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Time to get cautious?

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
sackofspuds
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Re: Time to get cautious?

#449576

Postby sackofspuds » October 12th, 2021, 4:46 pm

I'm glad I started this thread. Some interesting points made.

I've begun taking profits. Concentrating on individual shares that are on high multiples.

I guess at the end of the day it boils down to this:
1. You liberate some cash.
2. Market doesn't go South.
3. You feel unhappy because you've missed out on some gains.

or:
1. You liberate some cash.
2. Market goes South.
3. You feel happy that you mitigated some of the losses.

or:
1. You do nothing.
2. Market goes South.
3. You kick yourself because you made some sizeable losses and didn't have the courage of your convictions.

Liberating some cash has already made me feel better. I'm not going to take it to extremes though.

simoan
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Re: Time to get cautious?

#449587

Postby simoan » October 12th, 2021, 5:09 pm

sackofspuds wrote:I'm glad I started this thread. Some interesting points made.

I've begun taking profits. Concentrating on individual shares that are on high multiples.

I guess at the end of the day it boils down to this:
1. You liberate some cash.
2. Market doesn't go South.
3. You feel unhappy because you've missed out on some gains.

or:
1. You liberate some cash.
2. Market goes South.
3. You feel happy that you mitigated some of the losses.

or:
1. You do nothing.
2. Market goes South.
3. You kick yourself because you made some sizeable losses and didn't have the courage of your convictions.

Liberating some cash has already made me feel better. I'm not going to take it to extremes though.

Feeling comfortable with your decision is all that really matters at the end of the day. I would ignore all the points numbered 3. you have listed above. You can only make the decision now based on how things stand and how you feel today. There is no use putting on your 20:20 hindsight glasses and beating yourself up in a few months time, or more importantly, if it goes in your favour in the short term, feeling like your some kind of investing genius! Both are equally dangerous states of mind...

All the best, Si

stevensfo
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Re: Time to get cautious?

#449815

Postby stevensfo » October 13th, 2021, 1:32 pm

sackofspuds wrote:I'm glad I started this thread. Some interesting points made.

I've begun taking profits. Concentrating on individual shares that are on high multiples.

I guess at the end of the day it boils down to this:
1. You liberate some cash.
2. Market doesn't go South.
3. You feel unhappy because you've missed out on some gains.

or:
1. You liberate some cash.
2. Market goes South.
3. You feel happy that you mitigated some of the losses.

or:
1. You do nothing.
2. Market goes South.
3. You kick yourself because you made some sizeable losses and didn't have the courage of your convictions.

Liberating some cash has already made me feel better. I'm not going to take it to extremes though.


Or, as I did unintentionally during the Financial Crisis:

1. You do nothing.
2. Market goes South.
3. You get on with life, no losses unless you sell.
4. Market recovers and goes North.
5. Discover a really good red wine! ;)

Steve

JohnnyCyclops
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Re: Time to get cautious?

#449955

Postby JohnnyCyclops » October 13th, 2021, 8:49 pm

stevensfo wrote:Or, as I did unintentionally during the Financial Crisis:

1. You do nothing.
2. Market goes South.
3. You get on with life, no losses unless you sell.
4. Market recovers and goes North.
5. Discover a really good red wine! ;)

Steve


Ditto Covid.

GoSeigen
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Re: Time to get cautious?

#450025

Postby GoSeigen » October 14th, 2021, 9:21 am

I'm not getting cautious, just less bullish. I'm paying down a bit of debt using interest payments and any other spare cash. Still significantly leveraged though with most positions in FTSE and overseas stocks with modest short positions on S&P500. Also hold a few short Dec puts against FTSE futures, more will be added while I hold my view that the market is mid-cycle and will continue to grind up.


GS

sackofspuds
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Re: Time to get cautious?

#450039

Postby sackofspuds » October 14th, 2021, 10:15 am

GoSeigen wrote:modest short positions on S&P500. Also hold a few short Dec puts against FTSE futures


Interesting. How are you shorting? Spread bet? Covered warrant?

sackofspuds
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Re: Time to get cautious?

#450043

Postby sackofspuds » October 14th, 2021, 10:28 am

Excellent article in the Telegraph today by Tom Stevenson, an investment director at Fidelity International, who writes a regular column (views his own):
https://www.telegraph.co.uk/business/20 ... coming-do/
The market crash is coming – here’s what to do about it
Here are four investment tips to help you weather the oncoming sharp correction in global markets


He says to sell some shares now and hold more cash.

He says every fund manager he knows is doing this in so far as their investment mandates allow (my bold).

simoan
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Re: Time to get cautious?

#450047

Postby simoan » October 14th, 2021, 10:34 am

sackofspuds wrote:Excellent article in the Telegraph today by Tom Stevenson, an investment director at Fidelity International, who writes a regular column (views his own):
https://www.telegraph.co.uk/business/20 ... coming-do/
The market crash is coming – here’s what to do about it
Here are four investment tips to help you weather the oncoming sharp correction in global markets


He says to sell some shares now and hold more cash.

He says every fund manager he knows is doing this in so far as their investment mandates allow (my bold).

I can't read the article as I don't subscribe but did he say anything useful? Like what day it would happen? :-) If he could send me a personal email the day before, that'd be very nice...

All the best, Si

sackofspuds
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Re: Time to get cautious?

#450050

Postby sackofspuds » October 14th, 2021, 10:39 am

simoan wrote:I can't read the article as I don't subscribe but did he say anything useful? Like what day it would happen? :-) If he could send me a personal email the day before, that'd be very nice...


Monday 8 November. Loads of people do what they've been doing for years and buy the dip but this time it doesn't work. Carnage by Christmas. Terry Smith retires. :)

simoan
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Re: Time to get cautious?

#450051

Postby simoan » October 14th, 2021, 10:42 am

sackofspuds wrote:
simoan wrote:I can't read the article as I don't subscribe but did he say anything useful? Like what day it would happen? :-) If he could send me a personal email the day before, that'd be very nice...


Monday 8 November. Loads of people do what they've been doing for years and buy the dip but this time it doesn't work. Carnage by Christmas. Terry Smith retires. :)

Thanks! I'll clear my diary for 4-5th so I can sell everything. Just don't tell anyone else :-)

All the best, Si

GoSeigen
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Re: Time to get cautious?

#450054

Postby GoSeigen » October 14th, 2021, 10:46 am

sackofspuds wrote:
GoSeigen wrote:modest short positions on S&P500. Also hold a few short Dec puts against FTSE futures


Interesting. How are you shorting? Spread bet? Covered warrant?


Spread bets. Very happy to have written puts because the FTSE has really not gone up much since I turned bullish in Dec/Jan and the puts have made a useful bit of premium in the meantime.

GS

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Re: Time to get cautious?

#450068

Postby mc2fool » October 14th, 2021, 11:29 am

simoan wrote:
sackofspuds wrote:Excellent article in the Telegraph today by Tom Stevenson, an investment director at Fidelity International, who writes a regular column (views his own):
https://www.telegraph.co.uk/business/20 ... coming-do/
The market crash is coming – here’s what to do about it
Here are four investment tips to help you weather the oncoming sharp correction in global markets


He says to sell some shares now and hold more cash.

He says every fund manager he knows is doing this in so far as their investment mandates allow (my bold).

I can't read the article as I don't subscribe...

The article is more equivocal than the headline leads one to believe, and his prediction last January didn't exactly happen (although that article too was more equivocal than the headline).
https://www.telegraph.co.uk/business/2021/01/25/market-correction-coming-investors-should-ride/

In any case, with nifty timing it's fairly easy to defeat the Telegraph's paywall and read the whole article.

Simply hit the big X button (stop-loading) on the toolbar of your browser while the page is loading. If you hit it too late you'll still get the paywall popup and if you hit it too soon you'll lose the end of the article, but if either happens just hit the circular arrow button (reload) it turned into and try again.

sackofspuds
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Re: Time to get cautious?

#450070

Postby sackofspuds » October 14th, 2021, 11:40 am

The authors of articles don't write the headlines.

I also don't have a problem with newspapers trying to protect their intellectual property with paywalls.

servodude
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Re: Time to get cautious?

#450091

Postby servodude » October 14th, 2021, 12:38 pm

mc2fool wrote:In any case, with nifty timing it's fairly easy to defeat the Telegraph's paywall and read the whole article


I'm personally quite torn by this information

I don't really want to read it...
But they really don't want me to read it given the paywall and you've given me a way to get round their efforts which would be to their detriment
But I don't want to read it :?

-sd

Itsallaguess
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Re: Time to get cautious?

#450093

Postby Itsallaguess » October 14th, 2021, 12:43 pm

sackofspuds wrote:
Excellent article in the Telegraph today by Tom Stevenson, an investment director at Fidelity International, who writes a regular column (views his own):

https://www.telegraph.co.uk/business/20 ... coming-do/

The market crash is coming – here’s what to do about it

Here are four investment tips to help you weather the oncoming sharp correction in global markets


He says to sell some shares now and hold more cash.

He says every fund manager he knows is doing this in so far as their investment mandates allow (my bold).


I think one of the first questions to ask ourselves as investors might be -

'What level of future correction would it require for you to take meaningful portfolio-level action now, if you knew it was on the imminent horizon?'

I mention this because the linked Telegraph article is largely based on the following premise -

Of course, there’s an equally important question before you even get there, which is whether a correction really is round the corner. The short answer to that is that neither I nor anyone else knows. But the odds are clearly shorter than they were.

The list of things to worry about has got considerably longer since the spring – inflation, broken supply chains, rising energy costs, an imminent turn in the interest rate cycle, high-ish valuations, stretched profit margins, slowing earnings growth. I could go on.

Even if it is not imminent, a correction will happen at some point. If you look at the performance of the S&P 500 in the three years following each of the major bear market bottoms over the past 60 years, there has been a pull-back of at least 10pc at least once.

We are now a year and half on from the Covid bottom and we are yet to experience that double-digit decline. Given the 5pc or so retreat in September, it is not unreasonable to wonder whether the inevitable correction is under way.


So he seems to have written an article regarding 'correction action plans' based on a belief that we're due one of the regular 10% pull-backs, and by-the-way, we might already be part of the way into it if one's actually happening right now...

Having read it then, I'm really not sure the 'action plans' suggested are even justified when viewed against his actual '10% market correction' expectations, and given that the market-worries that he's listed is likely to be somewhat baked in at this point anyway, I'd actually begin to wonder if it wouldn't take too many of those issues being mitigated somewhat to not pose as big an overall issue as he's trying to make out...

With that said, and to add a personal aspect into the discussion, I am actually in one of my fairly regular 'risk-off' modes at the current time, which allows incoming dividends and regular savings from wages to accumulate for a period, with a view to taking a bit of a breather from my usual position of regular drum-beat investment and re-investment. I don't tend to be a seller of open positions, and much prefer to simply mitigate how I feel about the current situation using accumulating cash, and over a number of months that can lead to a fairly meaningful amount.

I'll probably keep things that way until early next year with an eye on the 2022 ISA period, and this is a 'risk-off' cash-accumulation process that I've carried out a number of times over the years and which plays a large part in my 'sleep-at-night' requirements whilst I'm still working.

Getting back to the article itself - as it seems to be based on a 'correction level' of just 10%, then that's nothing like the type of 'correction' that I'd be willing to make wholesale portfolio-level sales in anticipation of, and I personally think that a correction of 10% is just about within the 'market noise' territory which we need to get used to as personal investors, and harden ourselves against thinking we've got to actually 'take action' to cope with...

Cheers,

Itsallaguess
Last edited by Itsallaguess on October 14th, 2021, 12:47 pm, edited 3 times in total.

monabri
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Re: Time to get cautious?

#450095

Postby monabri » October 14th, 2021, 12:45 pm

servodude wrote:
mc2fool wrote:In any case, with nifty timing it's fairly easy to defeat the Telegraph's paywall and read the whole article


I'm personally quite torn by this information

I don't really want to read it...
But they really don't want me to read it given the paywall and you've given me a way to get round their efforts which would be to their detriment
But I don't want to read it :?

-sd



I can summarise most articles in The Terrograph in one word "Panic"...you're not missing anything too informative. Articles often contain mkistakes that are not corrected or have been co-written by 3 or 4 people.



(yes, it was deliberate ;) )

tjh290633
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Re: Time to get cautious?

#450143

Postby tjh290633 » October 14th, 2021, 3:30 pm

In every market setback in the past, it has been a good idea to sit it out. The 2008 event was an exception in that a lot of shares fell from grace and had to be replaced. It certainly worked in 1974, arguably the worst in living memory.

They do offer opportunities to buy good shares at bargain prices.

TJH

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Re: Time to get cautious?

#450150

Postby absolutezero » October 14th, 2021, 3:58 pm

tjh290633 wrote:In every market setback in the past, it has been a good idea to sit it out. The 2008 event was an exception in that a lot of shares fell from grace and had to be replaced. It certainly worked in 1974, arguably the worst in living memory.

They do offer opportunities to buy good shares at bargain prices.

TJH

I'm currently reading Tim Hale's Smarter Investing.

One of his tenets is that consistently timing the market is near impossible. As the author of the Telegraph piece also says when he uses words to the effect of 'nobody knows' when discussing whether a correction is coming.
There is some evidence to use the 10 month moving average to judge entry and exit points (see Chris Dillow in Investor's Chronicle, not Hale) but having back tested this myself I found that it looks difficult to execute and would get you out of the market for most of the falls and in for most of the rises but dealing costs and some unclear entry/exit points in quick succession made me doubt the validity.

Hale even goes further and does a rigorous analysis of the Dow Jones from 1981-2003 (in version 1 of the book) where he looks at $100 invested in the Dow in January 1981.
Staying invested at all times gave an annual return of 10.4% - a return of $932

By playing at trying to time the market and missing some of the best days he found:
Missing the best 10 days gave you an annual return of 7.7% - a return of $536
Missing the best 20 days gave you an annual return of 5.8% - a return of $353
Missing the best 50 days gave you an annual return of 1.3% - a return of $134

I.e Doing nothing paid off.
I have seen similar studies using different dates and ending with similar results elsewhere, so it seems reproducible.

The best thing to do is to make your regular investments as normal and if the market falls you get things on the cheap and this pulls down your average buying price.

Timing the market is a fool's game.

mc2fool
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Re: Time to get cautious?

#450180

Postby mc2fool » October 14th, 2021, 6:00 pm

"We are going to examine one of the most common but misleading statistics put forth by the supporters of the “Buy and Hold” approach ... namely the “Missing the Best 10 days” argument." :D

https://www.rounthwaitewealthmanagement.com/sites/default/files/users/davidrounthwaitenew/SIACharts-Missingthe10BestDaysMyth.pdf

And while missing the best X days definitely has a negative effect, staying in is nowhere near as beneficial as if you could miss the worst X days.

Image
S&P 500 price return, growth of USD 100 invested in December 1927
https://www.ubs.com/global/en/wealth-management/chief-investment-office/market-insights/house-view/daily/2020/worst-days.html


Now, where's that crystal ball ... ;)

monabri
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Re: Time to get cautious?

#450184

Postby monabri » October 14th, 2021, 7:12 pm

mc2fool wrote:Simply hit the big X button (stop-loading) on the toolbar of your browser while the page is loading. If you hit it too late you'll still get the paywall popup and if you hit it too soon you'll lose the end of the article, but if either happens just hit the circular arrow button (reload) it turned into and try again.


Sounds like a game of dexterity. I pay for the DT but sometimes wonder why....probably because it is a lot cheaper than The Times...you gets what you pay for!


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