Out of the market after 35 years

[terminal7]

In retirement living off OAP, various draw downs from SIPPs/ISAs etc. Over the last 2/3 years have rebalanced my pension pots (had my own company - hence basically self-employed with no company pension) from 90%/10% to 40%/60% re shares/non-share based bonds. I took advantage of the uptick this am to sell all my shares. Yes I took a nasty hit last week but over the long-term the pension pot has done well. Now after 35 years owning shares - I am no longer a shareholder. Will probably re-invest in more non-share based income bonds in order to generate further income streams to substitute for loss of dividends.

Did I panic? Suppose I did - but my time horizons are limited and no longer looking for long-term capital growth.

Will sleep hopefully a bit better tonight - no longer worrying too much what is happening in Far East markets overnight.

T7

[londonwayfarer]

best of luck!!

35 years, wow that's a long time.

If you had to give 3 pieces of advice to ppl like me who are just about getting started in the market, what would it be?

[tjh290633]

Did I panic? Suppose I did - but my time horizons are limited and no longer looking for long-term capital growth.

You are not looking for income growth either, then. Just hope inflation doesn't take off.

TJH

[terminal7]

If you had to give 3 pieces of advice

There are many more able investors on this site than me!

The 35 years has been littered with some huge successes and a number of awful dogs. One thing I can say with conviction - never get sentimental about a share. Too many times, I have held on for a rebound - even averaged out on a falling SP - or not taken juicy profits. Bag profits and take losses (always can put in a stop/loss - so you don't waver). Of course there will be times you get it wrong - but my personal experience is that this a lower risk approach given you cannot fully monitor the markets continually as a private investor.

Never follow tipsters - DYOR. If you know a sector well - use the knowledge. I was in international consultancy and it was evident some 15 years ago that some UK owned international consultants were going to be subject to take-overs. Personal knowledge and research showed the more likely candidates.

Overall you need to be prepared to spend the time and effort. If not, you end up effectively gambling or paying someone else to advise you. My experience of the latter is limited though my unsubstantiated view is that small investors are exploited for the churn. As regards the former, I can give you a tip for the Gold Cup at Cheltenham next week.

T7

[terminal7]

You are not looking for income growth either, then. Just hope inflation doesn't take off.

Partially you are correct - but I do have an OH bringing in income as well as extensive holdings in corporate and government bonds as well as property.

T7

[fca2019]

Congrats on achieving your goals! I'm hoping to get to live to that point later in life.

[Dod101]

Did I panic? Suppose I did - but my time horizons are limited and no longer looking for long-term capital growth.

Will sleep hopefully a bit better tonight - no longer worrying too much what is happening in Far East markets overnight.

After 35 years in the market, one might have thought that the OP would have learned not to panic. That would be another piece of advice for londonwayfarer. Do not panic.

Dod

[Bagger46]

Did I panic? Suppose I did - but my time horizons are limited and no longer looking for long-term capital growth.

Will sleep hopefully a bit better tonight - no longer worrying too much what is happening in Far East markets overnight.

After 35 years in the market, one might have thought that the OP would have learned not to panic. That would be another piece of advice for londonwayfarer. Do not panic.

Dod

My thoughts exactly. I must say that the OPs post took me by surprise. One can understand newish investors, who might not have gone through market crises, to panic and sell all, but not a relative veteran at investing. After 35 years one should not lose any sleep at all around market girations. I personally like set backs, better time to invest. I have been busy deploying available ammo, and reorganising portfolios a little, as opportunities are there.

In the long term staying in the markets would I feel sure would have produced better results for a more prosperous retirement, or if not required for that purpose, better for the next generations.

Bagger

[dealtn]

You are not looking for income growth either, then. Just hope inflation doesn't take off.

Partially you are correct - but I do have an OH bringing in income as well as extensive holdings in corporate and government bonds as well as property.

T7

So reducing the markets that have potential to sell off from 3 to 2 will help you sleep better at night?

Good luck in avoiding a credit crunch, an increase in interest rates, or a sell off in property if those are the areas you are now invested in. It's all well and good "no longer looking for long-term capital growth" but equities provide diversification across asset class as well as providing such growth. Do any of your bonds mature at par, or 100, and where is their current price?

[terminal7]

Thanks for the interesting comments.

Please note that I am 74 and have indeed largely held tight through previous major downturns - particularly 1987 and 2008. As you know - markets up to the recent downturn have been at historical highs and hence my pension pots have also in general been near their highs. I agree that if you have mid/long term investment goals you should act differently to someone who has a short term time perspective. I am not suggesting that anyone should follow my example - certainly not investors in the early stages of building pension pots etc. However, if you have shares that have significant downside potential as opposed to limited upside - sell and come back another day.

Credit crunches and property markets are largely irrelevant and indeed interest hikes would be welcome for obvious reasons.

Actually, I usually sleep well at night - but 2008 and Northern Rock did provide the occasional sleepless night. As for now, my personal view is that I prefer to have little to zero exposure to the LSE.

Regards T7

[dealtn]

Thanks for the interesting comments.

Credit crunches and property markets are largely irrelevant and indeed interest hikes would be welcome for obvious reasons.

Not obvious to me sorry so you will have to explain. I am just going off your "but I do have ... extensive holdings in corporate and government bonds as well as property" comment. None of which would be good investments under a scenario of unexpected hikes in interest rates for, ahem, obvious reasons.

[terminal7]

The amount of data upon which Fools make judgements of others is very limited on a forum such as this. Pedantic statements can give the appearance of a degree of wisdom. Comments made 'tongue in cheek' are taken humourlessly.

Given my personal circumstances, I was stating that I felt that being 'out of the market' was best for me. This was momentous for me as I have been investing in shares for over 35 years. This week - like last week - has been very testing for many investors. Some SP declines will I suggest take a considerable time to recover from. Some companies may never recover in the foreseeable future - indeed may collapse.

At a time of crisis - you take your decisions based on personal circumstances or through inertia.

T7

[0x3F]

Hi Terminal7,

I think you've received some quite condescending replies to your post, which show little regard to your circumstances.

In the long term staying in the markets would I feel sure would have produced better results for a more prosperous retirement, or if not required for that purpose, better for the next generations. Bagger

Can't believe this got 3 recs. It's not clear to me what you're trying to say here, "would I feel sure would have produced "? The OP has been invested in the markets over the long term, for 35 years. The OP has now retired, and is possibly quite well off. You're saying he should keep his money in for later?

I actually do agree that going to 0% stocks isn't ideal, as leave the pot vulnerable to inflation. The last 40 or so years have been a very good to be invested in stocks, but that doesn't mean the next 40 will. There have been decades with no/-ve returns, and if you're 74 reducing exposure seems sensible - though possibly not to 0.

All the best,

-0x3F

[Steveam]

Although I don’t plan to do anything I do respect the OP’s decision. I’ve known for a long time that I’ve “won the game” but instead of becoming super conservative with my investments I’ve let things ride and enjoyed great but unnecessary success. A 30% drop will be annoying but a 70% drop will seriously hurt. I didn’t need to take any risk at all (although inflation is a risk not to be ignored).

I don’t have a particularly long time horizon (age and health), I don’t have dependants, why have I been taking risks?

Best wishes,

Steve

[johnhemming]

There is nothing wrong with saying that you are happy with your current position and would prefer in the circumstances to stick with that than to risk the market. Back in the 2008 period there was always a risk that cash would disappear as a result of bank insolvencies. I don't think we have that at the moment other than theoretically.

However, people can make their own decisions and I don't think anyone should be criticised for any decision that they make. (even if in retrospect it turns out to be wrong).

[scrumpyjack]

If you have indexed pensions and indexed linked gilts, then fine, but I certainly wouldn’t sleep at night if I did not have a secure indexed pension and had my investments all in cash or bonds. I saw what that did to my grandparents generation. Those who took that route were wiped out by inflation. That is a massive long term risk still IMO and you could live another 20 - 25 years.

I’ve been in equities for 65 years (from age 6 – thanks Dad). It has been quite a rollercoaster but cash would have been catastrophic!

[tjh290633]

I started investing in 1958, in a small way, admittedly. I continued investing through the various market setbacks, in 1974, 1987, 2000 and 2008, and intend to continue through this one. Staying fully invested has turned out to be a good policy, although 2008 did call for some portfolio realignment in the aftermath to restore the level of income to the status quo ante.

I see no logic in giving up a good income flow for fear of what might happen.

TJH

[BT63]

I started investing in 1958, in a small way, admittedly. I continued investing through the various market setbacks, in 1974, 1987, 2000 and 2008, and intend to continue through this one.

I don't think the current 'crisis' is as bad as 1974 or 2008.
Maybe on a par with 1987 or 2000.

FTSE wasn't significantly overvalued nor overextended before this correction/bear began, whether measured in terms of price action, historical P/E, historical dividend yields or relative to other yields such as bonds.

Yes, FTSE could go lower and probably will, probably another drop tomorrow after all the bad virus news this weekend.
However, on average, FTSE constituents aren't overpriced whichever way you measure them and if FTSE goes lower it will become undervalued or even significantly undervalued.
Those who are brave enough to gradually accumulate over the next several months or so of volatility might be glad they did in several years time.

[0x3F]

I see no logic in giving up a good income flow for fear of what might happen.

Under the current circumstances, reviewing ones investment allocation seems logical to me.

We've got:

- Countries in lock down and with potential pandemic. People not going out, not spending.
- Global Supply chain disruption, working its way through the system.
- Stocks just off all time highs following longest expansion in history.
- Bond yields crashing to multi decade lows, signalling deflationary event
- Gold price rising and commodities falling.

I'm not sure how this will play out, if things quickly return to normal or a prolonged event. I suspect the latter. Maybe stocks won't fall, and there'll be huge stimulus driving them higher. I don't know. My point though, is that in the context of the above, I do think reviewing allocations and making adjustments seems entirely sensible.

I'm pleased you've down well over the years by staying fully invested. It is possible to achieve comparable returns to 100% equity with less volatility by not being fully invested eg 60/40, Harry Browne, etc

-0x3F

[johnhemming]

Research does come a bit harder because more details need to be looked at. For example if the Saudis push oil prices below USD30 then companies that hedge may be more effectively protected than those that don't. The hedging portfolios tend to be reported so you can work out the likely result, but it is more work than normally has to be done.