Reply to: US stock market crash tonight/tomorrow

[jamesbrown]

If you want/need the money now (or in the next 5 years), then you should not even consider investing in the first place.
The objective is FIRE (Financial Independence/Retire Early) not to accumulate till you die. This can happen of course but imagine being 50-55 and completely financially secure for the rest of your life. You can carry on working or not, pick and choose work and locations, walk away from sh*t jobs you would usually have to stick in, take 3 or 6 month breaks, have every summer off. It is a freedom few people will ever get. So you build up the pot and then run it down as you need.

If you are talking short-term trading then that is a different chat. For day traders the standard is 90% lose 90% of their money in 90 days. I know people can get lucky for a while and some do have the aptitude to consistently be ahead (just like some can bet on horses and win or be professional footballers, it dont mean you can).
You are competing against thousands of smarter people with better, quicker information than you can ever get. This is no different from betting on horses cos you like the names, I don't fancy those odds...

As I say, it's too prescriptive. You can be fully aware of the benefits of one strategy over another - I believe I concurred that the long-term value play is the best one in, er, the long-term - but there's not much fun in that approach, and you're wrong to suggest that everything in between this approach and day trading is, effectively, gambling. I'm not interested in day trading at all, in fact. I adopt your strategy for my pension. I don't use the stock markets to become financially independent. I have a day job for that, because it's a far more certain path to early retirement. If your motivation were the only sensible one, there would be no point in investing after one became financially independent. Nah, there are various different, legitimate, motivations for investment, and I like a mixture. I've been investing since my early 20s, with all manner of outcomes, but the pension pot has neither been the most interesting nor the most lucrative.

[diseasex]

If you want/need the money now (or in the next 5 years), then you should not even consider investing in the first place.
The objective is FIRE (Financial Independence/Retire Early) not to accumulate till you die. This can happen of course but imagine being 50-55 and completely financially secure for the rest of your life. You can carry on working or not, pick and choose work and locations, walk away from sh*t jobs you would usually have to stick in, take 3 or 6 month breaks, have every summer off. It is a freedom few people will ever get. So you build up the pot and then run it down as you need.

If you are talking short-term trading then that is a different chat. For day traders the standard is 90% lose 90% of their money in 90 days. I know people can get lucky for a while and some do have the aptitude to consistently be ahead (just like some can bet on horses and win or be professional footballers, it dont mean you can).
You are competing against thousands of smarter people with better, quicker information than you can ever get. This is no different from betting on horses cos you like the names, I don't fancy those odds...

+1
Invest in share that is growing financially, and have other good factors like good management etc. And price will follow sooner or later...

So far made 4300$ on speculation since Monday to be honest that gets me nowhere. To get a million i would need to make £50k consistently every month for 2 years (OK less because have pot already)
Long term investment is the key

[lukemg]

And die rich? Aside from fear, greed is what motivates people to sell, i.e. wanting the money now. I agree with everything you say, but the difficulty with this strategy, as a prescription, is that different people have different objectives in their investing. Personally, I find the long-term value play very boring (something for the pension), although I fully appreciate the logic.

If you want/need the money now (or in the next 5 years), then you should not even consider investing in the first place.
The objective is FIRE (Financial Independence/Retire Early) not to accumulate till you die. This can happen of course but imagine being 50-55 and completely financially secure for the rest of your life. You can carry on working or not, pick and choose work and locations, walk away from sh*t jobs you would usually have to stick in, take 3 or 6 month breaks, have every summer off. It is a freedom few people will ever get. So you build up the pot and then run it down as you need.

If you are talking short-term trading then that is a different chat. For day traders the standard is 90% lose 90% of their money in 90 days. I know people can get lucky for a while and some do have the aptitude to consistently be ahead (just like some can bet on horses and win or be professional footballers, it dont mean you can).
You are competing against thousands of smarter people with better, quicker information than you can ever get. This is no different from betting on horses cos you like the names, I don't fancy those odds...

[WordIsBond]

edit : said too much.

You should learn how to copy-paste and use the above technique more frequently.

[diseasex]

edit : said too much.

[BlasterBates]

So - this is the risk you take for the potential of a better return. The long-term graphs look nice as they march upwards but hidden in there are sickening lurches downwards that shake people out.

Average return from market is something like 6pc over inflation, average private investor makes 3pc entirely due to poor decisions, trading costs, trying to time the market, losing bottle in a downturn etc.

These are the people you need to make money from, so:
1. If you cant hold your nerve, buy bonds, leave in 1% bank account.
2. Diversify globally and rebalance to your required asset allocation (%'ages in countries/sectors) using thresholds (or chuck in a Vanguard Lifestrategy 80 fund, which will rebalance to bonds for you)
3. NEVER SELL and consider using Value Cost Averaging to automatically make you buy more at lower prices.
It's really simple but it's not easy...

You've hit the nail on the head. It's not just private investors that get hit by the crashes. Basically a crash occurs in a liquidity crisis, i.e. companies as well as individuals are all "maxed out" Hedge funds, banks as well as companies and individuals are rolling over loans, investing loans in shares, making profits and "bang" liquidity dries up. Individuals are forced to liquidate their investments because they lost their job, or businesses too. This means they throw shares onto the market at rock bottom prices

Basically if you hold cash and remain liquid, a crash is a marvellous opportunity to sweep up "money" i.e. cheap shares from "hard-up" hedge funds who can't roll over their loans.

[jamesbrown]

NEVER SELL

And die rich? Aside from fear, greed is what motivates people to sell, i.e. wanting the money now. I agree with everything you say, but the difficulty with this strategy, as a prescription, is that different people have different objectives in their investing. Personally, I find the long-term value play very boring (something for the pension), although I fully appreciate the logic.

[lukemg]

So - this is the risk you take for the potential of a better return. The long-term graphs look nice as they march upwards but hidden in there are sickening lurches downwards that shake people out.

Average return from market is something like 6pc over inflation, average private investor makes 3pc entirely due to poor decisions, trading costs, trying to time the market, losing bottle in a downturn etc.

These are the people you need to make money from, so:
1. If you cant hold your nerve, buy bonds, leave in 1% bank account.
2. Diversify globally and rebalance to your required asset allocation (%'ages in countries/sectors) using thresholds (or chuck in a Vanguard Lifestrategy 80 fund, which will rebalance to bonds for you)
3. NEVER SELL and consider using Value Cost Averaging to automatically make you buy more at lower prices.
It's really simple but it's not easy...

[diseasex]

Your analysis had best be better than that.

Company reports A) can be slanted in some ways B) can even be Enron-esque C) are backwards looking, not forwards looking. Even if they are accurate, they tell you what was, not what is and what will be.

For a company to be successful going forward, they have to have products that people are going to want to buy. They have to have management that knows how to run a company, control costs, and form and implement good long-term strategy. They have to have marketing people who are good and a marketing approach that works. Unless you have good reason to believe in those things, forget about reading the company reports and buy a tracker. If you believe in those things, then check the company reports to make sure there are no financial disasters impending and that the company has the resources to implement all of the above.

And if you want to pay a fund manager, find one who you actually know does that kind of analysis. Otherwise, again, buy a tracker.

I've spent good 20 hours over the weekend on analysis found like 4-6 ,but my god all of them were like +5 - +20% yesterday.
I invested in one but it's madness, i prefer steady and calm growth. Now I'm fearing crash too.....
Post on this forum is already sign that things not right, when we hear about share stock market from barber it's time to pack things (I'm waiting for +4% on indexes though)

[WordIsBond]

a) you need to be able to perform a quick analysis on company reports. If you're not downloading the company accounts before you invest and screening the company, you shouldn't really be buying its shares.

Your analysis had best be better than that.

Company reports A) can be slanted in some ways B) can even be Enron-esque C) are backwards looking, not forwards looking. Even if they are accurate, they tell you what was, not what is and what will be.

For a company to be successful going forward, they have to have products that people are going to want to buy. They have to have management that knows how to run a company, control costs, and form and implement good long-term strategy. They have to have marketing people who are good and a marketing approach that works. Unless you have good reason to believe in those things, forget about reading the company reports and buy a tracker. If you believe in those things, then check the company reports to make sure there are no financial disasters impending and that the company has the resources to implement all of the above.

And if you want to pay a fund manager, find one who you actually know does that kind of analysis. Otherwise, again, buy a tracker.

[diseasex]

There, I've said it.

so how much did you lose on short pal ? because my shares went nuts to the point i'm thinking of cashing in in fear of crash on US stocks....
prefer slow and steady long term growth

[diseasex]

Try this as a paper exercise.

Sit quietly in a room by yourself. Imagine that you've just lost 80% of your investment overnight. How do you feel?

Would still be on plus!
I'm carrying on!

[tomtomagain]

I have 1% stake in one business on LSE, and about 0.5% stake in that other business on NYSE, so technically I own 3 companies including my contracting limited

Try this as a paper exercise.

Sit quietly in a room by yourself. Imagine that you've just lost 80% of your investment overnight. How do you feel?

[diseasex]

I agree and that's why that's not how I invest.

But the point I was trying to make was that he got sucked into how great this company was, believed it was going to become a world beater and even when the paper profit evaporated and he was making a small loss he couldn't bring himself to exit his position with some of his original investment intact.

He got hooked on the illusion that it was worth the previous high valuation and believed that, that is what it would eventually return to. Even when the market was telling him otherwise. Eventually it was worth zero.

I don't believe that I have any special skill, insight or understanding that would allow me to pick a soon-to-be successful company before it was successful which is why I have always bought trackers. After 17 years of investing I am not about to change that strategy!

nice one. I'll start with trackers / bonds as soon as I've acumulated enough to sustain myself.

[tomtomagain]

That isn't how to invest in shares

I agree and that's why that's not how I invest.

But the point I was trying to make was that he got sucked into how great this company was, believed it was going to become a world beater and even when the paper profit evaporated and he was making a small loss he couldn't bring himself to exit his position with some of his original investment intact.

He got hooked on the illusion that it was worth the previous high valuation and believed that, that is what it would eventually return to. Even when the market was telling him otherwise. Eventually it was worth zero.

I don't believe that I have any special skill, insight or understanding that would allow me to pick a soon-to-be successful company before it was successful which is why I have always bought trackers. After 17 years of investing I am not about to change that strategy!