Is this a bear market?

Alexland

It really isn't clear that the US will go back to work in a few weeks. Bill Gates is right you can't just ignore the growing pile of bodies. Their health care system is even less prepared than ours. Could be further downside when this is understood.

vitamin_joe

Obviously it's a guess, but I don't think we are anywhere near the market bottom. I suspect this will be a historic crash. The whole thing has to play out in the economy- the unprecedented global economic inactivity, the stimulus packages. At the very least, that's going to cause a lot more volatility.
If I knew how to short I'd do it now, but I'm a novice.

EdGasketTheSecond

vitamin_joe you can short the market using Wisdom Tree ETFs. Go to their website and see the Leveraged and short ETF range; just watch the fees as they can chew you up on shorts and leveraged products.

tropic_of_Username019

When somebody says they'd like to use a chainsaw, but doesn't know the first thing about chainsaws, the most helpful thing to do isn't to direct them to an appropriate hardware shop.

Anybody considering short ETFs would do well to first read this article, which explains how they probably won't do quite what you were hoping they would do: monevator.com/short-etf-maths/

At the moment, it's easy to tell many of the people who don't know what they're talking about: it's the ones who are confident about the future direction of the markets.

Let's just imagine, for the sake or argument, there are some people who can predict some part of future market performance. Might they be using shorts? It seems quite unnecessary. Since any long-term portfolio would usually contain a significant amount of equities, they could just reduce their equities (even to 0%) before market drops, and increase it (even to 100%) before rises; which would be very profitable in volatile markets such as we've seen in recent weeks.

Those of us who lack any foresight will just be rebalancing our portfolios to the allocations we already decided on.

If you don't yet have a portfolio with defined allocations, then you should start by getting one, not by thinking about esoteric stuff liking shorting. (Getting one could be as simple as buying a single multi-asset fund, which will also do the rebalancing for you.)

EdGasketTheSecond

Shorting is quite simple if you use ETFs and I did warn about the costs involved. In some ways taking a view that the market will fall from here, which I think it almost certainly will, and finding out how to benefit from that is a very sensible thing to do. It is also far less complicated than 'thinking about defined allocations' of stocks and bonds as you suggest.

vitamin_joe

Thanks for the info you both. Made for some interesting reading. 

I invested for the first time on Monday- there's no way I have the experience to take a gamble on shorting right now. It's a nice idea, maybe for the future when I have a LOT more experience.... and maybe never. Leave it to the big boys

tropic_of_Username019

EdGasketTheSecond said:

Shorting is quite simple if you use ETFs and I did warn about the costs involved. In some ways taking a view that the market will fall from here, which I think it almost certainly will, and finding out how to benefit from that is a very sensible thing to do. It is also far less complicated than 'thinking about defined allocations' of stocks and bonds as you suggest.

Have you read that monevator article? The point is not just about costs.

It's simple to take a view on which way the coin I'm about to toss will fall. But it isn't sensible.

Sensible investing is unavoidably a bit more complicated. It can be as simple as buying a multi-asset fund, but an investor does also need to understand a bit about why that is a reasonable thing to do, or they are at risk of panicking and selling out at a later date.

Sensible and a bit complicated is better than simple and silly.

EdGasketTheSecond

Have you considered if the markets are still way overvalued in the current situation?

Linton

Leveraged and short ETFs are a very good way to lose money.  Consider:

You invest £5000 in a 2Xleveraged FTSE 100 fund:

Day 1: FTSE at 5000 rises to 5500: Your holding is worth £5000+2X£5000X 00/5000=£6000

Day 2: FTSE drops back to 5000: Your holding is worth £6000-2X£6000X 500/5500=£4909

And if the changes happen in the reverse order:

Day 1: FTSE at 5000 falls to 4500: Your holding is worth £5000-2X£5000X 500/5000=£4000

Day 2: FTSE recovers to 5000: Your holding is worth £4000+2X£4000X 500/4500=£4889

And with a Short ETF

Day 1: FTSE at 5000 falls to 4500:  Your holding is worth £5000+£5000X500/5000=£5500

Day 2: FTSE at 4500 rises to 5000.  Your holding is worth £5500-£5500X500/4500=£4889

or with reversed changes

Day 1: FTSE at 5000 rises to 5500:  Your holding is worth £5000-£5000X500/5000=£4500

Day 2: FTSE at 5500 drops back to 5000.  Your holding is worth £4500+£4500X500/5500=£4909

tropic_of_Username019

EdGasketTheSecond said:

Have you considered if the markets are still way overvalued in the current situation?

Have you considered that you're not typing this from your own private island?