Pensions and ISA ideas

DefaultM

Might be silly questions but we'll see...

My investments fell 26% (13% gains and a further 13% so I was at a 'loss') now they're back at break even. So am I right in thinking it fell because people sold off their shares, but by continuing to regularly add to mine during this time (£1200 in total) when it goes back up I'll get a boost I wouldn't otherwise have had?

I get that some people saw this coming and so sold when in profit, let it crash and then added back in. My question is why did people sell once they'd seen it was already crashing? 
Isn't the whole point that it's a long term thing? Maybe they thought the world was ending, but in that case their money is useless anyway?

spark240

Load of people panic sell when they see a fall...I know some of them!...mainly because they invested thinking it was a one way street upwards.....Ive also seen my pension and ISA fall, the ISA is almost back , the pension has a way to go but still rising.

You should get the benefit of currently buying shares at a lower price, so more units per £1 invested, , I actually upped my month amount about 3 months ago on this basis ...we will see...hopefully at some point a catapult upwards.

Barnezy

DefaultM said:

Might be silly questions but we'll see...

My investments fell 26% (13% gains and a further 13% so I was at a 'loss') now they're back at break even. So am I right in thinking it fell because people sold off their shares, but by continuing to regularly add to mine during this time (£1200 in total) when it goes back up I'll get a boost I wouldn't otherwise have had?

I get that some people saw this coming and so sold when in profit, let it crash and then added back in. My question is why did people sell once they'd seen it was already crashing? 
Isn't the whole point that it's a long term thing? Maybe they thought the world was ending, but in that case their money is useless anyway?

Yes. Some people say the best longterm strategy is to pay in the same amount each month for 20-30years and never touch it, that way you're buying at the average, not a peak or low. 

I prefer to avoid a loss I can see coming, hence why I sold when things were getting bad in Italy and bought back in when I was happy it was low enough. Now I'll continue adding. 

They could have still been in profit, had a better opportunity elsewhere etc. Its not individual that move the markets, its hedge, managed and pension funds. You'll never beat them. 

capo4th

Managed funds long term leave it to the experts for consistent returns. 

Build your pension and max out the tax relief. 
Have a neighbour who is a financial advisor.

spark240

capo4th said:

Managed funds long term leave it to the experts for consistent returns. 

Build your pension and max out the tax relief. 
Have a neighbour who is a financial advisor.

Is his house bigger than yours?

capo4th

No my extension is larger although he does have a fishpond 

tone1

I’ve got a Post office account....

Barnezy

spark240 said:

Load of people panic sell when they see a fall...I know some of them!...mainly because they invested thinking it was a one way street upwards.....Ive also seen my pension and ISA fall, the ISA is almost back , the pension has a way to go but still rising.

You should get the benefit of currently buying shares at a lower price, so more units per £1 invested, , I actually upped my month amount about 3 months ago on this basis ...we will see...hopefully at some point a catapult upwards.

Get ready for some more panic selling. It's highly unlikely that we are in recovery, but in a Bear rally. Who knows how long it will last, a few months of a couple of years. It will drop to new lows at some point before the real recovery starts. My guess is before the end of the year. Triggers could be increased tensions with China, second wave, slow down of federal funding, realisation of the full impact of the virus, etc. There are also alot of retail investors entering the market for the first time. They are easily spooked by losses, so it could happen very quickly when it does. It reminds me a bit of the Bitcoin situation a few years ago. FOMO is driving the market, which is not sustainable. 

capo4th said:

Managed funds long term leave it to the experts for consistent returns. 

Build your pension and max out the tax relief. 
Have a neighbour who is a financial advisor.

An IFS would recomend Managed Funds as the earn commissions. Only 18% of managed funds have out performed market trackers in the past 20 years and that's before you pay them fees, regardless of whether they have performed. I agree they are better than buying individual stocks, and I use them for emerging markets, where I have little insight, but I'm not confident I can pick the 18% of funds that out perform market trackers. Trackers are a low cost, low risk, low maintenance, long term investment that out performs 82% of managed funds and delivers an average 7%+ return per annum. 

https://www.fool.co.uk/investing-basics/isas-and-investment-funds/index-trackers-vs-managed-funds/

capo4th

Thanks @Barnezy ; I am happy with the results over the last 12 years. 

I am not sure the three funds have out performed market trackers but the gains have been good. 

I will look at getting into some tracker funds as they have to be better than cash in the bank right now.

Low maintenance is the key as I don’t have the time and the fees on mine were sensible.

PolarityMan

Barnezy said:

Get ready for some more panic selling. It's highly unlikely that we are in recovery, but in a Bear rally. Who knows how long it will last, a few months of a couple of years. It will drop to new lows at some point before the real recovery starts. My guess is before the end of the year. Triggers could be increased tensions with China, second wave, slow down of federal funding, realisation of the full impact of the virus, etc. There are also alot of retail investors entering the market for the first time. They are easily spooked by losses, so it could happen very quickly when it does. It reminds me a bit of the Bitcoin situation a few years ago. FOMO is driving the market, which is not sustainable. 

This is what Im interested in / trying to work out. Im prepared to ivnest for the long terms but it seems crazy not trying to sell before the way down and rebuy at a lower price.

I have reserved cash in my S&S ISA so if I fuck up the timing I can at least benefit from cost averaging when the dip comes.

The thought of a couple of years before another dip is a pain in the ass though, dont really want to be having to check daily for 2 years!

Anyone know of any good sites where you can set up alerts for certain thresholds?

Barnezy

This is a good high level article on the concept of bear rallies. 

https://www.forbes.com/advisor/investing/bear-market-rally/

RandallFlagg

Barnezy said:

This is a good high level article on the concept of bear rallies. 

https://www.forbes.com/advisor/investing/bear-market-rally/

and here is an article that suggest the current 50 day market rally is the biggest in history and is the precedent for a new bull market:

https://markets.businessinsider.com/news/stocks/stocks-biggest-50-day-rally-what-they-did-next-past-2020-6-1029282236

I hope so, the 2 funds I am invested in in my ISA are flying this year at 43% & 23% gains respectively and my pension fund is recovering quickly and is now only 8% down from last year end so I hope it will be firmly in positive territory by this year end, maybe 10-15% up or more. 

RandallFlagg

For anyone who researches past fund performance to assist with their investment decisions, here is an article on how to calculate the geometric annualised average returns for a fund as opposed to just using a simple average sum of the percentage annual returns:

https://www.investopedia.com/articles/08/annualized-returns.asp

It's a more accurate summary of returns apparently.

RandallFlagg

Does anyone bother with the MSE (Money Saving Expert) forum?

I posted a simple question about the merits of cashing in a preserved final salary pension for the offered sum, as I was suggesting I could get a better return that it will pay out in a SIPP and after some debate I got told I was being naive and had my ability to do maths questioned when I suggested that there are mutual funds out there can can return 14-16% annually after fees. That place is weird. 

Well there is, and I'm invested in them, here are the last 10 years annualised geometric averages:

• ASI UK Smaller Companies Fund: 16.56%
• Polar Capital Global Technology I GBP: 18.45%
• Baillie Gifford American B Acc: 16.71%

PolarityMan

RandallFlagg said:

Barnezy said:

This is a good high level article on the concept of bear rallies. 

https://www.forbes.com/advisor/investing/bear-market-rally/

and here is an article that suggest the current 50 day market rally is the biggest in history and is the precedent for a new bull market:

https://markets.businessinsider.com/news/stocks/stocks-biggest-50-day-rally-what-they-did-next-past-2020-6-1029282236

I hope so, the 2 funds I am invested in in my ISA are flying this year at 43% & 23% gains respectively and my pension fund is recovering quickly and is now only 8% down from last year end so I hope it will be firmly in positive territory by this year end, maybe 10-15% up or more. 

I think that article is ignoring the context of the initial crash though. I dont think you can use past performance as the sole indicator of movement. I think its far more likely that there will be a second dip when the damage on companies balance sheets are realized.

RandallFlagg

PolarityMan said:

RandallFlagg said:

Barnezy said:

This is a good high level article on the concept of bear rallies. 

https://www.forbes.com/advisor/investing/bear-market-rally/

and here is an article that suggest the current 50 day market rally is the biggest in history and is the precedent for a new bull market:

https://markets.businessinsider.com/news/stocks/stocks-biggest-50-day-rally-what-they-did-next-past-2020-6-1029282236

I hope so, the 2 funds I am invested in in my ISA are flying this year at 43% & 23% gains respectively and my pension fund is recovering quickly and is now only 8% down from last year end so I hope it will be firmly in positive territory by this year end, maybe 10-15% up or more. 

I think that article is ignoring the context of the initial crash though. I dont think you can use past performance as the sole indicator of movement. I think its far more likely that there will be a second dip when the damage on companies balance sheets are realized.

Past performance is what you're basing the expectation of a 2nd dip on. No previous crash has seen this level of government stimulus and intervention so you're right the past is no guide to these unprecedented times.

The downturn will affect some sectors but not all, store front retail, travel, leisure and entertainment will suffer heavily, as will oil but other sectors will not only not face a downturn but they will thrive, such as technology and online retail like Amazon, Netflix etc. Some stocks may dip again others may not.

This is where more targeted mutual funds with 30 or so company holdings will do well and more traditional diverse funds that take a spread across an index will not do so well and be more reflective of the wider economy.

There is nowhere else to go but equities if investors want to make decent returns so cherry picking stocks or targeted funds with strong companies that are either positively impacted by the COVID-19 lockdown or have strong underlying fundamentals is the way through this.

PolarityMan

RandallFlagg said:

PolarityMan said:

RandallFlagg said:

Barnezy said:

This is a good high level article on the concept of bear rallies. 

https://www.forbes.com/advisor/investing/bear-market-rally/

and here is an article that suggest the current 50 day market rally is the biggest in history and is the precedent for a new bull market:

https://markets.businessinsider.com/news/stocks/stocks-biggest-50-day-rally-what-they-did-next-past-2020-6-1029282236

I hope so, the 2 funds I am invested in in my ISA are flying this year at 43% & 23% gains respectively and my pension fund is recovering quickly and is now only 8% down from last year end so I hope it will be firmly in positive territory by this year end, maybe 10-15% up or more. 

I think that article is ignoring the context of the initial crash though. I dont think you can use past performance as the sole indicator of movement. I think its far more likely that there will be a second dip when the damage on companies balance sheets are realized.

Past performance is what you're basing the expectation of a 2nd dip on. No previous crash has seen this level of government stimulus and intervention so you're right the past is no guide to these unprecedented times.

The downturn will affect some sectors but not all, store front retail, travel, leisure and entertainment will suffer heavily, as will oil but other sectors will not only not face a downturn but they will thrive, such as technology and online retail like Amazon, Netflix etc. Some stocks may dip again others may not.

This is where more targeted mutual funds with 30 or so company holdings will do well and more traditional diverse funds that take a spread across an index will not do so well and be more reflective of the wider economy.

There is nowhere else to go but equities if investors want to make decent returns so cherry picking stocks or targeted funds with strong companies that are either positively impacted by the COVID-19 lockdown or have strong underlying fundamentals is the way through this.

I don't think the expectation of a second dip is based on past performance, I think it more based on the fact that current growth isnt reflective of the state of economic health and has really jsut been a reaction to the various stimulus measures. I suspect too late to get into tech right now, I'd expect as an when normality resumes they will take a slight dip as people rely less on services. Id like to get some in my portfolio but I suspect now is not a good time to buy tech.

Barnezy

RandallFlagg said:

Does anyone bother with the MSE (Money Saving Expert) forum?

I posted a simple question about the merits of cashing in a preserved final salary pension for the offered sum, as I was suggesting I could get a better return that it will pay out in a SIPP and after some debate I got told I was being naive and had my ability to do maths questioned when I suggested that there are mutual funds out there can can return 14-16% annually after fees. That place is weird. 

Well there is, and I'm invested in them, here are the last 10 years annualised geometric averages:

• ASI UK Smaller Companies Fund: 16.56%
• Polar Capital Global Technology I GBP: 18.45%
• Baillie Gifford American B Acc: 16.71%

If you believe the "recovery" we've seen so far, is based on solid foundations, that's great. No one knows for sure. I'm skeptical, as are 68% of fund managers, but we might be wrong. You do what you believe is right. 

As for the funds you've mentioned. Yes 18% out perform market trackers, so you have a 1:5 chance of picking one that does. Very easy to do it after the event of course. I could also show you a list of funds that are -50%+ and you'd still have to pay them a fee for the privilege. 

Time is the biggest factor. If you take a 30 year approach, banking £40k a year in ISA's, then you can aim for £5.5m with minimal effort or risk using a market tracker. If you don't have 30 years or £5.5m isn't enough, then you need to take more risk to chase larger returns. 

RandallFlagg

Barnezy said:

RandallFlagg said:

Does anyone bother with the MSE (Money Saving Expert) forum?

I posted a simple question about the merits of cashing in a preserved final salary pension for the offered sum, as I was suggesting I could get a better return that it will pay out in a SIPP and after some debate I got told I was being naive and had my ability to do maths questioned when I suggested that there are mutual funds out there can can return 14-16% annually after fees. That place is weird. 

Well there is, and I'm invested in them, here are the last 10 years annualised geometric averages:

• ASI UK Smaller Companies Fund: 16.56%
• Polar Capital Global Technology I GBP: 18.45%
• Baillie Gifford American B Acc: 16.71%

If you believe the "recovery" we've seen so far, is based on solid foundations, that's great. No one knows for sure. I'm skeptical, as are 68% of fund managers, but we might be wrong. You do what you believe is right. 

As for the funds you've mentioned. Yes 18% out perform market trackers, so you have a 1:5 chance of picking one that does. Very easy to do it after the event of course. I could also show you a list of funds that are -50%+ and you'd still have to pay them a fee for the privilege. 

Time is the biggest factor. If you take a 30 year approach, banking £40k a year in ISA's, then you can aim for £5.5m with minimal effort or risk using a market tracker. If you don't have 30 years or £5.5m isn't enough, then you need to take more risk to chase larger returns. 

I've been investing in good mutual funds since 2003, picking and tracking good funds with a solid track record, a sound investment strategy and quality fund managers isn't difficult, it really isn't.

As for time, I probably don't have 30 years left to live yet alone accumulate wealth! What I will have in a few years will do me and provide all I need. Net worth will be over £1M by then.

RandallFlagg

PolarityMan said:

I don't think the expectation of a second dip is based on past performance, I think it more based on the fact that current growth isnt reflective of the state of economic health and has really jsut been a reaction to the various stimulus measures. I suspect too late to get into tech right now, I'd expect as an when normality resumes they will take a slight dip as people rely less on services. Id like to get some in my portfolio but I suspect now is not a good time to buy tech.

Why? is technology finished as a sector? will there be no further technological progress in the world?

That's a ridiculously short term view, I it's great time to buy into good tech funds for a 5 year or longer investment, there is a lot of exciting and new technologies around us and plenty of technological developments are needed to sustain human life and our needs in the next 50-100 years.

Here's Ben Rogoff, head of Polar Capital Global Technology Fund explaining their portfolio management strategy and clearly demonstrating to me that he and his team have a far better understanding of the tech sector than I have or have time to have reinforcing why I prefer to let competent fund managers make the investments decisions for me.