Covid crash #2 started

Sailtheworld

ProDave said:

Sailtheworld said:

csgohan4 said:

ProDave said:

Prism said:

ProDave said:

The main thing that was making me nervous of a crash was the rising cases of Covid and lockdowns in the UK and Europe.  Another lockdown and business shut down again is not going to help the markets.

But I also saw some analysis of how the FTSE 100 was doing, you know where people draw lines on the chart and where the lines intersect tell you it is about to "break out" of it's current trend. That analysis basically said if it went below 6000 it would carry on falling, if it stopped short of 6000, it would turn upwards.

Now you can argue whether studying charts like that and drawing lines is an accurate way of predicting where it will go, but it had seemed as though it had taken the downward path.

Why are you nervous of a crash? You mentioned your pension fund in the first post so I assume this is a long term investment for you. If you are still accumulating a crash is a great thing as it means you buy cheaper for a while. If you are in drawdown then a crash isn't quite as beneficial but a well structured plan can cope with almost anything. There is nothing to worry about.

The money is in a SIPP which I anticipate to start drawing in just under 3 years.  It is only a small pot, and it's intended functions is to be drawn down in full by the time I reach state pension age in 10 years time.  I will be drawing my main DB pension in 3 years and this little SIPP pension will help to give some income until I reach SP age by which time I will be comfortable.

So the investment window left is short, and I don't want to end up in 3 years time with less than I started with.  So it is to be invested cautiously and that means trying to avoid anything that will make it crash.

with that short of a period I would consider converting some of your SIPP to bonds earlier, but everyone has different risk appetites

I'd missed that from Dave. He's currently 100% equities and needs to be spending some of the fund in 3 years time. No wonder he's nervous.

To get where he wants to go he shouldn't have started from here.

Indeed, but what are my options?

Leave it in cash and it will devalue by inflation?

It is already in what most consider a safe dependable low risk fund, but that is not immune from a crash.

I have asked before but nobody here wants to suggest what exactly to do with it.  It's in a HL SIPP and there does not seem to be a "2% per year savings account" option.  It's shares, bonds, funds or cash.

You're trying to front run a DB pension for ten(?) years. I'd divide by 10 and determine if that was enough to live on. If yes I'd stick most of it in cash with maybe 20% - 30% in a global tracker to, hopefully, cover inflation. I'd also bear in mind what the priority was at all times i.e. ten years spending rather than beating inflation or decent returns.

If no then you could take more risk and increase equities, save more or work an extra year.

You're tempted to trade your way to a solution - I bet it doesn't work.

schiff

I know this won't be supported by many on here, but why not pour the cash into regular savers, 1/2 year fixed bonds and the main part into whatever easy access accounts give something like a decent interest rate. It may not beat inflation but the difference could be treated as insurance against possible losses from staying invested in the markets. It would be heavy on the time for monitoring everything but if/once you're retired......

Linton

ProDave said:

TBC15 said:

ProDave said:

No I maintain the time to fill your boots will be several weeks away.  Lets see who is right over time?

What’s you top tip to recognize when fear has turned to greed?

When markets in general, or your chosen investment in particular has stopped falling and shown a period of rising again.

You will never catch the bottom exactly, but that worked for me in April and I will be looking to repeat again.

This only works for big movements like in March and what I think we are about to see now.  It is not a strategy to try and beat normal market small rises and falls.

The problem is that you dont know for sure that a particular fall is big until it has already happened and even then you have no idea whether it will drop further.  Conversely you never know that a recovery is real until it is well under way - beware the dead cat bounce.

Prism

ProDave said:

TBC15 said:

ProDave said:

No I maintain the time to fill your boots will be several weeks away.  Lets see who is right over time?

What’s you top tip to recognize when fear has turned to greed?

When markets in general, or your chosen investment in particular has stopped falling and shown a period of rising again.

You will never catch the bottom exactly, but that worked for me in April and I will be looking to repeat again.

This only works for big movements like in March and what I think we are about to see now.  It is not a strategy to try and beat normal market small rises and falls.

If you have a nicely balanced portfolio there won't really be much of a fall to take advantage of. I have I guess what you could call a 'balanced' portfolio outside of my SIPP. Its floats between around 60/40 and 70/30 where the higher number is equities and the lower number cash and bonds. This is roughly what it looked like this calendar year..
Up 2.5% by Feb 20th
Down 9.5% by March 23rd (lowest point)
Up 1% by April 20th
Up 5% by 20th May

There honestly wasn't much to take advantage of. The only change I made was a switch of around 10% from government bonds into some infrastructure that had dropped significantly. I will probably bring the bond level back up with additional contributions next year. 

You portfolio should be able to easily survive the minor crash that we saw this year as over an extended period it could get significantly worse than that - or better but that wouldn't be a discussion like this.

ProDave

Linton said:

ProDave said:

TBC15 said:

ProDave said:

No I maintain the time to fill your boots will be several weeks away.  Lets see who is right over time?

What’s you top tip to recognize when fear has turned to greed?

When markets in general, or your chosen investment in particular has stopped falling and shown a period of rising again.

You will never catch the bottom exactly, but that worked for me in April and I will be looking to repeat again.

This only works for big movements like in March and what I think we are about to see now.  It is not a strategy to try and beat normal market small rises and falls.

The problem is that you dont know for sure that a particular fall is big until it has already happened and even then you have no idea whether it will drop further.  Conversely you never know that a recovery is real until it is well under way - beware the dead cat bounce.

I think what we had from April to July was the dead cat bounce.  I managed to do nicely out of that and hope to do the same on the next one.

LHW99

ProDave said:

Linton said:

ProDave said:

TBC15 said:

ProDave said:

No I maintain the time to fill your boots will be several weeks away.  Lets see who is right over time?

What’s you top tip to recognize when fear has turned to greed?

When markets in general, or your chosen investment in particular has stopped falling and shown a period of rising again.

You will never catch the bottom exactly, but that worked for me in April and I will be looking to repeat again.

This only works for big movements like in March and what I think we are about to see now.  It is not a strategy to try and beat normal market small rises and falls.

The problem is that you dont know for sure that a particular fall is big until it has already happened and even then you have no idea whether it will drop further.  Conversely you never know that a recovery is real until it is well under way - beware the dead cat bounce.

I think what we had from April to July was the dead cat bounce.  I managed to do nicely out of that and hope to do the same on the next one.

Best to just decide what represents a price you are happy with and buy then perhaps (at any time)

Stargunner

Linton said

The problem is that you dont know for sure that a particular fall is big until it has already happened and even then you have no idea whether it will drop further.  Conversely you never know that a recovery is real until it is well under way - beware the dead cat bounce.

Generally I agree with you but in February COVID was an exception to the rule and I and some other members on here predicted a sharp drop, so I and others sold our equities and then bought them back at the end of March/ beginning April. I didn’t sell at the top or buy back at the bottom but managed to miss a lot of the drops whilst I was out of the market and then benefitted from the dead cat bounce that followed.

Prism

Stargunner said:

Linton said

The problem is that you dont know for sure that a particular fall is big until it has already happened and even then you have no idea whether it will drop further.  Conversely you never know that a recovery is real until it is well under way - beware the dead cat bounce.

Generally I agree with you but in February COVID was an exception to the rule and I and some other members on here predicted a sharp drop, so I and others sold our equities and then bought them back at the end of March/ beginning April. I didn’t sell at the top or buy back at the bottom but managed to miss a lot of the drops whilst I was out of the market and then benefitted from the dead cat bounce that followed.

The trouble is that it's so hard to do reliably. It works one time but then the next it drops even further or just has a short correction and then lifts off never to be seen again leaving you with cash. 

Thrugelmir

 Stargunner said:

Linton said

The problem is that you dont know for sure that a particular fall is big until it has already happened and even then you have no idea whether it will drop further.  Conversely you never know that a recovery is real until it is well under way - beware the dead cat bounce.

Generally I agree with you but in February COVID was an exception to the rule and I and some other members on here predicted a sharp drop, so I and others sold our equities and then bought them back at the end of March/ beginning April. I didn’t sell at the top or buy back at the bottom but managed to miss a lot of the drops whilst I was out of the market and then benefitted from the dead cat bounce that followed.

Whilst I was a seller. I didn't repurchase the same shares that I sold. Markets have subsequently polarised between those companies that were perceived to benefit or are relatively untroubled by events due to the nature of their business.  Majority of shares remain beneath their pre Covid January 2020 high levels. Of the cats 9 lives only so many actually bounced.  Another sharp correction may not provide the same opportunities. 

Jim1980

I think the correction that is happening in the US at the moment is partly due to capital gains tax. Under Trump CGT is 20%, Biden is proposing CGT at 39.6%. If Biden wins this is likely to start on January 1st 2021. People are taking profits out now as they think Biden will win on Tuesday. Personally, I think it will be close and there could be legal challenges if the result is close, especially with so much postal voting. This could cause uncertainty for the markets.