Investing in uncertain times and diversifying

london21

I was speaking with someone recently and they scared me with talk about the Iran war and everything happening globally. It made me panic sell my holdings, not at a loss, but I reduced my profit.

I had over £300k in index funds.

What do others invest in during times like this? I do want to start my own business eventually, but I haven’t figured out what yet. I was made redundant last year.

Previously, I held the Vanguard FTSE Global All Cap Index Fund and the S&P 500. Some of these were in my ISA, and the money is still sitting in my iWeb account.

chiang_mai

https://forums.moneysavingexpert.com/discussion/6663198/investing-in-uncertain-times-and-diversifying

It's a shame that you sold all of what you were holding, if I find I want to reduce my risk I may sell some, but never all. You don't tell us your age but I presume you are younger rather than older?

Defensive funds are already at a premium so now may not be the best time to buy, unless you want to get involved with wealth preservation funds such as Capital Gearing Trust and the like but their upside is very limited. Personally, if I were you I might try to find my personal risk level and decide what percentage equities let you sleep at night. Perhaps start with 50% equities using a well diversified global fund, I personally like HSBC FTSE All World, but that's just me. Spreading your risk across sectors, geographies and capitalisation should give you sufficent diversification to where you'll sleep well, if it doesn't, adjust up or down accordingly.

As for what to do with the remaining 50% (or so), others will advise perhaps on the state of the bond/gilts market and its suitability for your circumstances.

The last component of the picture is time and patience, assuming you're not older, time in the market is your friend.

PS I'm 76 and don't live in the UK

london21

https://forums.moneysavingexpert.com/discussion/comment/81954056#Comment_81954056

Thank you

I am 36.

I was made redundant last year October and it is taking longer to get a new role.

I probably should have posted on here earlier.

Uncertain times but best to ignore the news, he was saying the tech stocks in the funds are overpriced etc and with AI.

I also need to learn abit more to better understand the markets.

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/81954061#Comment_81954061

The followng link has been a good reference source for me.

https://www.investopedia.com/

masonic

I started derisking over the last 1-2 years, not really because of what markets were doing, but because my investments had grown to the level where I didn't need to take as much risk. Though I was also concerned about how rapidly valuations had been rising. Today I have significant holdings in index linked gilts and some exposure to a broad commodities ETF (which has been helpful recently!), but equities remain my largest asset class.

Tech / AI is arguably overvalued, but it has been this way for years and nobody knows what that means for the future. So by all means reduce exposure, but it would be very brave to avoid these stocks entirely as they've been responsible for a lot of the heavy lifting in the past. The US already makes up a very large part of global indexes, so adding further S&P500 exposure seems unwise. Some, myself included, look to add additional rest-of-world exposure to dilute the US.

jaybeetoo

Be careful who you take financial advice from. The worst thing you can do is sell when the market drops like it has. History tells us to sit on your hands and do nothing as historically the market recovers. Investing is for the long term. It sounds like you were investing for the short term. If you have been made redundant (a life event), that would have been a good time to review your savings and investments.

InvesterJones

Yes, best not to react to the news. But you can't change the past, so start with a fresh slate: If you were to carefully consider investments now, looking forward not backward, what would you invest in? As usual, work out how much you need in the near future to live off and for any unforeseen emergencies, to work out what is left for long term investment, and pick assets accordingly (e.g. cash savings and cheap global index tracker respectively)

Aminatidi

Events like this are bad but in a weird way they do help you gauge your real appetite for risk.

It might not feel it but relatively speaking what's happened has been "noise" so if that's concerned you I suspect in the nicest way you're in over your head and shouldn't be in 100% equities.

I know because a year or so back that was me.

I dialled down the risk a little to roughly 60/40 and found it made a difference to me.

I'd be giving some serious thought to your real appetite for risk i.e. you mentioned £300K.

Would you be prepared to wake up and find that was £280K? £250K? Albeit (hopefully) temporarily.

jimjames

Unfortunately you've sold after most of the drop and just before the bounce today. FTSE250 up over 4% this morning.

WitsEnd101

These kind of posts always remind me of this sage advice.

Warren Buffett's famous, contrarian investment advice, "

Be fearful when others are greedy and greedy when others are fearful

," advises buying quality assets during market panics and cautioning against herd mentality during bubbles. 

MEM62

Unless duly qualified or professionally connected to the subject "someone" is not an individual that you should be unduly influenced by and you should certainly not allow their comments to put you in a state of panic.

For me personally, there is nothing in recent events that would cause me to change strategy.