Just went 95% cash in Super - Share Market Correction

Nice attitude there by PT.

The South Sea Bubble of 1720

What isn't stated in the above article is Sir Isaac Newton also invested in this "endeavour." He initially made a lot of money but fell for the siren call aka greed and went back in. Lost the lot, which in today's money would be some $4m - $5m.

If one of the greatest minds of the ages fell for it and also screwed up the timing, what hope do we have of getting it right?

 

I suppose that’s why I like widely diversified LICs / ETFs and don’t invest in individual stocks anymore. Single companies can go bust but the likelihood of a country’s entire stock market doing so is very remote. Invest in widely diversified “Global” stock markets then the risk is non existent barring a global nuclear war or meteorite wiping out the human race.

 

I only did it to show that October wasn’t a black month for Aussie shares .

30 seconds on SS. Didn’t take up much of my day .

Now to continue my trip around the Yarra Valley with family.

 

Show off.

 

Grrr. Average speed camera = 104kph and $200.

 

What have you done now SK? Always getting into trouble.

Well about to head off to Brisbane for cardio check. Will get a Big Mac and fries for lunch on the way.

 

Yep....I like that line of thunking......holding individual shares are real Royal pain in the bum.

Having said that having more than 6-8 LICs/ETF can be a pain also......but some level of diversification is also required. The move of assets from property to shares is slow but happening.

Mind you this is outside of super. The super stiff I move around a bit as the funds there are exposed to things like infrastructure ...etc...as they are run by Hostplus. Diversification you can'get else where. The plan is to max out super in the next 8 years and then concentrate on the funds outside super. But property will still give a six figure income.

 

So - ASX now up 25% since this thread started in October 2018.

Time to sell back down to keep 30% cash.
Tempted to sell a bit more than that though.

 

Not me...I moved mine into a conservative balance ...it has moved 30k for me since Nov.

I will keep it there for the moment.

 

We have a SMSF - so selling down is the conservative move.

Contributions and dividends going in normally keeps it in balance - but currently less than 25% cash, which is too aggressive for us.

 

That is why I went with a Industry fund...I can move funds around and allocation...at a click of a button have done that a couple of times last year.

I need to hit the cap by 60...hook or crook....8years to go.....

 

Best time to manage risk is during a bull market, when everyone is cheering and they let you sell them or restructure at whatever price, once asset price turn it is a lot harder.

No risk management rather than timing you would not buy into the same thing you cash out just because it has another run, you locked it in, you spread it out to newer business and you cap your loss at 5% on each stock that you own.

you can only concentrate with Aussies properties cos it never go down

A lot of article you see that mentioned timing and all sort of stuff these guys would not make in over the long run any way as they cant manage risk, just like people buying into ETF and LIC,

your exposure loss to a single stock of a few % point or less and even in a crashed it cant permanently damage you because a few stocks gone belly up that just a few % of the ETF or LIC.

has Newton cashed out on that company and risk manage and bought the index he be super rich today

 

The 1.6 m cap?

 

Yep...with indexation it will probably be around 1.9m...2028

The cap started in 2017....so assuming inflation of 1.7% per annum sonce 2017...we should hit a cap of $1.7 by July 2021....and then again by 2025 to $1.8m and by 2028 to $1.9m.

 

100% agree...because the index rebalance to overall cap of the say ASX. Lets say even if a large bank went down the tube that would only make up 4-5% of the index. So yes there is quite bit of risk management built.

People doing SMSFs will probably lose a lot if there was a major crash as they tend to own less stock.

 

If a large bank in Australia, (presumably you mean one of the big 4), were to fail totally, it would be either the result of an economy crash or would cause one.

Your index fund would go down by far more than the market share of the failing bank - the resulting economic chaos would lead to an unprecedented crash in the entire share market which would make the GFC look like a picnic.

 

One thing I have learnt over the years is that I am crap at predicting the future.

I am not the only one. This time last year, experts were predicting:

“Commsec was very bullish about the local bourse's prospects, and anticipates it will rebound by 10 to 12 per cent this year.

Meanwhile, AMP Capital's forecast was slightly less positive, but still upbeat.

"Australian shares are likely to do 'okay' but with returns constrained to around 8 per cent with moderate earnings growth," said AMP chief economist Shane Oliver.”

Experts say 2019 will be another volatile year for the Australian share market​

The market returned 25%+ (VAS achieved 27+% in the last year).

I feel for those who increased their cash component a year ago, based on experts’ predictions.

I am a boring B+H investor, with property and shares. Basically, I am lazy and I know I can’t predict the future.

Since becoming serious about share investing since October 2002, our portfolio has returned 17%+ pa.

This timeframe includes the dreaded GFC and many other downturns.

There is a lot to be said for being dumb and lazy, especially in regards to share investing .

 

[QUOTE

has Newton cashed out on that company and risk manage and bought the index he be super rich today [/QUOTE]
No he wouldn't , there was no index but if he invested a proportion, no matter what weighting in the other companies he had at the time he would have been more broke sooner. Government meddling, corruption and giving the South Sea Company royal charter (monopoly) and competitive advantage meant other companies collapsed . If he just done nothing eexcept took profits along the way and managed weighting, sell down as rising, perhaps buy one pounds worth for every three pounds worth he sold when falling he would have got good profits and preserved capital, increased his shareholding when the share price returned to the low 175 pounds, the beginning price, after rising to over 1000 pounds. Other companies went belly up he would have blown his capital divesting. Weighting management is what is important for risk management, It has been proven over and over again for the last 300 years. The biggest risk is not taking an active position. Not investing is taking a position but is the only position where poor returns are guaranteed. CASHING OUT IS NOT RISK MANAGEMENT. Managing weighting is what has to be done for risk management. Don't have more than you can afford to loose exposed.

 

That was an analogy....the gubbermint would not let that happen. But it was an illustration of how Index funds re-balance.

 

If a large bank went down or even close to going down it would cause a lot chaos in the markets and a lot more than 5% will be lost.

The ASX is worth about 2Trillion, the banks about 20% of that at just over 400B. All financials about 30%.
If one big4 bank goes down all the other banks will be facing huge losses as well and it will spill over the market.
On the other what would cause a bank to go down is deflation of asset values which means that you lost a big chunk of wealth long before the bank gets close to going down.

Happened in to 70s and the 90s globally and 2009 in the US.
Steady asset values, the RBA $$ and 500B in gov debt propped up the land of Oz.