Scared about holding stocks long term

[Dod101]

You mean now? Why do you think that? Buying a tracker right now makes little sense unless this is the only option. I guess one could start to cost average into a tracker but not the best option out there right now IMHO.

Attempting to identify attractive individual shares makes little sense now because nearly all shares are so volatile that it is almost impossible to identify any that are attractive in the sense that they will outrun the general market say over the next couple of years. Thus if you are intent on investing in the stock market at this moment I think a tracker is probably the only way to go so that you will follow the market in general upwards. I do think that the FTSE will probably be higher in a couple of years than it is now but the best shares?

What do you suggest. For my part I am quite fully invested and will just stay that way for now.

Dod

[Bubblesofearth]

Hi,

I'm looking to build my portfolio, mainly in my ISA account, by investing into some UK stocks over time. I've previously held ETFs and index funds but I'm looking to build some positions in companies that I will hold long term (years possibly till retirement). However, I've looked at some decent companies that just exhibit scary price action.

£2500 in each of 20 different individual companies listed on the LSE, picked from different economic sectors, and in the FTSE350.

The other £50k in a Global tracker. Vanguard do a couple that have very low charges.

Then leave alone until retirement and possibly beyond.

BoE

[TUK020]

to invest in one or more respectable IT's (not a fan of ETF's)

Be interested to hear your reasoning as to why ITs ahead of ETFs.

No hard science I am afraid , every time I have been tempted I remind myself that I don't want to own everything. With a human in charge I can tell myself they are avoiding the tat.
There is also behaviour in a downturn. Maybe another sharp leg down will convince me that ETF's cope just fine.
I have been tempted again recently in setting up a SIPP for my wife. Is it fair to foist an ETF experiment on her do you think ?

In the spirit of diversification, I think she should explore ETFs!

I usually avoid ETFs on the basis that the ones that are traded on FTSE are unblanaced (e/g FTSE 100 is heavily skewed towards certain sectors).
I do have a holding in the L&G Global 100 which does seem to cast a wider net

[vagrantbrain]

I'm a very experienced investor with a high proportion of assets in individual medium/high-yield shareholdings (e.g. GSK, AZN and NG. which are my largest three by market value) but I'm not brave/foolish/smart enough to be trying to pick individual shares to add to my portfolio in the current chaos.

However I think overall the FTSE offers good value for money so I'm buying heavily into tracker funds several times each month.

I think that now is probably one of the few times that buying the market via a tracker is probably a good idea.

Dod

You mean now? Why do you think that? Buying a tracker right now makes little sense unless this is the only option. I guess one could start to cost average into a tracker but not the best option out there right now IMHO.

Well you're guaranteed to get the market return and it doesn't require taking a position on who's going to do well/badly out of the ongoing economic disruption - only that capitalism is going to continue and that stocks will increase in value over time.

I'm curious why you think it makes little sense

[tjh290633]

DS SMITH PLC
LSE:SMDS
pasteboard.co/J2xbIFW.png

This is a paper manufacturer. They seem to have been going very well then in 2018 - a crash. They went from 1700-something to 1200-something. I've looked at statements the company has made. Nothing easy to spot that can justify the crash. If anything they were flinging cash to buy other companies.

To call SMDS a Paper Manufacturer is miss some of the point. They specialise in Board for packaging and also recycle paper for their own use.

The growth of on-line purchasing is considered to be a point in their favour.

TJH

[ursaminortaur]

I have no comment upon the individual stocks mentioned - best addressed on another board such as company analysis.

As to whether this is a good time to invest in equities at the moment - that is a different matter. It is interesting that the FOOTSIE is at a level of some 4 years ago. Given the economic and financial policies of the UK Govt (and others) do you really believe (intuition if you have minimal macro skills or read what others say and take a view) that the UK economy is going to rebound soonest?

In effect, do you forecast that the UK economy (or on a wider basis) will expand from here in the short term? Do you think that the UK economy will expand in the long term (whatever that means in terms of years)? If the answer is yes to both - start investing soonest on a selective basis taking account of current downside risks and the absence of potential dividends. If the answer is No and Yes - wait and park your cash and try to squeeze out some return and wait until you can answer yes.

A large number of the FTSE 100 companies are operating worldwide rather than really being UK focussed companies hence will do well if the world economy improves even if the UK economy continues to suffer because of more UK specific concerns (eg Brexit).

[sss555sss]

You mean now? Why do you think that? Buying a tracker right now makes little sense unless this is the only option. I guess one could start to cost average into a tracker but not the best option out there right now IMHO.

Attempting to identify attractive individual shares makes little sense now because nearly all shares are so volatile that it is almost impossible to identify any that are attractive in the sense that they will outrun the general market say over the next couple of years. Thus if you are intent on investing in the stock market at this moment I think a tracker is probably the only way to go so that you will follow the market in general upwards. I do think that the FTSE will probably be higher in a couple of years than it is now but the best shares?

What do you suggest. For my part I am quite fully invested and will just stay that way for now.

Dod

Depends what you use to identify individual shares. I agree, if you are a trend follower (and most investors including myself are) then you need to wait for a trend. The trick here is to identify investments which aren't pure gambling and without waiting for this trend because by the time it forms, you've already lost 20% in a fairly short period of time.

The problem with index funds and ETFs at the moment is that you are buying the market. The market involves restaurants, cruise ship companies, cinemas and all listed airlines and I don't think you want to hold such companies now. This is why I'm against funds and ETFs.

[sss555sss]

It's hard to tell what I would have done if I were to hold these stocks when they tanked in 2018. I probably would have held on to it. When the stock plunged from 1700-something to 1200-something, it's hard to tell though if it would go back up or would be of the likes of Metro Bank which is down something like 98% from it's highs.

You should hold investments until the investment thesis no longer stacks up; everything else is noise to be ignored.

For example, if your investment thesis included measures of price action as an input then a trend break or similar technical signal might well have triggered a sale of those two examples you cite, at some point in the decline.

But many investment theses don't include those things as inputs and will instead be based on fundamental aspects only, often and mainly objective measurable things such as financial ratios and metrics etc, but also subjective qualitative issues. Until the investment thesis failed according to these measures, you'd keep holding the stock. You wouldn't sell just because it had fallen in price; indeed, the fall in price might have improved the investment thesis (eg. improved earnings/cash flow/dividend yields), so you might actually be looking to buy more on falls, so long as you remained within the max position size for a single holding, or other risk measures.

One of the great appeals of broadly diversified, passive, index-based strategies is that the investment thesis always applies, so you don't have to monitor, assess or do anything at all, other than "keep the faith". This makes for a much easier life in many regards, and much lower costs over the long term, just so long as you have the temperament and discipline to stick with it. And if you don't, you shouldn't be investing in risk assets.

With this type of portfolio, often the only thing to make decisions on is to gauge your risk/volatility tolerance and to decide your overall asset allocation. Ongoing maintenance should just comprise periodic rebalancing back to target weights. For an even easier life, at a little extra cost, you can outsource all of this to an investment manager, by choosing a predominantly passive multi-asset fund, so you have nothing to do at all. With no decisions to make yourself there's less chance of errors (since you are usually the weakest link in the plan), allowing you to collect more of the risk premium over the years. You've just got to "hold fast"!

Thanks. Using technical indicators, it's easy to get into touching your portfolio too many times. Trend breaks are usually very quick and unless managing the portfolio is a full time job, is almost impossible to catch them especially on something like a single stock which could very well tank when everything else in the economy is going well. I like DS Smith and the company is doing and will do well in my opinion. At the same time, it's hard to put say £10,000 in it and leave it because even if it went to £20,000 in 10 years, it could easily be wiped out by some event as shown on the chart.

[Dod101]

Depends what you use to identify individual shares. I agree, if you are a trend follower (and most investors including myself are) then you need to wait for a trend. The trick here is to identify investments which aren't pure gambling and without waiting for this trend because by the time it forms, you've already lost 20% in a fairly short period of time.

The problem with index funds and ETFs at the moment is that you are buying the market. The market involves restaurants, cruise ship companies, cinemas and all listed airlines and I don't think you want to hold such companies now. This is why I'm against funds and ETFs.

I certainly agree with following the momentum which can be very powerful but on the whole I do not follow the crowd very much. Neither would I personally buy passive funds or indices. But the other side of the coin is that at the moment it is almost impossible to identify decent shares or at least share which will do well over the next few years. That is why as I said, that if you are intent on buying into the market at the moment buying an index tracker is just about the only sensible thing. Of course you will pick up some rubbish but that has always been the case and who is to say that restaurants, cruise ships and cinemas will not do well as we move out of this? The survivors in any of these industries will probably do very well.

Dod

[tikunetih]

Using technical indicators, it's easy to get into touching your portfolio too many times. Trend breaks are usually very quick and unless managing the portfolio is a full time job, is almost impossible to catch them especially on something like a single stock which could very well tank when everything else in the economy is going well.

I agree. I ran a strategy that combined fundamental & technical analysis (trend following) for a decade or so; once positions were opened they were managed almost exclusively via price action + other behavioural factors. I did this full-time. It was extremely effective but it was also hugely time consuming, and certainly incompatible with a regular working life/career.

At the same time, it's hard to put say £10,000 in it and leave it because even if it went to £20,000 in 10 years, it could easily be wiped out by some event as shown on the chart.

Effective long term investment normally requires taking a different approach to the one you seem to have in mind, employing portfolio design based around diversification and asset allocation. These allow your portfolio to become more resilient, lower cost and largely hands-off; hands-off is good because it requires less input (less time), delivers an easier ride (psychologically), and because for most investors it'll lead to better outcomes - the well known Pogo line "We have met the enemy and he is us" could well have been written about investors.

It's worth bearing in mind that if you're young (eg. 30), you may be investing for 50+ years, and if you're fortunate you'll likely end up with the majority of your net worth tied up in it. As such, it's worth approaching it as a suitably serious undertaking and giving it plenty of thought. If you've been browsing private investor forums over the past month you'll have read the consequences of what happens when events expose those who didn't take it sufficiently seriously.

If you're numerate as I assume, I'd suggest an early read of William J Bernstein's "Rational Expectations - Asset Allocation for Investing Adults" would serve you well.
https://www.amazon.co.uk/Rational-Expec ... 00KSPCY24/

NB the book isn't as high brow as the publisher's description makes out - don't be out off; and for the UK the USisms need to be translated.

As I said before: if you approach this seriously and form a good plan, you should succeed (it may not always be easy but it should work); but otherwise the chances are it won't work out too well (and/or you'll pay an expensive tuition along the way).

Sounds a bit heavy, I realise, but I think it's true!

[tjh290633]

Some of us are contrarian investors at heart. In my view that is much of the logic behind HYP investing. Pick companies out of favour at the moment which have strong fundamentals. Some are out of favour for good reasons, so avoid them.

TJH

[sss555sss]

Depends what you use to identify individual shares. I agree, if you are a trend follower (and most investors including myself are) then you need to wait for a trend. The trick here is to identify investments which aren't pure gambling and without waiting for this trend because by the time it forms, you've already lost 20% in a fairly short period of time.

The problem with index funds and ETFs at the moment is that you are buying the market. The market involves restaurants, cruise ship companies, cinemas and all listed airlines and I don't think you want to hold such companies now. This is why I'm against funds and ETFs.

I certainly agree with following the momentum which can be very powerful but on the whole I do not follow the crowd very much. Neither would I personally buy passive funds or indices. But the other side of the coin is that at the moment it is almost impossible to identify decent shares or at least share which will do well over the next few years. That is why as I said, that if you are intent on buying into the market at the moment buying an index tracker is just about the only sensible thing. Of course you will pick up some rubbish but that has always been the case and who is to say that restaurants, cruise ships and cinemas will not do well as we move out of this? The survivors in any of these industries will probably do very well.

Dod

Yes, long term the market will do well. You cannot go wrong with buying the market unless you use money that you need in the next few years. The market is your benchmark. Investors are all about outperforming the market at least short term (under 5 years).

[JohnW]

The problem with index funds and ETFs at the moment is that you are buying the market. The market involves restaurants, cruise ship companies, cinemas and all listed airlines and I don't think you want to hold such companies now. This is why I'm against funds and ETFs.

Might be worth having a look at this summary of how the best informed fund mangers in the land have performed compared to a related index, during the first quarter this year. Not that well on average after fees, but we don't know how much risk they've taken which might explain their performance. But 'picking decent companies' is clearly not that easy.
https://www.evidenceinvestor.com/how-di ... rket-rout/

[TUK020]

The problem with index funds and ETFs at the moment is that you are buying the market. The market involves restaurants, cruise ship companies, cinemas and all listed airlines and I don't think you want to hold such companies now. This is why I'm against funds and ETFs.

One ETF you might want to consider is the L&G Global 100.
Not many cruise ships or cinemas in that lot

[sss555sss]

The problem with index funds and ETFs at the moment is that you are buying the market. The market involves restaurants, cruise ship companies, cinemas and all listed airlines and I don't think you want to hold such companies now. This is why I'm against funds and ETFs.

Might be worth having a look at this summary of how the best informed fund mangers in the land have performed compared to a related index, during the first quarter this year. Not that well on average after fees, but we don't know how much risk they've taken which might explain their performance. But 'picking decent companies' is clearly not that easy.
https://www.evidenceinvestor.com/how-di ... rket-rout/

Active management is the opposite of investing so it's apples and oranges. Active managers are often not paid for delivering performance but risk and exposure to a particular asset class. Of course, they try to deliver maximum performance given the risk but if you want exposure to the energy markets and you go to an active manager that trades those markets and the oil market tanks which catches the manager by surprise you will get poor returns but you will get the exposure and the risk which is what you're paying for. You can equally pick a list that has outperformed the market albeit a much, much smaller one.

I have to say the article is very poor. What kind of funds are these? The article doesn't say. Are this UCITS or hedge funds? Are we talking about one of the 99999 funds legal and general has or a hedge fund with a pedigree and track record? Are they discretionary or systematic? Don't compare a fund manager to an investor. I wouldn't put my money in an actively traded fund tbh. Most hedge funds are underperforming too. However, keep in mind that you are comparing active managers in equities only and the environment for equities has been pretty crazy over the past 12 years - 0 interest rates and a FED that props up the market. Remove the FED's help to keep the market up, put interest rates to 5% and let's see how things are.