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Like the February Correction ?

edited 30 November -1 at 1:00AM in Savings & Investments
204 replies 21.6K views
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  • Voyager2002Voyager2002 Forumite
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    HarryGray wrote: »
    I have a question about asset allocation. So my asset allocation broadly follows the world index:

    - 50% US Equity Index
    - 14% Europe ex UK
    - 8.5% Japan
    - 16.5% EM
    - 12% UK ( I know this is too much and I'm not selling down but concentrating it by buying other indexes)
    -1% cash

    Can you criticise this? I invested in Jan 17 and have been investing more heavily this year. My portfolio was up £2,200 this time last month, its now down £500. I only invest in index funds (iShares mainly and a couple Vanguard funds). I am not panicking at all but now is probably the best time to get my asset allocation right considering I'm a young investor and I'm looking to invest for 25+ years.

    Thanks :)


    Perhaps you should start a new thread.


    My immediate comment is that Emerging Markets include some very different areas: think of Russia; India; Southeast Asia; Brazil... each presenting very different risks and opportunities. In some of these situations, active management might prove far more rewarding than passive.


    And there is no law that allocation has to be based on geography: some people swear by Energy; Technology; Pharmaceuticals.
  • MalthusianMalthusian Forumite
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    Alexland wrote: »
    Wasn't that caused by the poor management decisions in their own business to centralise debt collection?

    So it turned out.
    I think I'll ignore comments on the Telegraph from now on....

    Telegraph comments make housepricecrash.co.uk look like, well, here.

    They are largely populated by people who lost all their money in HBOS shares or the likes of London Capital & Finance ten years ago and since then have told everyone who will listen that the stockmarket is a con.
    stehouk wrote: »
    70% Stock Market Crash to Strike November 1, Economist Warns

    permission granted

    I googled this and was amused to see that the blog article has a headline "Stock Market Crash to Strike November 1" but the URL is 70-stock-market-crash-to-strike-august-1-economist-warns/

    So it's like the cult leader who predicts that we will all be beamed up by UFOs in 2012, then when nothing happens they announce that they got their calculations slightly wrong and it will actually happen in 2020.

    The blog is a blatant scam so I will not link to it.
  • Am surprised the Nikkei 225 finished today's session in green territory because it almost always slavishly follows Wall Street's lead. Shanghai was up too. FTSE is currently trading up 0.8% and, well, suddenly all is well with the stock market world again.
  • MalthusianMalthusian Forumite
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    HarryGray wrote: »
    Can you criticise this?

    50% in any one country is too much IMO, due to lost decade risk, although some might say that given its multinational reach, the notion of a lost decade in the US stockmarket is fanciful.

    Why have you avoided the developed Pacific? (South Korea, Australia, Hong Kong etc.)

    You have no commercial property or bonds. 100% equities means you should ask yourself how you'd feel about a 40% fall, and then how you'd feel if it was even worse than that. How would you feel if you opened your online account and saw that you'd "lost" £2,500?

    (I'm making a very vague stab at the potential pounds and pence loss as you didn't say how much you actually have invested, and I have to make a vague guess based on your current "loss" and the recent fall.)

    I completely believe you when you say you're intending to hold the funds for 25 years. But hundreds of thousands of investors every year panic, dump their investments in a correction or crash and lose money, and none of them invested with the intention of "I'm looking to hold my funds for 1 year and then dump them all in the next crash." All of them would have said pretty much what you did about their intention. Obviously you know you're not going to be one of them. Why do you know what you know?
  • AnotherJoe wrote: »
    best thing for you would be a decline and low prices for a few years. So there should be no "frustration"

    This cannot be emphasised enough.

    For the vast majority of investors, (ie. those with sensible investment horizons), low asset valuations for years and years ahead are to their benefit*.

    Plenty don't see it like this, hence the sort of stuff we've seen posted here these past few days.

    I live off my portfolio, don't have other income from a job, and so am "all-in"# to a greater extent than most posting here, yet I welcome (long for!) volatility, corrections, crashes and lower valuations for assets generally. The lower the better. A huge panic that took valuations to once-in-a-lifetime lows? Probably never see it, but would be great.

    A/the primary driver of future returns are the valuations of assets at the point when you invest. Lower current valuations are the driver of higher future returns. Low valuations throughout the entire time you invested (even if decades), would be optimal. Perhaps this should be tattooed in mirror writing on investors' foreheads?

    Those early in their investment careers, like many posting here, should be praying for prolonged low valuations of equities and other investment assets, not hoping valuations will recover in a few days, weeks or months.

    It seems some posters would benefit from "rewiring" their thinking: shifting away from an unhelpful focus on the current balance of their brokerage account or SIPP, which is irrelevant or even illusory, and thinking instead about what is beneficial to achieving their long term investment goals. Their current thinking is rather faulty and may stand them in poor stead in the future, particularly if they get to see a serious crash, where they will be at risk of doing the wrong thing in response to it.

    --
    *Low prices don't just help those following lengthy regular investment programmes, such as via pension contributions, over years or decades (as many here will be following), they also help anyone who's reinvesting investment income (such as dividends, bond coupons or maturity proceeds), and they benefit listed businesses themselves, as they are able to reinvest their own profits at higher rates of return, such as when they acquire other businesses at lower valuation multiples, increasing ROI.

    --
    #I do have a 'sensible' asset allocation so would not become a forced seller of low-priced assets for a long time.
  • dunstonhdunstonh Forumite
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    Carrieanne wrote: »
    Am surprised the Nikkei 225 finished today's session in green territory because it almost always slavishly follows Wall Street's lead. Shanghai was up too. FTSE is currently trading up 0.8% and, well, suddenly all is well with the stock market world again.

    Not really that surprised. US equity has grown faster than global equities. So, the fallback would be higher as well.

    The US really needs a correction whereas global equities are not quite in the same position (caveats apply)
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dunstonh wrote: »
    Not really that surprised. US equity has grown faster than global equities. So, the fallback would be higher as well.

    The US really needs a correction whereas global equities are not quite in the same position (caveats apply)


    Further to this point, for anyone interested I'd suggest taking a look at the Morningstar Asset Class Returns table in this note from RiverFront, published last week, which emphasises:

    (i) the persistently strong relative performance of US equities vs. other asset classes for quite a number of years now;
    (ii) RiverFront's observation that, historically, outperformance like this has always mean-reverted.

    Link will download a PDF:
    https://marketing.riverfrontig.com/acton/ct/4685/s-0522-1810/Bct/l-001b/l-001b:1b90/ct3_0/1?sid=TV2%3AkPnxPbsZ2
  • HarryGrayHarryGray Forumite
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    Malthusian wrote: »
    50% in any one country is too much IMO, due to lost decade risk, although some might say that given its multinational reach, the notion of a lost decade in the US stockmarket is fanciful.

    Why have you avoided the developed Pacific? (South Korea, Australia, Hong Kong etc.)

    You have no commercial property or bonds. 100% equities means you should ask yourself how you'd feel about a 40% fall, and then how you'd feel if it was even worse than that. How would you feel if you opened your online account and saw that you'd "lost" £2,500?

    (I'm making a very vague stab at the potential pounds and pence loss as you didn't say how much you actually have invested, and I have to make a vague guess based on your current "loss" and the recent fall.)

    I completely believe you when you say you're intending to hold the funds for 25 years. But hundreds of thousands of investors every year panic, dump their investments in a correction or crash and lose money, and none of them invested with the intention of "I'm looking to hold my funds for 1 year and then dump them all in the next crash." All of them would have said pretty much what you did about their intention. Obviously you know you're not going to be one of them. Why do you know what you know?

    Thanks for this help :-). Honestly I am happy with volatility and really don't mind the falls as I have quite a high capacity for loss and I'm in the industry and have studied the field for years. I only struggle with asset allocation - but holding out and the psychology of investing I'm fine with. Perhaps property is an area I can look into with a REIT in my portfolio. I will also look at the developing world, although my EM index funds second largest holding is South Korea so I'm not sure if that's needed. The reason I have 50% in USA is because their global market cap is 54%, but I should perhaps try and cut this to 45%. Thanks for the advice!
  • talexusertalexuser Forumite
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    I had well over £500 of dividends arrived yesterday and just decided to reinvest in the fund that had fallen the most. More interesting is going to be Trumps' excuse since has taken credit for the boom so far, presumably the fall will be the democrats fault.
  • As with any investments be in for the long term
    Some of the quality investmen trusts look very attractive but which expert can call the bottom of anything
    Those with nerve can look at emerging markets and look forward to Trump claiming to have reached the most awesome fantastic of all deals with his great friend President She of China
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