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  • FIRST POST
    • tel_
    • By tel_ 13th Oct 18, 3:12 PM
    • 59Posts
    • 11Thanks
    tel_
    What the "correction" means for us newbies
    • #1
    • 13th Oct 18, 3:12 PM
    What the "correction" means for us newbies 13th Oct 18 at 3:12 PM
    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.
Page 1
    • Novice investor101
    • By Novice investor101 13th Oct 18, 3:49 PM
    • 325 Posts
    • 830 Thanks
    Novice investor101
    • #2
    • 13th Oct 18, 3:49 PM
    • #2
    • 13th Oct 18, 3:49 PM
    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
    • By le loup 13th Oct 18, 4:54 PM
    • 3,891 Posts
    • 3,923 Thanks
    le loup
    • #3
    • 13th Oct 18, 4:54 PM
    • #3
    • 13th Oct 18, 4:54 PM
    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
    • By Tom99 13th Oct 18, 4:59 PM
    • 3,099 Posts
    • 2,151 Thanks
    Tom99
    • #4
    • 13th Oct 18, 4:59 PM
    • #4
    • 13th Oct 18, 4:59 PM
    Think of it as this months 1,000 buying 10% more shares than last months 1,000, a bargain!
    • Alexland
    • By Alexland 13th Oct 18, 5:00 PM
    • 3,827 Posts
    • 3,125 Thanks
    Alexland
    • #5
    • 13th Oct 18, 5:00 PM
    • #5
    • 13th Oct 18, 5:00 PM
    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.
    Originally posted by tel_
    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
    Last edited by Alexland; 13-10-2018 at 5:10 PM.
    • Wildsound
    • By Wildsound 13th Oct 18, 5:19 PM
    • 232 Posts
    • 168 Thanks
    Wildsound
    • #6
    • 13th Oct 18, 5:19 PM
    • #6
    • 13th Oct 18, 5:19 PM
    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
    • By dunstonh 13th Oct 18, 6:19 PM
    • 96,058 Posts
    • 63,875 Thanks
    dunstonh
    • #7
    • 13th Oct 18, 6:19 PM
    • #7
    • 13th Oct 18, 6:19 PM
    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). 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.
    • Alexland
    • By Alexland 13th Oct 18, 6:38 PM
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    Alexland
    • #8
    • 13th Oct 18, 6:38 PM
    • #8
    • 13th Oct 18, 6:38 PM
    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?
    Originally posted by dunstonh
    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
    Last edited by Alexland; 13-10-2018 at 7:11 PM.
    • tel_
    • By tel_ 13th Oct 18, 11:45 PM
    • 59 Posts
    • 11 Thanks
    tel_
    • #9
    • 13th Oct 18, 11:45 PM
    • #9
    • 13th Oct 18, 11:45 PM
    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
    • By Nasqueron 17th Oct 18, 12:10 PM
    • 6,189 Posts
    • 3,769 Thanks
    Nasqueron
    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
    • By Alexland 17th Oct 18, 1:23 PM
    • 3,827 Posts
    • 3,125 Thanks
    Alexland
    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
    Originally posted by Nasqueron
    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
    • dunstonh
    • By dunstonh 17th Oct 18, 1:32 PM
    • 96,058 Posts
    • 63,875 Thanks
    dunstonh
    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
    Originally posted by Nasqueron
    in simple terms, in a 5 year period you would expect a bad year, a nothing year and three positive years. You never know the order they will come.

    Plus, like any house that is on a floodplain with a 1-20 year floor risk, it doesnt mean you will get a flood every 20 years. You could go 40 years without and then get two in a row.

    We had someone that invested a couple of months ago who has mumbled about the loss but they were well trained to know that it could happen. We had another that managed to get in at the bottom of the recent drop and he is beaming. Pure luck or bad luck in the short term but in the long term, it really wont make a lot of difference.
    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.
    • Nasqueron
    • By Nasqueron 17th Oct 18, 1:40 PM
    • 6,189 Posts
    • 3,769 Thanks
    Nasqueron
    Yeah I appreciate it's long term, I understand there are risks with the S&S ISA but long term the growth should really be more once there is a decent sum in there (was doing 150 a month for the first year, now 200). It's the same as the pension, was well up earlier this year, now it's about 1500 down but that's for 30 years away so hopefully it ends up higher
    • dunstonh
    • By dunstonh 17th Oct 18, 2:25 PM
    • 96,058 Posts
    • 63,875 Thanks
    dunstonh
    As a regular contribution, you should be loving these early period declines. They are needed with regular contributions.

    You just have to look what happened to endowments when you go an extended period without any negative period. And how endowments improved a few years after the credit crunch as the investments purchased between 2008 and 2012 went on to boost them.

    If you were doing a regular contribution plan for 15 years, you would want the first 10 years to have mostly negatives.
    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.
    • tel_
    • By tel_ 18th Oct 18, 9:20 PM
    • 59 Posts
    • 11 Thanks
    tel_
    So after posting this message (see quote below), I have today been thinking about dropping another lump sum into my S&S ISA, as well as my regular monthly contribution.

    Talk about changing my mind!!


    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.
    Originally posted by tel_
    • bowlhead99
    • By bowlhead99 18th Oct 18, 11:21 PM
    • 8,306 Posts
    • 15,196 Thanks
    bowlhead99
    So after posting this message (see quote below), I have today been thinking about dropping another lump sum into my S&S ISA, as well as my regular monthly contribution.

    Talk about changing my mind!!
    Originally posted by tel_
    It does make more sense to be adding more to your investment rather than adding less to your investment, now the markets are a bit cheaper.

    If it keeps going down, you'll curse that your investments are now worth less, but the new money is buying more assets per pound, so there's a silver lining. Alternatively if you didn't add your extra lump, and things go up, you will be happy your assets are rising in value but cursing the fact that you missed the opportunity to buy more when they were temporarily cheaper.

    If you just have the mindset of buying whenever you have spare cash available you will be doing a long term 'drip feed' process, whether or not the monthly or quarterly or annual amounts are equal and no matter how many 'lump sums' you end up throwing into the pot from time to time. You will be buying at a whole range of prices for years to come.

    You can't be sure that the current 'lump sum' will be invested at the cheapest possible price that will be available in the next few years... but you can probably be sure it will be invested at a cheaper price than was available a couple of months ago, because most asset classes have come off a little (some more than others). So an investment made today might or might not end up producing abnormally high or low returns, but you at least know it won't be the worst possible return, because you bought at a cheaper price that you'd have needed to pay if shopping in July or August for example.

    Good luck with your investing. Luck is a nice thing to have. But in the long term, well-diversified investment funds should return more than cash without you needing to be particularly lucky. It's just how economics works. But it does require you to be in it for the long haul to reach that long term expectation and ignore the ups and downs along the way - rather than get a short term result which might be quite haphazard in terms of what gains or losses arrive when.
    • Alexland
    • By Alexland 18th Oct 18, 11:42 PM
    • 3,827 Posts
    • 3,125 Thanks
    Alexland
    Talk about changing my mind!!
    Originally posted by tel_
    Before you are too impulsive think through how you would feel if it dropped further and make sure you are completely comfortable with your decision. The worst thing that could happen is the market keeps falling, you despair the markets may never recover (sometimes it feels like that when you see the news), and you make the behavioural error of selling low.

    Alex
    • tel_
    • By tel_ 19th Oct 18, 5:30 PM
    • 59 Posts
    • 11 Thanks
    tel_
    I'm truly grateful for your words of wisdom bowlhead99. Thanks for taking the time to post such an interesting view :
    • tel_
    • By tel_ 19th Oct 18, 5:41 PM
    • 59 Posts
    • 11 Thanks
    tel_
    I'm curious now to see how many units my next payment will buy Alexland at the end of the month, so I will wait until then to decide weather or not to make an extra purchase.

    I think that's the best thing for me to do as I'm new to stocks & shares investing.

    I'm finding the whole process fascinating though.
    • Iain_For
    • By Iain_For 20th Oct 18, 8:18 AM
    • 80 Posts
    • 71 Thanks
    Iain_For
    My wife and I have identical ISAs. Her’s is down 3.89%, mine down 3.58% since August. Since April, her’s is up 0.38%, mine up 1.72%. The difference? Purely fortuitous, I invested this years ISA as a lump sum in April when markets were low, she drip fed April through August. This is all exceedingly short term, however, and I doubt whether either approach will have any significance long term compared to time in the market, which will be nearly identical in both cases.
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