What would you do?

[Avantegarde]

In just under a month, the value of my portfolio of sixteen investment trusts and tracker funds has fallen by 35%, or £75,000. This is not yet a loss on most of the initial values of the investments (which were mostly made in a few large lump sums 7 years ago) but rather a huge erosion of the stock market gains made since then. However, it is still quite an astonishing experience to see this erosion of paper wealth happening before ones own eyes. I think things are likely to get worse, much worse, before they get better, both for individuals suffering disease, economies (economic implosion and mass unemployment) and for personal investors like me. Luckily, I do not need the dividend income to live on. So, if you were me, would you hold on tight, keeping your investments more or less as they are, and avert your gaze until the worst is over? Or would you sell up some or even all of your investments now to avoid even more short to medium term losses?

[YeeWo]

I’m “hold on tight, keeping your investments more or less as they are, and avert your gaze until the worst is over”(!).

If you’re in this for 5+ years and are reinvesting dividends view the crisis in proportion. We’ve ALL lost tonnes of paper-wealth in this imbroglio. Pointless crystallising losses and if markets don’t recover in a few years we’ll all have far more existential things to worry about the shareprice(s)!! Good Luck........

[GoSeigen]

In just under a month, the value of my portfolio of sixteen investment trusts and tracker funds has fallen by 35%, or £75,000. This is not yet a loss on most of the initial values of the investments (which were mostly made in a few large lump sums 7 years ago) but rather a huge erosion of the stock market gains made since then. However, it is still quite an astonishing experience to see this erosion of paper wealth happening before ones own eyes. I think things are likely to get worse, much worse, before they get better, both for individuals suffering disease, economies (economic implosion and mass unemployment) and for personal investors like me. Luckily, I do not need the dividend income to live on. So, if you were me, would you hold on tight, keeping your investments more or less as they are, and avert your gaze until the worst is over? Or would you sell up some or even all of your investments now to avoid even more short to medium term losses?

You have to soberly consider two questions:
1. Before the crash began, did share values sensibly reflect the potential stream of income to those businesses over the long-term future? This is important because if the answer is no, then the huge number of shares which changed hands over months or years at much higher prices than now are in the hands of investors who got their sums wrong.
2. How much have the events of the past few weeks affected the value of that long-term stream of income? This is important because if the negative effect will be small there is more scope for recovery of share prices.

That should give you a foundation to build your plans on.


GS

[monabri]

From an income stream point of view, the ITs you hold might have " reserves" which will help them maintain the dividend awaiting better times.


Note, China reported "only" 8 deaths...the deaths over there are dropping. Then there is talk about various drug therapies ( one was successful and the patient recovered very quickly).

I can only speak for myself but I'm holding on and buying small top ups in ITs and certain individual shares ( LGEN, Diageo).

https://www.worldometers.info/coronavirus/

[Nocton]

If you think as you say "I think things are likely to get worse, much worse, before they get better." Then you should obviously sell everything now and buy back later. Personally, I should say it is too late to sell as there will probably be a small recovery bounce soon as investors see that lots of shares and ITs have been sold indiscriminately. If you not sure, then sell half to hedge your bets.

[swill453]

If you think as you say "I think things are likely to get worse, much worse, before they get better." Then you should obviously sell everything now and buy back later. Personally, I should say it is too late to sell as there will probably be a small recovery bounce soon as investors see that lots of shares and ITs have been sold indiscriminately. If you not sure, then sell half to hedge your bets.

I find myself with an urge to both sell and buy, probably the same stuff.

So I'll compromise by doing nothing. Masterful inaction, or rabbit-in-the-headlights? Don't care.

Scott.

[88V8]

Agree that the time to sell has passed. Hang on.
Overnight, one night last week, I 'lost' more than the cost of our first two houses. But it's not a loss unless you sell, or you want to sell to crystallise a loss for CGT.

I'm slowly buying.
MRCH, CTY, BERI, HFEL of which I now have too many having jumped in too soon heyho.
And some HYP shares. And some FI.

I think the market will bottom quite soon, so on the whole the time for some gentle buying is now.

V8

[swill453]

I think the market will bottom quite soon, so on the whole the time for some gentle buying is now.

To expand on my conflict of urges -

To sell: missed that boat, not going to happen.

To buy: our proportion of cash has significantly increased, as the equities have headed south. Could be a great opportunity.

To do nothing: since we gave up work we've always kept 3 years+ of normal expenses in cash, mainly to avoid any forced selling in times such as these. At a push, as long as we get some continuity of dividends, we could stretch this out to 6/7 years or more. At that point our state pensions will be starting to kick in, giving us a bit more of a safety net. Why would we put that at risk by catching a falling knife?

Not really asking for advice, I know I'll be doing precisely nothing.

(Unless an inheritance windfall happens, which unfortunately is statistically more likely now.)

Scott.

[vrdiver]

Greed and fear, fear and greed. I'm suffering from both at the moment.

I'm sitting on my investments, watching the newsflow come in and expecting a significant dividend cut across my portfolio for this year and likely next, assuming business gets back to normal by the end of the summer. (My assumption/hope, call it what you like!)

I won't sell, as the fear of being in cash during a swift upturn is greater than the greed of wanting to buy back in when the FTSE drops to 4,000 or even 3,500.

Mrs VRD and I live off of our dividends, but have cash reserves which I expect to cover us until dividends recover. We could also reduce our outgoings considerably, if required.

Question I keep asking myself, is whether to allocate some of those cash reserves towards a war chest? I'm thinking about going shopping for bargain companies! In this scenario, greed has not yet outweighed fear, but should the FTSE fall to the levels I mentioned earlier, the balance may well change, increasing both the fear-of-selling in my current portfolio and the greed to exploit the cash!

In your case, I'd probably jump ship, selling out and buying back in to something you had more confidence in, but if it was my decision I'd probably be paralysed with the fear of jumping out of the frying pan...

tl;dr
No idea what course of action would be better, so probably sit on my hands until things had settled down. Like I did with Lloyds, RBS, Carillion etc.

VRD

[richfool]

It is very very frustrating when you have spent years building up and diversifying your portfolio and fine tuning it to protect against market corrections,( and feel quite proud of it), only to then have a virtually unforeseeable, once in 100 years event, that indiscriminately annihilates it. Well, I am down -26% overall (from a position of +12.5%, some 2 months ago). To be fair because I have sold, taken profits & reinvested them and received dividends & reinvested them, along the way, it will be less than that.

All the work done to find and include investments that were counter-cyclical or inversely correlated to equities to enhance protection, seemingly to little or no avail. Renewable energy, infrastructure, utilities, property REIT's, all dramatically down. The only thing still in the black for me is PHP. Even my gold miner has backed off, for the moment anyway. Obviously the big protector I overlooked or under-appreciated, was CASH. My biggest faller is TMPL, bought only last December, now at -58%.

After all the work putting my portfolio together and as the seriousness of the situation and the panic unfolded, I did reduce (sell part) of some holdings on the way down, e.g. JETI (European), BMPI, MWY, (Global Growth), JGGI, HINT & MUT, and as the falls continued, topped up instead: PHP (Primary Health Properties), MATE (multi-asset), FGT, ULVR, (pursuit of quality), TRIG (renewables), MCT, (Middlefield Canadian Income - REIT's, energy, pipelines) & RGL (prop REIT v high yield), though still retaining a significant chunk of cash. The market has still carried on down well below the points at which I sold, bought/topped up. It is annoying that trusts that I thought would have been more defensive (such as TRIG & RGL) have fallen significantly too. I still however retain a chunk of cash in case of total Armageddon.

I know there will be some who will quickly point out the dangers of panicking or trying to time the market, but I do see this as more than a market correction and something that could bring down considerable sectors of business and affect future recovery for years to come. Meaning more than just blood on the streets. So I felt I wanted to take a proportion of what I had invested off the table, even though that incurred some losses.

I am now using my time at home to ponder what, if anything, I might top up again, when or if a glimmer of light appears down the tunnel and/or when/if I consider/guess the bottom may be near. ( The market is currently much lower than when I sold). Or indeed whether, in view of the exceptional times would it be better to just sit on the cash.

Global Growth & Income would be my preferred sectors, trusts such as: JGGI and HINT, but I am uncertain re JGGI as I am aware it subsidises income from growth, and sets its dividend based on NAV at the start of the year, therefore does that mean it's dividend could suffer more next year? Though I do like that it has exposure to global growth stocks including technology. Otherwise MUT (UK G&I) or lower volatility MATE (JP Morgan Multi-Asset Trust). That said maybe CASH could become a new component of my portfolio.

[Newroad]

Hi All.

There is a lot in the post chain above - let me try and unpack my view on the various bits.

In general and in short, if one doesn't need the money to live on, it doesn't make sense all other things being equal to sell now - the discounts to (estimated?) NAV alone, not just in IT's, but also some ETF's(!), would probably preclude this as an idea unless forced. As an aside, this is one of the very good things about being invested in IT's - the managers don't need to sell to fund outflows - they can afford to ride it out if they think the asset values will stand up in the medium/long term.

I'm not sure anyone got their medium to long term sums wrong per se - we/they just got hit hard with long tail risk. It is possible many of us got our short term sums wrong - in hindsight, we should all have sold - perhaps when the Italian outbreak first hit (in retrospect) might have been the sensible.

There has been discussion about long-term stream of income and/or dividend payments holding up (and an implication it may be OK to sit tight on that basis). I don't think it's at all clear that dividends will hold up. Certain sectors have been smashed and won't be able to, others may require government support, which may come with conditions on dividends, executive pay, bonuses etc.

Then there is when to buy if you want to. If we knew that, we'd be traders in The City (and perhaps some of us were). My guess is that it won't be for a while - probably when we have a sense of either (1) a vaccine and/or (2) the ability to treat to higher efficacy at an appropriate scale. I am already on record as saying maybe 3-6 months, but that could be horribly wrong in either direction. Possibly one solution could be to drip feed in 1/13th of one's free cash in a month over the next 13* months - modified a bit to take into account ISA allowances in 19/20, 20/21 and 21/22.

Regards, Newroad

* I'm not superstitious

[Parky]

I have cashed in my National Savings ready to buy shares. I have bought some TR Property today, which you can buy for 46% of their peak value just a couple of months ago. Their underlying investment is real property, which I cannot believe has lost that much value (in the medium to long term).
I am ready to buy some other Investment Trusts in due course.

[88V8]

I have bought some TR Property today, which you can buy for 46% of their peak value just a couple of months ago. Their underlying investment is real property, which I cannot believe has lost that much value (in the medium to long term).

Depends who did the valuing.

What bothers me about Property is its relative illiquidity in a downturn, like now.
Can buy Shell with the same percentage fall since one month. Can always sell Shell.

V8

[Parky]

I have bought some TR Property today, which you can buy for 46% of their peak value just a couple of months ago. Their underlying investment is real property, which I cannot believe has lost that much value (in the medium to long term).

Depends who did the valuing.

What bothers me about Property is its relative illiquidity in a downturn, like now.
Can buy Shell with the same percentage fall since one month. Can always sell Shell.

V8

I'm not planning to sell (for many years).

[tikunetih]

Events such as this crisis brutally expose those who've badly misjudged their own volatility tolerance, or have portfolios mismatched to their investment horizons.

If your portfolio has been constructed (ie. asset allocations chosen) to match your volatility tolerance, and your investment horizons are appropriate to the assets held within your portfolio, then you're golden. Discomforted, very likely, but relatively golden nonetheless. These drawdowns are the price to be paid for the greater returns you expect to receive in the long term by holding risky assets instead of only safe assets. C'est la vie.


Risky 100% equity holdings, such as single-name stocks, equity IT's, OEICS or ETFs, require that the holder either has a lengthy investment horizon for these specific positions (eg. 10+ years), or else manages these positions in a tactical manner.

If you were managing such positions in a tactical manner, eg. such as as on trend breaks, then you would already have jettisoned them much higher than today's prices. So if that was your plan, you've already blown it. Too late. Most people who attempt to run portfolios using such tactical trading methods will perform poorly: they're unlikely to have the psychology, iron discipline or time commitment required to monitor their positions and execute the plan, or their plan won't actually be a good one. Wisely, most people don't bother trying to do this over the long term, recognising relatively early on in their investment "careers" that a tactical trading approach is unlikely to work out well for them.


So which of the above mistakes have you made?

- Portfolio construction (asset allocation) mismatched to your volatility tolerance?
- Inappropriate time horizon for the assets held?
- Tactical trading strategy not correctly executed?

If you've made none of those mistakes, then you've done nothing wrong that time should likely eventually resolve.

Unless it's the end of the world, then <<shrugs>> bigger fish to fry.

[monabri]

I looked at how much certain individual shares have fallen. I then realised that a lot of the ITs have fallen similar amounts. For an income dividend point of view I have been selling down some individual shares and buying MRCH, HFEL and MYI. I will admit to top ups of LGEN and RDSB.

[forrado]

The OP asks the question “What would you do?”

Nothing is what I am doing.

I started down the stocks and shares ISA road a very long time ago when an ISA was just a PEP. For more than a decade now I haven’t made any annual contributions. Because by design, funds have been flowing out, in the form of regular and gradually rising dividend payment withdrawals, as opposed to flowing in. And, as long as that continues to be the case then nothing is what I going to keep doing.

A long time ago I asked myself the question, what am I expecting my ISA investments to do for me?

Well, other than to keep the tax man out of the picture, all I expect is that over the years my capital at risk together with the income produced keeps pace with inflation. If my investment returns happen to be better than inflation then that’s a bonus the market gives, or can just as easily take away from me. The current problem that less experienced investors are struggling to get to grips with is while the market tends to regularly hand out ‘bonuses’ in the form of steadily rising share prices. The market can turn cruel very quickly to claw-back such previously awarded capital ‘bonuses’ that have built up slowly over time.

That’s the paradox that most investors have trouble coming to terms with, the market giveth slowly but can brutally taketh away in a matter of days.

[tikunetih]

The current problem that less experienced investors are struggling to get to grips with is while the market tends to regularly hand out ‘bonuses’ in the form of steadily rising share prices. The market can turn cruel very quickly to claw-back such previously awarded capital ‘bonuses’ that have built up slowly over time.

"Markets take the escalator up and the elevator down"

It's very unfortunate if investors weren't aware of that old investment aphorism, because it is absolutely the nature of how markets behave, and that behaviour is extremely visible in any historic price chart should anyone care to take a look.

It's not a secret that markets behave in this manner, but it does seem that it requires direct personal experience of such price action in order for many investors to properly internalise what it means and how it might make them feel.

[staffordian]

I asked myself last night whether continuing to hold was the best option.

I hold a relatively immature portfolio of ten mainly income orientated ITs built up mainly over the last two years which peaked at about £93k not long ago, (£84k put in over this period and all dividends reinvested). It sat at £59k last night.

I too concluded it was far too late to sell. I was pondering whether to perhaps sell half hoping to buy still cheaper but I am far more worried about it recovering, leaving me in cash and missing the boat than the risk of further falls and bigger paper losses.

I'll get the dividends in the meantime; they may fall but should be more resilient than individual shares, and I'm confident they will recover eventually. If they don't then there will be far more serious things to worry about, I suspect.

It certainly tests one's reaction to volatility and paper losses, and I am confident holding is best for me. I'd be far more stressed selling then wondering if I'd done the right thing, plus worrying about when to buy again.

[mc2fool]

I have bought some TR Property today, which you can buy for 46% of their peak value just a couple of months ago. Their underlying investment is real property...

No it isn't, it's property securities. I.e. what they invest in is the shares of property companies, LAND, SGRO, etc, etc, not property itself, at least not mostly. They do have a small "direct property portfolio", which makes up about 6% of their NAV. The rest is shares, and so they suffer not only a discount on the IT's NAV itself (currently 31.8%) but also the sentiment/discount on the NAVs of the shares it invests in.

In fact they are the only IT in the AIC's Property Securities sector. If you want ITs that actually own buildings you need to look in the other property sectors, Property - UK Commercial, Property - Europe, etc, etc -- although there are some pretty big discounts there as well. https://www.theaic.co.uk/aic/find-compa ... &op=Filter