Liquidate entire portfolio until virus is over? 3 March at 3:46PM edited 3 March at 3:46PM in Savings & Investments 820 replies 87.4K views

EdGasketTheSecond

Is anyone else contemplating or have ever liquidated all their shareholdings and stayed in cash (or some other non-equity investment) while markets have crashed? I am thinking that this is probably only the beginning of a protracted bear market and we could see values drop by a third from here.

Thrugelmir

Sounds as you have a highly correlated portfolio if you are considering liquidating everything. Markets may well fall by a third. Doesn't mean that all shares will. Active management rather passive is better in turbulent markets. Horses for courses as they say. 

dunstonh

Is anyone else contemplating or have ever liquidated all their shareholdings and stayed in cash (or some other non-equity investment) while markets have crashed?
Good grief no.

 I am thinking that this is probably only the beginning of a protracted bear market and we could see values drop by a third from here.
So, you are predicting a crash bigger than the credit crunch and dot.com periods?   Entirely possible of course but is there any real data to suggest that is likely?

nrsql

Think you are just saying that the market will fall and you can sell then buy back at a lower price. Quite possible, I did it for the dot com, but because I was worried about how much I had invested so more of a re-balance. Doesn't have to be a large fall to be profitable.
Problem is - is it too late to sell, when do you buy back? Also markets get manipulated so external pressures can be overridden by central banks or just rumours.
What would you do with the money? You are saying that the market valuations will fall by more than sterling (if you keep the cash in sterling).
My portfolios have gone up by more than I could justify so sold a bit to move into other investments but that was just luck. Also they used to be fairly uncorrelated but that doesn't seem to be so much the case now so I'm not sure that diversification is such a panacea. I've moved a lot towards passive although I'm concerned about using them universally.

EdGasketTheSecond

In the financial crisis FTSE went from 6690 to 3750; I think you will find that drop was 44%. So yes I think we could well see a loss in value of a third from equities this time round.

bostonerimus

Give me strength! Investing is not complicated. Invest just the same as you would have done before the coronavirus. Put it in a multi-asset fund or a portfolio of a few inexpensive tracker funds with an asset allocation appropriate to your circumstances. Make sure you always keep at least 6 months cash on hand for emergencies. Do that until you retire and develop a withdrawal plan

EdGasketTheSecond

Thrugelmir said:

Sounds as you have a highly correlated portfolio if you are considering liquidating everything. Markets may well fall by a third. Doesn't mean that all shares will. Active management rather passive is better in turbulent markets. Horses for courses as they say. 

Yes well my idea of 'active management' is to get out of equities now and stay out until the virus has done its dirty work and the carnage can be assessed; assuming I am still alive at the end. Just wondering if anyone else felt the same or had ever done that.

Thrugelmir

EdGasketTheSecond said:

Thrugelmir said:

Sounds as you have a highly correlated portfolio if you are considering liquidating everything. Markets may well fall by a third. Doesn't mean that all shares will. Active management rather passive is better in turbulent markets. Horses for courses as they say. 

Yes well my idea of 'active management' is to get out of equities now and stay out until the virus has done its dirty work and the carnage can be assessed; assuming I am still alive at the end. Just wondering if anyone else felt the same or had ever done that.

Do you hold just collective investments? 

EdGasketTheSecond

Equities (or shares) but its a general question so applies if you hold a world tracker fund too or just a few funds. Obviously with individual shares its more costly to liquidate but maybe not as costly as continuing to hold might prove to be.

Linton

EdGasketTheSecond said:

Thrugelmir said:

Sounds as you have a highly correlated portfolio if you are considering liquidating everything. Markets may well fall by a third. Doesn't mean that all shares will. Active management rather passive is better in turbulent markets. Horses for courses as they say. 

Yes well my idea of 'active management' is to get out of equities now and stay out until the virus has done its dirty work and the carnage can be assessed; assuming I am still alive at the end. Just wondering if anyone else felt the same or had ever done that.

In my view such a strategy is madness and tends to be adopted by newbie investors who have invested beyond their risk tolerance.  On average it fails. The predicted crash may not happen or if it does you may well not be convinced it is over until prices are at least as high as they were when you sold, and in the meantime you have lost out on dividend and interest income.  In either case you are "selling low and buying high" which is a pretty certain way to lose money.  If you are still working and contributing to your investments a better strategy is to buy more during a crash since you get extra shares/units for your money.

Do you really believe the virus could be the end of the world as we know it?  If it is, I am not sure your happiness at having retained all your £s would be much compensation since who knows how much your £s would buy, assuming you are still alive to enjoy them.  If, as seems far more likely, the world economy carries on after a relatively brief hiatus, prices will quickly recover.

The lesson you should learn is to always invest in the knowledge that prices can fall at any time and so hold sufficient money in safe assets so that your nerves can take the strain.  The recent events, so far, have been a minor blip that will probably be ignored when future performance graphs are studied.

marlot

EdGasketTheSecond said:

Is anyone else contemplating or have ever liquidated all their shareholdings and stayed in cash (or some other non-equity investment) while markets have crashed? I am thinking that this is probably only the beginning of a protracted bear market and we could see values drop by a third from here.

The Spanish Flu hit the UK in three waves.  It's highly likely that Covid-19 will also hit the UK in waves.  How will you know when you hit the bottom?