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Market Correction
tony m
Posted: 31 January 2018 09:42:15(UTC)
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Is it time to cash out and wait for the market 'correction' as bond yields rise?
Catch The Pigeon
Posted: 31 January 2018 10:04:42(UTC)
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No. Trying to time the market is a fools game. Always stay invested and ride out any storms along the way.
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PaulSh
Posted: 31 January 2018 10:37:38(UTC)
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The question is largely moot for income investors anyway as you need to stay invested to get the income. From time to time I might set a stop loss on an individual stock that I'm particularly worried about, but cashing out entirely is not an option.
tony m
Posted: 31 January 2018 11:24:01(UTC)
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What about if you're investing for capital and don't need income for some time?
Catch The Pigeon
Posted: 31 January 2018 11:26:07(UTC)
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tony m;56215 wrote:
What about if you're investing for capital and don't need income for some time?


Still stay invested.

If you can't handle any volatility, then investing isn't for you.
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Big boy
Posted: 31 January 2018 11:56:10(UTC)
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PaulSc........be careful as could lose more capital than get in income. I prefer to wait in cash for buying op.(protect the gains made). When the bear markets comes it will last longer and stronger than we all think.

I went 100% into market(even raided current a/c) when FTSE100 was 6000 but last week I encashed a chunk of investments. Bt PBs/ cash in easy access A/Cs and am looking at Zeros.

Just gone into Oakley again as new NAV announced to-day......discount over 30%
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Keith Cobby
Posted: 31 January 2018 12:08:06(UTC)
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The important thing is to know what type of investor (or trader you are).Nobody knows when corrections happen (they have been forecast every year) or how deep they will be, nor when the upswing will start. I agree with Catch the Pigeon.
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Jim S
Posted: 31 January 2018 13:41:19(UTC)
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I'm with Keith & Catch the pigeon on this one. I'm rubbish at timing buying and selling, I suspect most people are.

You are investing for the long term, so stay invested. What you can do is try and tailor your investments so you spread your risk. Investing in well-managed quality equity funds (along with some diversifiers) should limit your downside in practice if you aim to hold long term.

Sometimes it must be 'the right time' to sell, because a downward correction is around the corner. But we don't know when that will be, its just opinion, even people who are correct about timing today will probably get it wrong next time.

A better approach is to move a bit more defensive when warning signs show valuations are high compared to their historic average. There are some funds which do this.
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Mr Helpful
Posted: 31 January 2018 14:19:56(UTC)
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tony m;56205 wrote:
Is it time to cash out and wait for the market 'correction' as bond yields rise?


Under normal circumstances Stocks and Bonds are negatively correlated. Bonds will zag as Stocks zig.
But these are not normal times.
All Asset Classes are today quite fully priced, by the deliberate capital sating of markets by Central Banks QE, which succesfully turned us back from a repeat of the 1930s.

Suggestions :-

Bonds (part of Defensives) : keep to short-duration which will be less affected by rising interest rates

Stocks (the Risk-Side) : Make sure the allocation is such that able to sleep nights and ride out any 50% drawdown, and add with glee. If not comfortable then dial back on the Risk-Side until comfort prevails and the pillow welcomes.

Note : A 50% drawdown is an ever present possibility with Stocks; but how the present market will in fact develop is well above this investor's pay-grade. Full pricing does not always mean a reversal is imminent.
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Micawber
Posted: 31 January 2018 14:23:35(UTC)
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During the past four months we've been taking some profits and cutting out some stocks that haven't performed. So we're about 15% cash in the pfs at present. I tend to go by whether or not I see serious opportunities at any time. They have been very sparse of late, but a correction would throw up some more. I have felt that a correction after the New Year is quite likely, of maybe 5-10%, but not likely or large enough to warrant any wholesale disinvestment. I don't see a real crash or a recession in the short term (famous last words...)

I'm thinking globally, mind, not the UK where I take a very short term tactical view in view of the Brexit and Corbyn risks.
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Big boy
Posted: 31 January 2018 14:27:13(UTC)
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Jim S ......I find that investor behaviour is the best way to Manage money. Interestingly if the market fell 20% a number of investors would turn sellers.....

Investors behaviour has been interesting if you follow WPC. Investors all bought the story.....make loads of money long term etc. and as some could not get in at the issue they started paying a big premium which reached 15%.
Not only did they buy the stock but Mr and Mrs Cherrypicker (they know best) also pushed up the underlying stocks.

Since issue the story has not changed but the the shares now trade below issue and on a discount of 10%.

By understanding human nature you will make more money than looking at loads of data etc.
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Keith Cobby
Posted: 31 January 2018 16:09:11(UTC)
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A 50% correction would double the FTSE100 yield to about 8%. Not likely with bank and gilt yields on the floor.
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P Everton on 01/02/2018(UTC)
Big boy
Posted: 31 January 2018 17:18:14(UTC)
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Keith Cobby;56241 wrote:
A 50% correction would double the FTSE100 yield to about 8%. Not likely with bank and gilt yields on the floor.



Sadly past experience shows that it does not work out like that. Normally Corporate Bonds default, companies cut or don't pay dividends and a few Companies go bust. Most Companies have gearing which in a rising market is great but can bring a very quick decline in share prices when it all turns down. Just check out what has been happening during last few weeks and to-day.
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Alan Selwood
Posted: 31 January 2018 18:08:18(UTC)
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Since most things were pushed up in price by the weight of money from QE, it seems natural to assume that if there is a reversal, most things will go down. There is little scope at present for benefiting from 'negative correlation'.

Therefore, if you are uneasy (rightly or wrongly), consider either going more into cash by pruning, especially those holdings that look expensive and have not been motoring upwards with the market generally, or by switching emphasis from the 'go-go holdings that have a glorious future ahead of them' to more staid ones that have survivor characteristics. Smaller markets tend to be more volatile, and removal of investor funds can lead to big falls - so think about your ability to weather large changes in value caused more by liquidity issues than underlying merit.
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King Lodos
Posted: 31 January 2018 18:14:39(UTC)
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tony m;56205 wrote:
Is it time to cash out and wait for the market 'correction' as bond yields rise?


No.

Getting shaken out of the market, because it's risen too much, or because of x, y or z looming concern, means you'll never profit properly when stocks go up.

It's what most people do: they sell too soon (on weird hunches) and hold on too long when markets go down (trying to avoid making losses real) .. Both behaviours are equally bad, and they're why most people do so poorly in stocks.


Some very famous fund managers sat on the sidelines waiting for a correction in the 90s, because stocks had risen so much in the 80s .. The correction never came, and they retired having done nothing and made no money for a decade.

You should hold an amount in safe assets (at very least 10%), that lets you take some profits from the market, and gives you dry powder for when stocks do fall .. Any attempt at timing works out horribly for most people .. Most smart money in the market is designed to take advantage of human psychology, so traders very much get away from hunches and emotions controlling decisions – instead using things like technical analysis and macroeconomic indicators
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Big boy
Posted: 31 January 2018 19:31:09(UTC)
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KL. I have found that nearly everyone uses a "text book" method and they tend to arrive at the same point but at different times. If you can measure this with Investment Trust discounts you can get amazing timing and results.

Most investors try and add value by using brain power but most likely they would have better odds with a pin.


I give 3 examples.....

In most bear markets I have been involved in Uk Smaller cos as they tend to call the bottom as the entrepreneurs see that the sector has been oversold. When running a Global Fund I went heavy into sector on discounts of 25% and HSL called the bottom of the market at 90p The FMs started looking for new ideas and begun to buy small tech stocks which started to boom...... NAVs shoot up and discounts narrowed......I gradually sold as they got close to the NAVs.

When the Finacial Crisis happened in the Far East discounts slumped to 25% and my Global Fund had a massive 19% exposure......as NAVs recovered and discounts narrowed the stocks rose nicely.


I keep any eye on the average discounts for Investment Trusts which had been steady for some time. Around about the BREXIT vote investors lost confidence and discount slumped (many billion) This was a great buying sign and I put 100%(no cash apart from current a/c) into market when FTSE 100 was 6000. I had know idea we were about to see a boom. Most Investors are happier to retain stock now than they were when the index was 6000.


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The Colonel
Posted: 04 February 2018 11:56:43(UTC)
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Personally I am reserving 25% in Cash to be ready, for if & when, the sky falls in. Being an 80 Year old Contrarian I am able to take some Risk as fortunately I do not have to rely on Dividends to pay the bills. Consequently I buy bullet proof Equities looking at companies with small payrolls in comparison to their Turnover . I avoid anything to do with Retail huge
numbers of employees and lots of Red tape to comply with. At the present time i am heavy into Burford Capital and a couple of other Insurance claim Funders.
For a bit of every day fun I take small limited positions in small Oil Explorers and Producers relying for advice on "Malcys Blog" I have had a number of spectacular outcomes by following Malcy.
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Micawber
Posted: 06 February 2018 08:51:18(UTC)
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Micawber;56234 wrote:
During the past four months we've been taking some profits and cutting out some stocks that haven't performed. So we're about 15% cash in the pfs at present. I tend to go by whether or not I see serious opportunities at any time. They have been very sparse of late, but a correction would throw up some more. I have felt that a correction after the New Year is quite likely, of maybe 5-10%, but not likely or large enough to warrant any wholesale disinvestment. I don't see a real crash or a recession in the short term (famous last words...)

I'm thinking globally, mind, not the UK where I take a very short term tactical view in view of the Brexit and Corbyn risks.


Around 7% correction as of now. Key indicator for me is ten year Treasury yields, which are retrenching a bit after rising sharply. By crude rule of thumb, if they get to 3% there would be a probability (other things being equal - which they never are) of a 16% correction in equities since the turn of the year, focused in higher yielding equities and those with high debt/weak balance sheets. Less of a correction down to 10y Treasuries regaining the lower 2.5%.

Less indebted growing companies and investment vehicles oriented towards them should quickly get back on an even keel, I think.

Bargain nostrils are beginning to twitch.....
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Big boy
Posted: 06 February 2018 09:49:15(UTC)
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Dear Macawber...... Most bear markets last longer and are harsher than we expect especially after longer bull markets..... Stats and data don't stop a bear market which will be driven by fear and human nature. Interesting to see one or two investors cutting WPC.....a former wonder stock which I will be a big buyer of on 25/30% discount. Some ITs with PE will need to write down their NAVs which are overvalued. SMT heads the list of fallers in FTSE100 ..........still time to get out and wait till the average IT discounts plummet.

I love a bargain but I have glued up my BUY button.........think I should book a long holiday....
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Hank Elvis Dobbs (texan)
Posted: 06 February 2018 09:53:38(UTC)
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..So in your opinion 'Biggers' ...we're in a bear market ?
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