Squeaky bum time!

Notepad_Phil

I won't find out the damage to my funds until this weekend when I do my bimonthly (every two months) calculations and check how our retirement is going. I don't really need to, but it is a hard habit to break, especially as I quite enjoy it.

We're taking the natural yield from our diversified set of equity funds (a mix of index and managed), with a safety net of many years of drawdown held in cash (currently just about holding up to inflation), so things will need to get a lot worse and remain there for a long time before I start to get worried. But then my retirement calculations were based on surviving a 50% drop in markets and yield with only inflationary increases from then on.

I've been investing since the early eighties so at the moment this is just another step in the ups and downs of the market. I do have some sympathy for anyone who has given up a db pension and is now seeing their funds drop in value, but provided they don't panic and sell then their fund values should eventually be restored. I have more sympathy for the youngsters who in the main will never have the security of a db pension.

MK62

It isn't just youngsters who will never know that security.....plenty of older people are in that boat too.

MarkCarnage

It's not "squeaky bum time", it's just normal variation in the markets. As HHGTTG or Sergeant Jones would say "Don't Panic"

Lance Corporal Jones, please!!

Also, for those familiar with the show, he was most certainly panicking when he uttered those words.....

Your serious point is quite correct though. This is just BAU and coronavirus is a trigger. If you are seriously spooked by this and about to do a 'Lance Corporal Jones', perhaps your risk appetite isn't aligned with your asset allocation.

Me? I'm beginning to move some cash from NS&I into my platform dealing account....just to be ready.....I was coming from a position of quite high liquidity (c20%). 

WannabeEdouard

What effect does a market correction like this have on CETV values?  I know they are linked with gilts somehow.  Seems if your figure doesn't change too much then it increases your opportunity to do well outside DB.  i.e. coming in off recent market highs .

bostonerimus

MarkCarnage said:

It's not "squeaky bum time", it's just normal variation in the markets. As HHGTTG or Sergeant Jones would say "Don't Panic"

Lance Corporal Jones, please!!

Also, for those familiar with the show, he was most certainly panicking when he uttered those words.....

Dooh! silly me....but the laid back attitude of Sergeant Wilson is probably the right attitude.

bostonerimus

MarkCarnage said:

Your serious point is quite correct though. This is just BAU and coronavirus is a trigger. If you are seriously spooked by this and about to do a 'Lance Corporal Jones', perhaps your risk appetite isn't aligned with your asset allocation.

Me? I'm beginning to move some cash from NS&I into my platform dealing account....just to be ready.....I was coming from a position of quite high liquidity (c20%). 

My strategic retirement plan has always been to get income from sources other than direct market investments. So I can be sanguine about the ups and downs and just sit tight.

Thrugelmir

Notepad_Phil said:

But then my retirement calculations were based on surviving a 50% drop in markets and yield with only inflationary increases from then on.

If share prices fall have you not factored in a potential decline in dividends as well. (Depending upon the investment portfolio you hold). 

Gary1984

WannabeEdouard said:

What effect does a market correction like this have on CETV values?  I know they are linked with gilts somehow.  Seems if your figure doesn't change too much then it increases your opportunity to do well outside DB.  i.e. coming in off recent market highs .

CETVs will go higher. Demand for gilts increases due to investors looking for a safe haven. This pushes prices up and decreases yields which are inverse to prices. The yields are used as the basis to discount future liabilities in the CETV calculation. Lower yields means less discounting which increases the value of the liabilities in today's money. This value of liabilities is the CETV.
Sensitivities will vary but yields have dropped by 0.25%. As a guesstimate a CETV may move by 10-15 times this amount, so perhaps a 3% increase to CETV values? 

[Deleted User]

Down 5 Honda Civics since the market top or around 5% year to date (vs 20% rise in 2019). Percentages are counted in money weighted returns. I increased my bond allocation in early January to 20%, but it’s still an aggressive and volatile portfolio. Bonds are up but nowhere near enough to offset the losses in stocks. 

Although the total value of the drop is still relatively small, this is an unusually sharp drop; likely due to such a high starting point - the market was priced to perfection.  Institutional investors are being forced into selling to keep up with the trend and preserve their job.  Expect coordinated central bank action shortly. 

For all I know, we could be back at the peak levels in 4 months. Or it could be a deep and prolonged bear.  Time will tell. 

No change in investment policy; will be investing more funds in March and April. 

I do expect Coronavirus epidemic to be under control in a couple of months but that’s just a guess and not sure if there will be any long term economic damage. Then we have the risk of Bernie Sanders on the horizon, so certainly a risky environment and makes sense that Mr Market got spooked

bostonerimus

Deleted_User said:

Down 5 Honda Civics since the market top or around 5% year to date (vs 20% rise in 2019).......

For all I know, we could be back at the peak levels in 4 months. Or it could be a deep and prolonged bear.  Time will tell. 

No change in investment policy; will be investing more funds in March and April. 

I do expect Coronavirus epidemic to be under control in a couple of months but that’s just a guess and not sure if there will be any long term economic damage. Then we have the risk of Bernie Sanders on the horizon, so certainly a risky environment and makes sense that Mr Market got spooked

I have a rough idea how far I'm down in the last week by just following the percentage losses in the major indexes, but I don't check my portfolio on a regular basis and I don't see a reason to change that as I'm not going to change my strategy. There's a bit of regret that I made my annual tax advantaged investment contributions two weeks ago at the top of the market, but that's just natural twenty twenty hindsight. That contribution will make money some day...I just have to wait.