Advice for pension funds with looming stock market crash

steampowered

lamont77 said:

My dad thinks that there is a crash around the corner that could well blow 2007/2008 out of the water.  

I've heard that many times over the past 15 years.

Bears called 12 of the last 4 crashes correctly.

You've got to be careful listening to stock market bears. If you listen to them, you would end up keeping your investments in cash for years. Where they lose value year-after-year due to inflation, while missing out on investment returns. Meaning that you end up being worse off even after market crashes happen.

BTW if you had invested just before the crash in 2007 and left your money there, so eating the full impact of the crash, you would have performed far better than someone who avoided investing. The markets recovered and will do so again.

Thrugelmir

zagfles said:

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.

I'm not an investment guru. Simply better informed it appears. For example. BOE had net purchases of UK Government debt of £328 billion in 2020/21. 

I have no particularly interest what investment choices you make. Markets trade on views and opinion. Some people get it right, others wrong. I prefer to err on the side of caution and thereby consistantly get the majority of my decisions right.  As investing as far as I am concerned isn't a competition to see who can make the most. Seen far too many people lose money that they can ill afford to lose. Investing is a hobby for me now. Discussing same is fun and rewarding. Better informed people will make better decisions. 

Thrugelmir

Grumpy_chap said:

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.

There's plenty of indicators that when combined together give a direction of travel though obviously not the timing. When there's a fog ahead warning on the motorway signs do you continue to speed or do you chose to slow down. Some one I knew years ago , chose to keep on speeding and drove straight into the back of stationery traffic. The consequences were life changing. Taking risk often reflects an individual's personality. Optimist or pessimist or somewhere on the scale between the two. 

zagfles

Thrugelmir said:

zagfles said:

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.

I'm not an investment guru. Simply better informed it appears. For example. BOE had net purchases of UK Government debt of £328 billion in 2020/21. 

I have no particularly interest what investment choices you make. Markets trade on views and opinion.

Well obviously. And the current market price reflects a balance of opinion where about half (ie buyers) think the price will rise and about half (ie sellers) think the price will fall. Some people think they know better than the collective market opinion, eg active fund managers who are very well informed. How many of them manage to consistently beat the market?

Some people get it right, others wrong. I prefer to err on the side of caution and thereby consistantly get the majority of my decisions right. 

Thereby? So you imply caution is always the best policy? Should we have listened to cautious investors in 2017? Or 2012? Personally, I'm glad I didn't. 70% gain on bog standard global trackers over 5 years, about 200% gain over 10 years.

As investing as far as I am concerned isn't a competition to see who can make the most.

No it's not, however anyone who "consistantly get the majority of my decisions right" should be have made far more than us mere mortals with our bog standard global trackers only making a mere 200% gain over the last 10 years.

Seen far too many people lose money that they can ill afford to lose. Investing is a hobby for me now. Discussing same is fun and rewarding. Better informed people will make better decisions. 

So discuss then, rather than selective snipping and replying with vague dismissive posts which imply the rest of us are uninformed idiots who don't know what we're doing. 

For instance, I asked you above, what are "underlying market fundamentals" you were referring to? You said not PE ratios, then what? You go on about indicators and fog, but not what, and you really believe such indicators have not already been priced in by the market? What are you invested in? What do you think is a good and bad investment at this point in time? And why do you think others in the market don't know about it, do you not believe the market is efficient? Do you not think that professional fund managers have spotted these opportunities and so piled in with millions or billions and so wiped out the inefficiency?

Grumpy_chap

Thrugelmir said:

Grumpy_chap said:

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.

There's plenty of indicators that when combined together give a direction of travel though obviously not the timing. When there's a fog ahead warning on the motorway signs do you continue to speed or do you chose to slow down. Some one I knew years ago , chose to keep on speeding and drove straight into the back of stationery traffic. The consequences were life changing. Taking risk often reflects an individual's personality. Optimist or pessimist or somewhere on the scale between the two. 

You conveniently quoted the least significant part of my post - the main point I was making was around the relative impact of a crash on the OP (with time to retirement) and the OP's Dad with less time to recover once the fog is cleared.

lisyloo

Grumpy_chap said:

Thrugelmir said:p

Grumpy_chap said:

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.

There's plenty of indicators that when combined together give a direction of travel though obviously not the timing. When there's a fog ahead warning on the motorway signs do you continue to speed or do you chose to slow down. Some one I knew years ago , chose to keep on speeding and drove straight into the back of stationery traffic. The consequences were life changing. Taking risk often reflects an individual's personality. Optimist or pessimist or somewhere on the scale between the two. 

You conveniently quoted the least significant part of my post - the main point I was making was around the relative impact of a crash on the OP (with time to retirement) and the OP's Dad with less time to recover once the fog is cleared.

I don’t really understand the “less time to recover” bit.
maybe I’m missing something but keen to learn.
if you are about to retire then the vast majority of your pot will remain invested for 5 years+ and some of it maybe 20, 30 or 40 years.
so whilst one needs some cash flow to live on the majority of a pot could stay invested for the long term.
am I missing something.
my understanding of “life styling” when pension companies adjust your risk 10 years before retirment, is that this is a blunt instrument for people who don’t want to actively engage with their investment i.e, the majority?

im told elsewhere this is all easily figured out by reading a couple of books (but I don’t buy that).

[Deleted User]

lisyloo said:

Grumpy_chap said:

Thrugelmir said:p

Grumpy_chap said:

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.

There's plenty of indicators that when combined together give a direction of travel though obviously not the timing. When there's a fog ahead warning on the motorway signs do you continue to speed or do you chose to slow down. Some one I knew years ago , chose to keep on speeding and drove straight into the back of stationery traffic. The consequences were life changing. Taking risk often reflects an individual's personality. Optimist or pessimist or somewhere on the scale between the two. 

You conveniently quoted the least significant part of my post - the main point I was making was around the relative impact of a crash on the OP (with time to retirement) and the OP's Dad with less time to recover once the fog is cleared.

I don’t really understand the “less time to recover” bit.
maybe I’m missing something but keen to learn.
if you are about to retire then the vast majority of your pot will remain invested for 5 years+ and some of it maybe 20, 30 or 40 years.
so whilst one needs some cash flow to live on the majority of a pot could stay invested for the long term.
am I missing something.
my understanding of “life styling” when pension companies adjust your risk 10 years before retirment, is that this is a blunt instrument for people who don’t want to actively engage with their investment i.e, the majority?

im told elsewhere this is all easily figured out by reading a couple of books (but I don’t buy that).

Correct. You don’t need two books to figure this out. You need just one. “Deep Risk” by William Bernstein. 

Its about sequence of return risk.  A few years before and after you retire is when portfolios are vulnerable to stock  volatility.  Life styling portfolios are based on solid theory but if you want to account for personal factors and understand “why” then “Deep Risk” provides the tools. You also get a much better understanding of other risk factors for the same grand  expense of 20 quid (or thereabouts). 

Thrugelmir

Grumpy_chap said:

Thrugelmir said:

Grumpy_chap said:

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.

There's plenty of indicators that when combined together give a direction of travel though obviously not the timing. When there's a fog ahead warning on the motorway signs do you continue to speed or do you chose to slow down. Some one I knew years ago , chose to keep on speeding and drove straight into the back of stationery traffic. The consequences were life changing. Taking risk often reflects an individual's personality. Optimist or pessimist or somewhere on the scale between the two. 

You conveniently quoted the least significant part of my post - the main point I was making was around the relative impact of a crash on the OP (with time to retirement) and the OP's Dad with less time to recover once the fog is cleared.

"Corrections" aren't always crashes. There's been long periods of stock market underperformance. That get buried in the oft quoted long term average returns of 4% to 5%. Complex topics get simplfied to a digestable black and white outlook. Rather than a considerable amount of grey which is the reality. 

Thrugelmir

zagfles said:

Thrugelmir said:

zagfles said:

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.

I'm not an investment guru. Simply better informed it appears. For example. BOE had net purchases of UK Government debt of £328 billion in 2020/21. 

I have no particularly interest what investment choices you make. Markets trade on views and opinion.

Well obviously. And the current market price reflects a balance of opinion where about half (ie buyers) think the price will rise and about half (ie sellers) think the price will fall. Some people think they know better than the collective market opinion, eg active fund managers who are very well informed. How many of them manage to consistently beat the market?

Some people get it right, others wrong. I prefer to err on the side of caution and thereby consistantly get the majority of my decisions right. 

Thereby? So you imply caution is always the best policy? Should we have listened to cautious investors in 2017? Or 2012? Personally, I'm glad I didn't. 70% gain on bog standard global trackers over 5 years, about 200% gain over 10 years.

As investing as far as I am concerned isn't a competition to see who can make the most.

No it's not, however anyone who "consistantly get the majority of my decisions right" should be have made far more than us mere mortals with our bog standard global trackers only making a mere 200% gain over the last 10 years.

Seen far too many people lose money that they can ill afford to lose. Investing is a hobby for me now. Discussing same is fun and rewarding. Better informed people will make better decisions. 

So discuss then, rather than selective snipping and replying with vague dismissive posts which imply the rest of us are uninformed idiots who don't know what we're doing. 

For instance, I asked you above, what are "underlying market fundamentals" you were referring to? You said not PE ratios, then what? You go on about indicators and fog, but not what, and you really believe such indicators have not already been priced in by the market? What are you invested in? What do you think is a good and bad investment at this point in time? And why do you think others in the market don't know about it, do you not believe the market is efficient? Do you not think that professional fund managers have spotted these opportunities and so piled in with millions or billions and so wiped out the inefficiency?

I've published part of my portfolio for many years in the Active vs Passive thread on this very forum.  As I unlike many, I'm happy to put my head above the parapet. Rebutts the mud that some posters attempt to throw. 

https://forums.moneysavingexpert.com/discussion/5719527/great-british-invest-off-or-passive-v-active-updates#latest

https://forums.moneysavingexpert.com/discussion/5719522/great-british-invest-off-or-passive-v-active-portfolios#latest

For the record. In the calender year 2020 my overall portfolio returned 39.1% ,  and in 2021 returned 27.7%.  Both were exceptional years. Not expecting to achieve the same levels anytime soon. 

I can suggest some good books to read if you wish to expand your investment knowledge. 

Thrugelmir

steampowered said:

lamont77 said:

My dad thinks that there is a crash around the corner that could well blow 2007/2008 out of the water.  

BTW if you had invested just before the crash in 2007 and left your money there, so eating the full impact of the crash, you would have performed far better than someone who avoided investing. 

Markets actually took 6 years to recover from their highs in 2007. Someone investing later would have achieved a far higher level of return and possibly benefited fully from the bull market. .