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Introducing the LemonFools Personal Finance Calculators

How are we doing?

Wider investment strategy discussions not dealt with elsewhere
BrummieDave
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Re: How are we doing?

#138287

Postby BrummieDave » May 11th, 2018, 11:41 am

Fred has beaten me to it, as I have been thinking for a few weeks now about raising the question about when do the 'sitting on cash' cohort conclude they've missed a trick in being out of the market. Posters on here and numerous fund managers in the press have sometimes rather smugly stated how high a proportion of cash they are sitting awaiting the impending crash at which point they'll enter the market. Inevitably, at some stage, they will of course be correct by their own definition. However there must also be a point at which had they stayed in the market they'd have been better off regardless. My math isn't up to working out when this would be based on time periods of recent mini bull runs within the overall multi-year bull run, and it depends on many other elements too like the % drop if/when we crash, if you re-enter at the best point, how quickly the market recovers etc.

I am reminded of a very good video I watched that showed how after a certain time in the market, and a certain regular investment amount, the return generated by accumulated dividends outstrips the return generated by the actual invested sum. It blew my mind. You miss out on all that if you're out of the market of course, and without opening up the 'Terry Smith said...' debate again here, at some point the power of compounding negates any benefit of timing the market anyway.

Good post Fred!

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Re: How are we doing?

#138309

Postby AleisterCrowley » May 11th, 2018, 12:43 pm

I'm sitting on 25% cash in my ISA (un-smugly)
I don't 'predict' a crash in the near future (<1yr) but I can't find much I want to invest in at the moment. It's not like I'm sitting on the sidelines waiting and hoping for a crash - if one occurred my 75% in the market would take a hit that would outweigh any benefits

The obvious question is- "If you wouldn't invest in something right now, why are you prepared to hold it rather than cashing in ?"

No idea...

FredBloggs
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Re: How are we doing?

#138313

Postby FredBloggs » May 11th, 2018, 12:50 pm

Actually, despite my portfolio exceeding its previous all time highs, I am sitting on an unusually high cash pile presently. My recent gold disposal has pushed me up to around 15% cash. As an opportunist I will bide my time here. I don't foresee the end of the world around the corner, but there could well be a return to the seesaw volatility that has been notably absent the last year or two. If another Petrofac event were to present itself, I'd have no hesitation in filling my largest boots. A sharp correction could come out of the blue anytime, but I think the scene is set for an equally sharp rebound.

Itsallaguess
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Re: How are we doing?

#138325

Postby Itsallaguess » May 11th, 2018, 1:16 pm

BrummieDave wrote:
I have been thinking for a few weeks now about raising the question about when do the 'sitting on cash' cohort conclude they've missed a trick in being out of the market.

Posters on here and numerous fund managers in the press have sometimes rather smugly stated how high a proportion of cash they are sitting awaiting the impending crash at which point they'll enter the market. Inevitably, at some stage, they will of course be correct by their own definition.

However there must also be a point at which had they stayed in the market they'd have been better off regardless. My math isn't up to working out when this would be based on time periods of recent mini bull runs within the overall multi-year bull run, and it depends on many other elements too like the % drop if/when we crash, if you re-enter at the best point, how quickly the market recovers etc.

I am reminded of a very good video I watched that showed how after a certain time in the market, and a certain regular investment amount, the return generated by accumulated dividends outstrips the return generated by the actual invested sum. It blew my mind.

You miss out on all that if you're out of the market of course, and without opening up the 'Terry Smith said...' debate again here, at some point the power of compounding negates any benefit of timing the market anyway.


Surely anyone has 'only missed a trick' if they decided to cash in all their chips and sit in a 100% cash position over the period that you're referring to?

Your reference to 'smugness' is uncalled for, by the way, and is likely to put people off discussing their views and positions, which is something I'm sure you'd prefer to avoid on a lively discussions board like this, where people's honest appraisals are often highly valued, no matter how much you may disagree with them....

I've had a cash amount roughly equivalent to around 14% of overall investible capital for some time now, but I'm at the stage of my life when I most definitely 'know myself' in terms of risk-tolerance, and you might be surprised to hear that it's only being in that '14% cash' position that's actually allowing me to stay fully invested with the other 86%, without any sleepless nights whatsoever.

There's no way that I'd go 100% cash, and there's no way I can foresee myself going 100% invested. Am I not allowed to reach a position between the two that I'm personally comfortable with, without being called out as someone who 'might be better off' if I'd only allow myself to be 100% invested?

Whilst I agree that the 14% cash might not be exposed to any subsequent market rise, the other 86% will be, and I'm actually quite content with that. On a personal basis, I'm covering both angles with my 14%/86% position, and the looney-tunes 'devil and angel' on each shoulder have little to bother me about on a day-to-day basis.

This is very important to me, and allowing myself to discover my risk-tolerance as my portfolio has grown is also very important to me. It's not been an easy journey to get here, and I'm sure it's the same for other investors too, so for someone to dismiss being in cash as 'missing a trick', then to me that suggests that they might be looking for the wrong trick....

Investing doesn't have to be a one-way-bet, and finding the right personal balance that enables us all to achieve the best outcome that we are comfortable with in the long term, is much more important to me personally than perhaps losing a few percent on my cash, or near-cash balance....

Cheers,

Itsallaguess

BrummieDave
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Re: How are we doing?

#138330

Postby BrummieDave » May 11th, 2018, 1:40 pm

I don't really refer to 'smugness' as you suggest, I said "sometimes rather smugly" which is quite different in tone IMHO and was more aimed at the 'informed' fund managers who inhabit the Sunday newspapers, and my post wasn't suggesting they are wrong or indeed right. I was (at least) trying to give a balanced view, asking at what point does one approach become 'more right' than the other, and the tone was meant to be light-hearted which I thought Fred was also being in his OP.

I have no desire to drive people away from discussing their views openly, but reserve the right for me to do so too.

Perhaps a smiling face will help... :)

BTW I too hold cash!

Itsallaguess
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Re: How are we doing?

#138338

Postby Itsallaguess » May 11th, 2018, 1:54 pm

BrummieDave wrote:
I was (at least) trying to give a balanced view, asking at what point does one approach become 'more right' than the other.


I think that's part of the problem though; that we often try to decide that something might be 'right' or 'wrong' by looking at a perceived final 'outcome' that's purely 'technical' in terms of profit or loss, but which loses sight of the fact that, for me at least, the process is far less to do with 'technical rightness' (profit-or-loss-outcome), and very much more to do with carrying a long-term, ongoing risk-tolerance at a level that is sustainable for the very long-term.

For me, being in 14% cash isn't really about the cash, it's all about being 'able' to continue with the other 86% 'fully invested' in a way that gives me very little day-to-day concern, and allows me to continue reaping the long-term market-rewards on the vast bulk of my investible capital, whilst allowing me to sleep at night and also provide some ammo for some of the sporadic market-opportunities that arise from time to time. Being in that position is very important to me....

I note your point regarding the use of the word 'smug', and perhaps if the sentence involved hadn't started with 'Posters on here' then it would have made the point you were trying to make in a less confrontational manner. If I hadn't already posted in the past regarding my approach to the portfolio cash-position situation, then it would certainly make me think twice about doing so if I thought people might really be thinking that it would be 'smug' to do so...

Cheers,

Itsallaguess

BrummieDave
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Re: How are we doing?

#138340

Postby BrummieDave » May 11th, 2018, 2:01 pm

And if I thought people would tell me what words it's not appropriate to use at the beginning of a sentence I'd think twice about posting too.

Like Ian Pickering said on another thread yesterday, this isn't school.

I'm at 11% cash btw :D

Itsallaguess
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Re: How are we doing?

#138342

Postby Itsallaguess » May 11th, 2018, 2:11 pm

BrummieDave wrote:
And if I thought people would tell me what words it's not appropriate to use at the beginning of a sentence I'd think twice about posting too.


Please - I didn't say that it's not appropriate to use them - I was simply trying to suggest that starting a sentence with 'Posters on here', that then referred to people 'smugly' stating things, is likely to stop people wanting to 'state things' in the future, which isn't likely to lead to balanced and informed views being expressed.

Cheers,

Itsallaguess

Steveam
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Re: How are we doing?

#138379

Postby Steveam » May 11th, 2018, 3:54 pm

I keep about 3 year’s expenditure as a cash buffer made up of cash or cash equivalents such a premium bonds and index linked certificates. This is a relatively small proportion of the portfolio but includes my emergency fund. My aim here is to never be a forced seller. We’re dividend income to drop substantially id still be able to carry on my (rather extravagant) lifestyle for 4 or 5 years without tremendous stress. (I live entirely off my investments and do not have a fall back income such as a pension, other than the availability of the state pension should I decide to claim it).

Best wishes,

Steve

OLTB
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Re: How are we doing?

#138380

Postby OLTB » May 11th, 2018, 3:55 pm

Up until very recently I was 100% invested - having noted Itsallaguess's previous comments on other posts that he was about 14% or so in cash. When IMB had it's latest fall I had no spare cash to take advantage of this. I now see the sense of keeping a little of my powder dry to take advantage of any future company/sector downturns when they arise so will ensure that I have a little stash of cash ready to pounce. Always learning...

Cheers, OLTB.

Urbandreamer
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Re: How are we doing?

#138396

Postby Urbandreamer » May 11th, 2018, 4:54 pm

Just like OLTB i'm normally 100% invested.

The correction about 3 months ago spooked me (somewhat to my surprise) and I moved quite a bit into cash. At my highest level I was 12% cash.

So how am I doing? Well I have a artificial year end of the 5th of April. Since then I'm up 7.9% as opposed to the FTSE100 which is up 6.9%
I'm currently 8.7% cash and still uneasy about the market. (The correction wiped out most of my gains last year leaving a paltry 1.5% return, but still better than the FTSE 100 which lost that over the same time).

However as others have said, is it really desirable to be 100% equity invested? Our passive friends who plug Vangard lifestyle funds don't seem to think so.
Personally I enjoy investing too much and have too little faith in governments to actually maintain any significant cash pile. I'm going to try and hang on to that cash until September, but don't hold your breath.

Quint
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Re: How are we doing?

#138400

Postby Quint » May 11th, 2018, 5:31 pm

Wmnr wrote:Nobody has mentioned sterling. The weaker it is the higher the FTSE goes. I wouldn't be surprised if the FTSE hits 8000 before this Brexit malarky is over.

True, I think sterling volatility is going to be with us for a while. Especially with Mark Carnage and his forward guidance.

swill453
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Re: How are we doing?

#138411

Postby swill453 » May 11th, 2018, 6:17 pm

Interestingly (maybe) is that although the FTSE100 isn't quite at its all-time high, the FTSE All Share Total Return index (which is what I measure my performance against) is (by about 1% over its January peak).

Probably not surprising since dividends have been rolling in since then.

Scott.

tjh290633
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Re: How are we doing?

#138431

Postby tjh290633 » May 11th, 2018, 8:01 pm

BrummieDave wrote:And if I thought people would tell me what words it's not appropriate to use at the beginning of a sentence I'd think twice about posting too.

Like Ian Pickering said on another thread yesterday, this isn't school.

I'm at 11% cash btw :D

Maybe the test should be, how would I feel if someone said that about me? Or to quote Thumper, "If you can't find anything nice to say, don't say anything".

TJH

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Re: How are we doing?

#138443

Postby GeoffF100 » May 11th, 2018, 9:09 pm

The FTSE 100 is near its all time high, and my UK shares appear to have done well recently. Vanguard Developed World ex UK is also near its all time high. Vanguard Emerging Markets VFEM peaked on 26th January and has not recovered. I called the top of the developed markets, and put fresh money into bonds. Purely by chance, I sold some emerging markets on 26th January. It looks as though the peak for the developed markets is about to be retested. Will they turn back or punch through? My guess is that they will turn back. Either way, I am sitting on my hands for now.

hiriskpaul
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Re: How are we doing?

#138446

Postby hiriskpaul » May 11th, 2018, 9:59 pm

Excluding property I divide investments into equities, fixed income and "speculative", which is mainly options trading. The last 5 or so years this means 25% equities, mostly ETFs/trackers now, but also get exposure through equity index futures, VCTs, ITs and a small number of individual shares. I topped up to 25% at the end of March/beginning of April, so I now consider myself "fully invested" with respect to equities. I have not calculated it precisely, but I think the portfolio is largely unchanged year to date, excluding dividends.

Fixed income is 50%, but only about 80% invested, the rest in cash. The reason for this is that I hold a lot of undated FI (prefs, PIBS, PSBs) and the cash is a counterweight used to reduce duration. I also sold some LLPC recently to take some risk off the table. FI has been a mixed bag so far this year. Some positive returns from Provident Financial, Premier Oil, Enquest, much unchanged, such as Co-op Group bonds and some capital losses on prefs due to the "Cancel at par" Aviva announcement upsetting the prefs market. Again, I have not tried to calculate precise returns, which is difficult due to accrued interest on bonds, but I suspect I am down because of the Aviva initiated problems.

With my 25% allocation to options trading, the entire variation margin is held in cash, scattered around various instant access accounts or at the broker, so not earning a great deal of interest. However, options trading has been extremely profitable so far this year due to all the volatility that kicked off in February. I have puts expiring next Friday and in 5 weeks time and if they all expire worthless, which looks likely, I will have made a 22% return since February.

Pastcaring
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Re: How are we doing?

#138806

Postby Pastcaring » May 13th, 2018, 2:11 pm

I'm not sure over what period of time but here goes.
From my peak ( early 2015 ) down around 200 K.Doesn' t really bother me.In any given year 25% rise or fall is normal.

The plan was always to live off dividends ,that side has gone great.Around 4% annual compounding since 2015.

Buying shares at low prices and excess income going to DRP means the drop is around 25K.The plan A was always to retire on a net income of double average earnings.

Then plan B was aim for paying average earnings in tax.Thankfully both occurred.

melonfool
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Re: How are we doing?

#138870

Postby melonfool » May 13th, 2018, 6:24 pm

During the low point (Feb) I talked myself into selling utes when they got back into the black - they are now back in the black and I can't recall why I thought I would sell them (SSE and Severn Trent). Volatility I think. Though they are good dividend payers.

But, if I sell them now (c£4k worth) then I need to reinvest and if the market is high then it's always a concern.

I admit, I am now moving away from individual shares and more towards ITs. I'm happy to have a core holding of decent shares but I got a bit bored of having to think about it all the time, so I bought two ITs and have since bought AJBell's own fund (the cautious one at this stage) which I am reinvesting all dividends in (once I get £500, though there is no fee to buy this fund currently).

So, maybe I will sell them and buy another IT. I have CQS New City High and Invesco Perpetual Enhanced Income so far. And a few ETFs.

I have c£50k in equities and c£30k in cash, but most of that cash is in a fixed rate/fixed term ISA so I don't need to make any decision about it for another 2 years (one of my better decisions!). I have a couple of regular savers that will end later this year.

Most of my 'spare' money goes into the SIPP now and, for some reason, I prefer to hold funds in there. I am about to move my main pension into it too, so will then need to think about how to invest that, plus my current employer pension which will go into deferment once I leave there in Sept.

Mel

DiamondEcho
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Re: How are we doing?

#139412

Postby DiamondEcho » May 16th, 2018, 5:30 pm

Wmnr wrote:Nobody has mentioned sterling. The weaker it is the higher the FTSE goes. I wouldn't be surprised if the FTSE hits 8000 before this Brexit malarky is over.


Nor would I. 8k has been a feature on and off the weekly technical forecasts over at FXEmpire for a month or two now; as their long[est] term target level above. We're in a rising wedge pattern right now [since the beginning of April], 7800 beckons on an upward break-out, and then once that is digested 8k.
More Sterling weakness +/or something notably positive re: BREXIT could combine to be the required catalyst.

Snorvey
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Re: How are we doing?

#139413

Postby Snorvey » May 16th, 2018, 5:33 pm

Weak sterling might explain the FTSE100's rise but it doesn't really explain the FTSE250's even more relentless climb.


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