Stock market correction or bear market/crash? Either way I bailed.

[Gordon Gekko]

I think that's a little harsh. There are some investment advisers in Ireland who adopt that type of long term approach with a focus on quality, and who don't railroad clients into their own products.

In an ideal world, someone would just buy a cheap MSCI World ETF, a basket of ETFs, or a basket of direct equities and leave it at that. Unfortunately, the behavioural side of things kicks in with investors, and they bail at the wrong time. Such an approach also ignores the identification of the right ETFs. For example, the UK market did very little last year and most people agree that the US is probably overvalued. Europe and Japan have been good places to be in recent times. A good investment adviser helps clients to overcome these issues.

Investors should look for transparency with regard to fees and charges, a lack of conflict with regard to how monies are invested, and appropriate investment resources.

 

[joe sod]

With regard to Japan that's true now but few people would have invested in Japan 2 years ago when they saw the horrendous performance of the Japanese stock market since 1990. There were many false dawns in that period also., The Japanese market was cheap for years so in 2007 you would think you were buying into a cheap unloved market only to see it decimated again in the financial crisis. The common talk about Japan for years was that it was an ageing very high debt market. It just shows you how difficult it is to stay the course when investing in out of favour sectors. It also shows that trends rather than fundamentals really drive stock markets eventually the fundamentals win out but you may have to wait years for this in the meantime watching your investment continue to decline.

 

[galway_blow_in]

I think that's a little harsh. There are some investment advisers in Ireland who adopt that type of long term approach with a focus on quality, and who don't railroad clients into their own products.

In an ideal world, someone would just buy a cheap MSCI World ETF, a basket of ETFs, or a basket of direct equities and leave it at that. Unfortunately, the behavioural side of things kicks in with investors, and they bail at the wrong time. Such an approach also ignores the identification of the right ETFs. For example, the UK market did very little last year and most people agree that the US is probably overvalued. Europe and Japan have been good places to be in recent times. A good investment adviser helps clients to overcome these issues.

Investors should look for transparency with regard to fees and charges, a lack of conflict with regard to how monies are invested, and appropriate investment resources.

european markets have never continued to gain while u.s markets were floundering , european markets are followers so if the u.s enters a full blown bear market , europe will do the same

regarding investment advisors , a close relative of mine came into some money in 2006 having sold some farm land for nearly 20 k per acre , they planned on doing nothing for a few years and just put the money in savings for a year , one day they got a call from an irish life operative , this person then actively pursued them for the following few months with endless phone calls and house calls , encouraging them to invest in a fund etc , this relative of mine was fifty nine at the time , they got them to stick the money in an india and china fund which nine years later is worth less than it was in 2007 ( in the years prior to spring of 2007 , india and china funds had delivered huge returns ) , now luckily i had a chat with this person fifteen months into there investment with irish life and they bailed ( a few months before the crash of 2008 really began in earnest ) and put everything back in cash , not only was there a 5% per anum managment fee on the fund for the fifteen months they were invested , there was an exit fee of 5% on top of that , this person invested 750 k and lost 50 k off the back of predatory banks but it wasnt just unethical , it was plain dumb , all they had to do when selling a product to someone near sixty was get them to put every penny in a bond fund

my point is , not only are most investment funds very bad value , more often than not , the advice is not particulary valuable

 

[galway_blow_in]

With regard to Japan that's true now but few people would have invested in Japan 2 years ago when they saw the horrendous performance of the Japanese stock market since 1990. There were many false dawns in that period also., The Japanese market was cheap for years so in 2007 you would think you were buying into a cheap unloved market only to see it decimated again in the financial crisis. The common talk about Japan for years was that it was an ageing very high debt market. It just shows you how difficult it is to stay the course when investing in out of favour sectors. It also shows that trends rather than fundamentals really drive stock markets eventually the fundamentals win out but you may have to wait years for this in the meantime watching your investment continue to decline.

did you know that when the s+p closed yesterday , it was only 25% above where it closed in august of 2000 , excluding dividends , thats a capital gain of only 1.5% per anum since the turn of this century , i dont know if that says the markets were very overvalued in 2000 , that they are cheap today , that even fifteen and a half years is too short of a time to realise large gains , had someone invested in the s+ p in 1986 , they would be up an enormous amount

 

[joe sod]

did you know that when the s+p closed yesterday , it was only 25% above where it closed in august of 2000 , excluding dividends , thats a capital gain of only 1.5% per anum since the turn of this century , i dont know if that says the markets were very overvalued in 2000 , that they are cheap today , that even fifteen and a half years is too short of a time to realise large gains , had someone invested in the s+ p in 1986 , they would be up an enormous amount

Yes I know I made that point earlier, it was more that the US market was way overvalued in 2000. But then is it the case that a lot of the business that US and western companies got before has shifted to China and emerging markets. Therefore maybe 2000 was the last big bull market in US stocks, so maybe the rise in the US markets is much slower now than before when the US had a much bigger share of the world market. I don't know I'm just thinking out loud. It would explain why the China Shenanigans is having such a big effect now. 2000 was a very optimistic time now the world is full of fear what with terrorism, flooding, and 2 financial crises. Maybe investors are obsessed with avoiding financial loss that the first sign of trouble they bail out.

 

[galway_blow_in]

Yes I know I made that point earlier, it was more that the US market was way overvalued in 2000. But then is it the case that a lot of the business that US and western companies got before has shifted to China and emerging markets. Therefore maybe 2000 was the last big bull market in US stocks, so maybe the rise in the US markets is much slower now than before when the US had a much bigger share of the world market. I don't know I'm just thinking out loud. It would explain why the China Shenanigans is having such a big effect now. 2000 was a very optimistic time now the world is full of fear what with terrorism, flooding, and 2 financial crises. Maybe investors are obsessed with avoiding financial loss that the first sign of trouble they bail out.

while the lot of the average american has declined relatively speaking this past forty years , american corporations have never been stronger , many of their employees now live in china etc and profits are recorded in places like ireland but they are not struggling , far from it

 

[joe sod]

while the lot of the average american has declined relatively speaking this past forty years , american corporations have never been stronger , many of their employees now live in china etc and profits are recorded in places like ireland but they are not struggling , far from it

Thats true. So where in general where would you be investing I know you said you were staying out until turmoil ends. The US looks like it is on the way down for now. But you also point out that it has not gained much since the year 2000 and also that american corporations have never been stronger. Also european stocks are alot cheaper than the US and emerging markets and commodities have been decimated last 3 years. When you lay it out like that there doesn't seem much justification for the big sell off when so many markets are cheap and when US not much higher than 2000.

 

[galway_blow_in]

Thats true. So where in general where would you be investing I know you said you were staying out until turmoil ends. The US looks like it is on the way down for now. But you also point out that it has not gained much since the year 2000 and also that american corporations have never been stronger. Also european stocks are alot cheaper than the US and emerging markets and commodities have been decimated last 3 years. When you lay it out like that there doesn't seem much justification for the big sell off when so many markets are cheap and when US not much higher than 2000.

europe is looking terrible economically going forward , its a mess politically , completely divided on many issues , germany and the uk are the only major economies which really have a clue , the uk may leave the eu and germany is too reliant on china , besides , european stocks are not near as cheap as many so called experts claim , they have always been cheaper historically than the u.s market , european equity markets have never continued higher while the u.s markets were heading lower , was the s+p to correct a further 10% , i think it would be a better buy than anywhere , i dont have much money in equities anymore full stop , il be making anual contributions gong forward in index funds , im not smart enough to spot terrific individual stocks , in the past ive either sold winners too early ( ryanair , glanbia , kerry , paddy power , smurfit kappa ) or bought stocks which were topping out ( ford , volkswagon )

i did do well by buying bank of ireland in 2012 however

 

[joe sod]

Yea but the point you made about the US not being much higher today than 2000 and other markets even cheaper than US. So 15 years have passed by where there have been bull markets and crashes especially in emerging markets but we are really at more or less same valuations as 15 years ago. I mean it's hardly the basis for all the over valuations of stock markets that we keep hearing. It seems that investors are going to have to deal with much more volatility than before even if investing in "safe" investments.

 

[galway_blow_in]

Yea but the point you made about the US not being much higher today than 2000 and other markets even cheaper than US. So 15 years have passed by where there have been bull markets and crashes especially in emerging markets but we are really at more or less same valuations as 15 years ago. I mean it's hardly the basis for all the over valuations of stock markets that we keep hearing. It seems that investors are going to have to deal with much more volatility than before even if investing in "safe" investments.

historically the average PE is 15 , its still above that as of yesterday , i dont think the s+ p has ever gone as long without a 20% correction either , bar perhaps the 1990,s

 

[joe sod]

Markets transfer wealth from the impatient to the patient

But what do you mean by patient, I mean you could have to watch your investment drop by 50 percent . Is that being patient,or is sitting through a cyclical downturn lasting years being patient. There are a lot of catchy sound bites in investing but the trouble is when you try to apply them to specific situations.

 

[Steven Barrett]

european markets have never continued to gain while u.s markets were floundering , european markets are followers so if the u.s enters a full blown bear market , europe will do the same

regarding investment advisors , a close relative of mine came into some money in 2006 having sold some farm land for nearly 20 k per acre , they planned on doing nothing for a few years and just put the money in savings for a year , one day they got a call from an irish life operative , this person then actively pursued them for the following few months with endless phone calls and house calls , encouraging them to invest in a fund etc , this relative of mine was fifty nine at the time , they got them to stick the money in an india and china fund which nine years later is worth less than it was in 2007 ( in the years prior to spring of 2007 , india and china funds had delivered huge returns ) , now luckily i had a chat with this person fifteen months into there investment with irish life and they bailed ( a few months before the crash of 2008 really began in earnest ) and put everything back in cash , not only was there a 5% per anum managment fee on the fund for the fifteen months they were invested , there was an exit fee of 5% on top of that , this person invested 750 k and lost 50 k off the back of predatory banks but it wasnt just unethical , it was plain dumb , all they had to do when selling a product to someone near sixty was get them to put every penny in a bond fund

my point is , not only are most investment funds very bad value , more often than not , the advice is not particulary valuable

Not justifying the predatory advances of the advisor. One thing that really bugs me is the way the banks monitor people's bank accounts and if a large deposit is made, they have someone phoning to sell them an investment bond without even asking what they person's needs are. The factfind is a compliance document to them, not a method of finding out what is important to the client.

Anyway, back to the charges! That 5% charge was the commission that the "advisor" got. it was a once off and not an annual fee. The India China fund is expensive though, you can expect to pay about 1.90% in annual fees for that fund.

The early exit penalties are to protect the life company from people taking advantage of the bonus allocation rates they give and then transferring the money to another provider a week later. It should have been made clear to him at the time that while he can move funds within Irish Life, he cannot move his money out for the first 5 years.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[galway_blow_in]

well its pretty clear now that we are in a very significant downtrend , nothing is able to raise this market , europe rose strongly earlier off the back of potential chinese stimulus , the u.s opened up but is now negative , europe always follows the u.s so will sell off tomorrow morning

 

[Gordon Gekko]

But what do you mean by patient, I mean you could have to watch your investment drop by 50 percent . Is that being patient,or is sitting through a cyclical downturn lasting years being patient. There are a lot of catchy sound bites in investing but the trouble is when you try to apply them to specific situations.

Which is called turning a temporary loss of capital into a permanent one.

I can't remember the precise stat, but from memory a diversified investor in equities has never lost money EVER over a 15 year time horizon.

 

[galway_blow_in]

Which is called turning a temporary loss of capital into a permanent one.

I can't remember the precise stat, but from memory a diversified investor in equities has never lost money EVER over a 15 year time horizon.

true but anyone who sold out in 2006 and rebought as late as 2011 , was better off , buy and hold forever is the least clever way to grow wealth , thats not to say its dumb , dumb is selling and buying in a reactionary way depending on what the market is doing over a relatively short time

 

[Sarenco]

I can't remember the precise stat, but from memory a diversified investor in equities has never lost money EVER over a 15 year time horizon.

Well the total return of the DOW, with all dividends reinvested, was negative from 1929 to 1944 and that ignores investment costs and taxes.

More importantly, there have been 15 year periods where bonds (or even cash) outperformed stocks. The first 15 years of this millenium is one example.

Don't get me wrong, I don't believe anybody can time the market with any accuracy. The expected return on stocks is clearly higher than cash over any 15 year period but the risk is that this expected return may not materialise.

 

[Gordon Gekko]

The stats I'm referring to relate to the S&P...perhaps that accounts for the difference? I will post the exact stats tomorrow.

 

[Fella]

Why do people care so much if the price of their stocks are rising or falling ? If you are investing for a long time 10years + and you check price everyday and are happy because the price is rising all the time , the day before you take your cash out the market could crash and you lose all that happiness you gained!
I can only think of a few reasons people care so much - they have put in too much money , they are trying to buy low sell high quick turnaround ( which is just gambling and likely you will lose ) or they are just not cut out for losing money . Most people are just terrible at losing money I see it all the time the difference between people who make it doing what I do and who don't is that most people can't take the mental side of losing.
I'm losing tens of thousands I'm sure every time there is a drop in stocks but I was never taking the money out anyway till I retire or leave it to my children , but if my stocks treble in the morning I don't really care either , I have no use for the money that's why I invested it , I really think that's the key invest money you never plan on seen again if you need money for a new car or to pay your mortgage don't invest .

 

[joe sod]

Well the total return of the DOW, with all dividends reinvested, was negative from 1929 to 1944 and that ignores investment costs and taxes.

More importantly, there have been 15 year periods where bonds (or even cash) outperformed stocks. The first 15 years of this millenium is one example.

Don't get me wrong, I don't believe anybody can time the market with any accuracy. The expected return on stocks is clearly higher than cash over any 15 year period but the risk is that this expected return may not materialise.

so basically since 2000 bonds have outperformed stocks, So stocks are more not much higher than they were in 2000. Yet everybody is saying that stocks are way overvalued now after 15 years !! I know this point has been made already. The only answer that was given was that we are due a significant sell off because we have gone too long without one. So basically we have to have a sell off not because of mad overvaluation but because financial history decrees that a sell off must happen with a specified period of time (to fulfill the scriptures).

 

[Sarenco]

Well I'm certainly not saying that stocks are overvalued relative to any other investable asset class nor am I suggesting that it is inevitable that we are going to see a deeper drawdown than we have already over the coming months.

What I am suggesting is that nobody knows the future so the only logical thing to do is to try and determine your own need, willingness and capacity to hold risky assets and then stick to your guns over the medium to long term.

Ignore the noise.