Next recession, trade wars, up to 50% portfolio losses

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  • OldMusicGuy
    OldMusicGuy Posts: 1,752
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    stoozie1 wrote: »
    I'd be interested to know if anyone is holding cash as a hedge.
    See post #31. I am holding enough cash/near cash to last us at least 10 years.
  • TBC15
    TBC15 Posts: 1,446
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    A lot of the people here seem to be contributing to the result they fear.
  • Thrugelmir
    Thrugelmir Posts: 89,546
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    Investment wise. Currently very low cash balance. As have identified a couple of long term opportunities that offer reasonable value. Not that they are exciting. However should outperform cash in the medium term. Nothing to suggest that the world markets en masse are going to come crashing down anytime soon. It's the large cap stocks that hurt the indices. Leaving many little changed.
  • OldMusicGuy
    OldMusicGuy Posts: 1,752
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    TBC15 wrote: »
    A lot of the people here seem to be contributing to the result they fear.
    Which means?
  • Thrugelmir
    Thrugelmir Posts: 89,546
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    Which means?

    Sentiment drives markets.
  • ChesterDog
    ChesterDog Posts: 1,106
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    TBC15 wrote: »
    A lot of the people here seem to be contributing to the result they fear.

    I always hold a lot of cash - it's not a reaction to current conditions per se. Well, perhpaps in the sense that I am holding much of that sum in place of bonds.
    I am one of the Dogs of the Index.
  • Glen_Clark
    Glen_Clark Posts: 4,397 Forumite
    edited 13 April 2018 at 6:23AM
    ProDave wrote: »
    So Maybot is about to put our 3 nuclear powers up against the might of Russia.

    Anyone now still feel a stock market crash is not iminent.

    As before I am keeping my pension pot in cash right now.

    What do the DUP think? If they are against war, vote of no confidence = Jeremy as PM. That might be good for keeping us out of a war but I still see that crash.

    Why do people think the pound sterling would hold its value better than a world tracker fund in a crisis?
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
  • OldMusicGuy
    OldMusicGuy Posts: 1,752
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    Thrugelmir wrote: »
    Sentiment drives markets.
    Not sure if that is directed at me but my sentiment is not contributing to any of this. Yes, I hold a lot of cash but I have far more invested in markets for the long run. I have actually reduced my cash balance and invested more in the markets than I had at the beginning of this year. And that was unfortunate for me, because I moved £100K from cash into trackers 2 days before the market correction in February (and that's still down 3.16% as of yesterday). But it's invested for 10 to 15 years so I know I will be ok over that timeframe.

    That's also why I won't be moving anything out of cash in the short term, because I have just retired and do not want to suffer more pound cost ravaging. Instead, I will take advantage of rising interest rates to set up a bond ladder with a lot of the cash. But I will not be selling any of the significant amount I have in the markets for the long term.

    IMO that is a sensible, risk averse strategy for someone that has just entered the decumulation phase. I think anyone can see we are entering more volatile times than we have experienced since 2008. Whether there will be a big crash or not, who knows. But I have set a strategy to protect myself from pound cost ravaging for the next 5 to 10 years, which is the crucial phase of retirement for me.
  • slapmatt
    slapmatt Posts: 104 Forumite
    Would anybody consider investing in an ETF which shorts the market?

    https://www.investopedia.com/articles/etfs-mutual-funds/072816/top-3-etfs-short-ftse-100-xuks-suk2.asp
  • bowlhead99
    bowlhead99 Posts: 12,295
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    edited 18 April 2018 at 12:42PM
    slapmatt wrote: »

    Yes, my pension has some of Boost's 3x daily ftse100 short etp, and some db-xtrackers s&p500 2x inverse daily swap, which I use from time to time as a general hedge without selling off individual equity/ fund positions. I have only a few £k in each at the moment.

    If you're thinking of using such a product it is worth checking the maths on how a (geared) daily inverse track will work and maybe plotting some charts of few random daily paths that the FTSE 100 could take, and what the daily inverse would look like. If the main market is choppy (a bit up, a bit down but no massive overall change) it can be quite possible to have a large (un)/favourable movement on the geared short ETP. They are not really suitable for holding over the long long term as something in your standard rebalanced portfolio- but more for capturing short term sentiment.

    If it was outside a tax wrapper I would just use spreadbets / CFDs or options on the index where your value is driven by what the index looks like on the particular day the bet/ contract is due to expire (or the overall movement since you started it) - and not the particular path it happened to take to get there. More straightforward with such products to create a broad general hedge for your long holdings, for a decent period of time (with gearing to avoid needing a massive amount of initial front money), and know what your result on the short will be for a given ending value of underlying FTSE / S&P etc.
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