Black Monday

[workingdad]

My analogy could have been clearer. The point I was trying to make is why would one sell investments because we may have a share-market correction. I own shares in POT, AIA, MFT and RYM among others. These are all high P/E shares. They are also undoubtedly some of the best businesses in NZ. Some posters here say one should sell these shares now as we are going to have a crash next year. We should either go to cash or buy high yield and low P/E shares. If one is a buy and hold investor and has statistically at least another 20 more summers, why do that? The share-market has always recovered and gone higher eventually.
Quality is quality(location,location,location).
As an unabashed Buffett fan, I see that I own a part of some very good businesses (the anchor warp of a POT tug,a toilet in AIA , two spare tyres in MFT and 6 blankets in RYM). These will remain very good businesses through any correction and go on to greater heights.
As I don't need the money for at least 10 years, this is why I am not moving.
Interesting that these 4 companies were my 4 picks for the share competition (with MDZ) giving me a 24th out of 170 place. Putting my mouth where my money is.

This thread is basically about how does one manage investment risk and it concerns me that some posters are selling a whole bunch of shares because they think a crash is coming.
Investment 101 tells you that you cannot time or predict the market vagaries. It also teaches you that diversification is the best means of handling risk.
I am hesitant to do this because, although this is what I do, I don't want to appear as though I know it all. One is always learning and modifying one's approach.
I diversify my portfolio and mitigate risk by constructing a portfolio that is like this:
60/40 shares/term deposits. Rebalance when out of whack by more than 5%
No share or ETF is more than 10% of the share portfolio.
NZ shares: 7 including 1 ETF -50% of share portfolio
Australian shares: 5 including 1 ETF-22% of share portfolio
International shares : 3 broad based ETFs-28% of share portfolio
Term Deposits: Laddered with 5 year terms in 4 banks owned by 3 entities.( Can't be bothered with bonds)

This is my philosophy. It is pretty normal and let's me sleep at night through boom and bust. Computer tracking programmes are not necessarily a good thing.
If you want risk, buy Australian shares. All the share screeners and annual reports don't seem to work for me. We read and get the feel about NZ shares everyday.

I am not going to buy or sell a share for 12months. Timing,huh!

While I don't completely disagree with the top post or the other, my plan differs. The way I see it since I dumped my shares and went into cash I have used up plenty of imputation credits from AIR dividends, made about 3% net and the market generally is lower now than it was when I sold up so I am in a better position had I stayed in. Crystal ball gazing it may be trying to time a correction or crash but I think there is enough tell tale signs out there to warrant the approach I am taking, charts, data and sentiment all give me enough to be concerned about.

Worst case things carry on rosy for another year or two and I miss out on some gains, I subsidise this with my 3% or even 4% gains if it was offsetting mortgage or otherwise and my money is relatively safe.

Best case from this tact and certainly not for some is if there is a considerable bear market given the debt, previous helicopter money and limited central banks headroom I may get into the same shares I had for 30% less maybe even more but I don't have to watch things over the holidays, don't have to worry or care too much about these massive swings from day to day or that things are trending downwards with lower highs ect.

I am comfortable and don't need the money for 15 years but hope to get into a better place by taking this approach than keeping my feet or body in the water.

[iceman]

Absolutely clear that what suits one person may not suit another with regard to investment strategy. Personal circumstances, risk tolerance etc etc all have a major bearing. But one thing that has a big influence on myself and many other investors/posters on here is tax obligations. Long term investors have no income tax obligation on their gains whereas traders do. This creates a big difference in real returns between traders and long term investors. I know this is mentioned regularly on here but needs to be, particularly for any newbies tthat may be reading these posts. Personally, this has a major influence on my investment behaviour as I do not want to become a "trader" as far as IRD is concerned.

[Balance]

So much angst about market crashes etc since this thread started in 2015.

Well, 2019 is almost here so here's to less angst in the new year about investing.

Best way of doing so is to follow the thoughts of one of the greatest investors in the world and here are his thoughts in the event of a Market Crash:

Warren Buffett's Advice for a Stock Market Crash

Stocks can fall far -- and they can fall fast. When investing in stocks, there's always a risk that a major downturn is right around the corner. ...
Avoiding leverage will give you greater clarity. ...
Don't try to time the market. ...
Don't view stocks as ticker symbols. ...
Stay invested. ...
Go shopping. ...
Stay focused on the long haul.

https://www.fool.com/slideshow/warre...-market-crash/

[iceman]

So much angst about market crashes etc since this thread started in 2015.

Well, 2019 is almost here so here's to less angst in the new year about investing.

Best way of doing so is to follow the thoughts of one of the greatest investors in the world and here are his thoughts in the event of a Market Crash:

Warren Buffett's Advice for a Stock Market Crash

Stocks can fall far -- and they can fall fast. When investing in stocks, there's always a risk that a major downturn is right around the corner. ...
Avoiding leverage will give you greater clarity. ...
Don't try to time the market. ...
Don't view stocks as ticker symbols. ...
Stay invested. ...
Go shopping. ...
Stay focused on the long haul.

https://www.fool.com/slideshow/warre...-market-crash/

Wise words indeed

[NeverQuestion]

I'm still hold stocks. I'm not pulling out if the stock market completely. But like Buffett and countless other professional investors. I have reviewed,sold risky stocks, and moved to known safe havens. We could easily be in for another 10 years of a bull market in 2019. That really depends If the central banks drop rates in 2019 in response to all this market volatility.

Interesting fact. No two recessions are the same. Looking back there are different triggers. I think this time it is credit fueled. That is why the bull market has been the highest and longest in history. Why bubbles have popped up everywhere. Why companies have been buying stocks and paying dividends with credit.

The scary thing now is that most central banks are close to or even at 0%. No one before the gfc thought that to be possible.
An interesting 2019 it will be.

[Lewylewylewy]

Happy New Year all.

NeverQuestion, good pbt about the rates. Although, do you think we are currently in a recession?

[value_investor]

The nzx50 finishes 2018 with a 4.92% increase, outperforming most other indexes around the world.

Hopefully we see more IPOs in 2019 because the replacement of stocks being taken over in 2018 isn't happening and the market will just get smaller and smaller..

Tilt, TradeMe, Restaurant Brands, Tegal and not a single IPO in 2018 and none in sight for 2019.

[Xerof]

Port of Napier is set for 2019.

[NeverQuestion]

Happy New Year all.

NeverQuestion, good pbt about the rates. Although, do you think we are currently in a recession?

I don't think we are in a recession. I personally believe we have the critical light on right now.

Reasons:

Oil: Oil has dropped quickly since October. It is down around $53 USD I believe. Typically that is an indicator of a recession. Especially when you look at what it was at around November. That is a huge drop. Oil is normally linked to productivity. So If the price of Oil price drops it normally means factories are dropping in output.The problem with this indicator now tho is around the up take in Electric cars/trucks and OPEC unrest. How much of that had an impact on Oil price? Not sure. But that is a huge drop.

Unemployment numbers: I can't find a good link sorry, but some economists I follow are saying there is a coloration between low unemployment levels being an indicator that a recession is coming. Not 100% sure that is true. That might just be a lagging indicator of an Economy coming off the boil so to speak. But the argument here is that low unemployment numbers don't last long and seem to always be followed up with a recession or downturn.

Interest rate hikes: The Fed have been raising interest rates. By my count we are at the 8th hike in the cycle. Take a look at all the major climbs in rates since the 1930s. When the Fed raise they always end up overshooting and causing a recession. But the reasons for them are always different. Right now we are stress testing the economy and I don't like the Feds track record on getting it perfect.

What I'm watching :

I'm watching the currency rates with interest. If you see huge drops in the dollar value of a country then there is something up. When a recession hits a country then Money leaves overseas quickly as foreign investors and those wanting to protect their assets get worried. As confidence slides there becomes a bit of fear for investors to get out ASAP and that causes a run on the currency. Central banks will be reacting to the price fall in the currency rate if it gets too aggressive. A stable currency is critically important to Economic stability and they will react with a rate cut immediately if it starts looking bad.

So in Short. If we start cutting rates we are in a recession/down turn/correction/depression.. or something!

Note: I'm not qualified to offer advice in this area. Just been reading up on a bit of economic history and doing my own analyses. More than happy to be corrected on a point!!

[winner69]

This is good

https://jacobinmag.com/2018/11/pulli...ts-out-of-hats



..... economic theory is the art of pulling a rabbit out of a hat right after you’ve stuffed it into the hat in full view of the audience.