Attitude to drops in market

DireEmblem

Smart money makes sure you have an emergency fund, and dont change your process based on nerves.

mattywallace121

What a great question rather than the normal 'Should I sell?' posts.

I bought 5X my normal monthly drip fed amount in a Vangaurd Lifestrat fund at the very bottom of the pandemic drop. Zero skill, I got lucky but I knew I was in for the long haul. Will it work next time, probably not it could drop further.

Stick to drip feeding, there will always be a bull and bear case for the markets.

Shocking_Blue

Wondered if members had any opinions on SSON & Fundsmith (topping up now)?

Thanks.

Thrugelmir

Shocking_Blue said:

Wondered if members had any opinions on SSON & Fundsmith (topping up now)?

Thanks.

Volatility will remain until there's stability and the fog has lifted. 

coastline

Shocking_Blue said:

Wondered if members had any opinions on SSON & Fundsmith (topping up now)?

Thanks.

Fundsmith still outperforming the world index over 5 years but in recent years not so. Interesting addition to the chart is the 5 year performance of the Ishares Momentum Factor ETF. Early days as it's a new ETF but Fundsmith might have competition.?

Chart Tool | Trustnet

Regarding the drop in the market .

Market Perspective Is Important To Avoid Mistakes - RIA (realinvestmentadvice.com)

adindas

mattywallace121 said:

What a great question rather than the normal 'Should I sell?' posts.

I bought 5X my normal monthly drip fed amount in a Vangaurd Lifestrat fund at the very bottom of the pandemic drop. Zero skill, I got lucky but I knew I was in for the long haul. Will it work next time, probably not it could drop further.

Stick to drip feeding, there will always be a bull and bear case for the markets.

Drip feeding and blindly buying it at any time at any price, even the funds already making a good run will work well in the bull market and you are investing in a well diversified funds that have history of have always gone up in the long run.

It is not the best strategy, imo in the bear market. In the bear market, the price of the funds/stocks tend to move zigzag within a channel. It is going up a little bit for a few days and then suddenly leg drop further down reaching a new low consolidating around this area. It could be refined and higher chance to get a better result by drip-feeding it just by buying them on selective days during the red days in this bear market.

In your case you are lucky as you drip feeding it during the COVID19 FUD, presumably Around March 2020.  The 2020 until third quarter of 2021 is one of the best bull years in the stock market.

anonmoose

I have been trying to pick my days at the moment for drip feeds as adindas says but with Vanguard it seems to take a couple of days sometimes for the transaction to process for the LS funds.  As it is so volatile day to day it can be annoying that you don't always get the price you think you will get.  Still probably doesn't make a massive difference over the long term.

Alexland

anonmoose said:

Is the best thing for an amateur like me to keep drip feeding and not even look at my portfolio during instability to prevent irrational decisions?
Or how do you get through periods of uncertainty without making emotional decisions? Just wondering what the smart money does?

I don't see the harm looking at the daily valuations if you can maintain the self control to avoid doing anything destructive. I keep an eye on the price of other investments that I might also be interested in holding which may be differently impacted.

For example a few days ago I switched one of my global tracker ETFs which had dropped around 10% into a global IT which had dropped around 17% year to date because of it's use of leverage and deepening discount. They are both solid choice investments but the global IT has more 'bounce back potential' whenever the market recovery comes and if the discount narrowed again (currently around 10% but was on par with NAV around 3 years ago) however long that takes I am happy to wait years and keep buying and at lower prices in the meantime.

Malthusian

It is not the best strategy, imo in the bear market. In the bear market, the price of the funds/stocks tend to move zigzag within a channel. It is going up a little bit for a few days and then suddenly leg drop further down reaching a new low consolidating around this area. It could be refined and higher chance to get a better result by drip-feeding it just by buying them on selective days during the red days in this bear market.

If you have a monthly investment due to go into the market on the 15th and you instead hold off in the hope of selecting a day on which the market is lower, there is just as much chance that the market will go up instead and you miss out on gains.

What if you wait a whole month and the market still hasn't dipped below the level it was at one month ago, and you now have two contributions stuck in a queue waiting for you to select the right day?

There is no evidence that anyone can consistently time the market.

A bull market is the worst time to pursue a drip-feeding strategy as you get fewer units for your buck with each month that passes. However this is only a bad thing if you are drip-feeding a lump sum of available cash that you could put into the market all at once if you chose. If you are drip-feeding a regular source of income, then that's just life, and not being able to invest money you haven't got yet. (Unless you gear up, but that's a whole other story...)

vacheron

I have a reasonable amount of both Barclays and Hill & Smith shares. If I had sold each time their price fell by 15- 20% over the last year, and then bought back in half way up their recovery slope I would have lost about 40-50% of their value based on this time last year.

By simply sitting tight they are both currently at about 95%-100% of last year's price. 

I can't say I know of a single everyday home investor who has consistently outperformed the market by dipping in and out, but can think of a few examples of the exact opposite.

By the time the rest of us get to see a pattern, the smart money has already been and gone and we are simply reacting to the wake, not the ship.