Is cost averaging the way to go at this stage?

Manesova83

Hi all,

I've heard loads of people saying it's better to invest regularly rather than time the market, and that time in the market is the most important thing, regardless of your entry point. And I get all of that. But given that there's inevitably going to be another recession any year now, and many experts predict it'll be a bit of a beast, do any of you leave some money in cash and wait for the downturn to get a better price?

I've been sticking whatever I can in a cheap global ETF (HSBC MSCI World), as I'm trying to keep it simple. But I'm wondering if it would be better to stick the money in an easy-access savings account and bide my time, and then buy the market when/if it drops 30% or more. Or am I just over-complicating things?

Thanks in advance for your advice.

DiggerUK

No, you are not "over-complicating things" In fact I'd say your approach is spot on, and I am not in any form of equity investments today.
Your biggest issue will be protecting cash from inflation. Regular savers seems about the only game in town on that score. For security go with NS&I..._

Alexland

Manesova83 wrote: »

But given that there's inevitably going to be another recession any year now, and many experts predict it'll be a bit of a beast, do any of you leave some money in cash and wait for the downturn to get a better price?

There are always risks (and occasionally the experts are right) but I would continue investing regularly with an appropriate long term asset allocation (for your volatility tolerance and investment period) with enough equity exposure that you are not generally 'out the market'.

When times of more obvious value occur then you can still increase risk exposure by converting bonds and/or cash into equities if you decide to take advantage.

Alex

Albermarle

There is a wide variety of opinion , from leave it all 100% invested in equities and ride out any volatility at one extreme, and cash everything in on the other extreme. It's down to peoples personality .
I am sure there are some doing what you are doing i.e. staying invested but not adding any more at the moment. Others will be in 60:40 or 40;60 multi asset funds and will not change anything .
Another strategy is to stay invested but move to more defensive type funds/IT's.

In reality the majority of investors will be in their pension default fund and not even know it . So will do nothing , which is often the best strategy of all , as timing markets is somewhat tricky.....

LobsterMemory

Manesova83 wrote: »

Hi all,

I've heard loads of people saying it's better to invest regularly rather than time the market, and that time in the market is the most important thing, regardless of your entry point. And I get all of that. .

But then go against it

Manesova83 wrote: »

But given that there's inevitably going to be another recession any year now, and many experts predict it'll be a bit of a beast, do any of you leave some money in cash and wait for the downturn to get a better price?

I've been sticking whatever I can in a cheap global ETF (HSBC MSCI World), as I'm trying to keep it simple. But I'm wondering if it would be better to stick the money in an easy-access savings account and bide my time, and then buy the market when/if it drops 30% or more. Or am I just over-complicating things? .

And if it only falls 25%?

Manesova83 wrote: »

Thanks in advance for your advice.

What you're suggesting doing may work out perfectly; just be aware you're doing the opposite of everything in the first sentence

Thrugelmir

Which market are you referring to? A diversified portfolio will provide protection against extreme falls in particular ones.

AnotherJoe

OP if you you know when the recession will be then you should sell up and go 100% into cash, and then pile it all back 100% into equities when you know the recession will end. (I presume you mean a global recession right!) ) So you'd better sell up now.

Reaper

Manesova83 wrote: »

But given that there's inevitably going to be another recession any year now, and many experts predict it'll be a bit of a beast

Yes there will be another crash/bear market because they come round regularly. Have a look on Wikipedia and you will be surprised just how often they occur. But their frequency is the reason for pound cost averaging and global diversification.

Also to my mind the worst crashes come out of the blue when stock markets start to think everything is rosy. The falls tend to be smaller when everybody is gloomy. Given how gloomy everyone is about global tariffs and Brexit it may not be as big a fall as you fear. It also might not happen for ages yet in which case selling up would turn out to be a mistake.

So in my opinion it's best to chuck away the crystal ball and keep investing no matter what.

Linton

Manesova83 wrote: »

.... But given that there's inevitably going to be another recession any year now, and many experts predict it'll be a bit of a beast, do any of you leave some money in cash and wait for the downturn to get a better price?
....

There are always self proclaimed “experts” saying that. Some make a living selling books called something like The Great Crash Of <next year>. Eventually they will be proved right. But if a significant number of professionals believed it they would have sold their shares and the crash would have already happened.

What do you know that the people managing £billions do not?

On average you will lose more making wrong predictions than you gain from the minority you get right.

george4064

As others have mentioned, its anyone's guess which way the market will go. Personally I think its very bold (and unwise) to go all into equities or all into cash.


What you might want to consider is to direct some of your savings into cash whilst still investing in the market. So say for example currently you are saving £500 a month and all of that is being invested into your HSBC MSCI World ETF, perhaps adjust this so that £250 goes into your ETF and the other £250 into a regular saving or another savings account.

Manesova83

Thanks for all your replies.

I get that market timing is best left for professional traders. And I don't proclaim to know anything that others do not. The only reason I am thinking about this is because we are currently in a record-breakingly long bull market, suggesting the next downturn is probably not too far away.

I don't intend to sell anything. I am just wondering whether to keep putting everything that I don't spend each month into my global ETF, or whether to hold back a bit and wait.

I'm in my mid 30s, so I'm looking at being invested for 20 years at least. I get that over that time, one would expect to do pretty well out of the stock market, but still, I'd like to maximise any gains by buying more stocks when they are clearly cheaper.