More newbie investor advice

MaxiRobriguez

Neil1344 wrote: »

Thanks for all the advice so far.. I have invested my first 20k (this years isa allowance into the LS80 through the vanguard platform) last week. As per my first post, I now have a further 30k earmarked for investment, remaining which is currently sitting in an RCI bank savings account aearning 1.42 annual interest. My question is around market timing and when to invest the rest of my savings into the LS80 fund, using a vanguard general investment account. As someone new to investment, I am unsure how much attention I should pay to ‘market noise’ which could suggest an incoming market correction /downturn , such as the stagnant ftse, brexit looming, America/China etc... I appreciate that market conditions will never be perfect and having read Lars Kroijer’s book should not approach investment assuming I have an ‘edge’, but surely this conditions do present a potential opportunity to ‘wait and see’ and possibly get lucky and invest following any short term correction? Am I overthinking or should I go all in now?!

No one can really answer that.

Fundamentals looked stretched with corporate debt high, P/E ratios massive and risks like the trade war and Brexit not going away.

But there's every chance ZIRP/QE continues for the near term to drive markets up more than what would historically be considered a 'bubble'

You need to decide what's more important for this allocation. Is it capital preservation, in which case you may only choose to invest a smaller portion, or do you need growth, in which case it's better to get in now and take the risk that volatility/declines happen whilst you're invested?

Only you can answer that question as it's based on your needs and risk profile. How would you feel about major market losses in the next 5 years?

Neil1344

I will be investing for the long term ( 10 years plus) so I’m not overly concerned by market loses in the short term but would kick myself for not being able to invest significantly during one. I suppose my thinking is based on the assumption that this year is not likely to be a vintage year for high levels of growth in the life strategy fund based on all the market noise, which is leading me to think pause, but I suppose this is beginners nerves!

MaxiRobriguez

Neil1344 wrote: »

I will be investing for the long term ( 10 years plus) so I’m not overly concerned by market loses in the short term but would kick myself for not being able to invest significantly during one. I suppose my thinking is based on the assumption that this year is not likely to be a vintage year for high levels of growth in the life strategy fund based on all the market noise, which is leading me to think pause, but I suppose this is beginners nerves!

It's one thing actually holding a portion of cash as dry powder ready to pounce on market sell offs, it's another thing actually doing it when you've watched the market drop 15%+ and the media is all fire and brimstone.

You can of course do both, invest some of it, hold a small percent of cash (5-15% say) which you use to scoop up assets if they're a certain percentage off their highs.

I think most sensible people are of the opinion that the large gains seen between 2016-2017 aren't going to be repeated and the path of least resistance over the next few years is flat or down, which isn't based on market noise but fundamentals being on the expensive and reversion to mean being a real thing. But those people invested now are going to be picking up dividends, which you won't if you're sat in cash.

Get to know yourself and your risk tolerance before committing on what to do. Ten years is the minimum for "long term" investing - a 50% crash in a couple of years time might not get recovered by the time you actually want to get your hands on the cash - are you willing to accept that as a risk?

MaxiRobriguez

By the way you're on the right path asking questions and taking in knowledge. There's no one perfect answer, the only thing we can be is as educated as possible in order to make decisions as best we can at the time.

Neil1344

All replies very helpful thank-you. The prospect of 10 plus years to break even following a significant crash wasn’t something I had overly thought... so plenty to think about

Albermarle

I think most sensible people are of the opinion that the large gains seen between 2016-2017 aren't going to be repeated

There are different views but there seems to be a loose consensus that returns over the next 10 years will not be as good as the last 10 years .

For the OP it is not logical to choose VLS 80 ( relatively high risk ) and then start dithering about investing .
Maybe if you dialled down the risk level on the investment , you would not feel as anxious about actually investing.
Also if you invested in a pension instead of an ISA , you already have a buffer against market drops with the tax relief.

MaxiRobriguez

Albermarle wrote: »

There are different views but there seems to be a loose consensus that returns over the next 10 years will not be as good as the last 10 years .

Which makes sense, given ten years ago prices had just collapsed by 60% and valuations were relatively attractive if you didn't believe the global economy was about to die.

Fast forward ten years and you've had almost uninterrupted growth to the point where valuations are stretched and what would have been zombie companies are still operating thanks to loose money.

The risks of losses is more pronounced now than it has been in a while, which is going to stunt growth as people that have dry powder aren't so quick to actually use it. If we see tightening or a decline in economic indicators then I don't see how banks stop the declines given that for most developed economies apart from the US there's no real room to make interest rate cuts or embark on huge amounts of QE again.