Timing the market!

dunstonh

How much of the speculation about a market crash (on YouTube or social media) is an attempt to ramp up bitcoin pricing?

Baldytyke88

https://forums.moneysavingexpert.com/discussion/comment/82114526#Comment_82114526

I asked AI which share I should buy if the troubles in Iran continue and get worse. I am doing that more often, and it recommended Babcock and Harbour Energy.

I have enjoyed buying and selling shares for over 20 years. I only earn £20k so these are only hundreds and thousands, but over 20 years I must have bought and sold a reasonable number of shares. Not timing the market would be boring.

RogerPensionGuy

https://forums.moneysavingexpert.com/discussion/6680928/timing-the-market

I felt last autumn the markets were too frothy and I had enjoyed a very good run and annuities were ramping up and I wanted hard income for lifetime and didn't want to get too involved in SORR or SWR or sleepless nights over the years, so I switched much equities to cash like devices.

I watched annuity rates roll up & up and converted a pretty big % of my DC SIPP in to a RPI annuity just a few months back.

I'm happy enough with what I did, yeah in hindsight I obviously should of stayed bigger in equities, but hindsight is one of my poor qualities.

I liked the overall dynamics and I made decisions.

I'm normally a lot cautious and if I had decided or do decide to do DC SIPP Drawdown I would probably pick a drawdown rate of just 2.5% to hopefully allow pot to grow strongly and if a market correction is or crash occured, I would of stopped drawdown until it had recovered as I wouldn't have liked seeing it roll down and kept taking withdrawals.

So overall I felt appropriate to do what I did.

A very personal choice.

Cheers Roger.

Cobbler_tone

It took me a couple of years to understand the mechanics of investments, risks and probably the hardest, my risk appetite. We are ALL different in that respect, which is the most complicated element. Those who are whipped up by speculative reporting must suffer the most.

Even though my core income will be covered by a DB, my extra DC money feels important to me and I worked hard to invest into it. Considering I have ample flexibility of drawing it down (probably 5-15 years life permitting and to remain tax efficient) I take a pretty low risk approach. Starting in 12-18 months I have 25% in cash, 45% in equities and 30% in a lifestyle fund which has a mixture. I have now reduced my contributions for the final 12 months, having gone PT and hammering it for 3 years previous. It is slightly ahead of where I intended to get it at retirement. I guess if I was very low risk I'd be looking to buy an annuity (or more in cash) but I want the capital and it to tick along. Even heavily reducing was a balanced decision, as it gives me more spending power today (despite moving to PT) and funds a new car. For me, life has always been a balance of living for today and making sure your future is secure.

When it comes to drawing, I will look at the growth/dip and make sure there is always a cash element. I won't lose too much sleep over obsessing on what the latest movement is. If the markets totally crashed I'd leave it and if it was a sustained low market I guess I'd have to make a decision on timing.

I think you often have to take a pragmatic approach. I am offloading £1,500 of company shares this month. A mixture of dividend shares, matching shares and the odd one I bought via SS. They cost me around £150 net. I rarely leave many in the 'tax free' bucket. Whilst people at work (some sitting on six figures) always say "They'll be x in 12 months time". They are also very expensive shares and there could be a long way down. The remaining ones I have will all be tax free when I retire, so it merely taking the risk out of it.

You can always end up with more or less, unless you lock it in.

Pat38493

https://forums.moneysavingexpert.com/discussion/6680928/timing-the-market

Although I broadly agree with many of the comments that you cannot time this, and even if you manage to time the start of the crash, you have to get it right to call near the bottom of the market as well. This is the generally accepted wisdom.

That said, I have made some small adjustments - I have moved about 10% more of my pot with a tilt towards a value/dividend global index fund that per definition don’t include the US big tech companies. This won’t prevent my equities from crashing but it will reduce the damage a bit (maybe) and these funds don’t actually have long term growth much less than a full global tracker anyway so it’s a pretty small hedge really.

If you want to consider a counter argument - look up the ERN early Retirement now article about “momentum investing”. He did an interesting study that appeared to prove a higher safe withdrawal rate if you follow this approach but it’s probably a PITA to implement. TLDR momentum investing sort of does what you are asking - it tries to use a data driven approach to get your out of the asset class near the top (not at the top but just after the top) and then get you back in near the bottom (again just after the bottom). The big downside to this is that it results in what he called “whipsaw” effects where you sometimes make big adjustments to your portfolio, only to reverse them again a month or two later because it was a false alarm - the theory is that the losses from these false alarms are outweighed when you avoid a 4 year bear market. Using this approach you would have avoided the Great Depression, 2008 etc for the most part. Interestingly, the momentum signal right now under his approach is to be 75% in equities, 0 in bonds, a tiny bit in gold and 20% in cash.

75% equities is higher than his baseline so again TLDR the momentum signal for equities remains positive right now.

Edit: - I should probably put the disclaimer that the Momentum study mentioned uses mainly US only funds, and uses assumptions about transaction costs and spread losses that may not be the same for the UK. as far as I know, he has not run the study based on global rather than US only funds, so you have to be a bit careful about assuming this would be beneficial for a typical UK investor.

barnstar2077

https://forums.moneysavingexpert.com/discussion/comment/82114727#Comment_82114727

Investing is meant to be boring, excitement means increased risk, which is more akin to gambling than investing.

@Spivo46

Warren Buffet has been saying that the US stock market is overpriced for the last twenty five years (and sometimes he was right! : )

Although we can always look at historical data, we have never lived in the time of AI, or had millions of retail investors buying meme stocks on their mobile phones, until now. Will it continue to propel the market ever higher for years to come, or is a crash right around the corner?

We can only make plans with the presumption that a crash will happen at some point, and invest accordingly. When people buy new cars, they don't assume that it will never break down or need replacing at some point. Replacing a part, or saving to replace the car completely, should be budgeted for from day one.

I invest every month in globally diversified index funds, month in, month out. I can control costs, so I make sure I am not paying too much in fees. The rest will sort itself out in time. Rinse and repeat until you are closer to needing access to the money.

I myself suffer from anxiety on occasion, so I know it isn't always easy to stay the course. It has helped me immeasurably to shift my perspective from comparing todays numbers to yesterdays, to thinking instead about where I will be in ten years compared to today (when todays, or even the last few months, of ups and downs will feel irrelevant.)

If I look back ten years from now and see I have made 7% a year on average I will be happy, I won't care about the ups and downs along the way.

If you go on Youtube or Ticktock you will see a million people with a million opinions about what is coming and what you should do about it. Not every opinion carries the same weight, or should be given the same attention.

ali_bear

Recently I looked at all my investments and built a simple spreadsheet to calculate the overall allocation to shares, market funds, bonds and cash. Turns out I am already fairly defensive.

Bostonerimus1

I've increased my cash allocation to 22% and moved way from US tech stocks as I think they form far too large a part of the US indexes. I'm still 67% equities, but that is evenly split between the US and the rest of the world and slightly less than 20% of it is in tech.

I don't think of my changes as "timing the market", more rebalancing my asset allocation in the face of a large tech bias in the US markets.

Cus

https://forums.moneysavingexpert.com/discussion/6680928/timing-the-market

I de-risked most of my equity exposure towards the end of last year. Not because I am convinced there will be an equity crash, but more that I think it's more likely we will see a long period of sub optimal equity growth for many years compared to other asset classes

Mistermeaner

in broad terms I agree with initial comments that timing the market is a bad idea and just drip feed your money in each month and don’t worry about it

however…..

A lot depends on circumstances- in my own case I invested heavily in my youth ignoring noise and ups and downs and as a result at age 46 have more than enough in my pension and investments to cover my retirement (between me and the missus now 1.4mil in DC pensions and Lisa’s). It was 100% global equities. Having hit and exceeded the target number I felt we no longer needed to be overly exposed to risks …. We don’t need stellar growth so why risk a crash.

long story short 400k of my dc pension has been derisked; 200k into money market funds and 200k into gilts. This 400k should cover the first 5-10 years of retirement which we hope to start in ~10years time. The remaining portfolio is still in equities which we shouldn’t need to access for 20 years so can stomach risk there

should there be a sizeable crash any time soon I will give good consideration to buying back in with the 200k that’s in money market funds - this absolutely would be timing the market against popular wisdom …. I’m not 100% sure I will do it but as I sit here now I struggle to see a downside. If my timing is bad and the markets continue down I’m still in a better position than if I’d never timed it. If the markets recover I’ll be in a better position than if I had not withdrawn earlier

happy to be told I’m getting it wrong but I think market timing isn’t a simple good / bad decision it depends what stage of your investment journey you are at and what you can afford to risk and potentially gain.

A bit like if you went a casino with a desire to win 200k. At the end of the night you’re 300k up. You can put 200k in your pocket - objective achieved then come back tomorrow and have a play with the 100k surplus , you may lose it all or you may win big again , either way it doesn’t matter as your 200k that you really needed is safe in your hotel room