Preparing for the Crash

BuildTheWall

It’s funny that people think they have become experts in market timing after just one crash and rally in the short term. 

Good. A majority of these people will either miss the next rally or lose money trying to time it. Great for investors who want to stay put for long term. 

For some perspective, have a read of this:
https://verdadcap.com/archive/investing-in-a-bubble

BuildTheWall

barnstar2077 said:

Personally I don't see another big drop in the near future.  I think once covid becomes less of an issue and things start opening again that the markets will go up for a while.

There is always going to be another big drop coming, I wouldn't want to miss out on todays gains trying to guess when it might be though.

Have to agree there. Market value is based on future earnings, not past. With less uncertainty going forward, earnings will improve for a vast majority of companies. 

But don’t say it publicly. The more people sit on cash, better for others. 

Albermarle

valiant24 said:

wmb194 said:

Outside a Sipp, the easiest, relatively low-effort place to park hundreds of thousands of pounds in a single account is with NS&I i.e. pseudo-gilts. Otherwise just spread it across multiple ordinary institutions.

Hi.   Thanks for being one of the few responders who actually addressed the question.
However, most of the assets I am talking about are within a SIPP or ISA.  Unless I take the cash outside the wrapper, I can't invest in NSandI, at least to my knowledge.  And obviously I don't want to take the money outwith the wrapper.

There are SIPP's where you can hold savings accounts paying interest and Ns& I .
They are mainly smaller more specialised 'Full Sipp' arrangements rather than the usual mainstream low cost SIPPs mentioned .
This one has been mentioned before but there are others . InvestAcc Pensions - SIPP and SSAS specialists : InvestAcc Pension Administration

tigerspill

Here is how I might handle it.  There will definitely be a crash.  When?  No one knows.
My plan is to hold 5 years in cash.
Firstly that will smooth out things in a crash.  I can reduce my spending to make this last longer if needed.
Secondly I might consider using some cash to buy bargain equities and sell on the rise - taking enough profit to see me through a bit longer than the 5 years.  Or I might not.  I will just have to wait and see,
What I am not doing is selling out.

Notepad_Phil

I don't know what you think causes this crash, but if you're 100% sure that there is going to be a significant one in the near future then probably the safest place for the majority of causes that I can think of in the current environment would be funds solely holding short dated government bonds, with the higher the amount in major government treasuries the better.

But keep in mind that even though I am retired our investments are 100% global equity based with a cash sum stored outsde of our SIPPS/ISAs to help if a crash does come - as even though I know there is a crash coming at some time, I'm aware enough to know that I have no idea of when it will come or when it will be over so will just keep on investing as I've done for the last 30 to 40 years.

pip895

My method of "Preparing for the crash" is to hold between 20 and 40% of my funds in a portfolio for "wealth preservation".  When I am feeling anxious - as you are now, I will hold 40% in this portfolio.  If I am feeling bullish (perhaps after a large correction) I will move to a much smaller % and increase my equity percentage towards 80%. 
The reason I restrict myself to this relatively modest range is that I have learnt from bitter experience I am as hopeless as the next man/woman at predicting when crashes are going to occur!

The wealth preservation portfolio for me consists of cash, short dated corporate & government bonds,  some strategic bonds, PNL IT and various other Targeted return funds + Gold.  It is a bit of a scatter gun approach but you never know what will do the job next time - I don't entirely trust bonds...  I used to include some property REITs in this portfolio - these failed spectacularly in the Covid crash so have now been consigned to the equity part of the portfolio.. 

Eco_Miser

valiant24 said:

If one believes, as do I, that an almighty stock market crash is coming, what is your opinion on the necessary defensive action?
Sell equities obviously, with the intention of buying back later, but then what?   Keep the cash in, er,  cash?

You could buy gold or other supposed contrary assets as  ETF/ETCs. I wouldn't, but you want non-equity ideas.

[Deleted User]

The biggest crash the world has ever seen will come one day perhaps soon. But modern government or banks have methods they have been using for some time to prevent this. Most financial experts seem to agree that the methods they have been using are almost at the point of no longer being effective. But it is disputed what will happen next. Surely a crash I say, an extremely big crash. 

Thrugelmir

Steve182 said:

valiant24 said:

barnstar2077 said:

Personally I don't see another big drop in the near future.  I think once covid becomes less of an issue and things start opening again that the markets will go up for a while.

There is always going to be another big drop coming, I wouldn't want to miss out on todays gains trying to guess when it might be though.

Yes.  But I do want to bail out, rightly or wrongly, and wish to know what the safest store for my money within an Isa/SIPP platform is while I wait, wallowing in my error.

Safest place is cash, no risk, but also no return, at least no return for cash within any normal S/S ISA that I know of.

 it's hard to see crashes happing in the near future. What could happen soon that could compare with Covid? 

A correction starts and investors stampede for the exits. Markets in the broadest sense have brushed Covid aside.  Whereas company profitability is somewhat different. The markets aren't the real economy. When numerous US start ups trade on 35 times annual revenues. You know that common sense has been left at home. It's a pure numbers game. 

valiant24

barnstar2077 said:

Personally I don't see another big drop in the near future.  I think once covid becomes less of an issue and things start opening again that the markets will go up for a while.

Although that supposition should be wholly baked into the price already, shouldn't it?
Anyway, a few people did address the original question (how best and safest to sit things out if that's what you want to do) and I think that the summary was:

• - cash
• - short-dated gilts
• - gold

I don't think that the latter is particularly safe, as it no longer seems to be negatively correlated with equities, perhaps because for now the cool kids at least prefer Bitcoin.