S&P500 at record highs - time to stay in or pull out?

[paulguitar]

Having a good morning here.

[Mr Pointy]

Inlineonline said:

okgo said:

A tracker fund is a very sensible starting point, but for the long-long-term big money, some individual selection becomes necessary, as investors become more experienced

Can you elaborate here? I think it s completely incorrect but happy to understand why I may be wrong. Perhaps our versions of big money differ but I still fail to see how something that works at one level doesn t at another.

Me too.

Are you saying that you can predict the markets?

In which case why bother with a tracker at all, actively pick your entire portfolio surely?

Except we know that the vast majority of amateur and professional stock pickers do worse this way.

What does the size of the investment have to do with any of this?

Genuinely curious. I'm pretty experienced, but sanguine about my ability to beat the historical stats.

Jon is a dividend-loving invest & hold investor, not a trader. He is not at all a typical PH investor, possibly a bit more Buffet-ish than most on here? It certainly seems to have worked for him but it seems to offend some posters.

[okgo]

I don’t think his approach offends anyone, its well known on here that he has had a strong track record with large FTSE components with a buy and hold strategy using Buffet-eque fundamentals in his approach. But as has also been covered, his success is very rare (i.e his track record is better than some fund managers with millions of £ AUM), and while its been working for him, I don’t believe the comments about passive to be true.

There’s many passive investors out there sitting on large portfolios - my own approach has not changed from when we started with this approach to today, and the portfolio has grown to an objectively large number (and many here likely the same with even bigger numbers). What is not obvious to me is why this approach works at £100k but not at £1m or even £5m or £10m - nothing particularly changes with the ‘why’ of passive investing regardless of the numbers behind it.

[anonymous-user]

okgo said:

I don t think his approach offends anyone, its well known on here that he has had a strong track record with large FTSE components with a buy and hold strategy using Buffet-eque fundamentals in his approach. But as has also been covered, his success is very rare (i.e his track record is better than some fund managers with millions of £ AUM), and while its been working for him, I don t believe the comments about passive to be true.

There s many passive investors out there sitting on large portfolios - my own approach has not changed from when we started with this approach to today, and the portfolio has grown to an objectively large number (and many here likely the same with even bigger numbers). What is not obvious to me is why this approach works at £100k but not at £1m or even £5m or £10m - nothing particularly changes with the why of passive investing regardless of the numbers behind it.

Exactly, I have been an active investor for 15 years, and built up a pretty decent pot, but being totally sanguine about it, a passive approach over the same time period if adhered to with discipline, would probably have been just as good, and a lot less effort and stress!

I'm now at a stage where the size of the investment is enough that I don't need to chase excessive returns, and also can weather out any downturns as I don't actually need the income from the investment (still working plus have a pension paying out already) so I appreciate that I'm in a fortunate position.

The irony is though, that with this more hands off approach, not only is it far less work, I suspect the returns will be as good if not better than before. It really is a case of the less you do the better.

I'm not remotely tempted to go back to active investing though, there are better things to spend time on!

[ooid]

Jon39 said:

Edited by Jon39 on Monday 18th May 09:46

Barratt lost nearly 70% last 5 years though.. (Similar to other house builders in UK, it's systemic).

I'm not arguing about company by the way, I think they are pretty good at what they are doing but macro factors in UK have been neck-slapping them.

I think the point is, betting on one company that specialises in one country only (and the country you are actually living in) is a big home-bias and huge risk, especially if that country is in a continuous decay of economic conditions....

[anonymous-user]

Jon39 said:

Panamax said:

... Relentless diversification has served me well. And I don't consider buying a simple index or market to be diversification.

Obvious diversification is an easy sell, when the investment funds advertise.
"Oh you need a fund in USA, Europe and one in the exciting Emerging Markets."
The buyers say sign me up to all three funds, without even considering how dreadfully the 'emerging markets' have performed.

Real but far less obvious diversification, are the huge FTSE 100 businesses, which trade in over 160 countries around the world. Wide geographic and currency diversification, within just a single company.

A tracker fund is a very sensible starting point, but for the long-term big money, some individual selection becomes necessary, as investors become more experienced.

Even selecting sectors is not that difficult. My starting point for a life without requiring many portfiolio changes, was simply to avoid the cyclical sectors. I have made one exception though - Oil and Gas. The managements of those businesses have shown that they are able to manage the regular downturns and keep dividends flowing.

Here are three examples.

Edited by Jon39 on Monday 18th May 09:46

Consider Barrett since 1990 from your graph?

UK inflation over that period was approx 195%

Global stocks (excluding dividends re-invested to be fair) around 40-500%

So that Barrett pick although superficially attractive has been terrible by comparison

[Hustle_]

Barratt has probably paid decent dividends over the years

[130R]

UK homebuilding in general are garbage stocks. Almost anything else will have performed better over the last 10 years.

[Simpo Two]

130R said:

UK homebuilding in general are garbage stocks. Almost anything else will have performed better over the last 10 years.

And yet more houses are being built than ever before and every politician says 'Must have more houses'. So why aren't these companies booming?

[ooid]

130R said:

UK homebuilding in general are garbage stocks. Almost anything else will have performed better over the last 10 years.

Well, if we were talking about active management, yes a good active manager would have shorted the whole housebuilders and go long on Serco Group. (Mostly Asylum seekers related services), for the same period...






People can't afford to buy new homes, and developers can't afford to build profitable homes due to rates and excessive taxes but politicians love pissing money on social services so here is the asymmetric beauty.

[simon800]

Or could have just stuck the whole lot in Nvidia, easy;




But then if you are going to do that you might as well stick it all in Nvidia 3 x Leveraged.

Etc etc.

The idea that investors should wait until their portfolio reaches a certain size and then abandon time proven strategies for far higher risk ones, by becoming individual stock pickers, is just silly.

[DaveA8]

130R said:

UK homebuilding in general are garbage stocks. Almost anything else will have performed better over the last 10 years.

I don't know, if you'd stuck £10K in each of Barrett, Bellway, Taylor Wimpy and Vistry in Feb of this you year ( 14 weeks ago) you'd have let's see, start at £40k and today about 19K.
But don't worry, they all comeback and given the share price destruction, cash preservation will be next,not immediately but soon enough and that means dividends get stopped.
I no longer invest in a buy and hold strategy because I can't sit and look at a 52% loss in 3 months and think that's okay, it's not drawdown, it's a loss and applying a macro view ( which I never do in real investing except a market strength view), given likely changes in policy, if anything private housebuilding will be dragged down further and more pressure will be put on builders to do more social housing at paper thin margins but high risk on projects they get planning on.
And that is why Warren Buffet said for the average person, a low cost index fund is a good choice and I include myself in that because if I knew back then what I know now, I'd have just stuck in the big 3 US indexes because history is on your side.

[Panamax]

DaveA8 said:

I no longer invest in a buy and hold strategy because I can't sit and look at a 52% loss in 3 months and think that's okay, it's not drawdown, it's a loss .

I'm inclined to agree.

Back in 2020 I took an absolute bath with the capital value of a chunk of bonds. Mercifully I've worked my way out of that during the past five years and only have a small remaining holding. The equities I bought instead have gone like a train while bond yields are now on the rise again. Yes, it all looks easy with 20:20 hindsight but what counts is identifying a strategy and using it. in this case the strategy was to switch some bonds out, crystallising the loss, and see what happened. It went well so so I switched some more and so on. As of today if I'd just sat on the 20% drop I would be much worse off than is actually the case having knuckled down and addressed the problem. (FWIW total return on the bonds worked out somewhere around 1% p.a, lagging significantly behind inflation. Meanwhile the equity replacements have risen in line with markets so have done pretty well.)

[LeoSayer]

Jon39 said:

Obvious diversification is an easy sell, when the investment funds advertise.
"Oh you need a fund in USA, Europe and one in the exciting Emerging Markets."
The buyers say sign me up to all three funds, without even considering how dreadfully the 'emerging markets' have performed.

Real but far less obvious diversification, are the huge FTSE 100 businesses, which trade in over 160 countries around the world. Wide geographic and currency diversification, within just a single company.

A tracker fund is a very sensible starting point, but for the long-term big money, some individual selection becomes necessary, as investors become more experienced.

In contrast to the bold above, my investments have become simpler as they have grown and as I gained experience.

20 years ago I held a number of different actively managed equity funds and along with a few individual company shareholdings from previous employers. I spent a huge amount of time analysing different factors to decide on the right fund and allocation. All it gave me was the same return I could have got from holding a global equity index tracker fund.

Around 10 years ago I started buying a global equity index tracker fund and for the past 7 years it's been my only equity holding.

I've seen enough stock pickers try and fail to beat the market and seemingly only a handful succeed over long time periods. I find managing my tax and pension planning difficult enough without adding further complexity.

This approach has led me to retire much earlier than I expected because the returns from the past 10 years have been great - averaging 9% per year compounded. I'm now sufficiently de-risked to not be materially impacted by a market downturn should it occur.

[CrippsCorner]

Hey guys, I'm pretty new to investing. I've been testing recently with small amounts, been talking to friends, researching etc. and I'm pretty comfortable with a boring approach, i.e. chucking into Vanguard type-of-thing and leaving well alone.

My question is if you had a five figure sum that you didn't need for 4-5 years (but then definitely did) would the best approach just being to doing the above for as much as possible, i.e. maxing out your tax free amount for 2-3 years... or could I be better spreading it across different things?

Most of my savings are in Premium Bonds which I know isn't the best tactic, although I did win £10k once so it's overall done me well over the last few years! I just think, maybe I've had my luck there and can do better elsewhere.

My only thought for not going all in with the stocks ISA is that if I'm just planning to take it all out and use it a few years down the line, I'm not going to get that tasty compounding... and maybe I'm just better drip feeding in money that I don't need, monthly. Although, it wouldn't be a lot doing it that way.

[Panamax]

Simpo Two said:

And yet more houses are being built than ever before and every politician says 'Must have more houses'. So why aren't these companies booming?

Because the UK is a disaster-fest and politicians won't admit it.
Over-crowded country with ongoing net immigration.
Limited availability of building land so high cost of building land.
Slow and costly planning process.
High cost of materials
High cost of complying with a multitude of regulations.
High cost of employing anyone in the UK to do any work at all. (Well done Rachel Reeves.)

Developers build the smallest new homes in Europe to crank up their numbers and then find people don't want to buy them at the prices asked. Bear in mind that building a 50% larger home only increases construction cost by a modest amount but the cost of land increases pro-rata and the cost of planning, permits, management etc is spread over a smaller number of homes on the development. UK is just a very expensive place.

Yes, this is substantially off topic for a S&P500 thread but highlights the problems house-builders are facing.

[Josemartinez]

Panamax said:

Because the UK is a disaster-fest and politicians won't admit it.
Over-crowded country with ongoing net immigration.
Limited availability of building land so high cost of building land.
Slow and costly planning process.
High cost of materials
High cost of complying with a multitude of regulations.
High cost of employing anyone in the UK to do any work at all. (Well done Rachel Reeves.)

Developers build the smallest new homes in Europe to crank up their numbers and then find people don't want to buy them at the prices asked. Bear in mind that building a 50% larger home only increases construction cost by a modest amount but the cost of land increases pro-rata and the cost of planning, permits, management etc is spread over a smaller number of homes on the development. UK is just a very expensive place.

Yes, this is substantially off topic for a S&P500 thread but highlights the problems house-builders are facing.

I agree with the cost of building and the small houses. I work for a business that supplies Barratt Redrow and others and we have noticed the average house size has reduced and they are squeezing our margins more and more.

[pingu393]

Inlineonline said:

Panamax said:

20:20 hindsight.

The next implosion will be equally easy to spot - after the event.

After the Wall Street crash of 1928, with dividends reinvested, prices recovered in 10 years.

That s well within the timeframe of a mortgage.

That's a big caveat. The graph I saw was it went from 30 down to 10, and didn't get back to 30 until the late 50s.

[anonymous-user]

pingu393 said:

Inlineonline said:

Panamax said:

20:20 hindsight.

The next implosion will be equally easy to spot - after the event.

After the Wall Street crash of 1928, with dividends reinvested, prices recovered in 10 years.

That s well within the timeframe of a mortgage.

That's a big caveat. The graph I saw was it went from 30 down to 10, and didn't get back to 30 until the late 50s.

But it reflects what you would actually experience as a long term investor. After the crash, dividends were unusually high and helped recover the losses.

So I think it’s correct to think of the performance including the dividends

[bmwmike]

Inlineonline said:

But it reflects what you would actually experience as a long term investor. After the crash, dividends were unusually high and helped recover the losses.

So I think it s correct to think of the performance including the dividends

ACC ETF's FTW!