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

JSnowWinterfell

Registered User
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69
There is an emotional aspect to consider, it is very hard to sell a portfolio that is 30% down, especially on a portfolio of substantial size. Equally, it is difficult to look rationally and objectively at the market when it is returning almost 30% in a year (S&P 2019). It is very easy to post on this forum the approach taken but I doubt anyone invests with zero emotion.

The warning signs of this crash were there to be seen, we just chose to ignore and I include myself. I read an article published on reuters three weeks ago that talked about how there was a flight to quality after the initial Covid outbreak in China but US stocks were still going up. It showed when this happened before a sharp decrease followed. The rational was that US stocks have been the biggest winner over the last 10 years, and nobody wants to give that up (herd mentality). I read it, but I didn't react.

I am sure we have all watched 'The Big Short' there is a focus on two Hedge Fund managers who identified the problem and bet against the market. I wouldn't call this predicting the market, but it is people using evidence and taking a view. That view may prove to be wrong, or it may be wrong for a long time.
 

jim

Frequent Poster
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518
Staying the course is ok but surely taking action at times, esp if you hold strong views and have some knowledge, makes sense for at lease some investors.

If one anticipates further drops they should sell. How can anyone argue with this?
 

galway_blow_in

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1,593
Have a look at 'total return' rather than just price index.

And being invested exclusively in European shares wouldn't even start to be diversified.
i know that and i didnt imply anyone should be exclusively in the european market ,i mean that only someone who avoided everything bar the U..S market is up 100% since 2007
 

Fidgety

Registered User
Messages
98
If one anticipates further drops they should sell. How can anyone argue with this?
If one anticipates further increases they should buy. How can anyone argue against this?

It's illogical and yet both perspectives are valid. It's likely this extreme volatility, with wild swings in both directions, will continue for a while.
There is no wrong or right so do whatever you wish that makes you sleep better.
 

joe sod

Frequent Poster
Messages
892
And being invested exclusively in European shares wouldn't even start to be diversified.
so you needed to be diversified by investing in the "overvalued" US market, even though on many posts here today people are saying it was obviously over valued and was the "longest bull market in history". So if you deliberately chose to reduce your exposure to the US markets and increase exposure to the rest of the world, that was still wrong , right.
So the only correct strategy then was not invest in the US, not invest in Europe, not invest in UK, not invest in emerging markets but stay in cash for the last 5 years, but what cash, euros, pounds or dollars, and this is the very cash that the worlds central banks have been printing trillions of since the financial crash.
 

jim

Frequent Poster
Messages
518
If one anticipates further increases they should buy. How can anyone argue against this?
Well, yes. This is my point. There may be ups and downs from day to day but over the next few weeks i think the mkt will be down, based on strong evidence we see every day ign news. So how can one say "stay the course", do nothing, let your funds drop. This seems lazy and stupid. What am i missing? The strong concensus seems to be contrary to my thinking.

Of course then when the mkt is anticipated to rise, based on what we will see in the news for example virus being controlled then buy bsck in.

So rather that stay the course proactively manage your funds.
 

RedOnion

Frequent Poster
Messages
4,282
so you needed to be diversified by investing in the "overvalued" US market, even though on many posts here today people are saying it was obviously over valued and was the "longest bull market in history". So if you deliberately chose to reduce your exposure to the US markets and increase exposure to the rest of the world, that was still wrong , right.
So the only correct strategy then was not invest in the US, not invest in Europe, not invest in UK, not invest in emerging markets but stay in cash for the last 5 years, but what cash, euros, pounds or dollars, and this is the very cash that the worlds central banks have been printing trillions of since the financial crash.

Did you read the context of the post? The period since 2007. So the US market has been overvalued the entire time?
 
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RedOnion

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4,282
i know that and i didnt imply anyone should be exclusively in the european market ,i mean that only someone who avoided everything bar the U..S market is up 100% since 2007
Yes, but even if you invested exclusively in European stocks, you're still up. Significantly.

You need to look at total return indexes, not just price. Large Cap European stocks pay higher dividends than US stocks. Lots of large European companies were removed from indexes, when they were bought by US companies. So a price index doesn't show the full story.
 

Brendan Burgess

Founder
Messages
40,233
Hi Duke

I have amended the first post to include your Camp. Am I summarising it ok?



Camp 3 - The Duke's Camp

Camp 3 is similar to Camp 1 in that it does not claim to know what will happen in the future. However, the past is no longer a useful guide as we are in uncharted territory. The Coronavirus is a new phenomenon as is the extent of Quantitative Easing.



History might not repeat itself under these circumstances.

So while Camp 3 does not attempt to forecast the market, the level of risk outweighs the potential gain.
 

Duke of Marmalade

Frequent Poster
Messages
2,653
Hi Duke

I have amended the first post to include your Camp. Am I summarising it ok?



Camp 3 - The Duke's Camp

Camp 3 is similar to Camp 1 in that it does not claim to know what will happen in the future. However, the past is no longer a useful guide as we are in uncharted territory. The Coronavirus is a new phenomenon as is the extent of Quantitative Easing.



History might not repeat itself under these circumstances.

So while Camp 3 does not attempt to forecast the market, the level of risk outweighs the potential gain.
I could never have put it so eloquently.:)
 

Gordon Gekko

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4,130
Presumably, you are aware of the on-going debate whereby certain posters recommend all-in equity for ARFs? Such folk would triumphantly make comments like the following...…."I don't want 30% in defensive assets which pay nothing - as 6% of 30% is an annual loss of 1.8% and I ain't paying that brother for a better night's sleep!"

On many occasions, I warned against such silliness - often a pretty lonesome voice. There were a few notable and to be commended exceptions. I do not recall you being one. Indeed, I seem to recall you being an all-in equity in retirement man. Is that fair? Anyway and also, the advocates of such silliness seemed completely deaf to any risk warnings.
Whatever the case, so long as folk realise that all-in equity in retirement is a very, very dodgy play, I'm relaxed!
I will always be invested 100% in equities because we’ll have a material level of DB already. Clearly that’s not for everyone.
 

Itchy

Frequent Poster
Messages
338
If you were happy riding the wave of the bull market but these big drops are causing you to reevaluate then you should really reevaluate two things: 1) your asset allocation strategy and 2) your risk tolerance - you've likely exceeded it
 

Gordon Gekko

Frequent Poster
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4,130
If you were happy riding the wave of the bull market but these big drops are causing you to reevaluate then you should really reevaluate two things: 1) your asset allocation strategy and 2) your risk tolerance - you've likely exceeded it
The salient point is that if the current volatility is causing you to think about abandoning your investment plan, the investment plan wasn’t appropriate in the first place.
 

elacsaplau

Frequent Poster
Messages
799
I will always be invested 100% in equities because we’ll have a material level of DB already. Clearly that’s not for everyone.
I don't recall the DB element being mentioned previously - That means you are not "all-in" equity with your retirement saving. As I pointed out in #14, I am referring to folk who absolutely or predominantly depend on their ARF. Anyway, hopefully, this message is done, once and for all, now.

The salient point is that if the current volatility is causing you to think about abandoning your investment plan, the investment plan wasn’t appropriate in the first place.
There are no easy answers here. An investment plan, drafted in calm waters, may seem reasonable at the time of drafting. When the storm comes, folk will react differently. Some will be sanguine, others will panic. Having a plan is one thing, how one reacts when punched on the nose, another - i.e. one only discovers one's true risk tolerance during the storm. Also, this storm may be different to previous ones?!
 
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Gordon Gekko

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4,130
The DB element is not mine. But the key to a 100% equity strategy is conviction; if times like now make you nervous and have you questioning the plan, then perhaps the plan’s not for you.

The “maybe this storm is different” narrative is a dangerous one. Different to what? 9/11, the Global Financial Crisis, the Cuban Missile Crisis, World War II? Markets will recover.
 
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JSnowWinterfell

Registered User
Messages
69
This storm is different to previous ones for sure. The circuit breakers have been hit again on the S&P and all futures markets. Despite the FED intervening again.

There is going to be a lot of volatility in the market in the coming weeks, my gut feeling is that until we see the cases in the US stop increasing the markets will not calm.

At what level that is nobody knows, but what is clear is that the economy is going to feel this for a number of quarters.

Ultimately we are going to see bailouts similar to those provided to the banks during the crisis.
 

Duke of Marmalade

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2,653
It is now clear that the greatest bull run in history was as a result of being pumped full of steroids. It left the markets' immune system in shreds. And all the doctors can do is to pump in more steroids - but is this just delaying the melt down?
 

JSnowWinterfell

Registered User
Messages
69
Have you got a link to any reliable source that agrees with your opinion here? Because it flies in the face of what the regulators are saying, and statements made over the weekend.
I worded the sentence badly. I do not mean that banks will need bailouts, rather governments are going to provide bailouts for the economy, we have already seen a number of stimulus packages announced.

 
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