What Lessons Learned?

chiang_mai

We are now two weeks into the latest bout of markets upheaval and doubtless some are fretting. We recently had a lengthy discussion about the merits of selling USA and buying Asia/EM plus separate discussions about derisking portfolio's because of a potentially overvalued Tech Sector. Within the context of those topics, what lessons have been learned from the recent turmoil and what are you now doing (or plan to do) differently?

For my part, my holdings are down 3% since 28 February but I continue to think that my low US weighting remains sensible and that the degree of diversification in my portfolio remains suitably strong. I don't feel that I made any significant mistakes that I would now want to correct. I was a little taken back by the falls in the bond market but I can live with that. With only 48% employed in equities, I remain relaxed and still sleep well and am not inclined towards any particular action, other than to sit and wait. I am toying with an idea to reallocate my FTSE AW holdings to Blackstone Consensus 85, a fund of funds. My major reason for holding the AW fund is to enable diluted US markets access, something that Consensus will be able to do, at lower risk.

And you?

masonic

Markets have been a little choppier than we've become used to in the recent past, but I've been surprised at how little they've reacted to world events. The MSCI All Country World Index is up around 6% over 6 months (slightly positive YTD at time of writing) in GBP terms and within 4% of its all time high. We are not even in correction territory.

I don't regret derisking over the course of last year, but so far it hasn't benefitted me to have done so. It was risk I no longer need to take, and, with inflation expectations now ticking up, I am very comfortable with my long dated index linked gilts with a locked in YTM of RPI/CPIH+2%. I'm happy at 60% equities and to leave some risk premium on the table for someone else.

In terms of lessons, the main one that rings true so far is that you cannot predict how the market will react, or time it. I imagine that we will ultimately see the impact of recent events, but whether that's through a future correction/crash/recession, or just a period of depressed growth, I've no idea. Or perhaps this will all be dwarfed by an uplift from an AI revolution.

InvesterJones

I think the main lesson is diversity is important and that we can't predict the future.

Moving away from US into EM or Asia for example would have cost you in the recent situation, ditto a rotation out of tech into 'old world' sectors - while oil has done OK, financials and miners (for those chasing beta on gold) have tanked. Talking of gold, everyone jumping on that bandwagon has discovered that it's not the safe haven they might have thought when going to war with an oil sensitive region. The more you know…

Section62

We are now two weeks into the latest bout of markets upheaval and doubtless some are fretting….

The main lesson is - don't fret.

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/81921235#Comment_81921235

An interesting article in Bloomberg recently talked about the limits that traditional diversification can provide to the average retail investor. Whilst diversification is important and is very useful, most of the time, things can quite quickly reach a stage where the usual alternatives are no longer useful. Most people don't want to hold those sectors that are dull and non-performers, just to act as a counter balance on the very infrequent occaisons when they are useful to own.

With regard to Asia and EM: I'm a long term advocate of the region and have built up substantial gains in the past year to where a 3% hit had no impact. I continue to believe that the pairing of EM with Developed Asia, or the inclusion of Japan within the fund, provides a helpful balance and counterweight to offset volatility.

Linton

I am very happy with my current well diversified allocations
36% US (Inc 7% mag 7)
23% Europe
13% China
8% Japan
8% other asia
There is no intention of making any significant changes in the future.

My 100% equity growth portfolio is down 4.6% since 28 Feb but still up 2% since the start of the year(outperforming the MSCI All Countries World Index ETF!). But these short term figures dont matter since any affect on standard of living will only become apparent in perhaps 5-10 years. The biggest concern, apart from the end of the world as we know it, is a massive increase in oil prices affecting already booked holidays.

mattywallace121

I have done nothing, and will continue to do nothing different.

VNX

I keep buying and keep holding

Cus

I've learnt that the US crude oil price is currently the only driver of the US S&P.

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/81922224#Comment_81922224

Which is interesting given the narrative that the S&P is dominated by tech. I'm pretty sure the S&P has not been as badly affected as other markets though, so I don't think that's a learning you could really take.

Cus

https://forums.moneysavingexpert.com/discussion/comment/81922228#Comment_81922228

I think everyone knows/thinks that persistent high oil prices impact everything, from airlines today to semiconductor production tomorrow.

Is there a way to see the proportion of S&P 500 daily volume is linked to trades of the index and it's futures directly rather than specific shares driving the index level?