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Market Correction
philip gosling
Posted: 25 May 2018 08:52:03(UTC)

Joined: 06/01/2013(UTC)
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King Lodos;62865 wrote:
You get it regularly on every trading and investing forum ..

A wide-eyed user shows up saying they've sold everything because they think the market's going to fall (about every 3 years the media starts running "Sell everything" stories .. so that may be a factor).

And sometimes the market does correct a bit – usually it doesn't – and they come back vindicated, waiting to impress everyone with their next big 'market call'.

I don't recall anyone online being right twice in a row – so the next time they proclaim they're getting out, and it goes up and up instead, they tend to disappear .. Getting back into the market from there presents a real problem – I imagine they probably give up on investing; but maybe they just jump to the next gambling opportunity: Bitcoin? P2P bridging loans?


The problem is people have a preconception of what investing's about, and no amount of recommended reading or thinking about the problem seems to sway them .. I've got otherwise-intelligent friends I recommend Fundsmith or Lifestrategy 100 to – who'd have done great just sticking the money in there and ignoring it – but 2 months later it turns out they sold because "The market was too high", or something, and they're back to messing around with whatever latest investing fad they read about online .. And these people never become wealthy – they can tell you everything about binary options trading and gold futures, but they're always broke


Manek Growth Fund
Even a stopped watch or clock is at the correct time once or twice a day. But its not sensible wear one all the time. Those who have invested for a long time may remember Mr Manek who won a shares/investment competition and I think £100,000 two years in a row with fantastic notional returns. He left his job as a pharmacist and started the Manek Growth Fund which took in £200+ million and for a few years, 3 I think did well, and then it all went down hill and investors lost much of their money and returns were negative in rising markets.. Long term holders would have lost 90% and the fund is no more. Manek and many people thought he had special knowledge of how and what to invest in the Stock market a secret methodolgy. Instead he had been lucky - for a while.
1 user thanked philip gosling for this post.
AJW on 25/05/2018(UTC)
Mr Helpful
Posted: 25 May 2018 09:19:30(UTC)

Joined: 04/11/2016(UTC)
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King Lodos;62877 wrote:
Mr Helpful;62876 wrote:
Valuations do not mean revert overnight, so this is not about clever guesses re immediate market direction, or taking polarised positions; remembering JMK's observation "The Market Can Remain Irrational Longer Than You Can Remain Solvent".

And you know I've got slightly different views on this ..
A lot of praised value investors got out the market in the 90s or 00s, and still haven't got back in (e.g. Hussman) – and that's as bad as losing money.
(imo) Valuations don't mean revert (with the exception of irrational exuberance – which we haven't come close to in this bull market) .. It's the underlying economy that tends to mean revert – inflation -> rates -> etc. And that in turn would tend to lead to repricing of assets .. But if inflation and rates are in a new range, then valuations (by extension) will have a new long-term average



Quite so.
Would be erroneous to look at valuations in absolute terms and expect full mean reversion.
As discussed previously valuations median anchors drag this way and that from decade to decade.
Moving averages can help a little to see where anchor moved.

But what cannot be ignored is that price matters re future returns with Stocks as in other things in life.
So with due respect to dedicated always opportunistic momentum investors; some study of valuation charts may suggest a little prudence when prudence might be due.
I may well be wrong, but no outright alarm bells ringing today, the message is more nuanced.
Perhaps some caution for the value aware investor?

"There may be trouble ahead
But while there's music and moonlight and love and romance
Let's face the music and dance"
Diana Krall

Or as someone, but can't remember who, said, "let's dance near the fire exit".
4 users thanked Mr Helpful for this post.
dyfed on 25/05/2018(UTC), Jim S on 25/05/2018(UTC), Freefall Junkie on 25/05/2018(UTC), chazza on 26/05/2018(UTC)
tony m
Posted: 25 May 2018 13:40:56(UTC)

Joined: 20/12/2011(UTC)
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Well King Lodos etc I'll leave you all to your self congratulatory clique as you obviously can only cope with an alternate view by mockery and enforced superiority. Good luck communicating with each other, you obviously feel much happier with no challenge
King Lodos
Posted: 25 May 2018 14:56:08(UTC)

Joined: 05/01/2016(UTC)
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tony m;62914 wrote:
Well King Lodos etc I'll leave you all to your self congratulatory clique as you obviously can only cope with an alternate view by mockery and enforced superiority. Good luck communicating with each other, you obviously feel much happier with no challenge


The challenge is becoming wealthy .. If you want a real challenge, try beating the market.

People coming along saying they've sold everything are a dime a dozen – in trading we might call it getting 'shaken out' .. You've basically lost your nerve – the fear's taken over .. It's why investing's difficult.

The solution, however, isn't to become psychic – it's to become more rational, more evidence-based, to read more, generally to do less .. This is what stocks do, long-term – notice how much of the time they're actually making new highs .. Very few investors have the nerve to just sit and hold stocks – very few increase their wealth 100x:

http://3.bp.blogspot.com/_kRV8NvpbYc4/SbzB0msu1vI/AAAAAAAAAMU/TLkh2cBE5d8/s400/Graph+of+why+to+buy+stocks.jpg
4 users thanked King Lodos for this post.
Tyrion Lannister on 25/05/2018(UTC), Freefall Junkie on 25/05/2018(UTC), Balvenie on 25/05/2018(UTC), chazza on 26/05/2018(UTC)
Mr Helpful
Posted: 26 May 2018 09:26:09(UTC)

Joined: 04/11/2016(UTC)
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tony m;62914 wrote:
Well King Lodos etc I'll leave you all to your self congratulatory clique as you obviously can only cope with an alternate view by mockery and enforced superiority. Good luck communicating with each other, you obviously feel much happier with no challenge

Posters here have varying investment methods.
For some posters with determined views, this variety can become a problem and patience may sometimes run thin.
But one or two posters do not a consensus make.
Find your posts challenging and interesting, so please continue to contribute.
Where would we be without fresh thinking?
Dian
Posted: 26 May 2018 11:18:14(UTC)

Joined: 09/10/2016(UTC)
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In some sectors like consumer and healthcare picking the right stock is key. Investors are more likely to find bargains in areas of the market that are less covered by analysts. Less research means these stocks could get overlooked, and undercrowded. It seems time to avoid hot and crowded stocks. There could be attractive opportunities in sectors or geographies that are a bit out of favour. Companies with strong balance sheets and limited competition are also could do well. They will have profitable businesses even when conditions are challenging. Strong balance sheets firms will stand out from the rest. In addition to income from the core business they will have secondary income as well.
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