How to look past shares becoming "too expensive"

Just wondered if anybody has tips on how to look past rising share prices without getting nervous about it?

I think I probably fall into a bit of an unusual category in that I started investing around early February this year, and obviously the market tanked shortly after. So since I’ve started investing and participating in this forum there has been a lot of “buy the dip” mentality that I’m finding hard to shake off.

I know it’s illogical, because obviously the whole point of buying a share is that you want it to increase in value over time, which is exactly what is happening. My (modest) portfolio is up c. 20%, which is of course what you hope for following a dip, but I’m now finding myself at a bit of a psychological barrier in that it feels like shares are becoming more expensive than I feel comfortable paying.

I hope that’s come out coherently, it feels like a bit of a ramble. If anybody can relate and has any wisdom to share about how they overcame it, I’d really like to hear it! I’ve found myself holding cash as I’ve seen the prices rising, and wish I’d been able to look at low prices impartially as an opportunity, but it gets harder and harder as the prices go up.

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It is very possible that some stocks ARE becoming unreasonably expensive. I see 2 options here: either dollar cost average something like NASDAQ and hope it will work out long term or adopt a sound assessment strategy and keep looking until you find something that fits in that strategy.

I may be wrong but to me either of those options is better than holding to cash past a certain point.

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Buy a share for what you feel its value will be in at least 24 months time. I think anything less is not sensible. If it drops tomorrow you’re position does not change.
Have a search of forum for Bob the Worlds Worst investor for some encouragement.

I would also add that some shares just will not go up in value. Big dividend payers often are simply paying out their value with little ideas for growth. Other companies plough it into growth and see rapid share price rises. This is particularly true of tech stocks. Amazon Microsoft apple facebook were pretty solid in the dip and that tells you a lot about them as companies as well as the sector they are in.

If you are really nervous though use ETFS. S&p 500 and Nasdaq technology are very good ETFS

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Pay for an investing/trading service which monitors the market sectors and sends out letters each quarter on performance and under/overvalued positions + much more.

You’ll then stop investing blind and instead be doing it alongside data and indicators. (Along with your own personal insights).

Even long term investors could curb some of the risk by not investing blind. Having a few market people with 20+ or 50+ years experience sending indicators & insights from data sources is pretty essential, as this can also back up or alter your own views.

I have learnt quickly that I can not dither and I have to make more aggressive entries into an individual stock. Monthly or Quarterly into etf’s seems fine.

If a sector becomes valued too high too quick (like Nasdaq), aggressively find the sector that is out of favour and get insights on where that sector could be heading a few years out and look for value, preferably from data driven insights and sector direction. Then when your desired sector hits a dip (like Nasdaq), you’ll drop straight in and hopefully with a 10-15% discount.

The quote which sums this all up; “Be where the puck is heading”.

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I’m in the same boat as you. Started in February then put in a lot more than i had budgeted in March because i thought certain stocks were discounted.

One of the ways i’ve tried to overcome this is by looking at the 1 year or ‘max’ view. You’ll find that most shares are still below the prices they were trading at the begining of the year. However, if you’ve done your research/ DD and you still feel uncomfortable paying a certain price then its better to hold on to your cash. Next best thing is dollar/ pound cost averaging.

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Definitely in a similar position… Started a few months ago and now struggle to see past the super low prices a few weeks ago :weary:

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Who do you use for this?

I’m exceptionally cynical with regards to this practice as I feel they are already In lower than when they give the so called ‘tip’ and whilst the share is rising with punters money they are offloading and de risking.
But hey if your making money who cares right?

I can’t see the FTSE returning and staying/increasing at the 7300 level in the near future.

If everyone had been buying overvalued shares for the last 5 years then those highs are irrelevant Especially if you believe we are heading for a HUGE recession.

With a crystal ball we could be looking at a 4500 ftse index new normal or a 10000 ftse index norm.

Clearly nobody really knows and the speculation is rife - I’m keeping the majority of my cash safe until a clearer picture emerges if that means I miss more gains but buy a safer outlook in the future then so be it!
Big divs could be a thing of the past as companies could be forced to ring fence funds to navigate future pandemics.

I don’t think it hurts to hedge with a small amount following the herd but some caution I believe is needed.

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The most important factor that I ask the question to, came down to; which environment are the investments being made in and what can I do to limit risk. Having indicators to what is happening at the top i.e the professional investors helps reduce risk. I want to know quickly and as close to as it happens, what the top swing traders and longterm investors are doing. For that I need a teams knowledge that provide those indicators. A paid service. There are huge reasons why these services exist and it goes without saying not all services are as great as each other but there will be a successful trend coming from the top successful investors/traders. They have an edge because they have a team which monitors this stuff at professional levels.

I quickly found it rly hard to believe that I can do well by simply paying into random stocks and etf’s, I needed to know how to limit risk and I can not do that by reading an already out of date motley fool page or by guessing or by thinking or reading. It is much more useful to know straight up where the money is flowing and where should not be touched at all for now.

If it works for you that’s great - we’re all here for the same reason :+1:t2::+1:t2:

Which paid service do you use ?

I believe that even a £5 per month subscription to a tech investors newsletter or a biotech newsletter can significantly assist an investors knowledge and decision making. Finding something that works with your lifestyle. Though this can not be generic, it needs to be something of huge substance that has a proven following and providing of valuable insights.

I am not at all qualified to advise on anything. I will add that after receiving a personal call from John Thomas and paying attention to his team for a year an half and seeing his quarterly webinars, he gives out all levels of service and his biotech letter is one of the best there is. (If you can win it for free in a rare competition haha).

Id say that almost any successful investor with 20+ years experience is invaluable should they offer mentoring through the means of a sustained newsletter and alert style system to help you along whilst you learn the ‘why’ and ‘how’. Indicators do help. You look at the vix now amongst many other indicators put together, there are algorithms that lower the risk level on entering and exiting positions. That is what you are paying for.

A service with these is such a must. I have found genuine impact an awesome tool for scoping out equities quickly, it does however require market knowledge alongside otherwise genuine impact is more of a ‘it’s already happened’ kinda tool. We as investors want to be heading to where the puck is going and genuine impact alone does not provide this.

Best of luck to you.

Who needs to invest in the markets when you can just comment on them with the benefit on hindsight.

5 x 12 = £60 X any amount of people = nice work

Apologies for being cynical.

Like I said if you find it useful then truly that’s all that matters. :+1:t2::ok_hand:t2::+1:t2:

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If you’re looking to pay someone for their investing “expertise” why not just use funds?

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I literally repeat from the top. Investing blind is not investing, that’s borderline gambling. I’d imagine there are many people on here that enjoy reading the more tougher conversations from a glass half empty point of view.

I’m a fan of Burton Makiel’s book ‘A Random Walk Down Wall Street’ where he commented that “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.”

I’ve run such an experimental portfolio myself in the past (pulling stocks out of a hat and investing in them) and it was fairly successful.

It’s not a recommended strategy of course (though it was a lot of fun) due to the risk but I’m happy to throw most of my money ‘blindly’ at passives and it’s been fine for me (all losses recovered in full since the COVID crash of March).

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How do you define “expensive”? The most common way to do this is to look at the Price to Earnings ratio:
Screen Shot 2020-06-06 at 15.34.12

There are many stocks with varying values, regardless of the stage of the economic cycle.

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I think you might need to invest in some time and effort researching the companies you are looking to invest in. Try read an entry point book such as ‘The Naked Trader’ that will explain the jargon, tell you where to obtain information, give you guidance on how to read financials and company reports and then make your own decisions into the value of a company.

Honestly, 2 hours of research per company will completely take the emotion out of it.

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They’re not good enough to have retired yet though. :laughing:

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Mad Hedge Fund trader made 10 million dollars last year and paid 3 million in taxes. He’s been running the service since the 2008 financial crises for enjoyment and saw more happiness in helping a $50k portfolio get to $500k rather than making already rich people richer. Their service and fund has achieved 34% average yoy return over 11 years.

Yes these gurus make a killing with their trade teams and business setups, and many of them are also happy to help level the playing field and they do it well with a passion.

This time around they shorted on the way down Feb/March, took call positions in March lows and took profits through April & May. With one mistake placing a short recently that looks unviable to happen now. All whilst providing indicators for risk on/risk off. The most obvious play became the short on the vix in April.

Those kind of plays are so damn helpful for blind investors to know about even for the long term investor. There’s plenty of time to get into financials & travel, but many pro’s were absolutely all in on tech whilst most retail investors were scrambling around trying to get into random stocks that in hindsight, made zero sense. Riches are made in recessions and as many new investors found out (even myself), you needed some kind of mentor service to back up your thoughts.

I am still significantly in cash, yet the options pro’s are in cash because they freakin made a killing already and pulled out. That’s the difference. I personally did not know the environment I was in and even during that panic environment, it was not easy to navigate. Indicators were hugely needed and I was lucky enough to follow the basic insights and webinars during, which helped so much.

I see the value of a professional service. You get your time back and you do what the pro’s are doing, not the youtubers or their followers!

I think you should just stick to a saving account or hand over your money to a manager. I don’t think you have the temperament to be an investor. Your too risk averse to back yourself

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