Advice for pension funds with looming stock market crash

JOHNBOY42

Fund managers and " stock market experts" will tell you that they dont know how the markets will react tomorrow,,,, never mind your dad knowing the future .............. 

Thrugelmir

JOHNBOY42 said:

Fund managers and " stock market experts" will tell you that they dont know how the markets will react tomorrow,,,, never mind your dad knowing the future .............. 

They are certainly not going to tell you what they intend to do until they've transacted their trades. 

zagfles

Thrugelmir said:

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. 

Wow, and you claim to take a "cautious" approach!! Doesn't look "cautious" to me! What would you say your risk level is overall, objectively, compared to say something like VLS100? What were 5 year returns, can't see total values for the earlier posts?

Maybe you should get a job at one of the big fund houses as a star fund manager! Mind you Woodford consistently beat the market for over 15 years before massively plummetting completely wiping out those 15+ years gains in a couple of years, so don't get too cocky over a few good years' performance https://www2.trustnet.com/managers/factsheet/neil-woodford/ima-utoeic/O/00000WOO04/

bostonerimus

The initial question implies that the OP doesn't have an asset allocation appropriate for their circumstances. 

Linton

bostonerimus said:

The initial question implies that the OP doesn't have an asset allocation appropriate for their circumstances. 

Agree completely.  As no-one knows when the next major crash will happen it makes sense to assume that it is imminent, but that prices will recover in say 5 -10 years.    So if you need the money in the short/medium term or your temperament not could not cope with a major fall you should be sufficiently diversified away from equities so that the next crash, whenever it happens, does not cause too much pain.

Investing in reaction to panics and euphoria must be poor investing as it leads to buying high and selling low.

Of course if your know for certain that a crash is around the corner you should take advantage of your mystic powers and sell out completely, rebuying when they tell you the bottom has been reached.  However you should bear in mind the possibility that they could be wrong.

Thrugelmir

zagfles said:

Thrugelmir said:

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. 

Wow, and you claim to take a "cautious" approach!! Doesn't look "cautious" to me! What would you say your risk level is overall, objectively, compared to say something like VLS100? What were 5 year returns, can't see total values for the earlier posts?

Maybe you should get a job at one of the big fund houses as a star fund manager! Mind you Woodford consistently beat the market for over 15 years before massively plummetting completely wiping out those 15+ years gains in a couple of years, so don't get too cocky over a few good years' performance https://www2.trustnet.com/managers/factsheet/neil-woodford/ima-utoeic/O/00000WOO04/

Appetite for risk?  High but controlled. Having spent a lifetime in a broad range of finance related roles. Inside knowledge is invaluable. Allows oneself to have a very different perspective. Gut instinct also becomes second nature. 

Fund management is a very different game to managing ones own portfolio for a whoe variety of reasons. Having worked for and encountered a number of entreprenuers over the years. Majority only have one good idea or stroke of good fortune that propels them to the top. After that life becomes more challenging. Reputations are hard to maintain as expectations are unrealistic. 

I'm not cocky. My core investing principles have been set in concrete for some time now. Cash generative, profitable companies, with sound balance sheets and a quality management team. If the know the fable of the hare and the tortoise. You'll know whicjh one of them ultimately won the race. 

Hopefully my responses aren't too dismissive.    Generally my observations are merely to get people to research and think for themselves. Difficult sometimes to explain why.  

bostonerimus

Linton said:

bostonerimus said:

The initial question implies that the OP doesn't have an asset allocation appropriate for their circumstances. 

Agree completely.  As no-one knows when the next major crash will happen it makes sense to assume that it is imminent, but that prices will recover in say 5 -10 years.    So if you need the money in the short/medium term or your temperament not could not cope with a major fall you should be sufficiently diversified away from equities so that the next crash, whenever it happens, does not cause too much pain.

Investing in reaction to panics and euphoria must be poor investing as it leads to buying high and selling low.

Of course if your know for certain that a crash is around the corner you should take advantage of your mystic powers and sell out completely, rebuying when they tell you the bottom has been reached.  However you should bear in mind the possibility that they could be wrong.

Yes, if I'd had my crystal ball ready in 2008 I would have sold when the Dow Jones was at 14k and bought back in when it hit 7k. What I ended up doing was rebalancing through both extremes although doing nothing might have been better. The OP needs a strategic asset allocation and plan of action (or inaction) to get through market volatility.

zagfles

Thrugelmir said:

zagfles said:

Thrugelmir said:

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. 

Wow, and you claim to take a "cautious" approach!! Doesn't look "cautious" to me! What would you say your risk level is overall, objectively, compared to say something like VLS100? What were 5 year returns, can't see total values for the earlier posts?

Maybe you should get a job at one of the big fund houses as a star fund manager! Mind you Woodford consistently beat the market for over 15 years before massively plummetting completely wiping out those 15+ years gains in a couple of years, so don't get too cocky over a few good years' performance https://www2.trustnet.com/managers/factsheet/neil-woodford/ima-utoeic/O/00000WOO04/

Appetite for risk?  High but controlled. Having spent a lifetime in a broad range of finance related roles. Inside knowledge is invaluable. Allows oneself to have a very different perspective. Gut instinct also becomes second nature. 

Fund management is a very different game to managing ones own portfolio for a whoe variety of reasons. Having worked for and encountered a number of entreprenuers over the years. Majority only have one good idea or stroke of good fortune that propels them to the top. After that life becomes more challenging. Reputations are hard to maintain as expectations are unrealistic. 

I'm not cocky. My core investing principles have been set in concrete for some time now. Cash generative, profitable companies, with sound balance sheets and a quality management team. If the know the fable of the hare and the tortoise. You'll know whicjh one of them ultimately won the race. 

Hopefully my responses aren't too dismissive.    Generally my observations are merely to get people to research and think for themselves. Difficult sometimes to explain why.  

Not at all, there's a bit of substance to your points now. I hope you mean generic "inside knowledge", not specific! Clearly though you are not "cautious" in the sense that most investors use that term, I've not properly looked at your portfolio but it's obviously not "cautious" just from the returns. I've seen the sort of core investing principles you describe in the KIID of loads of active funds, I used to have quite an active portfolio (not individual shares but funds) and it did quite well but not really sufficiently better than passive to make up for the general extra volatility, so I've moved to a move passive approach. Still have a few active funds for specific areas.

[Deleted User]

Trumpeting ones 1-2 year returns as evidence for a winning method = financial p o r n.  Its a meaningless period of time.  

For comparison, Buffett has had a more modest annualized return of a mere 20% but over a meaningful period of time.  Thats why he has quite a few billions to his name. He also took a lot of risk, of course. 

Thrugelmir

Deleted_User said:

Trumpeting ones 1-2 year returns as evidence for a winning method = financial !!!!!!.  Its a meaningless period of time.  

For comparison, Buffett has had a more modest annualized return of a mere 20% but over a meaningful period of time.  Thats why he has quite a few billions to his name. He also took a lot of risk, of course. 

Ruffled a few feathers it seems. No trumpets on my part. Was merely attempting to give some context in a friendly discussion. If you bothered to follow the links you'll see that I've comfortably outperformed a passive global index tracker over the past 5 years. Despite holding none of the FANGS or the SP500 in any form. There's more than one way to skin a cat. 

As far as comprisons go.  Unfortunately I had to do a full time job for many years to earn a living. Unlike Warren I didn't have resources of an entire business empire nor the financial backing of an insurance company to acquire a 10% stake in a company such as Coca Cola. As it wasn't his money. He risked nothing personally. 

What Buffet and I share in common is being a disciple of Benjamin Graham and the theories behind value investing.