Buying on the dips
Discussion
Condi said:
I wouldn't beat yourself up. Its well known that most fund managers under-perform a market index.
It's also worth bearing in mind that all trackers will always underperform the index they are tracking.IMO tracking can be "OK" but certainly isn't the be-all and end-all. It is, by definition, just following the herd.
And think about it. If all the negatives about active management were true, there wouldn't be any highly paid active managers.
avinalarf said:
... the one single share I did invest in was ABF because I knew that Primark was a well run company and could actually see ,every week that I visited a store,how busy they were.
I bought in at £29.20,on a dip,and they pottered along then 2 months ago they rose to £33 ish.
I shoiuld have sold ,I knew I should have sold but I made a fatal mistake of an amateur I'd become "attached" to holding the share,stupid boy.
Now it's about £25 ...Primark is still trading well but the sugar market is under pressure.
I'm holding them because I fortunately don't need the money but will I sell when they reach say
£31 ,honestly I don't know because I'll be thinking will they go to £33 as some brokers seem to think.
That's what can happen when an amateur goes head to head with the big boys.
Hello Steven,
Do not be disappointed, because you have not done too much wrong.
You selected a business that you understood. What the future growth prospects are, and what the present valuation is, in relation to earnings and yield, I do not know. Your mistake has been to purchase a stake in just a single business, and then treat it as your equity investment fund. Most seasoned investors might begin with one company, then gradually build up the number of holdings in different companies and different business sectors.
As a retailer, it would be exactly the same, if you were to stock just one product line, and then hope it is a winner.
It is sensible to try to eventually acquire holdings in about 25 companies. At the start of each year, you will have no idea which companies will perform best during the next 12 months. Some will have good percentage increases and some will fall in value. However, if overall your capital has increased and the overall dividend income has increased, then you can be pleased. You cannot expect that to happen every year though. You have a spread of risk however, which is essential. International and currency risk spread can be incorporated in business selection fairly easily, but that is getting too technical. Established businesses may have bad years and the share price suffers, but unless they are in decline, a revival can be unexpectedly rapid, so losers in one year might be at the top of your league table the next. A recent example of that being the oil companies. When the over supply of oil, meant the price was only $25, who could have imagined it would would then reach $70 so soon. Trying to dance in and out of the market (a Warren Buffett quote), does not usually beat remaining invested in the market. Owning non-cyclical businesses can help considerably, because over the long term, recessions hurt some sectors more than others. As well as seeing your equities go up in value, you want to go down less than the market average during every recession.
I have yet to meet anyone who can repeatedly forecast future share prices. Even the blue blooded so called experts, must often hope that you do not look back at their earlier attempts at forecasting. If a company can steadily increase their profits, then their market valuation (share price) will eventually follow. It is a game of patience, but success depends upon trying to buy good steady businesses, not buying and selling at frequent intervals, which could be likened to gambling.
Pure common sense and logic, I consider to be important. You will remember the so called 'dot com' boom. I resisted buying any dotcoms, simply because I could not understand why fledgling tech. businesses, which had never made any profit, were supposedly already worth more than established blue chip companies. No special technical knowledge, it just did not make sense. After a couple of years there were receivership and investor tears. My thinking proved to be correct. A few did eventually do well, but hoping to pick one of those very few winners, from so many tech. businesses, was almost impossible.
On average, long-term share investment has easily beaten the overall return from cash accounts.
The dividend part of shareholdings, usually forms a significant portion of the total return. If you want some figures, my total dividend yield (think interest rate on a savings account) is at present 4.03%. Total dividends so far this year, have increased (think pay increase) by 6.10%. The capital values for shares obviously change constantly, and 2018 for me, the overall total is a down year so far. Proof that you cannot expect markets to go up all the time, and if that might be a worry, then people should not get involved. Being unable to sleep, is not worth it.
We must also remember, that when you were enjoying 7% interest on cash and cash equivalents, inflation was probably five or six percent. It does not sound so good then.
Hope that background might help a little. Maybe don't give up, after the experience of your very first shareholding.
Edited by Jon39 on Monday 9th July 10:35
The problem with buying dips is that until it goes up again the next day it wasn't a dip!!!! it could have been the start of a correction.
But buying dips in funds that invest outside of UK on days when the Pound is strong can provide enhanced returns.
Earlier this year (or in the near distant past) the Dollar was very strong against the Euro approx 1.04 so I increased my Europe exposure.
The Euro gained quite well to where it is now. Had European equity followed suite I'd be looking at 40%, alas it didn't. but I still did ok.
Value and opportunity can help, but nothing beats time (in the market)
If you have 500 to invest and the market is higher than you would like, you could take a contrarian view that Month and stick it in something out of favour.
This is where being diversified helps....you have options of where to put it. Even if you don't get it quite right the option to switch at NAV to NAV in the same fund family will cost you nothing.
Look where Tech was ten years ago to where it is now, sectors, countries and regions can flip giving extraordinary returns.
To average 8 or 9 pa. you need a couple of these every five years.
But buying dips in funds that invest outside of UK on days when the Pound is strong can provide enhanced returns.
Earlier this year (or in the near distant past) the Dollar was very strong against the Euro approx 1.04 so I increased my Europe exposure.
The Euro gained quite well to where it is now. Had European equity followed suite I'd be looking at 40%, alas it didn't. but I still did ok.
Value and opportunity can help, but nothing beats time (in the market)
If you have 500 to invest and the market is higher than you would like, you could take a contrarian view that Month and stick it in something out of favour.
This is where being diversified helps....you have options of where to put it. Even if you don't get it quite right the option to switch at NAV to NAV in the same fund family will cost you nothing.
Look where Tech was ten years ago to where it is now, sectors, countries and regions can flip giving extraordinary returns.
To average 8 or 9 pa. you need a couple of these every five years.
jeff m2 said:
The problem with buying dips is that until it goes up again the next day it wasn't a dip!!!! it could have been the start of a correction.
But buying dips in funds that invest outside of UK on days when the Pound is strong can provide enhanced returns.
But, as with your first line, you can only tell that the pound was strong in retrospect. If the pound being stronger than the day before was a decent buy signal then the algorithms would be all over it.But buying dips in funds that invest outside of UK on days when the Pound is strong can provide enhanced returns.
Lots of good advice here, particularly the one about not trying to time the market. A commonly used phrase is “time in the market is better than ticking the market”. That being said, I believe there will be a market correction this year or next and at that time I will most likely put in an extra few quid.
James_B said:
jeff m2 said:
The problem with buying dips is that until it goes up again the next day it wasn't a dip!!!! it could have been the start of a correction.
But buying dips in funds that invest outside of UK on days when the Pound is strong can provide enhanced returns.
But, as with your first line, you can only tell that the pound was strong in retrospect. If the pound being stronger than the day before was a decent buy signal then the algorithms would be all over it.But buying dips in funds that invest outside of UK on days when the Pound is strong can provide enhanced returns.
(I'm not concerned with day to day, six Months minimum)
So given the option (I'm a Dollar investor) of investing my hard earned money in the S & P with p/es north of 17, I have a look round and see Europe has p/e s of 14 and the USD/Euro rate is 1.04. That way I get more value.
There are no guarantees that the Euro will strengthen, it did come back to 1.16, luck maybe, but I put myself in the position of being lucky.
If you buy something at an inflated price the odds of selling it higher for a meaning gain later are reduced,
True for most things apples, oranges, shares, funds, houses, anything bought or sold.
Basically it's "what's hot" and "what's not", a bit of What's not gives you more value, more long term potential and one is likely less to buy at the top.
Going in at the top is the pits
JapanRed said:
Lots of good advice here, particularly the one about not trying to time the market. A commonly used phrase is “time in the market is better than ticking the market”. That being said, I believe there will be a market correction this year or next and at that time I will most likely put in an extra few quid.
We're still in the correction from end of February!jeff m2 said:
Currencies usually move in ranges and generally never move to "silly lows" like a distressed share. They have more defined support levels.
(I'm not concerned with day to day, six Months minimum)
I’ll tell the FX guys who sit opposite me this piece of wisdom. They will be able to make a fortune now that they know that currencies have defined levels.(I'm not concerned with day to day, six Months minimum)
It is truly wonderful that even after a quarter of a century trading for a living I can still learn something new.
James_B said:
I’ll tell the FX guys who sit opposite me this piece of wisdom. They will be able to make a fortune now that they know that currencies have defined levels.
It is truly wonderful that even after a quarter of a century trading for a living I can still learn something new.
You might want to point the equities guys at this:It is truly wonderful that even after a quarter of a century trading for a living I can still learn something new.
http://www.nber.org/papers/w24676
the abstract reads:
"Existing research has documented cross-sectional seasonality of stock returns—the periodic outperformance of certain stocks relative to others during the same calendar month, weekday, or pre-holiday periods. A model in which stocks differ in their sensitivities to investor mood explains these effects and implies new sets of seasonal patterns. We find that relative performance across stocks during past high or low mood months and weekdays tends to recur in future periods with congruent mood, and to reverse in periods with non-congruent mood. Stocks with higher sensitivities to aggregate mood swings—higher mood betas—earn higher expected returns during future high mood periods and lower expected returns during future low mood periods, including those induced by Daylight Saving Time changes, weather conditions and anticipation of major holidays. "
xeny said:
You might want to point the equities guys at this:
http://www.nber.org/papers/w24676
the abstract reads:
"Existing research has documented cross-sectional seasonality of stock returns—the periodic outperformance of certain stocks relative to others during the same calendar month, weekday, or pre-holiday periods. A model in which stocks differ in their sensitivities to investor mood explains these effects and implies new sets of seasonal patterns. We find that relative performance across stocks during past high or low mood months and weekdays tends to recur in future periods with congruent mood, and to reverse in periods with non-congruent mood. Stocks with higher sensitivities to aggregate mood swings—higher mood betas—earn higher expected returns during future high mood periods and lower expected returns during future low mood periods, including those induced by Daylight Saving Time changes, weather conditions and anticipation of major holidays. "
I think that they already know that backtesting works if you want to sell a product based on backtesting, but I don’t know that traders will care much about it.http://www.nber.org/papers/w24676
the abstract reads:
"Existing research has documented cross-sectional seasonality of stock returns—the periodic outperformance of certain stocks relative to others during the same calendar month, weekday, or pre-holiday periods. A model in which stocks differ in their sensitivities to investor mood explains these effects and implies new sets of seasonal patterns. We find that relative performance across stocks during past high or low mood months and weekdays tends to recur in future periods with congruent mood, and to reverse in periods with non-congruent mood. Stocks with higher sensitivities to aggregate mood swings—higher mood betas—earn higher expected returns during future high mood periods and lower expected returns during future low mood periods, including those induced by Daylight Saving Time changes, weather conditions and anticipation of major holidays. "
As with most trends, if it is real the algo guys have likely already arbitraged it away.
Edited by James_B on Friday 20th July 07:01
Back when I was working on an equity desk in the City through 2008 and beyond this video was doing the rounds...
https://www.youtube.com/watch?time_continue=100&am...
..it's a bit of fun, but many a truth spoken in jest! And actually not too much has changed.
https://www.youtube.com/watch?time_continue=100&am...
..it's a bit of fun, but many a truth spoken in jest! And actually not too much has changed.
Something that has stood me the test of time (Certainly in recent years of high news availability and velocity) is to buy when there are dips in certain stocks sentiment, while the fundamentals of the business don't change.
A recent example is Amazon, who dipped considerably a few months ago when Trump was bashing them directly on Twitter. They lost a couple of hundred dollars per share over the course of a few days. Of course, nothing fundamental in the business changed and they have soared beyond that to their all-time high.
Second up is Facebook, who dipped considerably during the Cambridge Analytica scandal and various public hearings. Yet again, the business didn't change, I checked to make sure there was no mass protest/boycott (which there wasn't) and bought considerably lower than they had been, while now they are yet again at an all-time high.
Tesla is a classic for this with Elon and his Twitter rambles... but.. for me, I don't believe in the longer term future of the business at its current value. Still... its fun to trade if you can ride the roller coaster each week.
Last but not least is Salesforce, that took a big hit when it spent a s
t ton of money on Mulesoft. However... knowing both businesses pretty well, for me it made a huge amount of sense from both a technology and customer experience perspective.
However... I almost made a huge mistake on Capita (Luckily I didn't pull the trigger)... I'll let this chart tell you what I almost did.
Moral of the story is... know the business inside and out (Or as best you can) and even then, you're still reliant on timing and luck.
A recent example is Amazon, who dipped considerably a few months ago when Trump was bashing them directly on Twitter. They lost a couple of hundred dollars per share over the course of a few days. Of course, nothing fundamental in the business changed and they have soared beyond that to their all-time high.
Second up is Facebook, who dipped considerably during the Cambridge Analytica scandal and various public hearings. Yet again, the business didn't change, I checked to make sure there was no mass protest/boycott (which there wasn't) and bought considerably lower than they had been, while now they are yet again at an all-time high.
Tesla is a classic for this with Elon and his Twitter rambles... but.. for me, I don't believe in the longer term future of the business at its current value. Still... its fun to trade if you can ride the roller coaster each week.
Last but not least is Salesforce, that took a big hit when it spent a s
t ton of money on Mulesoft. However... knowing both businesses pretty well, for me it made a huge amount of sense from both a technology and customer experience perspective. However... I almost made a huge mistake on Capita (Luckily I didn't pull the trigger)... I'll let this chart tell you what I almost did.
Moral of the story is... know the business inside and out (Or as best you can) and even then, you're still reliant on timing and luck.
Edited by ReaperCushions on Monday 23 July 04:05
ReaperCushions said:
Something that has stood me the test of time (Certainly in recent years of high news availability and velocity) is to buy when there are dips in certain stocks sentiment, while the fundamentals of the business don't change.
A recent example is Amazon, who dipped considerably a few months ago when Trump was bashing them directly on Twitter. They lost a couple of hundred dollars per share over the course of a few days. Of course, nothing fundamental in the business changed and they have soared beyond that to their all-time high.
Second up is Facebook, who dipped considerably during the Cambridge Analytica scandal and various public hearings. Yet again, the business didn't change, I checked to make sure there was no mass protest/boycott (which there wasn't) and bought considerably lower than they had been, while now they are yet again at an all-time high.
Tesla is a classic for this with Elon and his Twitter rambles... but.. for me, I don't believe in the longer term future of the business at its current value. Still... its fun to trade if you can ride the roller coaster each week.
Last but not least is Salesforce, that took a big hit when it spent a st ton of money on Mulesoft. However... knowing both businesses pretty well, for me it made a huge amount of sense from both a technology and customer experience perspective.
However... I almost made a huge mistake on Capita (Luckily I didn't pull the trigger)... I'll let this chart tell you what I almost did.
Moral of the story is... know the business inside and out (Or as best you can) and even then, you're still reliant on timing and luck.
How did you know at the time that Trump wouldn’t subject Amazon to some type of financial penalty or investigation or unfair competition type of fine etc?A recent example is Amazon, who dipped considerably a few months ago when Trump was bashing them directly on Twitter. They lost a couple of hundred dollars per share over the course of a few days. Of course, nothing fundamental in the business changed and they have soared beyond that to their all-time high.
Second up is Facebook, who dipped considerably during the Cambridge Analytica scandal and various public hearings. Yet again, the business didn't change, I checked to make sure there was no mass protest/boycott (which there wasn't) and bought considerably lower than they had been, while now they are yet again at an all-time high.
Tesla is a classic for this with Elon and his Twitter rambles... but.. for me, I don't believe in the longer term future of the business at its current value. Still... its fun to trade if you can ride the roller coaster each week.
Last but not least is Salesforce, that took a big hit when it spent a s
t ton of money on Mulesoft. However... knowing both businesses pretty well, for me it made a huge amount of sense from both a technology and customer experience perspective. However... I almost made a huge mistake on Capita (Luckily I didn't pull the trigger)... I'll let this chart tell you what I almost did.
Moral of the story is... know the business inside and out (Or as best you can) and even then, you're still reliant on timing and luck.
Edited by ReaperCushions on Monday 23 July 04:05
shopper150 said:
ReaperCushions said:
Something that has stood me the test of time (Certainly in recent years of high news availability and velocity) is to buy when there are dips in certain stocks sentiment, while the fundamentals of the business don't change.
A recent example is Amazon, who dipped considerably a few months ago when Trump was bashing them directly on Twitter. They lost a couple of hundred dollars per share over the course of a few days. Of course, nothing fundamental in the business changed and they have soared beyond that to their all-time high.
Second up is Facebook, who dipped considerably during the Cambridge Analytica scandal and various public hearings. Yet again, the business didn't change, I checked to make sure there was no mass protest/boycott (which there wasn't) and bought considerably lower than they had been, while now they are yet again at an all-time high.
Tesla is a classic for this with Elon and his Twitter rambles... but.. for me, I don't believe in the longer term future of the business at its current value. Still... its fun to trade if you can ride the roller coaster each week.
Last but not least is Salesforce, that took a big hit when it spent a st ton of money on Mulesoft. However... knowing both businesses pretty well, for me it made a huge amount of sense from both a technology and customer experience perspective.
However... I almost made a huge mistake on Capita (Luckily I didn't pull the trigger)... I'll let this chart tell you what I almost did.
Moral of the story is... know the business inside and out (Or as best you can) and even then, you're still reliant on timing and luck.
How did you know at the time that Trump wouldn’t subject Amazon to some type of financial penalty or investigation or unfair competition type of fine etc?A recent example is Amazon, who dipped considerably a few months ago when Trump was bashing them directly on Twitter. They lost a couple of hundred dollars per share over the course of a few days. Of course, nothing fundamental in the business changed and they have soared beyond that to their all-time high.
Second up is Facebook, who dipped considerably during the Cambridge Analytica scandal and various public hearings. Yet again, the business didn't change, I checked to make sure there was no mass protest/boycott (which there wasn't) and bought considerably lower than they had been, while now they are yet again at an all-time high.
Tesla is a classic for this with Elon and his Twitter rambles... but.. for me, I don't believe in the longer term future of the business at its current value. Still... its fun to trade if you can ride the roller coaster each week.
Last but not least is Salesforce, that took a big hit when it spent a s
t ton of money on Mulesoft. However... knowing both businesses pretty well, for me it made a huge amount of sense from both a technology and customer experience perspective. However... I almost made a huge mistake on Capita (Luckily I didn't pull the trigger)... I'll let this chart tell you what I almost did.
Moral of the story is... know the business inside and out (Or as best you can) and even then, you're still reliant on timing and luck.
Edited by ReaperCushions on Monday 23 July 04:05
Just kidding... I didn't, of course... but as with 99% of his blusterings on Twitter, he moves on very very quickly and the news passes. In addition, whatever fine would have been levied, it would still be a drop in the ocean. See the latest on Google and Facebook fines... not impacted them at all and they are in the billions.
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