Market timing

Bobziz

I suspect that Chris Dillow is not everyone's cup of tea on this forum but this podcast on investors chronicle has some interesting views about market timing, bonds v's cash, whether the UK market is actually cheap and more besides.

https://play.acast.com/s/investorschronicle/chrisdillow-i-veneverunderstoodtheideathatmarkettimingdoesn-twork-

coastline

From a trust which has a good track record in the defensive sector this is worth a listen or read.
There's a chat on the history of the trust and current strategy. Peter Shiller explains why he thinks investors should be in various sectors.

Peter Spiller: how to not lose money to inflation and financial repression | MoneyWeek

aroominyork

Bobziz said:

I suspect that Chris Dillow is not everyone's cup of tea on this forum but this podcast on investors chronicle has some interesting views about market timing, bonds v's cash, whether the UK market is actually cheap and more besides.

https://play.acast.com/s/investorschronicle/chrisdillow-i-veneverunderstoodtheideathatmarkettimingdoesn-twork-

It's a really good listen. I have no idea whether he is talking sense but he sounds like he is! For those who want to know CD's views on the points Bobziz mentioned:

- market timing. Buying or selling based on a ten month rolling average can help you can avoid a market crash.

- bonds vs cash. Bonds are an expensive insurance policy - stick to equities and cash.

- UK market. Yes it's cheap, but it has been for years. It's dominated by old school moniliths so no reason to think it will rise.

aroominyork

Possibly the point Dillow was most assertive about - and he is clearly a 'steady as you go' man - is that equity portfolios should include private equity, though diversified between managers. So I pulled out the private equity companies on HL which seemed most credible* and these are the numbers for HVPE, SLPE, IPRV (an ETF), PEY and XLPE (an ETF) compared to HSBC All World Index. If you can handle the volatility you might agree they have a place.

Edit    * by searching on companies with 'private equity' in their name, which misses out most of them!

jamesd

aroominyork said:

- UK market. Yes it's cheap, but it has been for years. It's dominated by old school moniliths so no reason to think it will rise.

Cheap or expensive compared to other markets is irrelevant. What matters is whether it's cheap or expensive compared to its own long term cyclically adjusted price/earnings ratio. Those are different for each market. The that way for a while and monoliths aspects cause me to think that the comment was relative to other markets not this market compared to its own average.

aroominyork

jamesd said:

aroominyork said:

- UK market. Yes it's cheap, but it has been for years. It's dominated by old school moniliths so no reason to think it will rise.

Cheap or expensive compared to other markets is irrelevant. What matters is whether it's cheap or expensive compared to its own long term cyclically adjusted price/earnings ratio. Those are different for each market. The that way for a while and monoliths aspects cause me to think that the comment was relative to other markets not this market compared to its own average.

I think it was in relation to other countries, but that his 'monoliths' comment meant many FTSE100 companies are what he calls 'ex-growth' and on a downward spiral in a global investing context.

I wonder how many experienced investors on this forum or elsewhere have more than 10% of their equities in a UK index fund? I guess not many.

ColdIron

Hard to avoid the UK if you invest for income, but via active funds or ITs rather than indexes. Horses for courses

aroominyork

Then invest for total return, not for income. Even City of London IT, renowned for raising its dividend every year, underperforms the FTSE, with a total return of 20% over five years. It's surely poor investing to bank the divvies but ignore lack of growth. 

ColdIron

Just making the point that the UK has it's uses if you seek income. That it is 'ex-growth' is not an issue

I maintain a separate portfolio for growth, mostly trackers, as it helps me focus on the job in hand without muddying the waters with a 'surf and turf' approach. That it is 'ex-income' isn't an issue either

Taken as a whole the portfolios are total return, just demarcated and very hands off

aroominyork

I understand the convenience of how you manage it, but surely a portfolio is only the sum of its parts and if a significant part is intended to earn income while forgoing growth, I wonder if it is accurate to say it is managed on a total return basis.

Linton

aroominyork said:

Then invest for total return, not for income. Even City of London IT, renowned for raising its dividend every year, underperforms the FTSE, with a total return of 20% over five years. It's surely poor investing to bank the divvies but ignore lack of growth. 

Your choice of income vs growth depends on your objectives. If you need to withdraw a steady income relying solely on growth investments can be problematic.

For evidence see the graphs from 2000 to 2007. A total return investor would have suffered a major fall from which the markets had barely recovered by the time of the following crash. If that investor had been basing their allocations on the previous 5 years performance data it could have been disastrous. Companies paying high dividends on the other hand were barely affected.  

But in my view for someone needing income purely investing for dividends would be as bad a mistake as would aiming purely for long term total return. One needs CTYs as well as higher risk tech funds with the proportions of each being determined from objectives. As always diversification is vital.