Experiencing my first mini dip as a new(ish) investor

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Jeems
Jeems Posts: 202 Forumite
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The numbers are very red and lots of minus signs but I dont feel concerned. I'm still up this year (just about).

But wow, does the strengthening of the £ and the potential interest rate rise really affect share prices that much? Will things settle down? When the £ was strong and interests rates at 5%+, I imagine share prices didnt tumble daily. How did the market react then?

What can I expect in the near future with continued £/interest rate rises?
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  • redmalc
    redmalc Posts: 1,433 Forumite
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    Get the crystal ball out and give it a big rub and let me know what it says I am sitting with 650 K in the markets and it's been there since 1988 and earnt me a fortune.
    Time will be shortly the right time to invest like I did in 2007, it was definately squeaky bumb time but worked well for me and I have one more recession of investing left before I retire
  • Jeems
    Jeems Posts: 202 Forumite
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    What were the markets like before during periods of strong £/interest rates? Is this sudden mini drop just a reaction?
  • grandst
    grandst Posts: 38 Forumite
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    I would be worried if you have a large amount of long dated government bonds in your portfolio, there's the potential for large capital losses.
  • darkidoe
    darkidoe Posts: 1,125 Forumite
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    Jeems wrote: »
    The numbers are very red and lots of minus signs but I dont feel concerned. I'm still up this year (just about).

    But wow, does the strengthening of the £ and the potential interest rate rise really affect share prices that much? Will things settle down? When the £ was strong and interests rates at 5%+, I imagine share prices didnt tumble daily. How did the market react then?

    What can I expect in the near future with continued £/interest rate rises?

    From my observations, which hasn't been very long, when the pound weakens, global companies which earn their profits in non-sterling currencies gain a boost in their prices in pounds due to the weak pound. This is reflected in a rise in markets prices. The converse has to be true as well if the pound continues to strengthen against other currencies. Time will tell. I suppose potential interest rate rise will strengthen the pound causing this effect as well.

    With Brexit negotiations has yet to be settled and the volatility of the Korean peninsula, both factors which can weaken the pound are still on the cards. How will these factors come together to make up the recipe is anyone's guess.

    Keep the ship steady in volatile waters, Capt'n.

    Save 12K in 2020 # 38 £0/£20,000
  • cjv
    cjv Posts: 513 Forumite
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    If I build some cash savings with the intention of putting it into my S&S ISA if there is a market crash, is that a sensible or stupid plan?

    I am not doing this currently, just something I have been wondering as a new investor.
  • Alexland
    Alexland Posts: 9,653 Forumite
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    Just take the market dips as a chance to buy more stock fund units if possible to reduce your average cost per unit. That doesn't really apply to bonds which might suffer permanent capital loss.

    The problem with only buying in the crashes is that it is hard to mobilise in the moment judging the market top and bottom and you miss loads of growth in the meantime.
  • BLB53
    BLB53 Posts: 1,583 Forumite
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    What can I expect in the near future with continued £/interest rate rises?
    The markets are very complex and it is difficult for the small investor to work out what effect these things will have so I would not waste much time on it tbh.

    The important thing is to understand that equities can be very volatile at times so you need to be mentally prepared for periods when the markets turn bearish...the past week is merely a blip.

    The best returns come from holding long term but you have to find a way to 'stay in the game'. For me this has meant taking less risk by holding more bonds via the Vanguard Lifestrategy 60 fund.

    Its about finding the right balance between risk/reward. Higher equities offers the potential of bigger returns but only if you stay with it through all the ups and downs.

    Make sure you hold the most appropriate asset allocation for your temperament.
  • dividendhero
    dividendhero Posts: 2,417 Forumite
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    Look on the brightside - if you value your portfolio in US Dollars, there won't have been a dip
  • Linton
    Linton Posts: 17,162 Forumite
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    cjv wrote: »
    If I build some cash savings with the intention of putting it into my S&S ISA if there is a market crash, is that a sensible or stupid plan?

    I am not doing this currently, just something I have been wondering as a new investor.


    Consider the lowest point of the 2008/2009 crash when people were afraid the world banking system would collapse. Would you have had the nerve to put all your cash into shares? And of course you wouldnt have known that it was the lowest point until well after the event.

    Since that time there hasnt been a reallyserious crash. Would you be prepared to wait with your money earning zilch in a deposit account for 10 years whilst everyone else's investments have doubled or trebled in value? When the crash eventually comes the lowest point may be higher than current prices.

    All the time you are out of the market you are missing out on dividends which on their own represent a higher return than many bank accounts.

    So no, it's not a good idea. Better to buy when you have the money and ride the roller coaster.
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    edited 16 September 2017 at 1:00AM
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    BLB53 wrote: »
    The markets are very complex and it is difficult for [strike]the small[/strike] any investor to work out what effect these things will have so I would not waste much time on it tbh.

    .

    Save enough cash to a bank account or S&S ISA for 6 months of spending. Then decide on an asset allocation between equities and bonds and stick to it through the ups and downs rebalancing as you go. I rebalance when my allocation is off by +/-5 %.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
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