DIY shares, Active & Passive funds, ETFS - COVID19 crossroads

Hi all,

I have for the last few years floundered with failures and severe stress in investing in shares and property and P2P lending, especially now with COVID19. I am medically retired and was given a lump sum to live off in 2016. I cashed out my Superannuation so it would be enough.

I have invested in DIY portfolios - Panic sold 2018 albeit still with a profit. Then I joined a DIY share trading platform service that offers education on their strategies and their share analysis. This time thinking with the supports in place I was better prepared.

Things went really well in 2019 but COVID19 in 2020 the crash came and I panic sold again a large portion and lost a ton of money. The sort of amount that will make you cry for days.
I invested leftover capital plus spare cash into a managed fund. But, not sure if it was a good decision.

As I have now discovered, a lot of the large managed funds are quite passive, other than some stock specific adjustments. Otherwise your funds go up and down like a cork in the ocean with little profits. And profits are what I need to get me over the line to self funded retirement and prevent capital erosion.

I have noticed there are actively managed funds that go all in, buying and selling shares, pulling everything or part into cash to protect a lot more profits and re-entering at the bottom of pullbacks. More technical trading. Fees are all pretty high.

DIY share trading is also fraught with huge dangers as emotions are included and decisive action needed in highly stressful times like now. Selling out of positions is not easy when they are at a loss. I just freeze with indecision and panic. Hence why the majority of DIY share investors fail. Even with what I thought were better tools to help me.

I did have ETFS before I sold (VAS and VGS) in the crash which provided nice dividends and although slow movers, did okay. The fund managers and others talk of the 'ETF bubble' and how ETFS are not the best investment choice.

I have been told by a past friend who was very wealthy anyway, that he had a broker who bought and sold options for him and that he was making a fortune out of that (cannot find the name of who he was using and have no idea who does this and if it is a good thing?) Are there brokers or advisers (maybe called something else) that take custody of your money and put it to work other than the usual managed funds such as in derivatives?

I am realising that I am spending a hell of a lot of time worrying, lost sleep, and no life as I daily watch the ASX markets, then out of sheer worry am up at night watching the NYSE DOW and the S&P500, as well as the futures markets. And i am so confused as to where to invest.

All I want is to get good growth of my remaining money and an income. So I can improve my life, afford to buy things, live in a better place and have time to enjoy living. Right now, my whole life is worrying about the share market 24/7 and my other investments. Is using multiple managed funds an option (diversify in funds?)

Would love some advice or recommendations. Wish there were decent advisers who could tell you what to do other than all the wishy washy "I cannot give you financial advice" rhetoric that leaves me floundering and more confused and worried than ever.

 

I've got two things to say to you......

Peter
Thornhill

 

quote..
Things went really well in 2019 but COVID19 in 2020 the crash came and I panic sold again a large portion and lost a ton of money. The sort of amount that will make you cry for days...

That's not good to read , if you are terrified to the point that the market has physically affected you then just shut everything down ,don't sell don't buy or even think about your holdings as miss market mr market are volatile character's and the market decides who is right and wrong..

This may sound blunt as i don't intend it that way,but you would not be alone with everything going on in the world but you have to pick a side to stand on..You keep doing the pattern of buy sell and the stress that comes with trading ..Or once you put aside the tribalism and never sell just hold everything don't worry about the price per day per week and stop being a seller,going from contributing money then taking less off the table after tax..

i look back at those instances like the one we are in now ,the same as all the other,s and if i told in money term's that the numbers have changed on one bank i have a small interest in for 25 years it may also cause concern but i don't care less as iv'e been through many times and if you never sell just add when you spy an opportunity even if it goes down another 25 percent..good luck..imho..

 

You want growth and income but you cant emotionally handle volatility.

For peace of mind, go term deposits and live off whatever you get.

if this is not enough, learn to handle risk. The market does what it does. You cant avoid it, only learn to handle it emotionally.

Fact is the xjo at 2016 isnt too far off from what it is now. If you could live off your lump sum in 2016 you could probably do it now.

you cant keep looking for someone to save you.

you dont have the emotional capacity to handle anything more than term deposits or maybe just index efts. If that isnt enough, work on your own mind.

 

Bloody hell this is a debacle. You certainly shouldn’t be self managing. The behavioral aspects of investing are not good for you. And there are decent advisors but they aren’t free. Given the hammering you’ve taken I’d suggest money well spent. In Sydney I know of two firms that I would suggest are worth talking with. Fortitude Private Wealth where Peter Thornhill’s son Oliver works, and who manages Peter’s wealth (so expect a LIC bias) and Minchin Moore who are index/asset allocation/factor tilt types. I’ve met a bunch over the years, most are garbage. These guys are decent imho. No warranty and good luck.

 

Yep. I highly recommend to @Sick_of_scams to go through Peter Thornhill's material and attend a Peter Thornhill day when one is on (probably might be a while in the future though because of Covid physical distancing).

I can't recommend his lessons enough, they are good for good times but in times of crisis (like now) is where his lessons really come to shine. He takes all these ups and downs, but long term, it won't matter. Long term, the stock market has always performed. And you are looking with a long term view. I personally see now as a buying opportunity.

 

In addition to @The Falcon's comments I'll add this from another thread.

You seem to be in a battle with yourself. The outcome of that is not likely to be a good one.

I sincerely wish you the best.

 

Your rich friend who makes lots of money trading options? They have down months too. Probably really big down months. But they understand the volatility and overall make money.

you would probably take everything out the first time you lose 10%, which is nothing if trading options.

 

I agree thanks Falcon. Medically discharged with chronic PTSD and given a negotiated lump sum to try to self manage was always going to be a recipe for disaster, in hindsight. But that is what they do since they scrapped the 75% salary medical discharge pension that NSW Police used to have (pre-88 pension). Thanks Neville Wran! A share crash triggers the 'fight flight' response x 100 in people like me. I've just looked and and listened to a podcast of Peter Thornhill. I will follow up your suggestions. I really appreciate your input. Thank you sir.

 

That's why I wanted to know of this seemingly little mentioned investment class. And if anyone knew more. I know very little about it but good traders use options (put and call options is what I have heard of) as well as going long on markets to insure themselves and then short the market other times. I even went to a night time seminar that spruiked a system for options but I ran a mile when they started trying to sell 'boot camp' training courses for a limited time etc.

 

There is no magic. Sure good traders use options. But you are not a good trader. Using options wont make you one. You wouldnt be able to handle the volatility your friend experiences if you cant even handle the recent sharemarket volatility.

A very sharp knife doesnt make you a better chef, but you are more likely to cut yourself.

 

Part of being an investor is understanding your own emotional issues and tailoring your strategy to avoid problems. Everyone is different. For people who cant save, invest first before spending. For risk takers, put a part of their money into safe investments first.

Maybe consider not having so much control over your own investments. Stick with index funds and term deposits?

 

Right. Our brains are wired for survival, not investing. Most unhelpful. You'd be better off with a very slothful advisor between you and your investments. I would not suggest self managing. You might go ok for a while, but will likely go pear shaped in the end based on what I've read.

 

20th April VAS paid about 67c or 4.85% (78% Franked) Seems like a good investment to me for doing nothing.

 

@Sick_of_scams these are hard times to be an investor. @The Falcon has suggested 2 good advisors in the Sydney area you could consider, perhaps talk to them? See what they have to offer you? Having someone to help you manage your money might be a good thing for you at this time. If you really want to invest yourself then my suggestion (for what its worth) is stick with a couple of index stocks such as VAS - Australia and VGS - international. If you need more than that there are some old listed investment companies (LIC's) eg ARG, AFI, MIR to name 3. Once you have invested in any of these, leave your capital there. Don't fiddle with it, don't panic. Good luck with what ever you choose

 

No-one here can legally give you advice, and they shouldn't knowing nothing about you or your risk tolerance.

You are experiencing cognitive dissonance - the angel and devil (apple or orange) on each shoulder giving you contradictory advice. You seem to realise that you shouldn't be investing yourself yet you are seeking investing advice so that you can invest yourself.

The only advice I can give you is listening to the @The Falcon. He is honest and trustworthy.

Your health will improve greatly not having to worry about investing.

 

I think if I had a dollar for all of the people who have told me it is easy to make money trading options I would have more money than most people who trade options.

Based on what you have described about how you have responded to previous downturns please cross option trading off the list.

 

Now I want to know how much money you lost..

 

I assume the post was meant tongue-in-cheek but given the obvious tone and contents of the OP's posts yours could be viewed as a little insensitive.

 

I thought this was going to be another troll post so didn't read it at first - now I hope it is because this situation sounds horrible. I'd imagine a lot of people get stuck in this sort of predicament, best wishes to you @Sick_of_scams

My thoughts echo @The Falcon - you need a good financial planner. Don't go it alone. You may also want to explore your options regarding special disability trusts if you don't have one.

The most important part for me if I was you is figuring out what you NEED to make per year from your lump sum to live. If you can live off a 2% return that's very different to needing a 10% per year return. Until you have that figured out you can't make a sensible decision on investing.

There are a lot of garbage financial planners out there, so make sure you choose one who knows what they are doing and aren't scammers. For you it sounds like you need a calm, stable influence when times get tough.

I would think Peter Thornhills son's practice would be good. Not advice though.