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  • FIRST POST
    • BrockStoker
    • By BrockStoker 5th Feb 18, 8:32 PM
    • 200Posts
    • 87Thanks
    BrockStoker
    Correction in progress!
    • #1
    • 5th Feb 18, 8:32 PM
    Correction in progress! 5th Feb 18 at 8:32 PM
    I've just seen the largest (single day) spike in volatility I've ever experienced (currently @ 106%). Certainly it's looking like this is going to be the largest correction since 2015!

    https://uk.investing.com/indices/volatility-s-p-500-chart

    Time to look at what to buy with the cash I've been holding!

    More inclined to look at overseas assets/equities, but I have been thinking about buying some UK micro-cap for a while, and possibly some Chinese equities. Any one else shopping right now?
Page 14
    • 2010
    • By 2010 10th Feb 18, 10:25 AM
    • 4,187 Posts
    • 3,339 Thanks
    2010
    If/when the support level goes at 7000, then the tend could be downwards for some time.

    Why didn`t people sell at 7700, because they never seen a correction coming. (you never do)

    Why aren`t they selling at 7093, because they are in it for the long term and anyway "it`ll bounce back".

    Well in Dec 1999 the Ftse 100 hit 7000 and then fell and it then took around sixteen years to hit 7000 again.

    Some people haven`t got time to be in it for the long term.
    • Glen Clark
    • By Glen Clark 10th Feb 18, 10:37 AM
    • 4,115 Posts
    • 3,140 Thanks
    Glen Clark
    Why didn`t people sell at 7700, because they never seen a correction coming. (you never do).
    Originally posted by 2010
    Even with the benefit of hindsight, there wasn't really anything to see was there?
    The reason for the fall (the threat of withdwawing QE) was well known and has been predicted for about 9 years ever since they introduced 'Emergency' 0.5% interest rates. Someone, somewhere, started taking the threat more seriously and started a panic.
    But it still might never happen.
    It is difficult to get a man to understand something, when his salary depends on his not understanding it. --Upton Sinclair
    • chrisgg
    • By chrisgg 10th Feb 18, 10:41 AM
    • 61 Posts
    • 52 Thanks
    chrisgg
    If/when the support level goes at 7000, then the tend could be downwards for some time.

    Why didn`t people sell at 7700, because they never seen a correction coming. (you never do)
    Originally posted by 2010
    You can never see a correction coming, yet you have essentially predicted an extended one...


    Why aren`t they selling at 7093, because they are in it for the long term and anyway "it`ll bounce back".

    Well in Dec 1999 the Ftse 100 hit 7000 and then fell and it then took around sixteen years to hit 7000 again.

    Some people haven`t got time to be in it for the long term.
    Originally posted by 2010
    Which is why you shouldn't invest above your risk profile/at all with a time horizon of less than 5 years.

    On another note, quoting FTSE returns without accounting for dividends is very misleading.
    • ColdIron
    • By ColdIron 10th Feb 18, 10:52 AM
    • 4,052 Posts
    • 5,024 Thanks
    ColdIron
    Well in Dec 1999 the Ftse 100 hit 7000 and then fell and it then took around sixteen years to hit 7000 again.

    Some people haven`t got time to be in it for the long term.
    Originally posted by 2010
    You're forgetting the dividends which are a large part of the total return
    • chucknorris
    • By chucknorris 10th Feb 18, 11:29 AM
    • 9,525 Posts
    • 14,312 Thanks
    chucknorris
    The main problem in times like these is that you MAY have been investing in the long term...but time waits for no man and now what was your long term, is now your short term, as you need the money sooner.
    Originally posted by Sea Shell
    I was 60 in January, and I've been thinking (for a while) that I am approaching the time when I should be starting to reduce my risk, and with that in mind I have probably just about got enough in equities now (apart from topping up my SIPP and ISA). So I will probably not be in a position to take advantage of lower prices after a correction any more.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now mostly hike, gym classes and weight training (also a bit of cycling and swimming), less impact on my joints.
    • economic
    • By economic 10th Feb 18, 11:45 AM
    • 2,940 Posts
    • 1,581 Thanks
    economic
    I was 60 in January, and I've been thinking (for a while) that I am approaching the time when I should be starting to reduce my risk, and with that in mind I have probably just about got enough in equities now (apart from topping up my SIPP and ISA). So I will probably not be in a position to take advantage of lower prices after a correction any more.
    Originally posted by chucknorris
    I still have roughly 30% in cash. Im 34, do you think I should just invest the lot in stocks? Minus the emergency cash.
    • chucknorris
    • By chucknorris 10th Feb 18, 11:51 AM
    • 9,525 Posts
    • 14,312 Thanks
    chucknorris
    I still have roughly 30% in cash. I!!!8217;m 34, do you think I should just invest the lot in stocks? Minus the emergency cash.
    Originally posted by economic
    It is very subjective, if it was me, at your age, and I had no specific or outline plans for that 30% cash, I would probably reduce it to about 10%, and invest the remaining 20%, but there is no right and wrong answer, it all depends how you feel about it.
    Last edited by chucknorris; 10-02-2018 at 11:57 AM.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now mostly hike, gym classes and weight training (also a bit of cycling and swimming), less impact on my joints.
    • A_T
    • By A_T 10th Feb 18, 1:22 PM
    • 396 Posts
    • 248 Thanks
    A_T
    One would expect Chuck Norris to be 100% equities
    • Prism
    • By Prism 10th Feb 18, 1:38 PM
    • 293 Posts
    • 209 Thanks
    Prism
    Well in Dec 1999 the Ftse 100 hit 7000 and then fell and it then took around sixteen years to hit 7000 again.

    Some people haven`t got time to be in it for the long term.
    Originally posted by 2010
    Over that particularly bad time period however, even with the two crashes you would be up about 50% by simply investing in the FTSE 100 - which no one in their right mind should do exclusively.
    • Eco Miser
    • By Eco Miser 10th Feb 18, 1:46 PM
    • 3,444 Posts
    • 3,234 Thanks
    Eco Miser
    Which is why you shouldn't invest ... at all with a time horizon of less than 5 years.
    Originally posted by chrisgg
    But that means you should divest five years before your target date, so T-5years becomes your new target date, which you should divest five years before. Et cetera.
    Simplifying: you shouldn't invest at all.

    Really, it depends what happens when you reach your time horizon.
    Eco Miser
    Saving money for well over half a century
    • Alexland
    • By Alexland 10th Feb 18, 1:46 PM
    • 2,248 Posts
    • 1,635 Thanks
    Alexland
    So not sure the current levels make a good buying opportunity based on this view of the world? Maybe a correction of 30-40% would make valuations look interesting for the long term?? I still think that with people seeing a 5-10% pull back as a buying opportunity is a sign that we still have a lot of market complacency? But, yes, if was that easy we would all be millionaires!!
    Originally posted by k6chris
    The problem is you can't just wait until markets correct themselves to match your view of the world. If you sit there waiting for this dip to hit at least a 30% drop before you start buying then you might miss the opportunity because it only ever drops 29.5%.

    As we don't really know the depth of this drop it makes sense to start taking advantage of it gradually so that we can be certain of acquiring at least some units at an advantageous price.

    Alex
    • chucknorris
    • By chucknorris 10th Feb 18, 2:46 PM
    • 9,525 Posts
    • 14,312 Thanks
    chucknorris
    One would expect Chuck Norris to be 100% equities
    Originally posted by A_T
    At the moment my (excluding my wife's investments) portfolio is:

    35% investment property
    34% equities
    18% fixed pension
    13% cash (not normally this high, but looking to upsize home)

    But over the next 5-6 years (for retirement) I will be re-balancing my portfolio to something like this:

    34% equities
    30% bonds/cash (mainly bonds)
    23% fixed pension
    13% investment property
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now mostly hike, gym classes and weight training (also a bit of cycling and swimming), less impact on my joints.
    • bowlhead99
    • By bowlhead99 10th Feb 18, 2:58 PM
    • 7,704 Posts
    • 14,100 Thanks
    bowlhead99

    Well in Dec 1999 the Ftse 100 hit 7000 and then fell and it then took around sixteen years to hit 7000 again.

    Some people haven`t got time to be in it for the long term.
    Originally posted by 2010
    Dividends reinvested it only took a few years for a typical FTSE100 investor to be back to break even if he had invested all of his money on 31 Dec1999 (pretty much the worst possible day in his lifetime to have invested it) and unfortunately found himself with no other money to invest at the new lower prices over those next half a decade.

    The FTSE100 is a poor index to invest your entire life savings into due to a high concentration in specific industries and it is only one of the world's major markets; If you had invested in the same dot-com bubble on the same day via the much larger S&P500, you'd be in profit within about a couple of years. The MSCI ACWI took about six years to break even IIRC.

    Similarly you could have invested in the broader FTSE250 on Dec 31 '99 (that terrible day to invest), left it a decade and a half with divs automatically reinvested, and your 10k would be 36k, despite another major crash during the global financial crisis. And that was just the first fifteen years from some old article I had saved - there's been another 20% growth since then, even net of the falls of recent weeks.

    What you often hear from people who are predominantly savers rather than investors is that investing can be a bad idea because 'look at all those people who invested in the index, it took X years to get your money back', and in doing that they use the capital value of the index rather than total return, and they assume that you put all your money in at the highest point, and threw all the dividends in the bin.

    I remember reading an article that was looking at the 'break even points of the S&P' for a Dec 1999 investor who had got back into profit but then sat through the GFC / credit crunch as well... it took until early 2012 to get back to square one again on a capital only basis, although by that point it was a 25% gain counting dividends reinvested, which pretty much made up for the inflation over the twelve years. The article pointed out that if you had invested in the capital value of the US index in Jan 1950 and thrown away the dividends you'd have got about an 8000% return by Easter 2012, but if you had let the dividends be reinvested your accumulated return would be over 66,000%.

    So, I tend to view the figures of people who only bang on about the FTSE capital number from the evening news, with scepticism - they are usually well meaning but misguided. But it's true to say we don't know the depth or duration of the next major upset. The 07-09 crash wiped almost 60% off the FTSE All-World on a total return basis in US dollars from peak to trough, so nobody can tell you the next fall won't be as much as 50% in sterling or that it will necessarily recover in three to five years. It could be a large swift fall and take a decade to claw back. Or a long slow fall with an even longer recovery as we enter a 'new normal'.
    The problem is you can't just wait until markets correct themselves to match your view of the world. If you sit there waiting for this dip to hit at least a 30% drop before you start buying then you might miss the opportunity because it only ever drops 29.5%.
    Originally posted by Alexland
    Over a century of history we have seen markets enter new phases where there is a sea-change of attitudes and returns. There could be another within the next couple of years. The only thing you can say for sure is that the future is not certain. So, people with 100% in equities because they "don't need it any time soon and will ride out the blips", or people who prefer to "sit on the sidelines and wait for the inevitable better pull-back", may each be regretting their actions, depending what transpires.
    Last edited by bowlhead99; 10-02-2018 at 6:55 PM.
    • BananaRepublic
    • By BananaRepublic 10th Feb 18, 6:29 PM
    • 1,191 Posts
    • 871 Thanks
    BananaRepublic
    It is very subjective, if it was me, at your age, and I had no specific or outline plans for that 30% cash, I would probably reduce it to about 10%, and invest the remaining 20%, but there is no right and wrong answer, it all depends how you feel about it.
    Originally posted by chucknorris
    Indeed. The person who knows when to invest in equities, and when to withdraw, would end up very rich. Unfortunately the markets are driven by sentiment, and a huge number of unknowns. We could quite conceivably have several more years of a bull market, or a significant crash. I doubt that anyone here knows with any certainty either way. I recall that the last bull market went on for ages, until it was no longer sustainable. I do not at present see a huge problem looming over the world, the elephant in the room if you wish, although the reduction in cheap money might be the cause of a crash.

    I guess for young people investing for the long term the only option is to invest steadily, with the realisation that sometimes newly invested money will plummet in value for several years. But on balance the net result will in the long term be positive.
    • Thrugelmir
    • By Thrugelmir 10th Feb 18, 6:46 PM
    • 58,225 Posts
    • 51,585 Thanks
    Thrugelmir
    I remember reading an article that was looking at the 'break even points of the S&P' for a Dec 1999 investor who had got back into profit but then sat through the GFC / credit crunch as well... it took until early 2012 to get back to square one again on a capital only basis, although by that point it was a 25% gain counting dividends reinvested, which pretty much made up for the inflation over the twelve years. The article pointed out that if you had invested in the capital value of the US index in Jan 1950 and thrown away the dividends you'd have got about an 8000% return by Easter 2012, but if you had let the dividends be reinvested your accumulated return would be over 66,000%.
    Originally posted by bowlhead99
    The average investor wouldn't have benefited from this I suspect.

    Even the great WB wasn't investing in 1950.........
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • LHW99
    • By LHW99 10th Feb 18, 7:04 PM
    • 1,251 Posts
    • 1,141 Thanks
    LHW99
    What you often hear from people who are predominantly savers rather than investors is that investing can be a bad idea because 'look at all those people who invested in the index, it took X years to get your money back', and in doing that they use the capital value of the index rather than total return, and they assume that you put all your money in at the highest point, and threw all the dividends in the bin.
    Of course a problem for those in retirement is that they are likely to be wanting to live on the dividend income, hence they won't benefit from being able to reinvest them. Hence why 100% equity may not be the best option in retirement unless you can cut down / stop taking the dividend income during the worst of a major crash.
    • coastline
    • By coastline 10th Feb 18, 7:22 PM
    • 940 Posts
    • 1,083 Thanks
    coastline
    Could well be forging a bottom...

    Only 13% of S&P stocks above the 50 day average..you can see the 2009 bottom at the far left.

    https://pbs.twimg.com/media/DVj55ZOVQAA7gPR?format=jpg

    Dow..

    http://www.indexindicators.com/charts/djia-vs-djia-stocks-above-50d-sma-params-5y-x-x-x/

    http://www.indexindicators.com/charts/djia-vs-djia-stocks-above-20d-sma-params-5y-x-x-x/

    FTSE..

    http://www.indexindicators.com/charts/uk100-vs-uk100-stocks-above-50d-sma-params-5y-x-x-x/

    http://www.indexindicators.com/charts/uk100-vs-uk100-stocks-above-20d-sma-params-5y-x-x-x/

    All good stuff...that 1000 point Dow reversal late on Friday was similar to the bottom in 2009..
    • Alexland
    • By Alexland 10th Feb 18, 7:41 PM
    • 2,248 Posts
    • 1,635 Thanks
    Alexland
    Thanks coastline - your graphs always deliver a fresh perspective. Very interesting. Alex
    • Thrugelmir
    • By Thrugelmir 10th Feb 18, 7:59 PM
    • 58,225 Posts
    • 51,585 Thanks
    Thrugelmir

    All good stuff...that 1000 point Dow reversal late on Friday was similar to the bottom in 2009..
    Originally posted by coastline
    Only takes the DOW back to where it was in November though. Hardly a bottom.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • coastline
    • By coastline 10th Feb 18, 8:20 PM
    • 940 Posts
    • 1,083 Thanks
    coastline
    Only takes the DOW back to where it was in November though. Hardly a bottom.
    Originally posted by Thrugelmir
    If its a correction then we might just be there...not saying its a crash.
    Look at those candles late Friday thats the way bottoms are commonly made with a huge daily reversal. Look at the tail on the big candle.

    https://tradingeconomics.com/united-states/stock-market
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