Investments still declining

[Livvyliv18]

Are anyones investments showing signs of recovery yet ?My pension has lost a significant amount in the last 3 months and still seems to be going down.
This happened in first lockdown but then started to do really well so I know it can improve.
Im just starting to panic and unsure if I need to see a financial advisor to look at it.
Im not 55 for another 5 years so maybe I don’t need to panic just yet
Any advice /reassurance greatly appreciated

Yes, we do the same, we dollar cost average our ISA allowance in over the course of the year. I had been wondering about putting in a little extra to buy the dip—seeing as it has indeed been a very high fear index the last two weeks—but now think I will stay with our averaging system for now as (as
she points out) more fear may be yet to come and the bargains to be had may be greater. If it turns out that this is actually the lowest point, then we can still rest easy knowing the averaging system means we’ve still bought low.

I'm open minded to other asset classes but I'm afraid you've lost me, Swifty, on the government letting sterling fail. Completely agree that we're in a macroeconomic hole, given inflation and the level of public debt. But sterling isn't going to become worthless overnight.

I'm an ex investment banker so, yes, I do have trust in our financial system. Crypto is completely different. No issues if you want to put your eggs in that basket, but (I'm also an ACA) I wouldn't advise someone to put their life savings in crypto. A small sum as a punt, maybe.

On the topic of monthly investing/pound cost averaging, I've been doing some research for work this week on how long the FTSE 100 took to rebound after previous crashes. It was about a year for the last two, then four for the dot.com and financial crisis crashes.

I'd say keep investing but the FTSE 100 has been less hit than the Nasdaq so I wonder if further falls are coming for U.K. stocks. Particularly with rising inflation and interest rates, plus negative GDP growth.

One thing I have done is shorted the FTSE. I've bought the L&G FTSE 100 Super Short ETF (SUK2) which goes up by twice the amount that the FTSE falls (and vice versa). It's one way of hedging against further falls.

Everything is on sale. Buy now! Why wait for prices to go up.

@daisymoo2
The risk I see with BTC is that people stop wanting to buy it. It’s got no underlying value unless people keep believing it’s worth something. This is a much much bigger risk with BTC than it is buying property or a small slice of a company as I can estimate the income I can generate from both of those asset classes in the future. Not the case with BTC as it won’t ever generate income.

Personally, I think you have understood this perfectly. Even if we were to 100% accept that BTC will be of fixed supply and that no other cryptocurrency will every be deemed by the marginal buyer to be a good substitute for BTC (the second one seems harder to defend than the first), if people were to get totally bored with BTC then it would have no value because it is not backed by any future income, nor by any substitute value in use.
As you pointed out, part-ownership of a company or of a piece of real estate is backed by cash flows of those owned entities. As for fiat currencies, at least they are in effect backed by the power to tax that governments have.

www.theguardian.com/technology/2022/jul/12/they-couldnt-even-scream-any-more-they-were-just-sobbing-the-amateur-investors-ruined-by-the-crypto-crash

Interesting article on crypto.

I can see why people buy property as an investment now!

I can't.

Fair enough if it's a roof over your head. But wanting to move you will just pay as much or more. Never mind the extra costs re. moving, estate agents, taxes etc.

Never mind the costs of renovating, new boiler, rewiring etc.

Those people broke the number one rule of investing... never invest more than you can afford to lose. I do feel sorry for them, don't get me wrong. I have to remind myself that everything I've invested could be gone tomorrow. Will I be upset? God yes. Will I be financially ruined? No. Tempting as it is to throw more money in during a bull run, I've always reminded myself that it's just a fancy form of gambling.

That's an interesting article @Pruella .. thank's for the link.

The last paragraph spells it out quite nicely...

"Future generations may look back at this boom as a period of mania, when money multiplied like bacteria and a collective delusion gripped financial markets."

Excuse the random apostrophe on thanks!

Why not wait for prices to go down further? If China takes Taiwan, prices will plummet: BBC News - China: MI5 and FBI heads warn of ‘immense’ threat
www.bbc.co.uk/news/world-asia-china-62064506

Because then you are speculating on what might happen

Sadly I think shares will go down further before they recover. The FTSE 100 has held its value better than the Nasdaq so far this year. It's more focused on defensive stocks than tech but I fear they won't hold firm for much longer given inflation and interest rates.

I've gritted my teeth and stayed invested but it's a bit painful. We have an interest only mortgage with ISAs to cover the capital plus SIPPs so it's quite depressing to see the falls.

I'm hoping my commodity funds and shorting the FTSE may hedge it a bit.

No more than assuming they're currently "on sale" and diving into the market with a "buy now!" attitude. Past trends are not indicative of the future, and we're living in unprecedented times. A more sensible mantra than "Buy now!" would be "Drip feed (but only money you can't afford to lose)!"

They are on sale as they have fallen in price. Fact.
Will they fall further? Who knows? No one. Fact.

7% of people have benefited in the past by drip feeding into the market. 93% were better off investing immediately. Fact.

The past is not such a different landscape. It can tell us what is going to happen, but it can show likely reactions of asset type to various situations.

My throw away comment is based on a degree in finance, a career, and reading of research from academics in the field. It really is not as daft as you seem to think.

*can’t tell us what is going to happen

I also have a career in investment banking and I'm a chartered accountant so I know a bit about personal finance. Sorry to be contrary but equity investing is, in my opinion, speculative. There's a spectrum across different types of investments but most have some element of speculation. I don't have an issue with it but others may.

The problem with buying on the dip is working out when the dip is. US tech stocks have certainly plummeted, not so much for the FTSE blue chips. The short term macroeconomic outlook isn't good and I think there's more downside than upside risk at present.

I'm still invested but I would be urging caution for people wondering whether to invest now and I also agree that it's a good time to be drip feeding.

Investment banking is a long way from what retail clients need. In some areas equity investing is speculative, but if you think a MSCI world index tracker or a Vanguard Lifestrategy fund is speculation, then what you’re saying is that the global economy isn’t going to function. If you follow that thought, putting it under the mattress won’t help you.

Getting ‘in’ on the world economy - with money on a medium to long term time horizon - once there has been a fall, is the best time. Will it fall further? Who knows. Is it more likely to rise. Yes, statistically it is. Are predictions likely to be wrong? Well
as 84% of active managers got it wrong over the pandemic, trying to read the future; THAT is speculating.

Name change but I appreciate that investment banking doesn't equal retail investments. But there's a big overlap. The impact of transactions on future share price growth, and by extension, retail and institutional shareholders was central to advising clients on mergers and acquisitions.

I now work on the retail investment side of things. As I said, I'm comfortable with risk and agree that some investments are far more speculative than others. But even trackers have an element of speculation. You're getting some upside in rising markets but there's nowhere to hide in falling stock markets and that's where active managers (potentially have the option to) come into their own.

As I said, I have an interest only mortgage backed by ISA investments as I believe that the stock market will deliver superior returns to cash in the medium term. But I draw the line at advising people that equity investments aren't speculative as I think they should understand the potential for losses before they invest their money. And with that, I'm done as I've said my piece.

and that's where active managers (potentially have the option to) come into their own

84% underperformed indexing funds in the last downturn. Save your money.

I'm a firm believer in active funds. I agree that not all actives beat passives, particularly for large caps where there's fewer 'bargains' to be unearthed due to the level of broker and research coverage. But you also have to look at the degree of outperformance for those that do.

Looking at current Trustnet data, the top performing global fund over the last 5 years is Baillie Gifford Positive Change with a total return of 130%. The highest index fund was L&G Global 100 Index at 84%.

Looking at U.K. all companies, MI Chelverton U.K. Equity Growth was top with a 5 year return of 70%. There's another 38 active funds above the top index fund which returned 20%.

It may not be easy to pick the top performing active funds but I'd argue there's definitely a place for them in a portfolio. I'm happy to pay the extra 0.25-0.5% in fees if they outperform the index funds.

The likes of Vanguard are still decent low-cost options for investors that don't want the hassle or risk of trying to pick active funds though.

I'm sure you are right,

Above, you are only quoting the past. Easy. A bit like standing on the finish line at Newmarket and telling us the winners… once the race has finished!

Try picking tomorrows winners. Just as tough as Newmarket. The form isn’t always enough. Once you add managers you add risk: the risk of getting it wrong. You add speculation.

If you take out survivor bias it’s even harder to see the value of active mangers over time. We can indeed measure it and the great and good command much fanfare. Try calling it with a retail client when the manager begins to under perform. When do you pull the plug? When do you buy their version of events? Is it a blip? Is it second sight? When you are speculating with retail client money I can tell you hindsight isn’t available.

If paying a few bps more was all it took, it would be very simple. You say ‘if they outperform the index funds’. You pay REGARDLESS of their results. Most don’t put perform. Of all that start the investment journey LESS than half manage it for a 3 year window. Get to 10 years, often NONE are left.

80% of returns come from asset allocation. I’ll take a top quartile portfolio above a speculative podium finish any day.

Oxford university have a great paper on this, worth a read. Beating the market is a dream sold by the men in red cars.

You might want to read Warren Buffet on this topic. Very interesting.

@Weirdlynormal

I don't have a degree or career in finance. I also failed my maths GCSE.

What I am extremely good at is research and after two years starting from a frustrated, desperate and confused position,not knowing where to invest; I've come to where you are. 😁

In fact some of your posts are exactly what I would have written. Have you also read JL Colin's, simple path?

I still have some way to go, I don't quite understand asset classes?

I need to sort out a new platform soon because Hargreaves charges a lot etc.
I'm 70% confident in my investments with steady passive funds eg vanguard and I have smaller amounts in naughty funds like Scottish mortgage and fundsmith. If I had any money spare I would be buying more.