Is it common for people to hold cash in investmentment accounts when the market is going down?

isayhello

dunstonh said:

You never know when the markets are going to fall.   So, holding cash trying to time the market is usually futile and pointless.  

Yes fair point, I've thought this too from things I've read. I guess I just wanted to question it as I've heard from many online videos on investing where the person has said their portfolio is down but they knew it was going to happen and they keep adding to it. It just made me think if you're that sure it will go down then is it actually wise to keep your money as cash in a wrapper during the downturn.

isayhello

Nebulous2 said:

I don't know if it is common - but I am certainly doing it. I opened a SIPP almost a year ago, have paid in over £12k so far, and hadn't invested any of it until mid-June, when I invested £4k. That was fortunate, rather than knowledgeable, but it is up around 6% and I find myself idly wondering why I didn't put in more! 

We tend to ascribe positives to skill and negatives to luck. You see that often with houses.

 "I knew this area would become more popular, people didn't believe me when I bought here and I've done really well.... " 

OR

" I was really unlucky. I bought just before the recession and have been in negative equity for years now....." 

Interesting point, so if not luck or skill, do you ascribe anything or it's just chance?

isayhello

[Deleted User] said:

I guess that's because nobody wants to admit that they made a wrong conscious decision.  It feels far better to blame someone/something else (in this case LUCK), than admit that you are wrong.  Conversely, we all like to take credit when things go in our favour even when it is down to luck.  This is called human nature!!!

@[Deleted User] I don't want to go off on a tangent completely but that did make me wonder, what's your opinion of what is more useful in this case, to blame luck? or admit being wrong?

Albermarle

isayhello said:

Albermarle said:

In fact markets have been moving up steadily in July so far.

How would you classify this? is it by looking at the ftse index which shows that? or some other global indices? 

All major stock markets have moved upwards in July

S&P 500 + 5%
Eurostoxx 50  + 5%
FTSE 100  + 2%
Nikkei225 + 7.5%

How this affects ones personal investments, will depend on what they are of course.

Nebulous2

isayhello said:

Nebulous2 said:

I don't know if it is common - but I am certainly doing it. I opened a SIPP almost a year ago, have paid in over £12k so far, and hadn't invested any of it until mid-June, when I invested £4k. That was fortunate, rather than knowledgeable, but it is up around 6% and I find myself idly wondering why I didn't put in more! 

We tend to ascribe positives to skill and negatives to luck. You see that often with houses.

 "I knew this area would become more popular, people didn't believe me when I bought here and I've done really well.... " 

OR

" I was really unlucky. I bought just before the recession and have been in negative equity for years now....." 

Interesting point, so if not luck or skill, do you ascribe anything or it's just chance?

It's hard to tell. We had a chunk of capital last year which was an unusual situation. We knew the stock market had gained a lot already, and felt investing it all was risky. We went 50 / 50 with 4 ISAs between us, and the rest in premium bonds. We watched the ISAs go up until Christmas and then come back down again until they were at or just under our starting point. 

The money in the SIPP was new money, which meant the balance had moved out of kilter, instead of 50 / 50 equities / cash we were now at 45 / 55. We were also watching inflation rise rapidly. 

So it was probably a combination of fear of inflation overtaking my concern about equities falling further, and a desire to move back towards 50 / 50. The fact I decided to move at more or less the low point in the S&P 500 was a bonus. 

Of course its entirely possible this is a limited rally and we find new lows soon........

Malthusian

isayhello said:

Yes fair point, I've thought this too from things I've read. I guess I just wanted to question it as I've heard from many online videos on investing where the person has said their portfolio is down but they knew it was going to happen and they keep adding to it. It just made me think if you're that sure it will go down then is it actually wise to keep your money as cash in a wrapper during the downturn.

They mean that they knew it would go down at some point but they had no idea when. Therefore they knew that holding in cash until the markets did fall (which might not happen until it is already too late to recover their losses from missing out on growth) was a losing strategy.

There is always another crash coming. But by the same token there is always another recovery and another bull market coming.

If they knew when it would go down, they would have stayed in cash and bought at the bottom of the market. But nobody does know.

jimjames

isayhello said:

dunstonh said:

You never know when the markets are going to fall.   So, holding cash trying to time the market is usually futile and pointless.  

Yes fair point, I've thought this too from things I've read. I guess I just wanted to question it as I've heard from many online videos on investing where the person has said their portfolio is down but they knew it was going to happen and they keep adding to it. It just made me think if you're that sure it will go down then is it actually wise to keep your money as cash in a wrapper during the downturn.

I'm not sure what exactly they said but if you are investing long term you know there will be points where markets crash and points when they rise. You just don't know when. So that's why you stay invested as you don't know the timing. If they are suggesting they did know the market would drop on a specific day/week then I think they are misleading you.

OldMusicGuy

I keep a fair amount of cash in my SIPP because I retired four years ago and it's part of my strategy for mitigating sequence of returns risk. And it helps me sleep at night. But I do that regardless of market direction.

However, prior to retirement (well about 5 years prior to retirement) I would never hold any of it as cash. Like everyone said, timing the market is a fool's game.

george4064

It’s easy to think this situation is all or nothing. For example, what I (try to do) is slow down or stop my regular contributions for a short and hold back that cash in instant savings with the intention of restarting them (plus topping up the monthly investments skipped previously) when the market is lower.

Generally speaking, you’d probably still lose out by trying this rather than simply letting the regular investments run on autopilot. Either way, I like to try safe with the knowledge that it won’t have a material impact on my overall return as the bulk of portfolio remains invested throughout.

NorthernJoe

The end of June 2022 saw a bogged down war in Ukraine, Russia cutting off gas supplies to Europe, inflation rampant in many developing countries, Chinese lockdowns adding to global supply chain issues, US & major Eurozone economies sliding towards recession, droughts & wildfires across the world and yet. . .  July has seen the biggest rises in major equity indexes in nearly 2 years. 

Maybe it was all priced in already. 

Was it the bottom? We can only know in retrospect. 

If it was, did you have the foresight to buy back in given all risks above? 

Personally I’m not clever enough to predict these things & reliably time the market so I stay invested and drip feed regularly.