Bear markets - strategies for coping

Swipe

bostonerimus said:

Swipe said:

Well, I already have more than enough currently invested for my retirement so not catching the bottom is not a huge deal breaker for me. What worries me more, is inflation eating away at my remaining uninvested cash. I'd rather jump back in on the way back up than invest now and watch it go down even further + inflation compounded on top of the losses.

What is your desired asset allocation ie cash/domestic equity/international equity/ bonds etc. You should be getting to that asap. Maybe you want to drip feed the money in over a year, but there is no way of knowing what strategy is best except with hindsight. Right now you are sitting on a load of cash and looking back you are glad you didn't invest just before the most recent dramatic falls in the markets and saying you did the right thing, but that tells you nothing about what you should do today. Where will the markets go in the next few months? Well if you are a long term investor you shouldn't worry about that and while you are waiting for the markets to do something your cash is being eroded by inflation and if you could be making larger pension contributions you are missing out on the tax advantages. Personally I would put your lump sum into tax advantages investments over the next year. You need a plan, not some vague "I'll jump back in when", because you will dither.

My pension and ISA are both maxed each year and for the current year. My investments have already also been eroded by market losses + inflation. It's only my cash at the moment that is protecting my capital. As I said, I have a large sum invested already (more than enough to see me to death), hence my large losses since December.

Eco_Miser

P1Fanatic said:

Do people really have the will power to only check their investments 4 times a year?

I check my investments 12 times a year - at the end of each month, for consistent record keeping.

Today I logged in to my platform to check dividends had arrived, and download the details.  I didn't look at the current valuations, even though technically I must have seen them; and so have no idea how much they have risen since Thursday.

Albermarle

youth_leader said:

Thank you for starting this thread.  I do feel a bit wobbly this morning, I've just received my half yearly review, and my investment has dropped by £20K.  

I was widowed in 2016 and found an IFA to invest part of the lump sum I received for my future care.

I'm 65 now, so hope not to need it for ten years or more, or not at all so my children benefit.

If your fund is £50K, then you are right to feel wobbly about a £20K drop. If it is a £100K , then not as bad but probably means you are invested at a too high risk level for you ( or you have been hit by the drop in bonds) . If it is a drop of £20K from a fund of £200K, then you are doing fine.
Better to concentrate on how much it has gone up since 2016.
In any case as you do not need the money for 10 years or longer it will almost certainly recover at some point.

youth_leader

Thank you Albermarle, my IFA has said he will continue to review the investment and the ISA, the ISA has dropped the most.  I will concentrate on how much it has gone up since 2016.  If it drops to my original investment level, would you take the money out and put into normal savings? 

Albermarle

youth_leader said:

Thank you Albermarle, my IFA has said he will continue to review the investment and the ISA, the ISA has dropped the most.  I will concentrate on how much it has gone up since 2016.  If it drops to my original investment level, would you take the money out and put into normal savings? 

This is an anonymous internet forum. Fine for general info and guidance, but not for specific advice . That is what you pay the IFA for.
However generally best not to cash out investments when they are down, and stay in for the long haul.

youth_leader

Thank you Albermarle.  My late husband was the clever one, I've found making all these decisions terrifying.  Sorry to have asked and appreciate your kind reply. 

masonic

Swipe said:

JohnWinder said:

Here's a brutal take on catchy slogans:

'Also, of course, keep in mind that catchy slogans sound good-- a) "Buy the dip" b) "Buy low, sell high" c) "Don't try to catch a falling knife" d) "Cut your losses and let your profits run" --but a and b are the exact opposite of c and d. Slogans like "buy the dip" are not really sound or consistent advice on what to do. They are really a stock of things that pop into your mind as pseudo-justifications for whatever it is that you want to do. If you want to buy, you tell yourself that you are "buying the dip." If you want to sell, you tell yourself that you are "cutting your losses."'

So are you suggesting I should have just lump summed all my house sale proceeds into the market in January at the all time highs? Even the 2012 Vanguard study says that DCA is statistically better over lump sum in a falling market.

Which basically means that it is statistically worse over all periods, and given that you cannot know what markets will do after the point you make your decision, it is better statistically not to DCA at all. However, if I were to come into a large sum of money, that would represent a significant portion of my current investments, then I would consider DCA. I wouldn't do it because I believed it would be better statistically, but rather as insurance against sequence of returns risk, with a likely negative impact on returns. I would not do so over a very long period, and I would accept that markets could start falling the day after I complete my DCA. I would consider not doing so if the market had already fallen a considerable amount, because statistically DCA works less well the further from a peak markets fall, and there comes a point where statistics win over psychology.

aroominyork

I have a decision soon about investing a large amount (an inheritance). My thinking is to invest it in three tranches over 12-18 months, with the 'uninvested' balance held in a couple of wealth preservation funds (probably the open ended versions of CGT and PNL). That gives me a halfway house between lump sum investing and DCA, while not watching inflation eat away at the balance.
PS The AGM of CGT is on 12 July in London. It will be interesting to hear their views on managing a wealth preservation fund in a high inflation environment.

bostonerimus

Swipe said:

bostonerimus said:

Swipe said:

Well, I already have more than enough currently invested for my retirement so not catching the bottom is not a huge deal breaker for me. What worries me more, is inflation eating away at my remaining uninvested cash. I'd rather jump back in on the way back up than invest now and watch it go down even further + inflation compounded on top of the losses.

What is your desired asset allocation ie cash/domestic equity/international equity/ bonds etc. You should be getting to that asap. Maybe you want to drip feed the money in over a year, but there is no way of knowing what strategy is best except with hindsight. Right now you are sitting on a load of cash and looking back you are glad you didn't invest just before the most recent dramatic falls in the markets and saying you did the right thing, but that tells you nothing about what you should do today. Where will the markets go in the next few months? Well if you are a long term investor you shouldn't worry about that and while you are waiting for the markets to do something your cash is being eroded by inflation and if you could be making larger pension contributions you are missing out on the tax advantages. Personally I would put your lump sum into tax advantages investments over the next year. You need a plan, not some vague "I'll jump back in when", because you will dither.

My pension and ISA are both maxed each year and for the current year. My investments have already also been eroded by market losses + inflation. It's only my cash at the moment that is protecting my capital. As I said, I have a large sum invested already (more than enough to see me to death), hence my large losses since December.

That puts you in a great situation. I also have more than enough invested and this is what I do. 
1) I'm thankful
2) I keep enough cash in the bank for two years of spending because I like the flexibility to cover large expenses and emergencies quickly and easily and frankly because I can afford it.
3) around 80% of my DC pension and other investments are in equities. As I have enough I don't worry about losses, rarely look at my balances and just plough money into international and domestic equity trackers on a regular schedule.

Audaxer

Eyeful said:

Swipe said:

How can you buy the dip if you don't check them?

How do you know its a dip at the time you are buying? It could just fall farther, so instead of buying the dip, you end up catching a knife. 

Yes, you don't know if markets will fall further, but if are buying now through regular contributions or a lump sum investment, you are buying at much cheaper prices than at the start of the year.