Ethical/ESG funds due a “ correction “

[whataboutbob]

Just read this in the financial pages of a major newspaper. People have been pilling in and funds are overvalued, it could be the next .com bubble. Makes some sense, what do others think?

Where did you read that?

@whataboutbob

I've read the whole market is due a "sharp correction" which I do think might happen as it's very high and doesn't seem to have factored in all issues coming down the line. Inflation, interest rates rising, squeezed consumer spending, energy and commodity price rises, labour shortages, supply chain problems..

if you plan to invest for the long term, then a major correction will happen, probably more than once in your investing lifetime. The key is to ride it out, don't panic when things drop, have your money invested in a wide range of things, to reduce risk and try not to regularly check what your investments are worth, as that can become self-perpetuating, and you then feel you have to do something.

Key is 'time in the market', not 'timing the market'.

@Amboseli it was in Le Figaro. A French broadsheet kind of equivalent to the Telegraph. I’m just wondering if many of the investors are like me: female, emotionally choosing ESG because it feels nice but possibly the fundamentals underpinning them aren’t that sound financially. But I am very unsophisticated so I hope to be wrong on this. Furthermore in the long run it will no doubt recover, as Resident says.

@whataboutbob I haven't necessarily been looking out for ESG and I did read recently, as you said, the fundamentals are not always what you'd invest in if it wasn't ESG.

I'm a slightly different situation in that I have very little actually invested at the moment but have been gifted a lump sum recently and have been researching where to invest it.

When I look at the huge gains made recently which seem to have been part vaccine rollout optimism and part lots of money sloshing round due to government economic support for the economy, I think from such steep curves the only way is down.

I'm not sure if the problems coming down the line have been factored in to current valuations, or the full impact isn't yet appreciated and a sharp correction will in fact occur. That's the BofE opinion although they're often wrong.

If I was already invested I'd just ride it out. But I'm not and I'm wondering whether to wait for a while or just carry on as I had planned to invest.

It's also hard to choose funds as some of the best performing funds have made a huge proportion of their cumulative gains during the past year. But will they perform as well during the very different economy landscape we are entering. And should I then be looking at different funds altogether, ones that are invested in areas that do better in bear rather than bull markets.

I can see even after writing all of the above that I'm probably overthinking it all and should just go ahead investing monthly. I will choose a couple of different funds than originally planned and go for more defensive rather than pure equity growth funds.

Gosh that was an essay!

I agree @Amboseli. Over 25 years ago I invested some money I inherited in an ethical fund. It has done better than any other fund I’ve held ( about 5 in total). Of course I’m sure in 2008 it went down, I didn’t even bother looking at the time probably because I had young kids. Now I have the space to do some housekeeping I’ve got rid of a few “ dogs” and just bought a Vanguard 60% fund plus an ESG for my kids, which I’m holding for the medium to long term. It will no doubt have some bear years but I plan to ignore them. I remember my late dad completely losing his rag during the 1987 crash and yelling down the phone to his share provider. It’s not a pattern of behaviour I want to emulate!