Understanding stocks & shares ISA

InvesterJones

Just bear in mind that for every share you've researched the background for etc. and have decided to buy, someone else has done the same and decided to sell..

Linton

Alex9384 said:

[Deleted User] said:

Good advice from Mark, he even mentions researching and evaluating.

I aim to buy companies which are good enough to keep long term even if they temporarily dip after I buy them

So no stop losses, you're just going to buy and hold as the ship sinks and you hope/pray for a recovery?
Good luck with that... How are you planning to manage risk?

Companies don't always recover, no matter how much you research them or believe that you know better than the market.

As above, be very careful with your money.

Thanks. But the same thing can happen to long-term investors. This one is not limited to trading.

StopLoss is a double edged sword. It can kick you out of from a position which is not really problematic, like some 1 day dip, realising the loss.

Long term investors could be  investing in thousands of companies so wont be wiped out in no matter what happens barring the end of the world as we know it and they can afford to wait until markets recover.  I believe that no-one really understands anything about investing until they have experienced their first major crash.

Middle_of_the_Road

Linton said:

Alex9384 said:

[Deleted User] said:

Good advice from Mark, he even mentions researching and evaluating.

I aim to buy companies which are good enough to keep long term even if they temporarily dip after I buy them

So no stop losses, you're just going to buy and hold as the ship sinks and you hope/pray for a recovery?
Good luck with that... How are you planning to manage risk?

Companies don't always recover, no matter how much you research them or believe that you know better than the market.

As above, be very careful with your money.

Thanks. But the same thing can happen to long-term investors. This one is not limited to trading.

StopLoss is a double edged sword. It can kick you out of from a position which is not really problematic, like some 1 day dip, realising the loss.

Long term investors could be  investing in thousands of companies so wont be wiped out in no matter what happens barring the end of the world as we know it and they can afford to wait until markets recover.  I believe that no-one really understands anything about investing until they have experienced their first major crash.

So true. My father elected to take retirement in 1987. He took reduced pension and a 50K lump sum. The company sent a financial advisor who convinced him to invest it all, and one week later that 50K was 17K.

Luckily, my mother, who had saved all her working life, and probably had a similar figure at her disposal, refused to take the risk, despite huge pressure from the salesman. Her money was earning at least 10% with the building society. 

No prizes for guessing who had the least stressful retirement.

dunstonh

Middle_of_the_Road said:

Linton said:

Alex9384 said:

[Deleted User] said:

Good advice from Mark, he even mentions researching and evaluating.

I aim to buy companies which are good enough to keep long term even if they temporarily dip after I buy them

So no stop losses, you're just going to buy and hold as the ship sinks and you hope/pray for a recovery?
Good luck with that... How are you planning to manage risk?

Companies don't always recover, no matter how much you research them or believe that you know better than the market.

As above, be very careful with your money.

Thanks. But the same thing can happen to long-term investors. This one is not limited to trading.

StopLoss is a double edged sword. It can kick you out of from a position which is not really problematic, like some 1 day dip, realising the loss.

Long term investors could be  investing in thousands of companies so wont be wiped out in no matter what happens barring the end of the world as we know it and they can afford to wait until markets recover.  I believe that no-one really understands anything about investing until they have experienced their first major crash.

So true. My father elected to take retirement in 1987. He took reduced pension and a 50K lump sum. The company sent a financial advisor who convinced him to invest it all, and one week later that 50K was 17K.

Luckily, my mother, who had saved all her working life, and probably had a similar figure at her disposal, refused to take the risk, despite huge pressure from the salesman. Her money was earning at least 10% with the building society. 

No prizes for guessing who had the least stressful retirement.

The October 1987 drops recovered within a few years and went  on to beat cash ever since.   Yes, some zig zags on the way, but your father would have done better than cash over the 10 year period

That said, a fall from 50k to 17k in that period doesn't tally with conventional investments.  So, there is probably some memory muscle failure going on there.    FTSE all share fell 34% from peak to trough.  It sounds like your father went in at the peak.    A 34% drop is exactly 17k.

So, its more likely that your father lost £17k on his investment rather than it fell to £17k as the markets certainly did not drop 67% as you are suggesting.

here is the decade after he invested 50k in the FTSE all share vs Leeds Liquid gold.



and the 20 year period.  Although the Leeds Liquid gold savings account stopped being a suitable benchmark for cash after Halifax merger in 95 (completed 96) but you get the idea and it shows why investing is a long game.

nottsphil

What caused that massive 25% drop in the FTSE over the summer and early Autumn of 1998?

thunderroad88

nottsphil said:

What caused that massive 25% drop in the FTSE over the summer and early Autumn of 1998?

David Beckham…everything bad that happened that summer was his fault 😀

EthicsGradient

nottsphil said:

What caused that massive 25% drop in the FTSE over the summer and early Autumn of 1998?

I think that was the Long Term Capital Management crisis: What Was Long-Term Capital Management (LTCM) and What Happened? (investopedia.com)

nottsphil

thunderroad88 said:

nottsphil said:

What caused that massive 25% drop in the FTSE over the summer and early Autumn of 1998?

David Beckham…everything bad that happened that summer was his fault 😀

Let's hope Harry Kane doesn't cause a similar calamity on Monday morning.

Middle_of_the_Road

dunstonh said:

The October 1987 drops recovered within a few years and went  on to beat cash ever since.   Yes, some zig zags on the way, but your father would have done better than cash over the 10 year period

That said, a fall from 50k to 17k in that period doesn't tally with conventional investments.  So, there is probably some memory muscle failure going on there.    FTSE all share fell 34% from peak to trough.  It sounds like your father went in at the peak.    A 34% drop is exactly 17k.

So, its more likely that your father lost £17k on his investment rather than it fell to £17k as the markets certainly did not drop 67% as you are suggesting.

here is the decade after he invested 50k in the FTSE all share vs Leeds Liquid gold.



and the 20 year period.  Although the Leeds Liquid gold savings account stopped being a suitable benchmark for cash after Halifax merger in 95 (completed 96) but you get the idea and it shows why investing is a long game.

Thank you for the analysis of the information I posted . It does seem the 17k figure I remember from that time was the amount the investment fell after that event. 

jimjames

nottsphil said:

What caused that massive 25% drop in the FTSE over the summer and early Autumn of 1998?

Emerging markets debt crisis?

https://www.economicsobservatory.com/russias-1998-currency-crisis-what-lessons-for-today

Just shows though that something that causes a 25% crash is forgotten after a while as markets get back to normal