Just went 95% cash in Super - Share Market Correction

Smart move..... ...better safe than sorry....when you are retire...it will hurt if your capital goes back 30% unless you have millions invested.

 

Being early in the accumulation phase I am holding on and in fact increasing my monthly equity investments following this correction. If it turns into a bear market I will further up my investment amount.

Imo going to cash after the correction has already happened is "missing the boat", so to speak. But we all have different risk tolerance and I can understand someone closer to retirement may want to move to a more stable position, sure.

Wow, that was rude. Unnecessary.

 

Why would fluctuation in super hurt any more than fluctuation in shares outside of super?

 

I suppose I lean towards never selling because it goes against my long term plan, which is to constantly increase my ownership of productive businesses, whether through LICs or an index fund. With the whole goal being a growing dividend stream.

Times like this is why you’ll see so many of us enjoy the merits of dividend focused investing. Prices are dropping when dividends and company profits are mostly increasing. Go figure. I know which I’d rather bank on.

To reduce my ownership because prices might fall takes me further away from my goal. Especially when I have absolutely no idea when prices might be ‘right’ again to get back in.

There’s probably twenty Buffett quotes that could be used here but I won’t bother. I’m happy if the nervous nellies go to cash and push the market down further. Us brain dead investors can simply keep buying at ever cheaper prices.

Sure I might buy some shares at prices that later look stupid, but at least every purchase is in line with my goals, increases my slice of the pie and increases my cashflow.

For me, I’ll just focus more on business ownership, profits and dividends (fundamentals) and less on the fluctuating market prices (speculation).

 

In Super pension mode minimum pension withdrawal is based on asset value. Most will be forced to realise assets with age as minimum pension withdrawal % of asset value increases.

In personal names one can just live off the dividends and never be forced to have to sell assets based on some silly legislated rules.

@SatayKing I’m guessing like myself is an income focused investor. We hate selling assets. Super forces us to do so. In reality it’s probably not a big issue as one just sells Super Assets when forced to then reinvests any surplus capital not required for living expenses in personal names. But it sort of makes you feel detached from your Super investments given the impermanence. I’m somewhat the same in that I take a lot more interest in personal investments as opposed to SMSF investments. Personal investments feel like their forever whereas Super just feels like a temporary thing.

Silly I know but this is how the mind works for some of us.

SK hopefully will correct me if I’ve misunderstood

 

Spot on young GrassHopper

Once I could detach from the emotions associated with capital fluctuations and focus on the more stable cashflow from equities it was truely a liberating moment. I see all sorts of complex strategies in an effort to smooth capital volatility and shudder at it all when there are such simple solutions.

Again I post this wonderful post from @truong in how this “cash flow” mentality can get you through tough market times:

Market corrections / crashes are not a time to fear but look forward to purchasing future income streams cheaply, sometimes very cheaply.

 

@Goodison thanks for the questions. The answer to your first question is quite a long story. Nearly all my clients keep buffers of unused funds ready to invest and they also DCA & debt recycle so are investors by habit every month and receive significant portfolio income each year which if debt recycling is paid back into the home loan and pumps up buffers again. So in short there are always some cash buffers available and these buffers are consistently growing at a known rate based on the cash flow algo and rate of overall debt reduction being used in the strategy.

As markets gets toppy at the end of a known major context Elliott pattern we are constantly publishing market updates (weekly) of technical signs and various other hints of the bull cycle ending.

At that point a decision can be made to either use some spare money from buffers to purchase the hedge OR we can stop the regular monthly DCA into the portfolio and redirect this into the hedge but only if the client wants to do so. We also understand that the right choice for some people is to keep things simpler and ride it out accumulating in the dips. Of course (unlike any other financial planning service in Australia that I am aware of) we publish highly specific info weekly to help that accumulation process at the sharpest of prices also.

In answer to your second question - this goes to the heart of the matter. I understand where you are coming from but I have a feeling this is where our views will diverge.

So the question was "And over a long period of time. Have you demonstrated this dynamic hedging adds greater RARE than simply keeping the FUM in bonds and rebalancing?"

My first answer is we do not practice dynamic hedging, the focus is always accumulation. Far from being dynamic this is an extremely rare event reserved for the end of the major bull cycles according to the long term Elliott pattern completions (weekly/monthly charts). Only happens once every 5 - 10 years at most. This is provided to clients and subscribers as general info only - it's their choice whether to use it. I simply provide the info as a service to help interpret the ever changing conditions of world markets and what the charts are telling us, up to them whether they take action on this.

Secondly, you have no doubt glanced at some of my TA and broader analysis work using multiple methods and market hints - what do you think? Have the market calls I provide here been accurate? My clients only choose to follow this info as they have been involved long enough to appreciate and understand my track record.

I am going off on a bit of a tangent here and I'm not sure everyone will understand what I am about to say.......there is an intangible at work in this case that 'big data' based studies cannot and will not ever account for and that, my friend, is the rare skills of an individual.

As my TA mentor (a legendary US hedge fund consultant) first said to me 20 years ago when he took me under his wing....."to achieve mastery, first there must be obsession, love and passion as well as a willingness to sacrifice in order to learn".

Most people are going to gravitate towards a strategy that does not require such mastery as they have no obsession or desire to do that amount of work and make the sacrifices, and maybe they don't believe it will work for them. Hence the tendency for people to gravitate to an easy, safe type 'indexing' approach (nothing wrong with this at ALL!).

Ironically, the next thing that happens is everyone using this approach converses endlessly here on how to improve the 'performance' of that kind of portfolio when the reality is due to the inherent nature of this approach, it will never generate much significant alpha (outperformance). And BTW outperformance is not necessary NOR is it the 'magic answer' to compounding significant wealth over a lifetime, cash flow management, structure, risk management, habits and discipline are the main answers there.

Meaningful outperformance of a portfolio or other investment for that matter, more than anything else, is inevitably reliant on the rare skills of an individual, whether that be a specific fund manager, a mentor or yourself.

It is the age old question of whether YOU (the individual making the decision) believe it is possible and worthwhile to use this market timing based strategy under our guidance and risk paying a premium if it does not work out. It also can be more a decision about feeling better in a downturn than aiming to increase performance - we also provide plenty of avenues for our clients to push their risk envelope if they wish to (and believe me if performance is the goal there are MUCH better ways than directing FUM in bonds and rebalancing into index funds!), however, not everything we do as investors has to be about performance. Sometimes it's about risk management, sometimes it's about locking in a new good financial behaviour etc.

We don't keep hard data on the results of this and only around 20% of clients choose to hedge. This approach has only been advocated to clients during two periods of this year (the newsletter where I publish this info has only been in existence for 2 years). Again I stress this is provided to clients and subscribers as general info only - we just like to give people the choice based on quality info and analysis. I simply provide the info as a service to help interpret the ever changing conditions of world markets and illustrate specific ways to take more advantages when they are there.

A stop loss is always used when hedging so the only downside is to get stopped out (as the market recovers and moves higher in which case the stocks are growing again) and we consider the loss if this happens as a 'premium' for having the portfolio insurance for the period it was held. Up to each client individually how much 'premium' they wish to use to hedge and naturally this defines the maximum risk. Sometimes it's worth spending the money on risk management (as portfolio insurance) for the SANF but that is up to each individual.

When hedging it works it's an amazing windfall! So far the score is 2 from 2 and profit on the second one is still growing and expected to continue to do so for many months.

No Advice

 

Dow was down just over 1%....on Friday....I think this is the slow correction....it will spill into mid to late 2019...will be very volatile.

 

Looks like you had a paradigm shift, from price focus to dividend focus, and you felt unshackled.

A random quote:

 

It’s that long ago I can’t remember what it was. I do however remember falling over on the road and hitting my head on the gutter on the way home from the Irish Pub around that time.

 

Lets hope it does not go that far ,as from the few I know that buy and sell don't end up making bucketloads from trading in after tax dollars as the vast majority of traders out there are on the wrong side of the 80-20rule are not going to make big bucks in any market..

You learn everyday..

 

Time will tell but it would be nice. My nervous system needs one of these events every 5 - 10 years to keep it in tip top condition. Each major market calamity teaches me something new. The first one I experienced was the 87 Crash. After that and other major market downturns since I’ve never been better prepared both financially and psychologically for the next one. Like Thornhill I eagerly look forward to GFC II or whatever the cause.

However I never sell assets in expectation of such events but simply take advantage of them to further turbocharge our cashflow.

 

Riding a bull is not always easy

 

Not a trader...but I don't like losing money..and then have to wait 4 years to get back where it is....

That works so long as you have the CF to maintain your lifestyle.

 

What can I say ....I love rodeos and am a cowboy at heart....

 

You've got it covered.

I do wish sometimes I can be pointed to the law - as opposed to lore - which dictates I must calculate the price of shares outside super. The ATO doesn't give a rats what you hold. It requires you to accurately report your income.

Even super generally only has to be "valued" once a year but if people want to look at it every fie minutes or so, go for it. I'm a POBOF who doesn't care to do that.

 

How I learned to stop worrying and love a big sharemarket downturn

US-centric but includes some practical observations that apply equally here.

 

I can only hope for a long and sustained market downturn. I will be adding and continue to add.

 

I think you’re a very greedy person. As am I, bring it on .....

Nodrog Gecko $$$$$$$$$