S&P500 at record highs - time to stay in or pull out?
Discussion
NowWatchThisDrive said:
Respectfully, one year isn't anywhere near long enough to draw any firm conclusions either way...come back in another 20 or more 
But conceptually I'd be pretty surprised if you outperformed index buy and hold over the long run doing this. You're essentially picking stocks in a market where you have little to no edge, with an allocation/rebalancing mechanism that as far as I can make out just caps your upside while still leaving you fully exposed to the downside. Sort of like writing covered calls but without getting paid for giving up the upside.
But conceptually I'd be pretty surprised if you outperformed index buy and hold over the long run doing this. You're essentially picking stocks in a market where you have little to no edge, with an allocation/rebalancing mechanism that as far as I can make out just caps your upside while still leaving you fully exposed to the downside. Sort of like writing covered calls but without getting paid for giving up the upside.
Long before completing 38 years of equity investment, I concluded exactly what you describe.
I know of another person, who proved that point extremely successfully.
Warren Buffett noted that despite the Dow Jones industrial average rising from 66 to 11,497 in the 20th century, many investors lost money, because they were 'dancing in and out of the market'. They only bought when they felt comfortable, and sold when they were frightened by the news, which is the exact opposite of a successful strategy.
The Consequence: This "dancing" behavior causes them to miss the best days in the market, which are essential for long-term compounding.
I did a similar thing when I started, misguidedly thinking it was the quickest way to become wealthy. In those days you could apply to buy shares in newly issued businesses, then sell mostly at a profit. It turned out to be an awful lot of work for little reward, so I changed to very long-term holding.
Anyway, I hope our new friend keeps posting regularly, so we can follow the success (ups and downs) of his get rich quick scheme.
pingu393 said:
I don't disagree. This is why I'm not going all-in with this. The upside is not compounding within the stock, yet the downside is ( -ve compounds get less over time, which is a good thing 
).
However, I am compounding, as I'm not realising any profits until I need the money. The profits are reinvested in something, so there is compounding withing the portfolio if not within the original stock.
).However, I am compounding, as I'm not realising any profits until I need the money. The profits are reinvested in something, so there is compounding withing the portfolio if not within the original stock.
I don't understand your definition of compounding.
I thought compounding involves a 20% market gain producing a £2,000 increase in year one, then 30 years later another 20% market gain produces a £200,000 increase. Tax free too, if done in a PEP/ISA, although not IHT free.
Jon39 said:
This "dancing" behavior causes them to miss the best days in the market, which are essential for long-term compounding.
That is very true. The catch with selling into a dip is the "big cojones" question of when you're going to start buying again, because an investor can't stay out of the market for ever.
P.S. I do hope you weren't awake at 3.30 a.m. worrying about your investments. A good strategy is IMO one which enables the investor to sleep at night.
Panamax said:
P.S. I do hope you weren't awake at 3.30 a.m. worrying about your investments. A good strategy is IMO one which enables the investor to sleep at night.
Well spotted.
You wouldn't believe me, if I said I stay up all night trading the Australian market. -
No, I might be down tens of thousands this week, but still go to sleep instantly.
Have seen it many times before. So far there have always been more ups than downs, so why worry?
Age brings with it, a nocturnal bathroom visit requirement. If more than once though, then see a doctor.
There is an interesting Radio 5 Live presenter during the night on weekdays after 1am, Dotum.
One night each week his subject is football, another music.
If you are ever awake early, he is followed at 5am by 'Wake up to money', a business programme.
Jon39 said:
pingu393 said:
I don't disagree. This is why I'm not going all-in with this. The upside is not compounding within the stock, yet the downside is ( -ve compounds get less over time, which is a good thing ).
However, I am compounding, as I'm not realising any profits until I need the money. The profits are reinvested in something, so there is compounding withing the portfolio if not within the original stock.
).However, I am compounding, as I'm not realising any profits until I need the money. The profits are reinvested in something, so there is compounding withing the portfolio if not within the original stock.
I don't understand your definition of compounding.
I thought compounding involves a 20% market gain producing a £2,000 increase in year one, then 30 years later another 20% market gain produces a £200,000 increase. Tax free too, if done in a PEP/ISA, although not IHT free.
As no money leaves the portfolio (unless I need it), the WHOLE PORTFOLIO is subject to compounding. It is just the individual stocks that aren't.
Example...
Buy $100 of "A" at 100, and sell $5 when price reaches 105. The new holding in "A" is still $100, but it was effectively bought for $1.05 per share.
The $5 profit can be invested in any stock. If it goes back into "A" I wouldn't have actually withdrawn, but I would have amended the spreadsheet to show the investment is now $105 invested in stock bought at 105.
If it goes into a different stock, I try to choose a stock that has been high, but has dipped. So I buy $5 of stock "B".
Hopefully, both "A" and "B" will grow, but there is more likelihood for "B" to grow faster in percentage terms.
If the next 5% hit is "B" - I win, because growth of "B" was faster than "A". If the 5% hit is "A" - I don't win as much, as the money would have done better left in "A".
All the capital AND the profit are invested. This is what I think people are missing.
Jon39 said:
Panamax said:
P.S. I do hope you weren't awake at 3.30 a.m. worrying about your investments. A good strategy is IMO one which enables the investor to sleep at night.
There is an interesting Radio 5 Live presenter during the night on weekdays after 1am, Dotum.
He gets the best phone-in guests. Absolute fruit loops most of the time, but let's them have their discussion with him. He is performing a public service by giving lonely people someone to talk to.
Long journeys were much shorter thanks to him.
pingu393 said:
I used to listen to him when driving - Swede.
He gets the best phone-in guests. Absolute fruit loops most of the time, but let's them have their discussion with him. He is performing a public service by giving lonely people someone to talk to.
Long journeys were much shorter thanks to him.
He gets the best phone-in guests. Absolute fruit loops most of the time, but let's them have their discussion with him. He is performing a public service by giving lonely people someone to talk to.
Long journeys were much shorter thanks to him.
Born I think in Nigeria, but sometimes speaks Swedish and talks about spending time in Stockholm.
Do you know whether that was education, or some kind of work?
I suppose Wikipedia might have the answer.
A man with an excellent memory.
Yes, most phone-in radio shows have more fruit cakes the Huntley and Palmers.
pingu393 said:
To me, compounding is keeping the profits invested. This allows for growth on capital AND profit.
As no money leaves the portfolio (unless I need it), the WHOLE PORTFOLIO is subject to compounding. It is just the individual stocks that aren't.
Example...
Buy $100 of "A" at 100, and sell $5 when price reaches 105. The new holding in "A" is still $100, but it was effectively bought for $1.05 per share.
The $5 profit can be invested in any stock. If it goes back into "A" I wouldn't have actually withdrawn, but I would have amended the spreadsheet to show the investment is now $105 invested in stock bought at 105.
If it goes into a different stock, I try to choose a stock that has been high, but has dipped. So I buy $5 of stock "B".
Hopefully, both "A" and "B" will grow, but there is more likelihood for "B" to grow faster in percentage terms.
If the next 5% hit is "B" - I win, because growth of "B" was faster than "A". If the 5% hit is "A" - I don't win as much, as the money would have done better left in "A".
All the capital AND the profit are invested. This is what I think people are missing.
I think people do get you are staying invested, just a strange way of managing investments. As no money leaves the portfolio (unless I need it), the WHOLE PORTFOLIO is subject to compounding. It is just the individual stocks that aren't.
Example...
Buy $100 of "A" at 100, and sell $5 when price reaches 105. The new holding in "A" is still $100, but it was effectively bought for $1.05 per share.
The $5 profit can be invested in any stock. If it goes back into "A" I wouldn't have actually withdrawn, but I would have amended the spreadsheet to show the investment is now $105 invested in stock bought at 105.
If it goes into a different stock, I try to choose a stock that has been high, but has dipped. So I buy $5 of stock "B".
Hopefully, both "A" and "B" will grow, but there is more likelihood for "B" to grow faster in percentage terms.
If the next 5% hit is "B" - I win, because growth of "B" was faster than "A". If the 5% hit is "A" - I don't win as much, as the money would have done better left in "A".
All the capital AND the profit are invested. This is what I think people are missing.
My brain is fried reading your posts, god knows how you manage 1hr a day at this for fun
Anyway, good luck in your investing.
loafer123 said:
Regrettably, Wake up to Money is ruined by Shaun Farrington who presents it mostly and who appears to launch into sentences and questions with little coherence or clue where they will end up.
Painful.
Painful.
Yes, the presenter does not really fit. He probably got the job by being an exact match for the BBC merit excluded, recruitment policy.
Thankfully the guests can sometimes be interesting.
Tighnamara said:
I think people do get you are staying invested, just a strange way of managing investments.
My brain is fried reading your posts, god knows how you manage 1hr a day at this for fun
Anyway, good luck in your investing.
Some days, 30 seconds just to look at the big number, sometimes a wee bit longer if three or four hit the 5%.My brain is fried reading your posts, god knows how you manage 1hr a day at this for fun
Anyway, good luck in your investing.
Today, is a 30 second day
Busy making ducting for the kit car today. Engine bay gets so hot I think it fried the alternator on the way to Le Mans. A friendly French garage let me replace it in their workshop, but don't want a repeat occurence.
Gratuitous petrolhead shot...
ukwill said:
Anyone having a bit of Korean action?
I'm partial to a bit of Korean, well my EM Asia fund has dropped from 72% to 60% (2yr performance since purchase). Ouch. It was my star performer and I did wonder about selling some on Monday. I'm not going to do anything until this all calms down. If its (assumed) recovery is sluggish compared to others then it might get culled.ukwill said:
Anyone having a bit of Korean action?
I made a big bet on Pacific ex Japan a couple of years ago for reasons related to the semiconductor shortage at the time. It trickled along for a bit, then began to gather momentum a year ago. I doubled down on it about 6 months ago, and then it went mad, driving mostly by its 3 biggest holdings TSMC, Hynix and Samsung.I was sitting on 80% gains. The last 3 days have been painful to watch. Only about 10% down but in monetary terms it feels like a big loss very quickly.
Holding on as too late to get out, and I don’t want to trigger the CGT.
PhilboSE said:
I made a big bet on Pacific ex Japan a couple of years ago for reasons related to the semiconductor shortage at the time. It trickled along for a bit, then began to gather momentum a year ago. I doubled down on it about 6 months ago, and then it went mad, driving mostly by its 3 biggest holdings TSMC, Hynix and Samsung.
I was sitting on 80% gains. The last 3 days have been painful to watch. Only about 10% down but in monetary terms it feels like a big loss very quickly.
Holding on as too late to get out, and I don t want to trigger the CGT.
What do you mean by ‘it’s too late to get out”? It sounds like you are massively up still after being invested for only a couple of years. Also, on the plus side, your CGT liability will have reduced if the value has fallen by 10%. I was sitting on 80% gains. The last 3 days have been painful to watch. Only about 10% down but in monetary terms it feels like a big loss very quickly.
Holding on as too late to get out, and I don t want to trigger the CGT.
PhilboSE said:
I made a big bet on Pacific ex Japan a couple of years ago for reasons related to the semiconductor shortage at the time. It trickled along for a bit, then began to gather momentum a year ago. I doubled down on it about 6 months ago, and then it went mad, driving mostly by its 3 biggest holdings TSMC, Hynix and Samsung.
I was sitting on 80% gains. The last 3 days have been painful to watch. Only about 10% down but in monetary terms it feels like a big loss very quickly.
Holding on as too late to get out, and I don t want to trigger the CGT.
I was sitting on 80% gains. The last 3 days have been painful to watch. Only about 10% down but in monetary terms it feels like a big loss very quickly.
Holding on as too late to get out, and I don t want to trigger the CGT.
If the fundamentals and future prospect of those three businesses are in line with their share prices, then I would not be worried.
However, if you think the upward share price has got well ahead of earnings prospects, then you might be sitting on risky bubbles.
Assume that there was a reason not to be holding in an ISA. There is effectively no CGT free allowance now, so almost no CGT sales are possible. Anyone aspiring to do well is regarded to be an awful person now. One good example showing a person the envy enthusiasts hate is Mr. Charlie Mullins.
As a young man he wanted to better himself. Started a business which became very successful, employing many people and therefore supporting their families wellbeing. His accountant told him, that prior to him selling his business, he and his company had paid £100 million tax.
Those who now throw insults at him, calling him an ex-pat tax dodger, will never ever pay that much tax in their lifetimes. Mr. Mullins family have now stared another UK business, which will employ and pay tax.
BAMoFo said:
PhilboSE said:
I made a big bet on Pacific ex Japan a couple of years ago for reasons related to the semiconductor shortage at the time. It trickled along for a bit, then began to gather momentum a year ago. I doubled down on it about 6 months ago, and then it went mad, driving mostly by its 3 biggest holdings TSMC, Hynix and Samsung.
I was sitting on 80% gains. The last 3 days have been painful to watch. Only about 10% down but in monetary terms it feels like a big loss very quickly.
Holding on as too late to get out, and I don t want to trigger the CGT.
What do you mean by it s too late to get out ? It sounds like you are massively up still after being invested for only a couple of years. Also, on the plus side, your CGT liability will have reduced if the value has fallen by 10%. I was sitting on 80% gains. The last 3 days have been painful to watch. Only about 10% down but in monetary terms it feels like a big loss very quickly.
Holding on as too late to get out, and I don t want to trigger the CGT.
Jon39 said:
If the fundamentals and future prospect of those three businesses are in line with their share prices, then I would not be worried.
However, if you think the upward share price has got well ahead of earnings prospects, then you might be sitting on risky bubbles.
Assume that there was a reason not to be holding in an ISA. There is effectively no CGT free allowance now, so almost no CGT sales are possible. Anyone aspiring to do well is regarded to be an awful person now. One good example showing a person the envy enthusiasts hate is Mr. Charlie Mullins.
As a young man he wanted to better himself. Started a business which became very successful, employing many people and therefore supporting their families wellbeing. His accountant told him, that prior to him selling his business, he and his company had paid £100 million tax.
Those who now throw insults at him, calling him an ex-pat tax dodger, will never ever pay that much tax in their lifetimes. Mr. Mullins family have now stared another UK business, which will employ and pay tax.
I am invested in it in ISA, SiPP & standard investment wrappers. Markets recovered somewhat today so I’ve got back about 20% of my losses already.
Totally get what you’re saying about higher rate tax payers being targeted - I wrote something similar a while back. The Labour Party vilifying such people just shows they don’t understand who generates and pays the majority of taxes.
Peterpetrole said:
City banker friend of mine says he's happy to pay tax because it means he's made money
That’s been my attitude, but it really only holds for income taxes. For transactional taxes, you would normally prefer not to trigger a tax event until the last possible minute. It would have been a bit galling to do so just because Trump was about to crap on the markets.PhilboSE said:
Peterpetrole said:
City banker friend of mine says he's happy to pay tax because it means he's made money
That s been my attitude, but it really only holds for income taxes. For transactional taxes, you would normally prefer not to trigger a tax event until the last possible minute. It would have been a bit galling to do so just because Trump was about to crap on the markets.
d gets done for the ludicrously dangerous crime of doing 24 in a 20. The Ev part of the site has been taken over by eco loons pushing Chinese junk 24/7 and now we have people suggesting they actually want to pay tax I mean WtAF. You avoid tax at all costs. Taxation is theft! Pure and simple. There a lefty bot factory somewhere in Shanghai working way too hard.Gassing Station | Finance | Top of Page | What's New | My Stuff