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Posts: 90
There is a legitimate trading style of "buy and hold" (through the rough and smooth).
If you're worried... work out what your portfolio was worth Feb 20th, it should help.
We may not be at the bottom yet, and there could be some casualties along the way so weigh up your risk of course... but try to remain calm. Emotion only clouds logic.
Posts: 1,227
As an investor that has been building my portfolio since 1977, I am reaching the point where I have begun to prepare it in anticipation of 30 or more years in retirement.
My goal has been simple. Just beat the market. If the market rises 5%, then I am content with 6%. If the market falls 15%, I am content with a fall of 14.5%. The FTSE has turned in a long term average of 8% which, provided that you mirror will see a doubling of your capital every 12 years. I have picked a lot of losers, but I have picked rather more winners and my capital has in the last well, almost 50 years, doubled every 8 years. The really sad thing is that it is far easier to get better returns from a more substantial capital base.
Don't let anyone tell you otherwise, but you will not get rich by not cutting your losses early. If you make a mistake, and I have made plenty, then accept the mistake, take the loss on your chin and pick a winner. Keep running your winners. Some are better than others..... Oh, and always take dividends as cash and never as shares.
Posts: 1
I am a new investor, this information is very useful to me
Posts: 288
good davice from a new investor here of the past few years.,
Posts: 1,227
Today AP has called the election in USA in favour of the Biden / Harris team. Traditionally markets favour a Republican President in office, and over their term rise roughly 7%. However, investors tend to do better under a Democratic presidency with a typical rise of 11% in an equivalent length term.
For myself, despite recording a whopping 37% fall in March, I am set for a 12% uplift on the year as a whole. It is slightly below my long term average, but by a tiny amount. I am forecasting that 2021 will be a bumper year for some sectors because in order to keep economies afloat MASSIVE and I mean really massive injections of paper money will be injected into markets.
Sure, much of this is illusionary, but it should see huge infrastructure projects (road repair, housing starts, reclamation of land from erosion etc) as well as trying to ensure that there is no structural failure of major employers.
In short, I am increasing my exposure to companies involved in AI/Machine Learning/Deep learning, technology and healthcare. Most recently have bought shares in Thermo Fisher Scientific.
Posts: 1,227
Seasoned investors (and I count myself in that group) try to remain fully invested. I have set aside between £15 and £300 per month for at least half of the last 42 years from income which I have invested. Of course, much depends on the structure of portfolio and where one is in the cycle of investment. For me..... well, I have another 4 years before I could draw a State Pension and have decision that have short and long term consequence. I cannot invest surplus income from salary as that is used to ensure that our business remains afloat.
New money for me, therefore are dividends. And, although most of those have been slashed this year, it does not mean that opportunities need be overlooked. Since the average holding (including cash) is 3% wealth, the moment that cash held on account exceeds 3% it needs to find a home.
My portfolio is structured for growth. I don't care whether the growth is from dividend that are generated or capital appreciation, growth is growth. And this bring me conveniently on to running profits and cutting losses. I will deal with the losses first. Investors make mistakes - I've made hundreds of them - mistakes might mean that profits were taken too early or losses taken too late. We are all guilty but we are all brilliant in hindsight.
Never be frightened not to take a profit. Profit is made at the point of sale. That applies equally whether long or short (work it out). Run the profit and cut the loss. Cut the loss early and re-invest. (You had lost the cash on the last "best thing" so the next "best thing" could return that loss in spades.
Sorry if this is another pithy and wittering comment from me. Took me 32 years to make first million (achieved in 2016) and at present rate of growth, it seems that it will be roughly 3 more years to make my 2nd. Very easy therefore to generate capital from capital but very difficult to generate capital from income. There have been in MY last 44 years of earning money about 15 years when I could not save a penny and drew all or most from my savings pot.
For the novice investor the rules are simple. Set aside small sums of money - modern investment favours a tracker. Once it reaches a capital value of £1,200, dispose of £1,000 and bury shares in an equity that generates at least 3% dividends. Maintain your savings in the tracker and repeat ad nauseum. When your dividends start to generate more than £50 / month put the dividends to work in a different tracker. Once these have generated £500 look for something speculative. most will fail but one or two will succeed. If in doubt, follow the money.
Posts: 1,227
Sorry if I am somewhat monopolistic on this thread, but, broadly it concerns strategy...... and strategy for novice investors.
FWIW, and I am certain that you have already sussed it out, I am just an ordinary herbert and, in comparison with my children at the start of their careers, my salary is a fraction of theirs. However, tas a consequence of steady investment through thick and thin of a few pounds each month that has increased steadily over the last 40 years as a proportion of disposable income, I find myself at the peculiar position where capital growth for my invested assets generate more every quarter than I do each year. In short, it leverages the power of compound interest.
We have now a very interesting development. Developed countries are fighting to ensure that their economies do not collapse and are chucking "money" at the problem. It is not real money, it is, for want of a better expression, "mortgage money".
Anyone that has bought property (in the UK) in the last 20 years has seen capital appreciation in the "value" of their asset. During this time, interest rates to finance the original advance has fallen from (and I remember when interest rates were 16%) about 6% to currently roughly 2%. The result has been house price inflation. And most in the UK feel that owing property is a brilliant investment.
In the sense that it is passive, then I concur. And for many years the "average house price" has grown at a faster rate than the FTSE. House price inflation between 1900 and 1940 was negligible. It really only began to increase in the 1970's and since then even small percentile increases add a huge amount to the equity held in the property. However, the interest on the advance to buy in the first place is not really ever taken into account.
Yet major indices such as the FTSE and DOW have put in a very steady 7% growth year on year, rain or shine, war or peace and they will continue in the future to do the same.
For 2021, we know that USA, UK and EU have ambitious plans to ensure that their economies do not collapse and will be announcing ways to ensure that the most important companies (quoted usually) survive as best they can. These and smaller, unquoted companies are dependent on this and a WALL of money will be chucked at this to ensure substantial survival.
A few will go bust. There will be rising unemployment and the unimportant businesses will fail. Yes, coffee shops, sandwich bars, pubs, restaurants, department stores etc will close and lay off some or all of their staff. It does not mean that your portfolio will follow.
There will remain businesses that will survive because they cannot fail - major oil, chemicals, fag companies and insurers. Some businesses will thrive and others wither. Buy shares in the BEST companies in the most assured sectors whether the price is rising or falling, but buy regularly and average your holding price.
Posts: 6