# Good problem - stop savings?



## andyB20 (20 Feb 2020)

Hello - thanks to all the great contributors on this forum - it's excellent - informed and helpful. I'd appreciate your wisdom/analysis. Here are my details per the template:

*Age*: 43
*Spouse’s/Partner's ag*e: N/A
*Annual gross income from employment or profession*: €205,000
*Annual gross income of spouse*: N/A
*Monthly take-home pay*: €8700 approximately
*Type of employment*: PAYE Employee

*In general are you*: Saving - approx €6500 per month

*Rough estimate of value of home*: €350,000
*Amount outstanding on your mortgage*: €70,000 
*What interest rate are you paying?* Tracker, < 1%

*Do you pay off your full credit card balance each month?* Yes
*If not, what is the balance on your credit card?* N/A

*Savings and investments:*
Approx €390,000 - cash, in various deposit a/c and govt savings bonds/things. Misc small (total <10K) direct shares

*Do you have a pension scheme?* Yes - 4%, employer contrib is 8%. Have been adding AVC (not max) for past few years. Overall pot is low though.
*
Do you own any investment or other property?* No.

*Other borrowings – car loans/personal loans etc:* None

*Ages of children: *N/A

*Life insurance:* Yes

*What specific question do you have or what issues are of concern to you?*
I spent quite a number of years in precarious jobs (startups and contracts etc) where savings/pensions were a second-thought or sporadic. The past few years have been in more stable environments, so I think I've over-focused on cash-savings, emergency-mode based on previous instability.
I'd basically welcome some thoughts the right balance of what I am doing with my income from now on - reading articles about negative interest rates makes it clear that just accumulating cash/savings is really diminishing value overall.
I presume it is a no-brainer that I just maximize pension AVC from now on?
I presume it is a no-brainer that I don't pay-off mortgage (based on low tracker rate)?
I think I need to divert 75%+ of future savings to investment. I think direct shares - I've looked a bit at ETF but it seems far too complex/grey in tax terms. I guess that is getting into Investment Forum territory..
Is there something else obvious I am missing? 

Thanks!


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## RedOnion (20 Feb 2020)

andyB20 said:


> I'd basically welcome some thoughts the right balance of what I am doing with my income from now on


What are your goals?
You post focuses on your salary and savings, but you've given no view about what you want to do. Retire early? Become an angel investor and encourage startups? Own a property abroad? Buy a yacht?
Or are you just asking how do you maximise your money? Over what time frame?



andyB20 said:


> I presume it is a no-brainer that I don't pay-off mortgage (based on low tracker rate)?


I wouldn't agree that this is a no brainer. You've enough cash to pay your mortgage off 5 times! How much of that cash is on zero rate, or less than 0.25% return? After tax? I think I'd be paying off the mortgage - simplifies things, and changes your view of risk.


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## andyB20 (20 Feb 2020)

Thank you @RedOnion. 
Agree - goals are very ill-defined in that post..
I think main goal is to maximize value of current/incremental cash - which on reflection, is Investment Forum territory. But looking for silly day-to-day errors/missing-options before that.
It's a good point that just clearing mortgage would change mindset....
Thanks again


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## Gordon Gekko (20 Feb 2020)

I would clear the mortgage. Yes it’s on a tracker but in the grand scheme of things it would be nice to be mortgage free.

I would maximise my AVCs for last year before 31 October and start maxing it for this year and subsequent years. 100% invested in the best all global equity option for your scheme.

Then I’d keep a decent amount in cash for emergencies; perhaps €50k, i.e. 6 months’ net income?

I’d take the rest (i.e. €270k) and create a diversified portfolio of global equities. Then I’d add my €6,500 a month to it.


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## David1234 (21 Feb 2020)

Start contributing the max to your pension. You can backdate contributions for 2019 also. With your level of cash, the fact you have a relatively small existing pension it is the first thing you should do in your position.

In your shoes I would pay down the mortgage to simplify my finances.


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## Steven Barrett (21 Feb 2020)

First of all, well done in getting into such a good financial decision. Part of that is because you're expenditure hasn't increased in line with your earnings. It's good to keep it that way.

I'd echo what the others have said, clear the mortgage so you are debt free, max out pension (earnings cap of €115,000 for pensions, so you can't put in 25% of your full salary), keep some money for a rainy day and invest the rest. 

That's the easy bit, the hard bit is you have to figure out what you want from life, both personally and professionally. You don't get to earn €205,000 a year without working for it, so can you see yourself working at the same level when you are 60? Would you like to be in a position to ease off before then? If so, what would you do with yourself and how much would that cost you? 

It can be difficult to come up with the answers if you don't know the questions and maybe a life coach can let you know what they are.


Steven
www.bluewaterfp.ie


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## SlugBreath (21 Feb 2020)

Gordon Gekko said:


> I’d take the rest (i.e. €270k) and create a diversified portfolio of global equities. Then I’d add my €6,500 a month to it.


At the moment stock markets are at a pretty much all time high. This week I needed to purchase some electrical items, laptop, mouse etc. Two of the laptops I wanted were not available. The selection of Mouse available were just a handful.

There has to be supply issues with China. There has to be a knock effect....eventually.....When companies start to issue profit warnings I think the markets will fall back.

I do believe in investing in the stock market is a good thing but I think you really need to time this right.


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## Brendan Burgess (21 Feb 2020)

1) Absolutely agree that you max your pension fund 

2) *You do not need any cash in a rainy day fund *
You will have a lot of investments in shares.  If you lose your job or you have a sudden expense, then you can sell shares. 
There is a good chance that if you lose your job, you will get notice and maybe even redundancy. You will be generating €6,000 in savings a month for a while between the time you get notice and find yourself without any income. 

3) Would you consider trading up your home? 
A family home is a great investment.  

Any gain is exempt from Capital Gains Tax. 
The "income" in terms of having a nicer home is tax-free 
If your income crashes in the future, you can always rent a room tax-free 
 It is ignored in the means testing of any social welfare benefits. 
If a wealth tax is introduced, I would imagine that it will be more favourably treated than an investment in the stock market. 

If you buy an extra €300k worth of house, you will pay an extra €600 in Local Property Tax. You may have some additional maintenance costs. 

4) If there is much of a chance that you will trade up, then you should hold onto your tracker as you will probably be able to move it to the new house with an increase in the margin of 1%,

5) If you have no intention of trading up, it's probably better to pay off your mortgage 
It is certainly better to pay off your mortgage at 0.8% instead of keeping your mortgage and having the equivalent in cash at 0% interest and that 0% is subject to DIRT!  

But a tracker of €70,000 is worth about €1,500 a year to you.  It's only a minor detail in the total of your finances, so you are not going far wrong in paying off the mortgage.


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## Fella (21 Feb 2020)

SlugBreath said:


> At the moment stock markets are at a pretty much all time high. This week I needed to purchase some electrical items, laptop, mouse etc. Two of the laptops I wanted were not available. The selection of Mouse available were just a handful.
> 
> There has to be supply issues with China. There has to be a knock effect....eventually.....When companies start to issue profit warnings I think the markets will fall back.
> 
> I do believe in investing in the stock market is a good thing but I think you really need to time this right.



I have seen this mentioned a few times recently , and on and off over the last couple of years on this site . If anyone took this advice they would be losing out on all the gains over the last couple of years. Eventually there will be a crash but nobody knows when , you could wait till a crash but you might miss years of 20% gains 3 or 4 years in a row and then be happy you missed the 50% overnight drop . 
If you invested in the stock market and your saying markets are high to someone else who wants to invest , do I take it that you have sold all your holdings ? because your going to lose also , but I very much doubt that everyone that says the stock market is high has sold up , there is no difference between been invested and advising someone else not to invest as to advising someone already invested to sell up .


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## Zenith63 (21 Feb 2020)

andyB20 said:


> I think I need to divert 75%+ of future savings to investment. I think direct shares - I've looked a bit at ETF but it seems far too complex/grey in tax terms.


I would not agree with this.  With direct shares, particuarly trying to get global diversity, you'll be dealing with stamp duty when buying/selling but only on certain markets, income tax on dividends but you need to manage withholding taxes which will vary depending on the country and declartions to avoid double taxation in certain markets, CGT on share sales, with a large basket you'll end up involved in some rights issues which again may have tax implications that can be complex if it's say a US company, DRIP/SCRIP schemes will leave you with loads of tranches of shares issued at different prices to when you bought, you'll get lots of interesting invites and requests to vote at AGMs etc etc.  Taxation on ETFs is less complex and more transparent than direct shares, it's a single rate and due every 8 years, simple as that.

The main complaint with ETFs is that you are disadvantaged tax wise compared to direct shares which can grow tax free indefinitely.  However again you have to ask yourself are you willing to deal with all the issues above related to direct shares adding in trying to build a portfolio that is truly diversified and constantly rebalance that as companies/countries fortunes change?  All this dealt with internally in an ETF, you just keep throwing a few quid in each month and forget about it.

Personally I think it may be doing a disservice to smaller investors to make ETFs seems like such a bad deal.  You MAY be able to do better, but the vast majority of people will not.  In your case in particular, you'll be engaging an accountant to do your tax returns whether you go direct or ETFs, so even if ETFs were more complex tax wise (they certainly would not be with a large globally diverse portfolio) it won't be your problem.


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## noproblem (21 Feb 2020)

I would make sure i've got good health insurance, would also make a will and after that i'd enjoy my life and not take anything too serious. Unless you go off the beam entirely you're in great shape and are doing very well in the way you're managing everything by yourself at the moment. at the moment. At some stage ask yourself, what's enough and am I happy?


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## Steven Barrett (21 Feb 2020)

SlugBreath said:


> At the moment stock markets are at a pretty much all time high. This week I needed to purchase some electrical items, laptop, mouse etc. Two of the laptops I wanted were not available. *The selection of Mouse available were just a handful.*
> 
> There has to be supply issues with China. There has to be a knock effect....eventually.....When companies start to issue profit warnings I think the markets will fall back.
> 
> I do believe in investing in the stock market is a good thing but I think you really need to time this right.



My daughter wanted a mouse for her laptop in December. Very poor selection. This was before coronavirus. Consumer has moved away from using a mouse. 



SlugBreath said:


> I do believe in investing in the stock market is a good thing but I think you really need to time this right.



Good luck with that. While timing the market will increase the amount of gains, trying to time it is a fools game. You might get lucky but that's all it is.

For the last few years people have been warning that there's going to be a crash. The end of 2018 wiped out all the gains for that year and they told us the crash was coming so they kept their money in cash, waiting to make massive profits from buying cheap. Guess what? They missed out on 30% growth in the market!! When the crash does happen, they'll pop up again and tell us how great they were for buying cheap ignoring all the growth they missed out on. 


Steven
www.bluewaterfp.ie


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## andyB20 (21 Feb 2020)

Thanks for taking the time to read and reply. Great perspectives and food-for-thought.


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## Gordon Gekko (21 Feb 2020)

The “markets are at all time highs” stuff is utter nonsense. The long-term trend of markets is upwards, so it’s natural for them to hit new highs pretty regularly! If you have a decent time-horizon, strong income, and the ability to add to the portfolio, just get on with it and stay invested. Trying to time the market is a mug’s game. There is an old adage that more money is lost waiting for corrections than in corrections themselves. The same people who spread fear and uncertainty today were doing it in January 2019! But they rarely talk about the 30-40% that’s been left behind since.


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## Gordon Gekko (21 Feb 2020)

Markets and companies are priced on the basis of the expectation for the next (say) 80 quarters and even beyond. Coronavirus may impact on sales this quarter or this year or it may not. But do you really think that it will be relevant in (say) 5 to 10 years time? So if you have a time-horizon that’s greater than (say) 10 years should you be obsessing about Coronavirus, listening to what some markets shock-jock thinks about Coronavirus, or simply buying a diversified portfolio of good companies and getting on with your life?


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## andyB20 (21 Feb 2020)

Thanks @Gordon Gekko 

I would not want to do a big, single investment/transfer into anything. That just seems like point-in-time gambling. I was more thinking of averaging-in future cash.


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## Gordon Gekko (21 Feb 2020)

andyB20 said:


> Thanks @Gordon Gekko
> 
> I would not want to do a big, single investment/transfer into anything. That just seems like point-in-time gambling. I was more thinking of averaging-in future cash.



Why? That’s also trying to time the market (or “point-in-time gambling” to use your term). On the basis that the long-term trend of markets is upwards, then statistically it makes sense to invest earlier rather than later.

You are in an incredibly strong position. You have a very long time-horizon. You would have no debt. You would have €50,000 in cash. You would be maxing out your pension contributions. You earn more than €200,000 per year.

You should just get on with it and ignore the negative noise around markets. Do you realise that a person who invested in a globally diversified equity portfolio at the peak in 2007/2008 (i.e. the worst time) has more than doubled their money today? Not at the bottom...someone who invested at the top. Your current asset allocation (mainly cash) and the historic neglect of your pension are the current black marks; forget about phasing in and simply get on with it. And don’t bother with anything other than 100% equities.

If you max out your AVCs, invest the €270k now and add €6,500 to it monthly, you’ll be in superb financial shape at age 60 (for example).

Best of luck.


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## SoylentGreen (24 Feb 2020)

Gordon Gekko said:


> The “markets are at all time highs” stuff is utter nonsense. The long-term trend of markets is upwards, so it’s natural for them to hit new highs pretty regularly! If you have a decent time-horizon, strong income, and the ability to add to the portfolio, just get on with it and stay invested. Trying to time the market is a mug’s game.


I would have thought that the Corona virus would have had a knock on effect on the market eventually.  So by holding back for the moment might seem a sensible thing to do, even a mug might get this one right.  Today is only one day in the scheme of things but the markets are already off by 2% this morning.  Was this not obvious?


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## Sunny (24 Feb 2020)

An individual making medium to long term investment decisions on Coronavirus is foolish. Even making short term decisions unless you are trying to be some sort of day trader is ridiculous. Even if the virus has an impact on economic output and supply chains, it is not going to have a medium to long term impact. The markets have brushed aside bigger news stories than this in the past 12 months.


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## michaelm (24 Feb 2020)

I'd be clearing my mortgage today and start working out a 12 year roadmap to retirement.


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## Steven Barrett (24 Feb 2020)

SoylentGreen said:


> I would have thought that the Corona virus would have had a knock on effect on the market eventually.  So by holding back for the moment might seem a sensible thing to do, even a mug might get this one right.  Today is only one day in the scheme of things but the markets are already off by 2% this morning.  Was this not obvious?



When does it hit the bottom?


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## Steven Barrett (24 Feb 2020)

andyB20 said:


> Thanks @Gordon Gekko
> 
> I would not want to do a big, single investment/transfer into anything. That just seems like point-in-time gambling. I was more thinking of averaging-in future cash.



Read the Of Dollars and Data blog. He writes loads about dollar cost averaging and how it doesn't beat lump sum investment, even when the lump sum is a lower risk strategy. 

But if investing a large lump sum in one go makes you nervous, it's fine to drip it in but know that there's a trade off of lower returns in the long term for that extra level of comfort in the short term. 

Steven
www.bluewaterfp.ie


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## SoylentGreen (24 Feb 2020)

SBarrett said:


> When does it hit the bottom?


I have been investing directly in the UK stock market since the 1980's.  You cannot call the top or the bottom but you can observe trends and study fundamentals.
I sold last April and made a substantial profit. I got it partly wrong, if I had stayed in, I would have made a much larger profit. However I didn't make a loss.
I have a large sum of money sitting in my Davy account at the moment. Incurring costs and nil dividends coming my way. At least I had the sense to leave it in Sterling and not convert back to Euro when I sold last April.
I am tracking some of my favourite shares at the moment. They are still not near the price I am willing to pay but they may get close. Unfortunately, then the greed sets in. "Will I buy now or hold out for them to fall further".  You can miss the boat by doing this but you might not lose any money.


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## SoylentGreen (24 Feb 2020)

There is a slight pick up in the Ftse as I write. Maybe the bottom feeders or the shorters covering their positions. A profit is a profit after all.
Or maybe a dead cat bounce?

Dow Futures down 2.40% forecast. This may lead to a further drop in the Ftse as the US market opens today.


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## Sunny (24 Feb 2020)

SoylentGreen said:


> There is a slight pick up in the Ftse as I write. Maybe the bottom feeders or the shorters covering their positions. A profit is a profit after all.
> Or maybe a dead cat bounce?
> 
> Dow Futures down 2.40% forecast. This may lead to a further drop in the Ftse as the US market opens today.



That is some amount of jargon in one post. No offence, but a 2.4% drop in the dow opening is not newsworthy. 

Bottom feeders and dead cat bounce?? Did I miss a market crash this morning or something?


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## SoylentGreen (24 Feb 2020)

Sunny said:


> No offence, but a 2.4% drop in the dow opening is not newsworthy.


No. What I said was...."Dow Futures down 2.40% forecast. This may lead to a further drop in the Ftse as the US market opens today."

But you knew that.....


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## andyB20 (24 Feb 2020)

Thanks everyone for inputs, and for taking time to read. Sincere apologies to the moderators for accidentally creating an investment thread in the wrong venue..

@noproblem - thanks for the advice on will, I do need to do that..
@Gordon Gekko - thanks for challenging my perspectives! My risk mindset probably does need re-wiring.
@SBarrett - Great link! I think you understand mindset.. 
@Brendan Burgess - it's a really interesting angle re trading-up. I travel too much though, so can barely keep up with keeping current place in-order so no appetite for a larger place  at the moment.

The thread has confirmed re pension, made me re-think on mortgage (will clear it). Need another thread in investment forum after I've parsed some things and gone beyond an idiot first post.

/A


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## garbanzo (24 Feb 2020)

RedOnion said:


> What are your goals?
> You post focuses on your salary and savings, but you've given no view about what you want to do. Retire early? Become an angel investor and encourage startups? Own a property abroad? Buy a yacht?
> Or are you just asking how do you maximise your money? Over what time frame?
> 
> ...



Hey RedOnion. You’ve given me some good advice over the years. Can I ask what you mean when you say above that paying off the mortgage changes ones views on risk? I’m on a journey towards that goal myself so interested in what is behind that sentiment.


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## Techhead (25 Feb 2020)

How do you pick shares ?


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## SoylentGreen (25 Feb 2020)

.


Sunny said:


> Did I miss a market crash this morning or something?



I know you missed yesterday's sell off.....did you notice anything today?


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## Sunny (25 Feb 2020)

SoylentGreen said:


> .
> 
> 
> I know you missed yesterday's sell off.....did you notice anything today?



You mean the Dow or the Ftse down less than 2% . Well excuse me while I go and buy my supply of canned goods and make sure I still have my codes to my bitcoin wallet. 

Do you want to know how much % you lost with your money sitting in a stockbroker account doing nothing for the past few months???

Talking about bottom feeders and dead cat bounce after a few hours of a mild market sell off shows that you are deluding yourself that you are investing smartly. Have you gone all in on the back of this massive sell off or are you waiting for more carnage on the street. 

And by the way, I know markets will be impacted by this virus. I also know the reaction will be overdone and I know the markets will recover. I wouldn't have a clue though when or how much will it will fall or what will happen. I dont care either. If you want to go defensive with your portfolio and equity allocation then go defensive but dont do it on the back of events with the intention of selling high and buying low.  You are not a day trader and you will get burnt.


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## WaterWater (27 Feb 2020)

Sunny said:


> Talking about bottom feeders and dead cat bounce after a few hours of a mild market sell off shows that you are deluding yourself that you are investing smartly. Have you gone all in on the back of this massive sell off or are you waiting for more carnage on the street.



Would you still call this a mild market sell off?  I think the DOW is now down 10% since Monday. Nothing mild about that.
Thankfully I sold my Irish airline stock last week anticipating something like this. I see that share price has dropped by €3.


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## WaterWater (27 Feb 2020)

Sunny said:


> No offence, but a 2.4% drop in the dow opening is not newsworthy.


But when it happens 4 days in a row it certainly is getting lots of news.


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## Odea (27 Feb 2020)

Gordon Gekko said:


> Why? That’s also trying to time the market (or “point-in-time gambling” to use your term). On the basis that the long-term trend of markets is upwards, then statistically it makes sense to *invest earlier rather than later*.


But.....maybe wait until the current correction settles down...….investing earlier last week would have cost you a lot of money.


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## Odea (27 Feb 2020)

SoylentGreen said:


> I sold last April and made a substantial profit. I got it partly wrong, if I had stayed in, I would have made a much larger profit. However I didn't make a loss.


 Well with the cash in your pocket you can sit back and wait a bit longer to see how things pan out. It looks as if investors are scrambling now to take their profits before there is nothing left for them.


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## Sunny (27 Feb 2020)

Of course there is a reaction but we are still far off anything close to panic. Markets have seen this before. SARS, Swine Flu, Foot and Mouth, Ebola etc etc. They have recovered quickly every single time. The economic risk is that Governments have to start taking huge steps to try and contain the virus. Travel bans, business closures etc etc will all a huge impact but it is temporary. Maybe the world is ending but I haven't seen any evidence yet.....


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## Fidgety (27 Feb 2020)

The world will get back to business ..... after a while. Uncertainty will stop consumption and increase savings. Earnings will suffer and costs increase. If job growth falters, recession fears will accelerate. Smart doctors will ultimately develop a vaccine. The vulnerability of global supply chains and over exposure to Asian manufacturing will cause a major rethink, regardless of the costs of production.

Lessons will be learned and opportunities will present themselves. Great companies will ultimately endure and this turmoil presents buying windows at better prices.

A correction was overdue. CV19, scary and distressing as it is .....merely accelerated that natural process.


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## TrundleAlong (28 Feb 2020)

SBarrett said:


> When does it hit the bottom?


Well you could have sold by now and saved yourself a lot of anguish rather than hanging in for 10 years as has been advised here.  That would have been the first step.
The next step is to try and anticipate "When does it hit the bottom". You won't get this right, but you might be able to pick up some shares that have been oversold with all your spare cash.


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## TrundleAlong (28 Feb 2020)

Sunny said:


> Of course there is a reaction but we are still far off anything close to panic


I am not so sure about your views. I have read your posts above. It looks to me as if their is panic selling out there. Investors trying to salvage the profits that they have built up.  Good to see that some posters above, who have been unkindly called "mugs" by some, took their profits by calling *what they saw *as the top of the market.  They haven't lost.


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## Sunny (28 Feb 2020)

TrundleAlong said:


> I am not so sure about your views. I have read your posts above. It looks to me as if their is panic selling out there. Investors trying to salvage the profits that they have built up.  Good to see that some posters above, who have been unkindly called "mugs" by some, took their profits by calling *what they saw *as the top of the market.  They haven't lost.



No, this is based on people saying that they have had money sitting in a stockbrokers account earning nothing (actually costing them fees) since last year and now claiming they are right because of the fall. Want to know how much equities increased in the past 6 months and they missed out on compared to the fall of the past week?

I have no problem going defensive on equities in my existing portfolio allocation if I think there is a significant change in the economic cycle but I would never stop investing in equities on a regular basis. If I think this virus will lead to world recession, then I will have to look again but I see no firm evidence yet.


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## TrundleAlong (28 Feb 2020)

Gordon Gekko said:


> The “markets are at all time highs” stuff is utter nonsense. The long-term trend of markets is upwards,



There is now talk about a bear market. Do you still hold your views?


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## TrundleAlong (28 Feb 2020)

Sunny said:


> An individual making medium to long term investment decisions on Coronavirus is foolish. Even making short term decisions unless you are trying to be some sort of day trader is ridiculous.


 Lots of people making "short term" decisions this week.....and taking their built up profits......are you saying that they are all wrong and you are right?


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## elcato (28 Feb 2020)

Thread closed as we are now discussing shares.


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