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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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  • moneyfoolishmoneyfoolish Forumite
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    talexuser wrote: »
    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.
    No. It's the Fed's fault for interest rate rises. He's got that one in already! Never slow to claim credit or blame something or somebody else! However, IMO, you can't expect much else from a neurotic narcissist.
  • This is why i asked the forum about a safe SIPP :)
  • ThrugelmirThrugelmir Forumite
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    Carrieanne wrote: »
    suddenly all is well with the stock market world again.

    What's happened in the real world though to change perceptions. Yesterdays problems exist today.
    “Markets have been so good for so long, that many investors are trivialising the advanatages of actively managing portfolio risk" - Gervais Williams
  • AudaxerAudaxer Forumite
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    seacaitch wrote: »
    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.
    seacaitch, I understand low valuations being good for those in the accumulation mode, and even good for me as a retiree as I'm not yet fully invested. As you are living off your portfolio I assume you are fully invested, so I'm interested to know why low valuations are good for you?
  • MK62MK62 Forumite
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    Audaxer wrote: »
    seacaitch, I understand low valuations being good for those in the accumulation mode, and even good for me as a retiree as I'm not yet fully invested. As you are living off your portfolio I assume you are fully invested, so I'm interested to know why low valuations are good for you?


    Yeah, does seem a bit of a strange notion.....
  • ffacoffipawbffacoffipawb Forumite
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    MK62 wrote: »
    Yeah, does seem a bit of a strange notion.....

    Perhaps he is reinvesting some of his dividends?
    Retired Cymro

    🏴󠁧󠁢󠁷󠁬󠁳󠁿 Cymru am Byth 🏴󠁧󠁢󠁷󠁬󠁳󠁿
  • edited 12 October 2018 at 4:50PM
    seacaitchseacaitch Forumite
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    edited 12 October 2018 at 4:50PM
    Audaxer wrote: »
    I understand low valuations being good for those in the accumulation mode, and even good for me as a retiree as I'm not yet fully invested. As you are living off your portfolio I assume you are fully invested, so I'm interested to know why low valuations are good for you?


    1. As I mentioned up-thread, my investee companies will benefit from lower valuations when they (a) make acquisitions of other businesses or (b) repurchase their own shares. Many of my shareholdings are regularly doing both of these things, which over time will compound value if they can do these purchases at lower prices rather than at higher prices.

    2. I have a "cash" bucket and a "reserves" bucket, which are both cash or cash-like, allowing me to leave the "investments" bucket alone, ie. no drawdowns, for quite a number of years (>=5) if necessary. That means all income generated from investments over that period can be reinvested, benefiting from the lower valuations on offer, the compounding of which over time will again add value.

    3. My "investments" bucket is divided between equities/equity funds and multi-asset funds. The multi-asset funds vary in nature, risk-profile and method, but all hold a range of assets across the risk spectrum and all include asset classes (eg. cash, short dated govies, short dated linkers) that can/will be rebalanced into riskier assets if/when the price of these risky assets falls and valuations improve. The more actively managed of these funds wouldn't just rebalance to a fixed equity % but could raise the equity % very considerably if prices took a caning and valuations became much more attractive. Even some of the pure equity funds carry modest cash holdings which would be deployed in the event of the manager seeing attractive valuations, although this effect would be marginal compared to the scope for the multi-asset funds to react to price falls (valuation improvements) in risky assets.

    So, plenty of irons in the fire!

    Running a significant cash/reserves buffer isn't a panacea; if markets keep going up, it can be a material "drag on returns, but it depends what your goal is. I have enough to live reasonably comfortably under a range of scenarios, and my main goal is to avoid really bad outcomes, and doing this allows me to sleep easy and remain and act rationally during periods of market stress, rather than get caught up in the mood of the (emotional) market.

    Paradoxically, the presence of that conservative safety buffer means I can just leave my investments to compound, which they've done magnificently in recent years, rather than me attempting to snatch at profits and second guess the market. And, any performance "drag" would be reduced if markets were to fall significantly, allowing the effects in points 1-3 above to come into play and begin their value compounding work. Hence me welcoming price falls.

    I am a great believer in the ability of stock markets to build significant wealth over the long term, so I want to give the market time and space to do its compounding. My approach lets me keep things sufficiently at arms' length that I can allow it to do that.
  • TBC15TBC15 Forumite
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    seacaitch wrote: »
    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.

    Hardly all in if you have a large cash reserve?
  • takesyourchancestakesyourchances Forumite
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    Out of interest, what do people think of Robert Kiyosaki's opinion on the stock market?


    Just watched his latest video that came up on my youtube :)



    https://www.youtube.com/watch?v=skZZaMW4dsY


    Then on the other hand there is Warren Buffet and the stock market. I read Kiyosaki's Rich Dad book ages ago.
  • edited 12 October 2018 at 6:10PM
    seacaitchseacaitch Forumite
    268 posts
    edited 12 October 2018 at 6:10PM
    TBC15 wrote: »
    Hardly all in if you have a large cash reserve?

    Nonsense.

    What I wrote was:
    ""all-in"# to a greater extent than most posting here", with the "#" symbol referring to a note at the bottom of the post.

    It's "all-in to a greater extent than most here" because, unlike those still building their investment pot via regular income from employment or business, my portfolio won't get any cash inflows from external sources, so in a sense is "complete".

    The cash/reserves I hold are to fund living expenses for an extended period, should it be necessary. It's not cash that's held by me in the hope of seeing lower equity prices, which I'd buy using that cash. The 'investments' bucket isn't likely to be getting any new money; money is likely to only ever flow out of it.

    It's a bit of a barbell investment strategy: risky long duration equities held in conjunction with very low risk short duration bonds or cash.

    The fact my asset allocation is 'sensible' - something I stated at the bottom the post referenced - (and includes asset classes uncorrelated to equities, plus the cash I live off day-to-day) is merely pragmatic investing and doesn't detract from the point I was making that most investors - including myself - need not fear volatility or price falls, but should welcome them.
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