Investment timing- thoughts…?

masonic

Bobziz said:

So it doesn't matter that the p/e of the s&p has only been this high 3 or 4 times over the last 100 years or so ?

If you want to use P/E as a metric for predicting future returns, then you really should cyclically adjust it. There is data that when the CAPE is at unusual highs, it is a predictor of the following 10 year returns being lower.
However, this is irrelevant to the case for drip feeding, which would usually occur over shorter periods, such as over 6-12 months. More than likely the crash won't come within 6-12 months, so would likely happen after you are fully invested.
A very high CAPE or P/E is an indicator to invest elsewhere rather than invest slowly. In the case of the S&P500, it has been expensive on both measures for most of the last 20 years. S&P500 CAPE was 38.6 in November 2021 (median is 16), but the index is 20% higher today than it was then, beating other cheaper markets. The CAPE is now 36.4. It did dip in the middle, creating a buying opportunity, but it could so easily have gone the other way. Markets can remain irrational for long periods of time, but if you think you can predict bear markets in advance, then the best thing to do is sell everything at the top and go all-in at the bottom

Cus

OldScientist said:

Daleandnolan said:

Hello- newbie here. Hoping to gather some thoughts and ideas about when to invest.
i have a lump sum about (90k) and are looking for somewhere to invest it. I think that I may have settled on VUAG and / or an all world cap . Max out the ISAs first of course. The S&P 500 seems high at the moment and I am mindful of the coming budget over here as well as the election in November. What are people’s views on investing now? Do it now and beat the election- never mind the price, or wait… welcome your views. 

Thanks!

Historically (see https://corporate.vanguard.com/content/dam/corp/research/pdf/cost_averaging_invest_now_or_temporarily_hold_your_cash.pdf) investing a lump sum in one go rather than in three instalments one month apart has led to higher returns in about 68% of cases (although not investing at all, i.e., leaving it all in cash is statistically the worst approach). Of course, whether the next few months will see one of the 68% cases or one of the 32% cases is impossible to predict (unfortunately, only hindsight will tell you what the best decision would have been).

Do they have any data cross referenced against the times markets were within say 1% of all time highs versus other times? Or against valuation levels? Maybe the data shows that installments is statistically better in certain scenarios 

jimjames

WindfallWendy said:

Is this (my way) a silly way to approach a windfall, then? Should I look at stocks directly like Daleandnolan???

Definitely not a silly way. I'd say buying individual stocks was a silly way unless you know exactly what you are doing and have a very substantial portfolio and even then only for a part of it.

JohnWinder

Do they have any data cross referenced against the times markets were within say 1% of all time highs versus other times?

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=356671&p=6196749&sid=9378de92a67b7e76ee225011c3d84d72#p6196749

Cus

JohnWinder said:

Do they have any data cross referenced against the times markets were within say 1% of all time highs versus other times?

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=356671&p=6196749&sid=9378de92a67b7e76ee225011c3d84d72#p6196749

Not quite what I was after but interesting 

WindfallWendy

Albermarle said:

You are right though that by investing via a S&S ISA you avoid some admin work and potential tax.
Same as with investments in a pension. You do not mention your pension position. Often this is a good place to invest lump sums, due to tax benefits.

Oh, yes there will be some going into pension as a lump sum too, largely to offset the tax I anticipate paying as a result of rent I've received (from the house I'm selling = the lumpsum). It turns out I got £2k tax returned as a result of my overly cautious £8k overpayment into my pension, so I'll probably do the same again, even though I will have even less rental income coming in - I like the tax returned!!

Albermarle

WindfallWendy said:

Albermarle said:

You are right though that by investing via a S&S ISA you avoid some admin work and potential tax.
Same as with investments in a pension. You do not mention your pension position. Often this is a good place to invest lump sums, due to tax benefits.

Oh, yes there will be some going into pension as a lump sum too, largely to offset the tax I anticipate paying as a result of rent I've received (from the house I'm selling = the lumpsum). It turns out I got £2k tax returned as a result of my overly cautious £8k overpayment into my pension, so I'll probably do the same again, even though I will have even less rental income coming in - I like the tax returned!!

Rental income does not count when it comes to how much you can put in a pension. You need to have taxable earnings from employment to get any significant tax relief.

WinTogether

tacpot12 said:

US Stocks are very overpriced. Their Cyclically Adjusted Price-Earnings ratio is up around 35 at the moment. It's 16 in the UK meaning that UK stocks are much better value. That doesn't mean that US stocks doing still have some momentum to continue their upward course. 

Will the US election change this? I doubt it. I suspect the market sentiments for US shares will be driven by factors other than who is President. Even if Trump screws up the US, firms there will still find a way to make progress. It's another way of saying that it's a mug's games to try to time the market. 

What is you investment time horizon? Are you a day trader or looking to invest for many years? Depending on which category you fall in, the P/E ratio analysis could be meaningless.

Daleandnolan

WindfallWendy said:

I have a windfall coming my way (£180k). My husband and I are going to chuck as much as possible into ISAs and premium bonds now, and then repeat on 7th April. And then each year move from premium bonds into ISAs.

This is because I don't want to have to to a tax return, and pay tax on interest and dividends. Neither do I want to have to pay attention to markets and instead will entrust my ISA provider to do that via S&S ISAs.

Is this (my way) a silly way to approach a windfall, then? Should I look at stocks directly like Daleandnolan???

I was not thinking of individual stocks per se, rather passive funds from the like of Vanguard, Fidelity or Investec