We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Timing the market!
Comments
-
Yes, found myself worrying too much about volatility and took an annuity with 50% of my pot.
However, this was less about timing the market and more about peace of mind.
As others have said, when you are accumulating riding it out is fine, once you are drawing down, sequence of returns can really hurt, particularly if you are bridging an income gap with your pot, so drawing more heavily earlier on.
1 -
But that's really mixing two separate concepts - it's entirely reasonable and sensible to derisk in a planned manner in accordance with known timescales of moving from accumulation to decumulation phases, but that's nothing to do with timing the market, which is all about believing in one's ability to anticipate future market conditions and reacting to rumours and speculation…
2 -
The two things are inextricably linked though. Those of us in decumulation phase who have already won the game, are still faced with the same questions when we see high values. How much, if any, do we move to a defensive position, with possible inflation risk, vs how much do we let it run?
When I moved 1.5 years of planned drawdown to the money market a few months ago, it wasn't in accordance to any pre-existing plan. It was much more like mistermeaner and his casino, taking some winnings off the table. The price (drag on returns) was worth it for peace of mind. When I actually came to make a withdrawal from the SIPP a couple of weeks ago, I did it from stocks rather than those money market funds. That was definitely market timing too, because the decision on where to take it from was entirely driven by valuations.
2 -
But the fact that you tried timing the market when in the decumulation phase doesn't actually counter the point I was making, i.e. that such opportunistic attempts are different from following a strategy?
0 -
If the strategies were laid out in advance and set in stone, then I would completely agree with you. In practice though, I think many of us are being triggered to make changes to our strategies by what we perceive to be high valuations.
2 -
I'm not saying that it's invalid to do that, but am just observing that doing so is simply trying to time the market rather than following a strategy - strategies can and do change for all sorts of reasons, but acting on perceptions of future or even current market valuations isn't a strategic approach…
0 -
I think we can all agree that trying to constantly second-guess the markets is a mug's game and definitely not strategic. We can probably also agree that it is not unreasonable to tweak our strategy sometimes in response to what the market does.
My point is that it's a very fuzzy boundary between those two things. We are, hopefully, all trying to stay at the 'stick with the existing strategy' end of that spectrum, but I would argue that it is definitely a spectrum rather than a binary.
2 -
How much do you have in cash/nr cash in terms of years of drawdown? If the market moves up again will you put more aside?
When we moved away from our IFA (15 months ago) I started off with enough cash to cover a reasonable time (OH is self employed and happy with her work/life balance at the moment so my plan has to cope with a few unknowns). I took feedback from this forum and undertook more research and amended my approach to buy income focused ITs to produce more stable income. In addition I wrote down when I would sell some of our global ETFs fully expecting it to be a few years down the line however we have hit my target figure twice and I have shifted more into ITs. We like you have ‘won the game’ but I don’t see the need to question the current valuations as I see it as just affecting how much we pass on rather than the enjoyment of our retirement. When I was in my early 20’s I lost money using options so maybe that ensured that I never thought I know better than others where the market is going next. My take on IFAs is that they help you to not make poor/rushed decisions which is why I have my written strategy. Psychology is important.
1 -
" If the market moves up again will you put more aside?"
The honest answer to that is I don't know. My 'strategy' has changed so many times (around the edges at least) that it would be foolish of me to believe it won't change again. I was absolutely certain I was going to sell £20k of money market funds, until I logged on and saw that my global trackers had gone up £20k since I last checked. So I sold from them instead. The only thing I can be certain of at this point is that I will spend far too much time agonising between which of several sensible choices I should plump for.
Interestingly enough, I have just dipped my toe into Investment trusts too. My previous total return strategy in my ISAs failed miserably when I found myself temperamentally unable to sell assets within ISAs. My hindbrain believes ISAs are for putting money into, not taking money out of. Fortunately, my SIPP has grown enough that the ISAs aren't needed, so I just earmarked them for gifting to the kids and started again with Investment Trusts in the hope that I will do better at withdrawing the income from them. We'll see what happens when the dividends start coming in.
1 -
MIL has OIECS and ITs in her ISA and Fidelity pay any income monthly to a separate bank account that she uses to gift money to her grandchildren children.
2
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 355.7K Banking & Borrowing
- 254.9K Reduce Debt & Boost Income
- 456.1K Spending & Discounts
- 248.2K Work, Benefits & Business
- 605.8K Mortgages, Homes & Bills
- 179K Life & Family
- 263.6K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.7K Read-Only Boards