What did the smart pension money do when values dropped in March/April?

Terron

I didn't touch my pension, but I stuck £20k in an ISA in March. I used a tracker fund. The money came from the sale of a former home early that month.

[Deleted User]

Prism said:

pip895 said:

Anonymous101 said:

Absolutely nothing.
My plan is to contribute monthly for another at least another 10 years. Market declines are part and parcel of investing and should have been contemplated beforehand. My strategy is to invest in low cost index funds and leave them alone no matter what. The best investors are either dead or forgot they had the accounts. That should tell you everything you need to know....

I think I disagree with that, although it is true that there is little point in trying to predict what the markets will do, you can see what they have just done.  It doesn't take a great intellect to work out that when markets drop 25% they represent better value than they did does it?  There for, it is a better time to buy and this holds true even if they then drop another 20%.  Taking advantage of market drops and to a point taking profits when markets are soaring to new heights is basic good investing.   

How can you take advantage of market drops unless you are holding back cash which means you are not fully invested? Why would you take profits at any given time when you don't need the money? Just to hold in cash for some future possible drop?

Holding cash on the sidelines and taking profits is not basic good investing. It is a type of more complex investing that is difficult to make work.

Exactly. Nobody actually knows when markets represent good value.  Valuations are based on guesses/expectations  about future profits and interest rates over many years, which are not known.  When reality proves to be different from expectations we have a big market move - up or down. 

I know people who decided that the market was overvalued in 2011.  They forecasted a major crash. They moved to cash so they have lots of “dry powder” for when the market drops. The market kept going up.  And up. And up. All the while paying dividends. Eventually they were proven right. The bear market did happen. Even if they timed the reinvestment perfectly and called the bottom in mid-March, they still missed out on massive gains.

Joey_Soap

To paraphrase Terry Smith on this he said something along the lines of "Nobody ever got poor by taking a profit, but the trouble is, nobody gets really rich by doing that either". In other words, keep the winners running. Nobody can time market tops or bottoms, another statement Mr Smith agrees with, so he says they (at Fundsmith) just don't try.

pip895

Anonymous101 said:

pip895 said:

Anonymous101 said:

Absolutely nothing.
My plan is to contribute monthly for another at least another 10 years. Market declines are part and parcel of investing and should have been contemplated beforehand. My strategy is to invest in low cost index funds and leave them alone no matter what. The best investors are either dead or forgot they had the accounts. That should tell you everything you need to know....

I think I disagree with that, although it is true that there is little point in trying to predict what the markets will do, you can see what they have just done.  It doesn't take a great intellect to work out that when markets drop 25% they represent better value than they did does it?  There for, it is a better time to buy and this holds true even if they then drop another 20%.  Taking advantage of market drops and to a point taking profits when markets are soaring to new heights is basic good investing.   

I see your logic. As you say they possibly represent better value after the decline. Although there was a reason for the decline.

My issue with that approach is that you’re always missing out on any returns whilst you’re waiting for that decline. Then how much of a decline is worth acting on?
There could also be the possibility of a very long wait and when the declines do come they might not be anywhere near the growth there has been between declines.
I believe that time in the market beats timing the market.

I wasn't waiting in cash for a crash - I was a bit over 60% in equity just as the market crashed (within the range I allow myself -60-80%) Once the crash happened my equity percentage had dropped to about 55% so I purchased Equity (using etfs) bringing my equity up to about 63% (It took about 25% of my "non equity" to do it). I intended to go further but things recovered quicker than I was expecting - still once things had recovered, my equity percentage was up to 72% so I sold some to take me back to just a bit over 60% again.  72% is still well within my risk tolerance but markets are very volatile and I don't need to take the risk.  Just slightly aggressive rebalancing really and not trying to guess what the markets are going to do just reacting logically to what they have done.

pip895

Joey_Soap said:

To paraphrase Terry Smith on this he said something along the lines of "Nobody ever got poor by taking a profit, but the trouble is, nobody gets really rich by doing that either". In other words, keep the winners running. Nobody can time market tops or bottoms, another statement Mr Smith agrees with, so he says they (at Fundsmith) just don't try.

I think keeping winners running works much better when you are thinking about individual shares (what Terry Smith was talking about) rather than a bunch of market/mainly global trackers..

pip895

Prism said:

pip895 said:

Anonymous101 said:

Absolutely nothing.
My plan is to contribute monthly for another at least another 10 years. Market declines are part and parcel of investing and should have been contemplated beforehand. My strategy is to invest in low cost index funds and leave them alone no matter what. The best investors are either dead or forgot they had the accounts. That should tell you everything you need to know....

I think I disagree with that, although it is true that there is little point in trying to predict what the markets will do, you can see what they have just done.  It doesn't take a great intellect to work out that when markets drop 25% they represent better value than they did does it?  There for, it is a better time to buy and this holds true even if they then drop another 20%.  Taking advantage of market drops and to a point taking profits when markets are soaring to new heights is basic good investing.   

How can you take advantage of market drops unless you are holding back cash which means you are not fully invested? Why would you take profits at any given time when you don't need the money? Just to hold in cash for some future possible drop?
Holding cash on the sidelines and taking profits is not basic good investing. It is a type of more complex investing that is difficult to make work.

Quite a bit of my "non Equity" was in cash as I was struggling to find alternatives I didn't hate - but the % equity was fairly normal for me.  After the crash I obviously had proportionally less equity than normal.
When you pick a percentage equity that suits your risk tolerance - why does it have to be a single number.  Why not a range? I felt more confident that markets would go up after the crash than I did before it - why shouldn't my % change within a defined range?

cloud_dog

Deleted_User said:

Prism said:

pip895 said:

Anonymous101 said:

Absolutely nothing.
My plan is to contribute monthly for another at least another 10 years. Market declines are part and parcel of investing and should have been contemplated beforehand. My strategy is to invest in low cost index funds and leave them alone no matter what. The best investors are either dead or forgot they had the accounts. That should tell you everything you need to know....

I think I disagree with that, although it is true that there is little point in trying to predict what the markets will do, you can see what they have just done.  It doesn't take a great intellect to work out that when markets drop 25% they represent better value than they did does it?  There for, it is a better time to buy and this holds true even if they then drop another 20%.  Taking advantage of market drops and to a point taking profits when markets are soaring to new heights is basic good investing.   

How can you take advantage of market drops unless you are holding back cash which means you are not fully invested? Why would you take profits at any given time when you don't need the money? Just to hold in cash for some future possible drop?

Holding cash on the sidelines and taking profits is not basic good investing. It is a type of more complex investing that is difficult to make work.

Exactly. Nobody actually knows when markets represent good value.  Valuations are based on guesses/expectations  about future profits and interest rates over many years, which are not known.  When reality proves to be different from expectations we have a big market move - up or down. 

I know people who decided that the market was overvalued in 2011.  They forecasted a major crash. They moved to cash so they have lots of “dry powder” for when the market drops. The market kept going up.  And up. And up. All the while paying dividends. Eventually they were proven right. The bear market did happen. Even if they timed the reinvestment perfectly and called the bottom in mid-March, they still missed out on massive gains.

You keep posting this stuff and yet the only person who has commented on timing the market or waiting for a correction because of some supposition of an over valued market is you, very strange.

Joey_Soap

pip895 said:

Joey_Soap said:

To paraphrase Terry Smith on this he said something along the lines of "Nobody ever got poor by taking a profit, but the trouble is, nobody gets really rich by doing that either". In other words, keep the winners running. Nobody can time market tops or bottoms, another statement Mr Smith agrees with, so he says they (at Fundsmith) just don't try.

I think keeping winners running works much better when you are thinking about individual shares (what Terry Smith was talking about) rather than a bunch of market/mainly global trackers..

By definition, a tracker fund can never be a winner. It defies all logic.

Thrugelmir

Joey_Soap said:

To paraphrase Terry Smith on this he said something along the lines of "Nobody ever got poor by taking a profit, but the trouble is, nobody gets really rich by doing that either". In other words, keep the winners running. Nobody can time market tops or bottoms, another statement Mr Smith agrees with, so he says they (at Fundsmith) just don't try.

Surprising how many people hold entrenched views and rather than cutting their losses hold onto poorly performing investments. In the belief that one day they'll recover. Far more difficult to acknowledge to oneself that one has made a mistake. Get over that fear, harden up and investing becomes far far easier. When inflation is so low. Sitting on cash until you identify a better place is no bad thing.  Markets are far from being efficient. Every so often you'll get reminded why. 

pip895

Joey_Soap said:

pip895 said:

Joey_Soap said:

To paraphrase Terry Smith on this he said something along the lines of "Nobody ever got poor by taking a profit, but the trouble is, nobody gets really rich by doing that either". In other words, keep the winners running. Nobody can time market tops or bottoms, another statement Mr Smith agrees with, so he says they (at Fundsmith) just don't try.

I think keeping winners running works much better when you are thinking about individual shares (what Terry Smith was talking about) rather than a bunch of market/mainly global trackers..

By definition, a tracker fund can never be a winner. It defies all logic.

I think you might be able to claim a US tracker was a winner against cash/bonds or even a UK tracker but I would still want to rebalance rather than let it become an ever increasing proportion of my portfolio.