"My shares have fallen 30% what should I do?" "Is this a good time to invest in the stock market?"

[Fella]

So that’ll be fear then...you’re afraid that markets will fall further

Hmmmm it's a strange one , initially I was thinking wow this is going to be a big drop at end of February , so this is what a big crash feels like !

Then I start thinking this could actually be my chance to make a lot of money I'm still in my 30's I've time on my hand and I believe in equities long term.

So the little fear I may of had turned to excitement of potentially making significant investment at a reduced price .

Now my excitement has turned to disappointmemt as I watch my portfolio recover in what I'm viewing as an irrational market.

I never thought I would be disappointed with a recovering portfolio but would love to get this big chunk in at where I thought we were heading .

I'm not going to rush in now as there may be opportunities in the future .

I've become accustomed to losing money that it rarely causes me fear , once I paid my mortgage and my income is gauranteed I look at all my money invested and in banks credit unions etc as at risk and potential to go to zero and I can live with that .

 

[joe sod]

I googled data on how much of the global stock markets were traded every year surprisingly it was not that widely available but here is a chart from the world bank upto 2016, Id say this year will be equally dramatic when total data collected for the year

World Bank Open Data

Free and open access to global development data

data.worldbank.org

What it shows is that in normal times with no big sell offs the proportion of the total stock market that has changed hands in a year is between 80 and 100% and this has been steadily rising, in the mid 1990s less than 50% of the stock market changed hands. However in years like 2008 250% of the total stock market changed hands so that in that year the average stock changed ownership 2.5 times in that year.
It is obvious that computers have caused alot of this over trading but I doubt they have added any real value .
Buffet said that the stock market is a mechanism to transfer wealth from the impatient to the patient.

 

[jim]

In relation to the title of the thread: My shares have now dropped 50%. Is now a good time to invest in the stock markets or should I wait until it drops further? I know that this is crystal ball territory but here are my 2 assumptions.

1. If the US unfortunately continues to see deaths and infections rising over the next number of weeks -assumption 1.
2. Then stock markets will fall further - assumption 2.

Then do not invest for a few weeks?

 

[Brendan Burgess]

The stockmarket is a leading indicator.

In other words, it does not wait for the latest GDP figures to be published and for the recovery to be well under way before it starts rising.

If investors think that the end is in sight, although it's expected to get worse in the meantime, the stockmarket will recover.

Brendan

 

[jim]

Its about 50% now versus about 3 weeks ago when i started monitoring it. Prob a bit less than 50% but its ballpark there. Yes, a big drop indeed.
A lot of advice out there to invest and snap up a bargain but is that wise given whats happening in the US and the probable further impact that will have on markets?
People say ya cant predict the mkts but what is happening is happening and its right before our eyes. The logic would be that itll further impact markets negatively. Be wonderful to here more views on this.

 

[Duke of Marmalade]

I think we can agree that there is huge uncertainty. There is a not negligible possibility that by year end markets will have substantially rebounded. In a sense that is almost bad news for it means there must be a compensating chance that they will sink much further - that's what makes a stock price.
Look at it this way. In normal times the markets might be taking a view that there is a 50% chance that they will be up 10% by year end and a 50% chance they will go sideways. In the current situation that is more like 50% chance they will be up 30% and a 50% chance they will be down another 20%. I presume this uncertainty is reflected in the price of options.
For someone who has lost 30% that poses a nasty dilemma - to get out now and see markets recover might be even more painful than staying in and tanking a further 20%.
For someone who missed the plunge it looks to me that jumping in now is taking a punt.

 

[cremeegg]

The stockmarket is a leading indicator.

In other words, it does not wait for the latest GDP figures to be published and for the recovery to be well under way before it starts rising.

If investors think that the end is in sight, although it's expected to get worse in the meantime, the stockmarket will recover.

Brendan

I agree with all the above, but the market will not have bottomed while there are people who think the dip is a buying opportunity.

The market is driven by fear and greed. Usually fear of loss and greed for profit, today fear of disease and greed for opportunity. The US is not anywhere near as afraid now as it will be in a few weeks.

 

[Sarenco]

Believe it or not, the shortest bear market in the Dow's history technically came to an end last Thursday!

Thursday's close was 20% higher than Monday's close.

Anybody predict that?

 

[Fella]

Nobody knows what way the markets will move , they trend upwards long term so if your not in your likely to miss out on the gains. I turned on cnbc the other day it was painful listening to some people saying its time to buy and others saying we haven't bottomed yet . There are death crosses or candles and stuff , whatever that means.

Anyway only you can decide when to invest and what to invest in , your guess is as good as the next persons. You don't have to be all in or all out . You could always invest 50% of your money now and invest 10% a week/month/quarter or whenever there's another drop. You can do what you want , you can drive yourself crazy , the gains aren't linear so if your hopping in and out of the market your going to risk missing the good days as well as bad days. I think the best advice for everyone is just buy and forget , likely when you look back over a few decades this will be a winning strategy compared to the timers of the market .

At the end of the day everyone's allowed have an opinion , I believe the markets are efficient and what we have is a market in equilibrium based on all available information. My instinct sometimes disagrees with this , but as someone told me "there's enough people trying to get rich quick , be happy to get rich slowly" , I also have to remember how bad humans are at making decisions . We carry way to much bias. I look at negative news like millions unemployed and economies coming to a standstill and stock markets rising and realise that this is not a game I can play because I don't know the rules!
So I jog on into the sunset happy to take my few percent a year with zero knowledge.

 

[joe sod]

In relation to the title of the thread: My shares have now dropped 50%. Is now a good time to invest in the stock markets or should I wait until it drops further? I know that this is crystal ball territory

It just shows you how hard it is to stay the course in investing and not panic sell. The crescendo of negativity from all quarters over the last few weeks was unbelievable, it was much more than in the 2008 financial crash. Yet surprisingly the stock markets have risen again over the last 2 days, nobody predicted that, I was surprised myself

 

[Brendan Burgess]

Yet surprisingly the stock markets have risen again over the last 2 days, nobody predicted that, I was surprised myself

But that is the point.

Most of us realise that none of us can predict short term movements.

Some have asserted "as the death toll rises in America, the markets will fall steeply". The confidence of their predictions is inversely related to their expertise.

Brendan

 

[joe sod]

Peter Brown had some interesting insights on news talk this morning, he is saying invest in Europe and even emerging markets, they were cheap before the sell off but are really cheap now, stay out of the US markets and even the dollar, he is saying that the dollar is going to fall back now that interest rates have equalised (that will be good for emerging markets). He is even recommending precious metals especially silver, maybe it's like 2001 all over again.

 

[Gordon Gekko]

I would be more inclined to listen to Peter Rabbit

 

[joe sod]

On those threads I posted Nourini's prediction which has for the most part already come through. Heads up to you all now. I am advising to come out of the market/pensions tomorrow (despite losses aleeady incurred) especially those people within 5 years of retirement and get into cash for the foreseeable future.

this was posted on 19 march, the market looks like it bottomed the very next day, the msci world index has climbed 25% from then to now, That looks like being the worst day to sell investments. Of course things could get bad again as the coronavirus drags on. But at that time in march almost all the predictions were for bigger falls in stock markets, nobody including Nourini predicted that the market would turn tails and rise 25% (nobody ever predicts stuff like that anyway because that gets remembered but predictions of falls are forgotten about until they actually happen) in a few weeks and that when Boris Johnson is in hospital and large numbers of people are dying in the US.

 

[Brendan Burgess]

this was posted on 19 march, the market looks like it bottomed the very next day, the msci world index has climbed 25% from then to now,

Hi Joe

Well spotted. It's funny reading it. I remember the frustration at the time. A few people reported that post saying it should be deleted as they guy clearly had no idea what he was talking about. But we would be deleting a lot of posts if that was the criterion.

The other objection was that it was dangerous and might well cause people to panic. It was asserted with such confidence. That people might be more influenced by the 100% confidence than by the "bland nothings" of the rest of who know we don't know.

Again, supports the point that no one can forecast the short term outlook for the stock market.

Brendan

 

[Zebedee]

I think it was Charlie Munger who said that “stock market forecasters make fortune tellers look professional “

 

[cremeegg]

So the S&P at about 2,800 is back to levels of about a year ago.

The MSC world index at 470 is back to levels of Jan 2019, (although its July 2017 since that level was an all time high).

So a set back of about 18/24 months to the world economy. No biggie then.

At the risk of being called an expert, (which seems to be a term of abuse around here), I am suggesting that the impact of the coronavirus is not fully priced into markets just yet.

 

[galway_blow_in]

So the S&P at about 2,800 is back to levels of about a year ago.

The MSC world index at 470 is back to levels of Jan 2019, (although its July 2017 since that level was an all time high).

So a set back of about 18/24 months to the world economy. No biggie then.

At the risk of being called an expert, (which seems to be a term of abuse around here), I am suggesting that the impact of the coronavirus is not fully priced into markets just yet.

It's been said that the stock market does not always reflect the broader economy and vice versa

The broader economy saw no recession in 1987 despite "Black Monday" occurring.

Perhaps the support provided by the Fed is seen as so comprehensive, stocks may have seen the bottom in March?

Obviously there could be much sharper falls yet but it's interesting how the disastrous job report last week had no effect on stocks, in fact the market rose sharply, the Powell put appears to be blocking the dam

 

[cremeegg]

And my opinion, your opinion, and Daddy Ireland's opinion are worthless.

You are entitled to your opinion as to the value of my opinion. I hope you will understand if I disagree.

Between bland nothings and passionate certainties, I think it is possible to have an intelligent ( if not expert no one is an exert in the future value of the market ) view as to the how well the market has priced in the available information.

I have put forward the view that the market has failed to reflect the enormity of the impact of the coronavirus.

I am basing this opinion on clearly outlined reasoned argument, which the reader is free to examine and accept, reject or ignore as they wish.

I am delighted if someone says I am wrong and explains why, the virus is not that bad, the markets have fully priced it in whatever the reasoning maybe.

But to say my opinion is worthless, is hardly within the spirit of AAM.

 

[Gordon Gekko]

cremegg, I think it’s naive in the extreme to say that markets have failed to reflect the enormity of Covid 19.

There’s field hospital in Central Park, the world is in lockdown, and thousands of people are dying every day.

Do you think that someday the authorities will announce that everything is okay and then markets will recover?