Stock Market Down - Is now the time to dump a lump sum into my S&S ISA?

Chelt_chap

With the stock markets in what seems and downward spiral, is now the time time to by cheap? I have a FTSE 100 index Fund, Vanguard LS 60 and an Asian Index Fund all of which were in profit for me but with the recent stock market slides these gains are reducing rapidly. 

I drip feed in £200 monthly from a surpluss I have at the end of each month of around £700. The rest goes into savings accounts. 

Thing is should I be dumping more lunp sums into my S&S ISA or putting more into my savings? I have around a years salary pre tax in cash savings. 

Is this an opportunity to buy cheap? 

Albermarle

Is this an opportunity to buy cheap?

Maybe yes, and then again maybe no ....

The reality is that to know if we are anywhere near the bottom of the market, you would have to be able to see the future.

Personally, I have made three new investments in the last 6 weeks and all three are down, so what do I know ??

Luckily the amounts involved were not large, and I suppose I can console myself that I did not buy in January !

JohnWinder

Could be useful to tick off your issues against sound investment strategies:

1. Your investments are well diversified and liquid - good.
2. Are you comfortable with the risks they carry, particularly volatility of price (and particularly price drops as I imagine price rises don’t worry you too much). Volatility shouldn’t matter much if you still have a long accumulation period ahead.
3. Are your investments suitable for taking out the amounts of spending money you’ll need, when you need it and how much? Long term investments aren’t well suited to short term spending needs if it’s a lot of spending; and short term investing can cost you opportunity if your spending needs are well into the future.

If your portfolio addresses those issues suitably, then you can reasonably put as much cash into it as you’re comfortable with.

Swipe

I'm adding a chunk at a time each time it makes new lows but I have enough already invested for retirement so not a big deal if it recovers and I'm still not fully invested

Section62

Chelt_chap said:

With the stock markets in what seems and downward spiral, is now the time time to by cheap? I have a FTSE 100 index Fund, Vanguard LS 60 and an Asian Index Fund all of which were in profit for me but with the recent stock market slides these gains are reducing rapidly. 

.....

Is this an opportunity to buy cheap? 

Not if the stock markets really are in a downward spiral.  How to tell though?

JohnWinder

Dump it in? Wait for new lows? Not if we’re in a spiral?
Here’s a simulation from 95 years of US stocks data: trickle new money in regularly, or wait for the market to fall 5%, or 10% or 15% etc?  $100 is available each month. Which gave the best result?

Invest every month, invest 1,141 times, final balance $14.09 million
Wait for a -5% drop, invest 129 times, final balance $13.46 million
Wait for a -10% drop, invest 63 times, final balance $12.42 million
Wait for a -15% drop, invest 41 times, final balance $12.01 million
Wait for a -20% drop, invest 24 times, final balance $12.11 million
Wait for a -25% drop, invest 17 times, final balance $12.24 million
Wait for a -30% drop, invest 12 times, final balance $11.92 million
Wait for a -40% drop, invest 7 times, final balance $9.55 million
Wait for a -50% drop, invest 5 times, final balance $10.28 million
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=356671&p=6196749&sid=9378de92a67b7e76ee225011c3d84d72#p6196749 

ChilliBob

I'll probably do a topup on Monday of my global index funds. They may fall lower, in which case I'll do it again. I'm pretty sure Monday's price will be the lowest price I'll have invested on these particularly funds over sbout a year or so.

My hunch is there is probably more to fall, so it's not like I'll be steaming in, but I'll be putting a chunk in in case this is the bottom, who knows eh?

If you pay attention to valuations it's still expensive (it being the US, the biggest part of a global index), but then people have been saying that for ages and still good returns have been had! 

adindas

JohnWinder said:

Dump it in? Wait for new lows? Not if we’re in a spiral?
Here’s a simulation from 95 years of US stocks data: trickle new money in regularly, or wait for the market to fall 5%, or 10% or 15% etc?  $100 is available each month. Which gave the best result?

Invest every month, invest 1,141 times, final balance $14.09 million
Wait for a -5% drop, invest 129 times, final balance $13.46 million
Wait for a -10% drop, invest 63 times, final balance $12.42 million
Wait for a -15% drop, invest 41 times, final balance $12.01 million
Wait for a -20% drop, invest 24 times, final balance $12.11 million
Wait for a -25% drop, invest 17 times, final balance $12.24 million
Wait for a -30% drop, invest 12 times, final balance $11.92 million
Wait for a -40% drop, invest 7 times, final balance $9.55 million
Wait for a -50% drop, invest 5 times, final balance $10.28 million
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=356671&p=6196749&sid=9378de92a67b7e76ee225011c3d84d72#p6196749 

@Chelt_chap, we are currently in the bear market. It will depend on whether you believe the market is already around the bottom or it will still spiralling down. Unfortunately noone knows when the the chips shortages, global supply chain has been overcome,  inflation is under control (e.g around 2%),  Oils/Gas supply is back to normal, the war in Ukraine is over, Russia stop attacking Ukraine wheat, no more thread that China will invade Taiwan.

@JohnWinder: That simulation you show does not include adapting / switching strategy from lump sum and DCA or vice versa during the bear market. The Bear market in average took 10 to 61 months. 

In the bear market there is already statistics about this have been posted that DCA beat Lumpsum. Also it does not need a genius to see that people will be better off DCA in the bear market even better with enhanced DCA where you only do it during the red days, a larger chunk during the new low (but not lump sum). In the bear market the stock price drops more than it rises.

After the bear market is over, people could switch strategy back to lump sum.

True, in the long run e.g 95 years (in your example) it does not really mater whether you DCA or lump-sum as it will always go up. But if you could improve the result during the bear market, why not ?

Also keep in mind not many people could commit for 95 years. If you observe S&P500 chart if you unluckily throwing your lump-sum money during the peak using throwing lump-sum and forget strategy you might be waiting 15 years to even earn 1 penny profit.

There is no strategy in the stock market that will last forever, therefore the key here is adapting strategy.best on the environment at that time.

Aminatidi

Keep in mind psychology matters too.

Even if lump sum is better over the long run most people don't like the idea of waking up in a weeks time and seeing that lump sum down 5-10% or whatever.

DCA can help just to keep you in the right headspace to stay invested and keep investing.

Notepad_Phil

Chelt_chap said:

With the stock markets in what seems and downward spiral, is now the time time to by cheap? I have a FTSE 100 index Fund, Vanguard LS 60 and an Asian Index Fund all of which were in profit for me but with the recent stock market slides these gains are reducing rapidly. 

I drip feed in £200 monthly from a surpluss I have at the end of each month of around £700. The rest goes into savings accounts. 

Thing is should I be dumping more lunp sums into my S&S ISA or putting more into my savings? I have around a years salary pre tax in cash savings. 

Is this an opportunity to buy cheap? 

You've not given any indication of what time period you're looking to be investing this money and it's that which in my opinion is the most important factor. If any money is for the long term (i.e.10 years plus) then put the majority into investments, if you'll need it in the next 5 years then keep it in savings, between 5 and 10 years is more difficult so that depends a lot on how difficult you would find it if markets were down when you came to withdrawing the money.

Albermarle

between 5 and 10 years is more difficult 
According to the graph in the link below, investing for 8 years has historically only given a 5% chance of a loss.
Of course this graph is based on historical data and is an average . So you could be unlucky, but it seems that  8 years is not a bad bet if you can not leave it any longer.


Long-term investing: Increasing your chances of positive returns (nutmeg.com)