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  • FIRST POST
    • Jeems
    • By Jeems 15th Sep 17, 6:48 PM
    • 188Posts
    • 118Thanks
    Jeems
    Experiencing my first mini dip as a new(ish) investor
    • #1
    • 15th Sep 17, 6:48 PM
    Experiencing my first mini dip as a new(ish) investor 15th Sep 17 at 6:48 PM
    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?
Page 4
    • Jeems
    • By Jeems 7th Oct 17, 11:00 AM
    • 188 Posts
    • 118 Thanks
    Jeems
    In a nutshell.
    The FTSE hit 7000 in Dec 1999 it then started it`s downwards trend and never reached 7000 again until the last year. It`s traded between 7000 and 7400 this year but the trend now is downwards again below the 7000 and beyond.
    Originally posted by 2010
    Well I'm glad this prediction didnt come true just yet.

    So it's been a few weeks or so since I posted this thread. I would say I've learned more in the past month as an investor than I have in the entire year. When I first dipped my toe in the water in Jan, the markets were fairly stable for 6 months or so. No major swings, generally a slow and steady upward trend.

    Certainly the past month has tested my risk tolerance levels. I've always said I dont need to touch the money in my S&S ISA (easy to say when you're in the green or before you've invested) but seeing constant red and minus signs with your real money was an eye opener. I'm glad to say I felt comfortable enough to stay in and not make any panic decisions especially as one of my funds dropped 6 or 7% in a couple of weeks (at a guess, as I've managed to kick the habit of daily checking)

    I'd like to thank everyone that contributed to this thread and also to those that have replied to my other questions in the past. They've all been massively helpful in my continuing quest to become a better and wiser investor. I know there will be many more extreme swings in the coming years but I feel a lot more confident now that I can handle them with a level head.

    Thanks again
    • dunstonh
    • By dunstonh 7th Oct 17, 11:09 AM
    • 93,034 Posts
    • 60,425 Thanks
    dunstonh
    Certainly the past month has tested my risk tolerance levels.
    Nothing has happened in the last month that has come close to testing risk tolerance levels unless you are very defensive natured investor. I still fear that you are investing above your risk profile.

    especially as one of my funds dropped 6 or 7% in a couple of weeks
    What are you going to do and how are you going to feel when it drops 25-40%? (or more)
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • lluzers
    • By lluzers 7th Oct 17, 11:23 AM
    • 120 Posts
    • 13 Thanks
    lluzers
    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?
    Originally posted by Jeems
    Study Warren Buffet , invest in value for long term , ignore short term discomfort of reds/minuses.Buy quality investments and forget .

    The western economies can not raise interest rates by more than 0.5 % , so pound can not rise by more than 5 % more theoretically.

    Long term you are ok , because cash depreciates and real assets do well.
    • Alexland
    • By Alexland 7th Oct 17, 11:45 AM
    • 2,591 Posts
    • 1,971 Thanks
    Alexland
    I agree with dunstonh the single digit movements in the past weeks are nothing compared to the double digit moves and long periods of recovery that can occur when a real crash happens. But still seeing some red is good practice, a good chance to make lump sum payments of any spare money lying around and helps broad multi asset funds work their rebalancing magic.
    • Jeems
    • By Jeems 7th Oct 17, 12:01 PM
    • 188 Posts
    • 118 Thanks
    Jeems
    Nothing has happened in the last month that has come close to testing risk tolerance levels unless you are very defensive natured investor. I still fear that you are investing above your risk profile.

    What are you going to do and how are you going to feel when it drops 25-40%? (or more)
    Originally posted by dunstonh
    The most I'd experienced this year were 1% swings, so this was a step up for me.

    I can't answer that until I experience a 40% drop. If I do experience one and come out the other side ok, will you be asking "well how will you feel if you experience a 50% drop?" It's all relative based on experience.

    Small steps and all that. I didnt mean for my post to make it sound like I am now 100% knowledgeable. It's an on going learning process and I just want to share my appreciation to the MSEer's who've given advice over the past year. Cheers!
    • A_T
    • By A_T 7th Oct 17, 12:10 PM
    • 445 Posts
    • 290 Thanks
    A_T
    Long term investors psychologically condition themselves by expecting a GFC-type crash imminently. That way anything better than that is a bonus.
    • Alexland
    • By Alexland 7th Oct 17, 12:15 PM
    • 2,591 Posts
    • 1,971 Thanks
    Alexland
    When the dot com and credit crunch crashes happened my main frustration was not having enough spare cash to chuck into the markets to bring down my average unit cost and maximise the recovery returns! I got some in but it's never enough.

    Still if you have cash on hand for too long then the inflation loss is more than the upside of chucking it in during a crash so you can't win.

    Maybe next time there a crash my family could try eating 100% Tesco Value food for a few months.
    Last edited by Alexland; 07-10-2017 at 12:24 PM.
    • bowlhead99
    • By bowlhead99 7th Oct 17, 3:26 PM
    • 7,988 Posts
    • 14,528 Thanks
    bowlhead99
    Maybe next time there a crash my family could try eating 100% Tesco Value food for a few months.
    Originally posted by Alexland
    They could try that now, and then you will have more money on hand to invest during the crash and no need to negatively impact your lifestyle at that point.

    You could even upgrade your lifestyle during the crash because the non-value food ranges will be on sale at Tesco, M&S and Waitrose as the public generally tighten their belts.
    • capital0ne
    • By capital0ne 9th Oct 17, 1:12 PM
    • 524 Posts
    • 254 Thanks
    capital0ne
    What were the markets like before during periods of strong /interest rates? Is this sudden mini drop just a reaction?
    Originally posted by Jeems
    Just look a a chart of the FTSE100 going back 20 or so years
    • capital0ne
    • By capital0ne 9th Oct 17, 1:15 PM
    • 524 Posts
    • 254 Thanks
    capital0ne
    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.
    Originally posted by Alexland
    Timing the market is waste of time time in the market is what matters
    • aroominyork
    • By aroominyork 13th Dec 17, 1:09 PM
    • 489 Posts
    • 159 Thanks
    aroominyork
    A bit of a tangent but rather than starting a new thread: sometime during the last few months I was making some changes to my portfolio and had a large amount of cash out of the market for a day. It was a day when the markets fell only to recover the next day so I unintentionally sold low bought high and it cost me about 0.5% of the funds' value. I found a way around this (at least it works on HL, though I'll soon be leaving them) which is that if you switch a cash amount rather than selling the full holding it buys your new fund the same day - no being out of the market. You can sell up to 90% of a fund's value so you just have the remaining 10% to sell the following day, which you can either do as another 90% of the remaining 10% in cash (and so on ad infinitum), or just sell the remaining holding and have a smaller amount out of the market for a day.
    • bowlhead99
    • By bowlhead99 13th Dec 17, 3:02 PM
    • 7,988 Posts
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    bowlhead99
    Yes, that's reasonably standard functionality with most providers working with open-ended funds on a platform.

    If you have 10000 of Fund A - as soon as you place an order to redeem out 9000-worth of fund A units, the platform operator will know that he is going to request the redemption of 9000-worth of units from Fund Manager A at the next dealing point and then he knows the 9000 will be settled into your account in X business days from that point. So, he knows that if you also request to subscribe to Fund B for 9000, that order will go to Find Manager B at the next dealing point and also need to be settled in X business days thereafter. If he knows you have 9000 being received into your account on that day, which will be available to cover it, there's no real risk in placing the trade.

    So, as soon as the Fund A order is placed, the Fund B order could be placed (assuming B and A have similar cut off times and settlement periods).

    Whereas, if you say you have 10000 worth of Fund A and want to cash in 10,000- worth, you can't place a matching order to buy 10000 of Fund B - because the ISA manager doesn't know that you'll really be able to honour that 10,000 payment because if the price of Fund A drops 3% at the next dealing date, the proceeds you'll receive will be only 9700 and you won't be able to afford the 10000 Fund B subscription you contracted for. In such a case you'd have to wait to hear the contracted sales proceeds before you could trade with it, and then you'll lose a day out of the market.

    So, usually with daily forward-priced funds, there is some level of value you can trade without knowing how much money per unit you're going to get from your existing holdings that you've ordered to be sold. Like, if you've put an order in to sell 9k or 10k of an 11k holding, you will probably be successful and be able to get at least that much proceeds and so you can freely book a 9k purchase to settle the same day - no days out of the market. But if you tried to place a 10k order (91% of your last reported holding value) it might be tight, and an 11k order based on a hoped-for 11k of redemption value is too risky if the platform manager doesn't want to take on the risk himself.

    There are some providers that will pre-fund your subscriptions and take on a small amount of liquidity risk themselves (generally not the cheap DIY platforms). They can sometimes do that with pension contributions too, eg they know you'll be receiving x of tax relief in the future and are willing to front the money from their own bankroll while waiting.
    Last edited by bowlhead99; 13-12-2017 at 3:04 PM.
    • Audaxer
    • By Audaxer 13th Dec 17, 5:22 PM
    • 1,081 Posts
    • 635 Thanks
    Audaxer
    Yes, that's reasonably standard functionality with most providers working with open-ended funds on a platform.

    If you have 10000 of Fund A - as soon as you place an order to redeem out 9000-worth of fund A units, the platform operator will know that he is going to request the redemption of 9000-worth of units from Fund Manager A at the next dealing point and then he knows the 9000 will be settled into your account in X business days from that point. So, he knows that if you also request to subscribe to Fund B for 9000, that order will go to Find Manager B at the next dealing point and also need to be settled in X business days thereafter. If he knows you have 9000 being received into your account on that day, which will be available to cover it, there's no real risk in placing the trade.
    Originally posted by bowlhead99
    Interesting as I didn't know you could do that. If in that example if you already had say 1k of cash sitting in your account, would they be able to put the 10k sale of Fund A and 10k purchase of Fund B at the same time?
    • aroominyork
    • By aroominyork 13th Dec 17, 8:31 PM
    • 489 Posts
    • 159 Thanks
    aroominyork
    Interesting as I didn't know you could do that. If in that example if you already had say 1k of cash sitting in your account, would they be able to put the 10k sale of Fund A and 10k purchase of Fund B at the same time?
    Originally posted by Audaxer
    Nope, because you are placing an order to switch part of Fund A to Fund B; not to sell Fund A and merge its proceeds with your cash account before buying Fund B.
    • Alexland
    • By Alexland 13th Dec 17, 8:43 PM
    • 2,591 Posts
    • 1,971 Thanks
    Alexland
    So far I have been mostly lucky when taking time out the market but I am due some bad luck soon which alongside the trading fees act as a deterrent to the temptation to fiddle with my investments to react to market noise.
    • bowlhead99
    • By bowlhead99 14th Dec 17, 12:32 AM
    • 7,988 Posts
    • 14,528 Thanks
    bowlhead99
    Nope, because you are placing an order to switch part of Fund A to Fund B; not to sell Fund A and merge its proceeds with your cash account before buying Fund B.
    Originally posted by aroominyork
    I don't understand the comment "merge its proceeds with your cash" as if that is some unusual or complex technique that needs a special request. New subscriptions into funds need to be settled in cash, on the settlement date which is a few days after order acceptance. It doesn't matter if that cash is cash that's already in the cash account going into the settlement date, or cash that arrives there on the settlement date from a fund exit or share sale.

    As explained above, they would be willing to let you fund a 9k purchase of Fund B with a 9k sale of Fund A (out of your 10k holding of Fund A), because they know there is no material risk that you wouldn't have the 9k available from the A sale on the settlement date for the B purchase.

    That's because the only way you wouldn't be able to get as much as 9k from A is if it dropped to less than 90% of its value by the next dealing date. So, they'll let you place a trade using that 9k of redemption proceeds that you ordered from A.

    If you already have 1k of cold hard cash as cleared funds in your cash account on the platform then there should be absolutely no problem buying 10k of B using the 1k cash which is sitting there before settlement date and the 9k cash which becomes available on settlement date from the A redemption.
    Last edited by bowlhead99; 14-12-2017 at 12:34 AM.
    • aroominyork
    • By aroominyork 14th Dec 17, 6:16 AM
    • 489 Posts
    • 159 Thanks
    aroominyork
    Agreed, bowlhead, as two separate Fund B purchases of 9k and 1k, but that's not the scenario Audaxer described.
    • bowlhead99
    • By bowlhead99 14th Dec 17, 8:21 AM
    • 7,988 Posts
    • 14,528 Thanks
    bowlhead99
    Agreed, bowlhead, as two separate Fund B purchases of 9k and 1k, but that's not the scenario Audaxer described.
    Originally posted by aroominyork
    What he described was:
    "If in that example if you already had say 1k of cash sitting in your account, would they be able to put the 10k sale of Fund A and 10k purchase of Fund B at the same time?"
    Given we are agreed you can take 9k out of A and put it into B at the same time, and there is also 1k of cash available as a buffer which can be used to buy 1k of B at any time you like, we know you can buy 10k of B all at the same time. He didn't say it has to be done in a single click...

    You may of course not get a full 10k from the A disposal because we don't know what the A shares will be sold for.... but you know you'll definitely be able to get 10k of B at the next dealing point from now because you have cash plus a disposal to fund it.
    • Audaxer
    • By Audaxer 14th Dec 17, 9:10 AM
    • 1,081 Posts
    • 635 Thanks
    Audaxer
    What he described was:
    "If in that example if you already had say 1k of cash sitting in your account, would they be able to put the 10k sale of Fund A and 10k purchase of Fund B at the same time?"
    Given we are agreed you can take 9k out of A and put it into B at the same time, and there is also 1k of cash available as a buffer which can be used to buy 1k of B at any time you like, we know you can buy 10k of B all at the same time. He didn't say it has to be done in a single click...

    You may of course not get a full 10k from the A disposal because we don't know what the A shares will be sold for.... but you know you'll definitely be able to get 10k of B at the next dealing point from now because you have cash plus a disposal to fund it.
    Originally posted by bowlhead99
    Thanks bowlhead, that is exactly what I described. Good to know it can be done that way.
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