Advice for pension funds with looming stock market crash

Steve182

Thrugelmir said:

Steve182 said:

Don't necessarily sell out of equities, they could gain another 10, 20, 30, 40, 50+ % from now until the crash.

As long as the stock markets resemble a casino then that's entirely possible. Though as people buy in at these higher levels they are simply reducing their future returns. 

Possibly true, but you didn't quote the following paragraph which elaborates my opinion further -

"To mitigate the affect of the crash you could look at what investments might best survive or even benefit from the turmoil and move some of your portfolio into those to better diversify."  - This is something I've done, or did rather prematurely, trying to predict the market.

Thrugelmir

Steve182 said:

Thrugelmir said:

Steve182 said:

Don't necessarily sell out of equities, they could gain another 10, 20, 30, 40, 50+ % from now until the crash.

As long as the stock markets resemble a casino then that's entirely possible. Though as people buy in at these higher levels they are simply reducing their future returns. 

Possibly true, but you didn't quote the following paragraph which elaborates my opinion further -

"To mitigate the affect of the crash you could look at what investments might best survive or even benefit from the turmoil and move some of your portfolio into those to better diversify."  - This is something I've done, or did rather prematurely, trying to predict the market.

My observation was made in the context that for markets to move upwards in the %'s you quoted. It would be a case of a rising tide lifting all boats, i.e. a continued monetary flow out of certain markets into passive global equity trackers. Stocks continuing to be priced on the basis of demand rather than underlying financial fundamentals. Stock selection would therefore have to be directed at areas of the markets where the vast majority of retail investors have little to no knowledge to avoid the turmoil that lies ahead. 

Scrudgy

With a user name of Lamont, he/she maybe one of Norman’s kids. Being a former chancellor of the exchequer, old Norman should has a few insights, maybe Rishi has told him to sell to cash as he is about to screw the world economy.

Bravepants

bigfer said:

I always remember the advice my dad gave me.... always be up front with everybody.

Great father, terrible goalkeeper.

My dad always used to say to me, "As one door closes, another opens."

Great father, terrible cabinet maker.

Bravepants

lamont77 said:

Well I wasn't expecting all the dad bashing. I thought this might have been a nice place with straight up advice. Thanks for those that gave that. My dad has a track record, and has done some pretty impressive things. I take his advice seriously as his knowledge is insightful and usually on the money. It would have been far more constructive and helpful if people could have just accepted the premise of the question ... what happens if the markets take a serious fall? How should I look to cover myself?

 

It's certainly not dad bashing. If I stated here that I think there's a crash coming I would get the same response from people. The fact is there always IS a crash coming, but no-one knows when. It could happen tomorrow, it could happen next year, it could happen in 5 years time. No-one knows because no-one can predict the future. And that future is not just about guessing stock market patterns or "dead cat bounces", it's actually about world events, sentiment etc.

We can generally say that as interest rates rise stock markets fall, they have an inverse correlation because savers cash out investments when they get better savings rates elsewhere (that's a while away yet), and because it becomes more expensive for businesses to borrow money. You get individual companies failing, so it is better to diversify investments to protect from that, and things like investment funds and trusts and other collective investments can cushion those sorts of blows.

Another thing to bear in mind is that people read these threads even if they don't contribute to them. They see people like you, your dad, me and your nextdoor neighbour, or my great-aunt's youngest sister's daughter, saying "Oh there's a crash coming", and if they are the sort to panic they may sell out needlessly. So the responses you are getting in this thread are the exact same responses told to people in other threads on the same or similar subject.  They serve the purpose as a consistent message to thread contributors and readers alike.

There is nothing personal in these messages and no insult should be taken. So please don't be put off posting to these excellent forums in the future, they are populated by some of the most knowledgeable and well-thought-of people in this subject area. And you can be assured of consistent and well-thought out responses.

 

jim8888

I've lived and invested through the dot com bubble, 9/11, the crash of 2008 and recently the Covid sell off (during these my investments fell by 30% or more). At these times, never does the motto "Keep Calm and Carry On" serve you better. Just keep investing through them. Personally, if I could turn the clock back, I'd have stuck all of my investments into a Global tracker instead of trying to pick winners, like I once did, sometimes listening to friends in the City who'd whisper to me "Japan is a great bet over the next five years" and then, like a dummy, following their advice. So, listen to your dad for sure, but spread your bets across the world markets. 

zagfles

Thrugelmir said:

Steve182 said:

Thrugelmir said:

Steve182 said:

Don't necessarily sell out of equities, they could gain another 10, 20, 30, 40, 50+ % from now until the crash.

As long as the stock markets resemble a casino then that's entirely possible. Though as people buy in at these higher levels they are simply reducing their future returns. 

Possibly true, but you didn't quote the following paragraph which elaborates my opinion further -

"To mitigate the affect of the crash you could look at what investments might best survive or even benefit from the turmoil and move some of your portfolio into those to better diversify."  - This is something I've done, or did rather prematurely, trying to predict the market.

My observation was made in the context that for markets to move upwards in the %'s you quoted. It would be a case of a rising tide lifting all boats, i.e. a continued monetary flow out of certain markets into passive global equity trackers. Stocks continuing to be priced on the basis of demand rather than underlying financial fundamentals. Stock selection would therefore have to be directed at areas of the markets where the vast majority of retail investors have little to no knowledge to avoid the turmoil that lies ahead. 

People were saying that 5 years ago. But a bog standard global tracker is up about 70% over those 5 years. Obviously stocks are priced based on demand as a major factor. What are these "underlying financial fundamentals"? That a particular PE ratio must be maintained? Says who? Is there some fundamental reason why PE ratio must tend towards a certain value? In the era of long term low interest rates, why should we expect the PE ratio to be the same as when interest rates were much higher?

Thrugelmir

zagfles said:

Thrugelmir said:

Steve182 said:

Thrugelmir said:

Steve182 said:

Don't necessarily sell out of equities, they could gain another 10, 20, 30, 40, 50+ % from now until the crash.

As long as the stock markets resemble a casino then that's entirely possible. Though as people buy in at these higher levels they are simply reducing their future returns. 

Possibly true, but you didn't quote the following paragraph which elaborates my opinion further -

"To mitigate the affect of the crash you could look at what investments might best survive or even benefit from the turmoil and move some of your portfolio into those to better diversify."  - This is something I've done, or did rather prematurely, trying to predict the market.

My observation was made in the context that for markets to move upwards in the %'s you quoted. It would be a case of a rising tide lifting all boats, i.e. a continued monetary flow out of certain markets into passive global equity trackers. Stocks continuing to be priced on the basis of demand rather than underlying financial fundamentals. Stock selection would therefore have to be directed at areas of the markets where the vast majority of retail investors have little to no knowledge to avoid the turmoil that lies ahead. 

People were saying that 5 years ago. But a bog standard global tracker is up about 70% over those 5 years. Obviously stocks are priced based on demand as a major factor. What are these "underlying financial fundamentals"? That a particular PE ratio must be maintained? Says who? Is there some fundamental reason why PE ratio must tend towards a certain value? In the era of long term low interest rates, why should we expect the PE ratio to be the same as when interest rates were much higher?

Perhaps the events of the past 5 years have passed you by. Likewise the impact of Central Bank policies since the GFC. I haven't mentioned PE ratios either. Plenty of material to read, watch and listen to if you wish to expand your investing knowledge. 

zagfles

Thrugelmir said:

zagfles said:

Thrugelmir said:

Steve182 said:

Thrugelmir said:

Steve182 said:

Don't necessarily sell out of equities, they could gain another 10, 20, 30, 40, 50+ % from now until the crash.

As long as the stock markets resemble a casino then that's entirely possible. Though as people buy in at these higher levels they are simply reducing their future returns. 

Possibly true, but you didn't quote the following paragraph which elaborates my opinion further -

"To mitigate the affect of the crash you could look at what investments might best survive or even benefit from the turmoil and move some of your portfolio into those to better diversify."  - This is something I've done, or did rather prematurely, trying to predict the market.

My observation was made in the context that for markets to move upwards in the %'s you quoted. It would be a case of a rising tide lifting all boats, i.e. a continued monetary flow out of certain markets into passive global equity trackers. Stocks continuing to be priced on the basis of demand rather than underlying financial fundamentals. Stock selection would therefore have to be directed at areas of the markets where the vast majority of retail investors have little to no knowledge to avoid the turmoil that lies ahead. 

People were saying that 5 years ago. But a bog standard global tracker is up about 70% over those 5 years. Obviously stocks are priced based on demand as a major factor. What are these "underlying financial fundamentals"? That a particular PE ratio must be maintained? Says who? Is there some fundamental reason why PE ratio must tend towards a certain value? In the era of long term low interest rates, why should we expect the PE ratio to be the same as when interest rates were much higher?

Perhaps the events of the past 5 years have passed you by. Likewise the impact of Central Bank policies since the GFC. I haven't mentioned PE ratios either. A very crude measure that can be engineered. Companies are pretty adept at painting their financial performance in the best possible light when reporting. 

You mean like a global pandemic which had a massive impact on the world economy? Maybe it's passed you by but the GFC was 15 years ago and most of the QE was done ages ago. People were saying in 2017 that all that QE has pushed prices up unsustainably. Yet another 70% rise on bog standard global trackers. You may believe you're an investment guru, but unless you show us a picture of your private yacht, I'll stick mainly with global trackers.

Grumpy_chap

lamont77 said:

Im in my mid 40's and am investing for my pension. 

My dad thinks that there is a crash around the corner

I dont need access to my pension for 20 years. 

Any insight or advice here would be brilliant thanks.  

I can't predict the next crash or the next boom.  Neither when, nor how large.

The insight I can give as a thought for your consideration is the relative impacts of a crash "just around the corner" on yourself versus your Dad.

You have a good long journey ahead of you so if there is a delay around the next corner you have a fair chance of a good run afterwards to make up the loss.

You are 40-something, so I assume (if he has not already) your Dad will be at the point where he is imminently looking to crystallise his pension funds and start drawing down.  If your Dad gets delayed just around the corner, he has less opportunity to make-up that loss.  In that situation, your Dad may choose to crystallise sooner rather than later.