Worst case investment scenario - what to do?

Grenage

Thrugelmir said:

Grenage said:

Over that long period of time there was only a couple of percent difference.  

A couple of % compounded over many years could be a sizable amount of money. Who won the race. The hare or the tortoise? 

You are correct, it could well be.  I was merely trying to say that as one cannot time the market, the worst-case scenario in the long run isn't horrific.

green_man

Well I am in near the same scenario that you outline in the Original post, as in I am mid transfer of funds between pension platforms and hence at the moment I am predominantly in cash. If stock markets soar in the period I am out of the market I’ve got to admit I will be reluctant to pump all my funds straight back in again. Even at current levels I have a strong feel that the downside is much bigger than the upside.

Thrugelmir

Grenage said:

Thrugelmir said:

Grenage said:

Over that long period of time there was only a couple of percent difference.  

A couple of % compounded over many years could be a sizable amount of money. Who won the race. The hare or the tortoise? 

You are correct, it could well be.  I was merely trying to say that as one cannot time the market, the worst-case scenario in the long run isn't horrific.

No you cannot time the market. However it is not neccessary to remain fully invested. If you invest on the basis of company fundamentals rather than market indexes. Opportunities will arise. 

Malthusian

A classic "I know I shouldn't try to time the market but should I try to time the market?" post.

History has shown that if you enter the market at the worst possible moment you will still beat cash providing a) you don't borrow to invest b) you are sensibly diversified c) you truly invest for the long term. (Note: selling everything after 5 or 6 years is not investing for the long term.) Unless the world enters a new Dark Age or total economic collapse, and that is an apocalypse scenario, meaning it doesn't matter whether you invest or stay in cash.

There is no evidence that anyone can consistently beat the market via market timing.

Thrugelmir said:

Grenage said:

Thrugelmir said:

Grenage said:

Over that long period of time there was only a couple of percent difference.  

A couple of % compounded over many years could be a sizable amount of money. Who won the race. The hare or the tortoise? 

You are correct, it could well be.  I was merely trying to say that as one cannot time the market, the worst-case scenario in the long run isn't horrific.

No you cannot time the market. However it is not neccessary to remain fully invested. If you invest on the basis of company fundamentals rather than market indexes. Opportunities will arise. 

That has exactly the same problem as timing the market, namely that there is no evidence that anyone can consistently outperform the market by active management (= sitting on cash until they have identified good opportunities based on company fundamentals).

By their own admission the OP is a novice so gambling on individual shares is not a good idea for them.

FinancialIdiot

Malthusian said:

A classic "I know I shouldn't try to time the market but should I try to time the market?" post.

History has shown that if you enter the market at the worst possible moment you will still beat cash providing a) you don't borrow to invest b) you are sensibly diversified c) you truly invest for the long term. (Note: selling everything after 5 or 6 years is not investing for the long term.) Unless the world enters a new Dark Age or total economic collapse, and that is an apocalypse scenario, meaning it doesn't matter whether you invest or stay in cash.

I accept all of this but the bit that worries me is "c) you truly invest for the long term." What's the definition of 'truly...for the long term'?

I see studies that look at entering into the market at the worst possible time where the investment period is at the upper end of the 'viable investment lifespan' (eg. 40 years). Such studies show there's nothing to worry about - just get on with it. But I don't think I've seen any studies which look at entering into the market at the worst possible time where the investment period is at the lower end of the 'viable investment lifespan' (eg. 10 years). What do those studies show is the typical outcome for the investor? Doesn't Bowlhead99's post suggest the situation is by no means clear-cut?

With regard to market timing, nobody can do it consistently but I believe people do manage it successfully now and again (even in this forum there are examples of people claiming to have done it). Don't get me wrong - I'm not suggesting that I can do it or that I'm intending to try to do it. This thread is based around a hypothetical scenario after all. But just as an observation, it does happen now and again (please don't clobber me for making the observation).

coyrls

With purely random market timing, you would expect people to "manage it successfully now and again".

FinancialIdiot

coyrls said:

With purely random market timing, you would expect people to "manage it successfully now and again".

There will be occasions where it is possible to identify the thing which is most likely to occur and on some of those occasions that is the thing which actually does occur. On such occasions people who base their investing decisions on the thing which looks most likely to occur will have timed the market based on their judgement and not just on luck. I say again and just as an observation, it's impossible to time the market consistently but it is done successfully now and again.

coyrls

FinancialIdiot said:

coyrls said:

With purely random market timing, you would expect people to "manage it successfully now and again".

I say again and just as an observation, it's impossible to time the market consistently but it is done successfully now and again.

You can say it again but my reply would still be the same.

Marco_L

FinancialIdiot said:

coyrls said:

With purely random market timing, you would expect people to "manage it successfully now and again".

There will be occasions where it is possible to identify the thing which is most likely to occur and on some of those occasions that is the thing which actually does occur. On such occasions people who base their investing decisions on the thing which looks most likely to occur will have timed the market based on their judgement and not just on luck. I say again and just as an observation, it's impossible to time the market consistently but it is done successfully now and again.

Hi there! I think it all depends on your financial goal(s)! what do you want to achieve with investing? do you want to buy a house, set a business, or else?

Malthusian

FinancialIdiot said:

Malthusian said:

A classic "I know I shouldn't try to time the market but should I try to time the market?" post.

History has shown that if you enter the market at the worst possible moment you will still beat cash providing a) you don't borrow to invest b) you are sensibly diversified c) you truly invest for the long term. (Note: selling everything after 5 or 6 years is not investing for the long term.) Unless the world enters a new Dark Age or total economic collapse, and that is an apocalypse scenario, meaning it doesn't matter whether you invest or stay in cash.

I accept all of this but the bit that worries me is "c) you truly invest for the long term." What's the definition of 'truly...for the long term'?

If you cash in after five years and make a loss (as has happened in the past), it wasn't the long term.

When do you plan to spend the money? I don't mean "in 10-15 years", I mean, what will it be spent on, what will the trigger point be that changes "in 10-15 years" to "now", what happens if the market is down at that time?

With regard to market timing, nobody can do it consistently but I believe people do manage it successfully now and again (even in this forum there are examples of people claiming to have done it).

Of course. Just as people can manage to successfully guess the outcome of a coinflip. However nobody can do it consistently and the expectation is that you will lose money while sitting in cash.