or look at Japan in the 1980s and 90s when it rose to 40,00 0then fell to 25%, 10,000. Doesn't take a genius to know that the past can happen again.

That chart wasn't "the market". It was just the UK's FTSE 100, a really narrow selection of stocks with very limited worldwide exposure that's done very poorly compared to the options in the rest of the world. To see what's available worldwide a look at the FT's markets data page then clicking on the "Macromaps: Markets" picture is useful. Click on the one year time period and you can see just how poorly the FTSE 100 has done compared to other markets.

EdInvestor

But how do you know that the current problems in the market are the prelude to one of the worst bear markets on Wall St? After all your link doesn't even mention the 1987 crash, the 1990s Asian,Russian and LTCM crises or the millenium dotcom/tech crash: what's to say the current wobble won't be one of these 'minor' corrections?

Here's the 2 year chart for the Dow:

http://uk.finance.yahoo.com/q/bc?s=%5EDJI&t=2y&l=on&z=m&q=l&c=

Is it down?

The general theory about equity investment suggests that you should only put in money that can be left invested for 5 years.There's a good reason for that: it's because most stockmarket corrections, even quite severe ones, will see recovery in less than 5 years and you will not lose money over that timeframe.

For instance although the FTSE 100 has not quite recovered to its pre millenium high, once you add in dividends an investor in a tracker at that time will have initially lost quite a lot, but his fund will have gone into profit a year or so ago.

purch

there will be a big fall. About 40-45%

:eek:

There you have it:rotfl:

Concise and to the point...........

simonleblank

Hi James

I have cut and pasted 1 of the articles you gave a link for. Interesting that one of the major reasons for this carsh was high fuel prices.



1973-74

• Fall in the Dow: 45%
• Losses recovered by: December 1982

The 1973-74 bear market - the only truly severe slide after World War II - came after a prolonged bout of optimism.

In 1972, after Richard Nixon's re-election, the Dow had exceeded 1,000 points for the first time ever.
The reverse came among a veritable landslide of bad news, including the Watergate scandal, an Arab-Israeli war and most particularly an oil embargo that sent fuel prices through the roof. High oil prices produced a recession, ensuring that the gloom persisted well beyond the political factors that sparked the market collapse; even Mr Nixon's resignation in August 1974 did nothing to cheer investors.

EdInvestor

These days I'd have thought a major rise in the oil price is more likely to cause a recession in China or India than in the US or here.After all we don't use much oil these days - and as for petrol, prices don't rise much at the pump because so much of the price now is actually tax.Have a look at the chart: the magnitude of the recent rise has been substantial yet the UK consumer has really not been impacted through petrol or energy prices much.Then of course there's the windfall for the Treasury from high export prices: we didn't have the North Sea oil on stream in those days.

http://www.wtrg.com/prices.htm


The world has certsainly changed since the 1970s.We don't get much economic impact from Mideast wars these days either.;)

Plus we have moved past the bad old days of the incompetent Chancellors who at the first hint of recession *raised* interest rates, thus making things even worse. :rolleyes:

jamesd

EdInvestor, you're not really trying to suggest that the normal market cycles have ended, are you? I'm not trying to suggest that the next big drop will be one of the biggest. Just the usual drop and recovery that happened 25 times last century in the UK, 30 in the US. It's all completely routine, people just need to know about it so it doesn't surprise them when it happens.

Asking if the Dow is down now is not really useful. Since 2003 the world markets have been in a major bull market. The up part of the cycle. Nobody knows when the down will start, just that it will sometime.

simonleblank, always a reason to trip the market from optimism and bulls dominating to pessimism and bears. What it'll be and when it'll happen isn't the part that's knowable, just that you need to plan for it. You may find the djindexes history by decade useful. The links are on the left under the Dow data heading and the charts include details of significant historical events as well as the index itself.

Planning includes things like a nice asset allocation including some fixed interest and real property and lower risk equities. Also regular rebalancing of the percentages so that you take profits during the up times and reduce losses during the down.

simonleblank

There is an old saying "The trend is your freind"
The problem is that I am not sure if the up-trend is still in place or if the recent downturn is a new Trend?????????

simonleblank

There is an old trading addage "The trend is your friend" My concern is, Has the up-trend stopped or is faltering? This is why I am unsure about entering current markets