What the "correction" means for us newbies

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tel_
tel_ Posts: 310 Forumite
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in ISAs & tax-free savings
I've only just started to invest in a S&S ISA for the very first time - since the beginning of August this year, drip-feeding 1k a month. I am in it for the long-haul (10yrs), but have been moderately concerned by this so-called "correction" or uncertain period we are in.

The money I've drip-fed thus far has returned me a loss of nearly 9%. I don't think I want to stop investing for the time being in my S&S ISA, but was thinking of halving my contribution to £500 for the time being, until hopefully things settle a bit.

Am I being a little wise or just-over cautious?

Any pearls of wisdom will be greatly appreciated.
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  • Novice_investor101
    Novice_investor101 Posts: 874 Forumite
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    I started investing in my S/S ISA in march 2017, & have seen a few ups & downs. My current portfolio value is showing in the minus.

    I've been invested in the L&G international index tracker from day 1 & this is still showing a plus, but only because I piled a couple of grand in in the last "correction" earlier this year. I've been drip feeding monthly so will have been buying at more than the recent values.

    My LISA is still a plus, because I bought into the same fund at the last dip....

    I added two smaller co's funds when prices were higher (£500 lump into each) & a regular drip feed. These two are now very much in the minus! My plan is to put another £1k in on Monday l - it's a long term plan & unit price is cheaper, & I don't need the money anytime soon.

    Think of it like going to the supermarket & seeing your usual brand of baked beans on offer at half price - you don't think "oh, I'll come back next week when it's back to full price", you buy two cans whilst it's cheap.

    This is a slight deviation from my current strategy - I reset my regular savings plan to pay 100% into the L&G fund to rebalance my asset allocation (US equity dropped a bit low) & selling out at a loss to rebalance isn't the right thing to do, so I've deviated on my contributions instead.
  • le_loup
    le_loup Posts: 4,047 Forumite
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    It's best to invest when the market is down - you get more for your money.
    It is a failing of those new to investing to invest when markets are high and sell when they go down.
    You are doing exactly the right thing by drip-feeding, particularly in volatile times.
  • Tom99
    Tom99 Posts: 5,371 Forumite
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    Think of it as this months £1,000 buying 10% more shares than last months £1,000, a bargain!
  • Alexland
    Alexland Posts: 9,665 Forumite
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    edited 13 October 2018 at 5:10PM
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    tel_ wrote: »
    was thinking of halving my contribution to £500 for the time being, until hopefully things settle a bit.

    Any pearls of wisdom will be greatly appreciated.

    If they reduce the price of something you buy regularly in the supermarket do you buy less? Personally I stock up and buy less when the item is looking expensive again. That's what a fixed monthly contribution does for you.

    It's madness to reduce your contribution when the market is cheaper. There's always uncertainty - do you only want to buy when shares are reassuringly expensive??

    By buying more you are reducing your percentage loss so your recovery will be quicker.

    The right question, which is a matter of personal judgement, is 'should I be trying to contribute more now?'.

    Alex
  • Wildsound
    Wildsound Posts: 365 Forumite
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    Buy high sell low is the trap you are falling into by the looks of it.
    What are you invested in? By the sounds of it, you are perhaps in something beyond your risk level and tolerance for loss, as if you are invested in a fund/portfolio which matches your attitude to risk, you wouldn't be having any qualms.
  • dunstonh
    dunstonh Posts: 116,492 Forumite
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    I am in it for the long-haul (10yrs)

    For a regular contribution, that is actually short term. Indeed, it is really the minimum period you should consider a regular contribution for as historically, a lot of 10 year regular investors have ended up with less than they paid in because of the short term nature. Half your value will be invested for less than 5 years.
    The money I've drip-fed thus far has returned me a loss of nearly 9%.
    That suggests you are pretty high up the risk scale. Cautious investors are down around 4%. Medium risk down around 6%. So, you are medium high to high risk.
    but was thinking of halving my contribution to £500 for the time being, until hopefully things settle a bit.

    Which is counter intuitive because:
    a) investments are now cheaper than when you started. So, you are buying more units for your money. Buying them more expensively means you get less. So, waiting for them to get more expensive before you start buying again is silly. You need these negative periods. Its great news for you.
    b) what has changed since you started? With your estimated risk profile, a loss of 35-40% is possible. You are getting cold feet after 9%. So, what is different today to when you started?
    Am I being a little wise or just-over cautious?

    It doesnt sound like you are investing cautiously with that level of loss. Perhaps you are not investing within your knowledge and understanding and risk tolerance.
    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.
  • Alexland
    Alexland Posts: 9,665 Forumite
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    edited 13 October 2018 at 7:11PM
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    dunstonh wrote: »
    b) what has changed since you started? With your estimated risk profile, a loss of 35-40% is possible. You are getting cold feet after 9%. So, what is different today to when you started?

    People also forget that after a 9% fall the downside risk is likely to be less than before. So if the OP was originally taking a risk of 35-40% they might now only be taking a risk of 26-31% (ok, a bit more as it would be a percentage of the new value).

    Lower cost, less risk and more upside opportunity - what's not to like?

    Alex
  • tel_
    tel_ Posts: 310 Forumite
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    I have found reading all your posts very inspiring, and knew not putting a comment about the positive aspect of it all (the ability to purchase more shares), on my original post, was glaringly silly now.

    Don't get me wrong Wildsound & dunstonh, I'm not crying in my drink tonight over the 9% loss. I chose to invest in a medium-high level tier because I can afford to, (you were correct on your estimate dunstonh). My other investments are in Fixed Cash ISA's and Current Accounts, so it's not as if I am ploughing my entire life savings into this medium-high risk portfolio.

    I feel I have learned a fair bit about investments over the last 12 months, and it's only due to reading the literature on the MSE website, along with all your posts, that has given me the ambition lately to spread my savings into various investment accounts.
  • Nasqueron
    Nasqueron Posts: 8,915 Forumite
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    My profile I think is a 6 and my S&S ISA (through an IFA) is down about 3%, I appreciate it's only been a year but it is quite frustrating on the numbers early on when I can get 2-3% interest on cash, but I guess over 5 years or so it'll balance up, so long as it eventually covers the adviser's fee and gets me a profit I'll be happy, until then I keep investing monthly
  • Alexland
    Alexland Posts: 9,665 Forumite
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    Nasqueron wrote: »
    My profile I think is a 6 and my S&S ISA (through an IFA) is down about 3%, I appreciate it's only been a year but it is quite frustrating on the numbers early on when I can get 2-3% interest on cash, but I guess over 5 years or so it'll balance up, so long as it eventually covers the adviser's fee and gets me a profit I'll be happy, until then I keep investing monthly

    Yes if investing with a balanced risk tolerance you really need to watch your costs as, with the advisor fee, I expect it will be very difficult to see much growth above the best cash rates in the medium term.

    Alex
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