Spooked by ongoing sharp decline in value of investments - should I cut my losses?

masonic

There's an element of faith required in the notion that capitalism (and the underlying ability to exchange labour for value) will continue to work, and that's what ultimately underpins investment theory. We know it has worked since before the industrial revolution. Underpinning it is the notion that the human race will continue to be productive and innovative.

So it is really a sociological rather than mathematical debate. Though there is plenty of commentary, for example https://thebulletin.org/doomsday-clock/2026-statement/

But it is also worth considering the consequences of the collapse of capitalism. If people are wrong, will they be meaningfully worse off in life compared to those who believe in cash, property, cryptocurrency, or precious metals? Things could get pretty grim for all.

In some ways, cash is the most fragile of these assets, because it requires both belief that it has value and a stable central authority to control it. But without cash, everything else becomes extremely challenging.

And so there is uncertainty. And that uncertainty is needed, because without it, and without risk, there would be no risk premium to be harvested. And so people who doubt and disbelieve are needed. It may be unproductive to convert too many of you. 😉

toothdoctor

I hope the markets keep on dropping. What would be ideal is if the bottom of the market exactly coincided with the 6th April when I dump more money into the market to fill the isas.

TheBanker

https://forums.moneysavingexpert.com/discussion/comment/81931611#Comment_81931611

I am in the same boat. I have a bonus sacrifice pension contribution due to hit on 1 April, and then an ISA top up in the new tax year. Knowing my luck we'll see a massive rally on 31 March!

wmb194

https://forums.moneysavingexpert.com/discussion/comment/81931611#Comment_81931611

06/04 is a Bank Holiday in most (all?) of Europe so unless you're buying securities listed in the US or somewhere else that's open you will need to wait until 07/04.

artyboy

well, yes, m very much in the same boat as others that I'd love a huge crash right now. I sold up at the end of last year and prices are now below the point at which I bailed.

Was never my intention to profit from death and destruction, I simply thought at the time that the whole market was a bit 'toppy' and wanted to effectively crystallise gain by moving to money markets.

Mind you, I did think that if there was a fall it would be due to something to do with dumb actions by the orange one. So there. I'm a flippin' genius…

PixelPound

https://forums.moneysavingexpert.com/discussion/comment/81931666#Comment_81931666

Or a further fall mid-late April that takes 5 years plus to recover.

Markets have shown quicker recoveries than compared to before, but we haven't had a crash, just a readjustment so far. Economic outlook now has changed from before a month ago and who knows what will cause the markets to rise/fall further.

masonic

https://forums.moneysavingexpert.com/discussion/comment/81931777#Comment_81931777

Indeed, if things rumble on, the natural instinct might be to rush to exploit the opportunity and go all-in (using as much of fresh ISA allowance as possible) immediately, because we are slightly below all time highs, which seems unusual. After all, there have been a number of missed opportunities in the past. But if we get to 7th April and we see the same sub-crash meanderings, the drip-feed approach might be worth considering.

PixelPound

https://forums.moneysavingexpert.com/discussion/comment/81931791#Comment_81931791

The dotCom bubble and GFC meant that the 2000's were seen as the lost decade. We've got the current war, whether AI is a bubble, and the private credit discoveries that could see GFC2. We could get a whole series of rallies and troughs over the next several years.

masonic

https://forums.moneysavingexpert.com/discussion/comment/81932016#Comment_81932016

Anything is possible, but the 2000s decade was among the worst of the range of possible outcomes. I remember starting my investment journey in the middle of that period. I regret that it wasn't a few years earlier.

Drip feeding was the way to achieve a real return over the period. It was a period of time where many made poor market timing decisions and lost out, but sequences of returns like this should be expected and planned for. A total return of +1% pa over 10 years, below any reasonable measure of inflation, is certainly possible again.

I'm very grateful I was able to start investing when I did - after the dotcom recovery and right before the global financial crisis. I had no idea at the time, 20 years later, my outcome would have been this good. But it is impossible to predict future returns from here.

talexuser

Frankly I have to be cruel and say that if you are worried by a 3% drop you are in the wrong place. I sold out and bought a new fund in the ISA in the first week of February which today is 4.3% down. That's nothing. Ok it it only 10% of the ISA and the other stuff is way ahead but the fact is that investing is not a few months game, it is long term, and should be money you never need to crystalise in an emergency.

After 40 years of investing, before index trackers had even arrived here seriously, I have been through ups and downs far worse and never sold out during a crash. Had great funds that doubled or more every 5 years, had one fund from a very famous house that halved through imaginary investments and fraud withe the manager arriving in court in women's clothes with a mental defect defence (the management house did not survive).

Many studies have shown that missing the few best days of the market can halve your return for the year, trying to time the market is a mugs game and there are many many thousands of professional investors with much better computers than you trying and not succeeding. I have always stuffed the ISA with as much as I can as soon as possible. If that is too strong then try drip feeding, just don't think or expect that things go up all the time - they don't. But ending up ahead of savings and inflation is just a longer stretch.