Hello I want to hear your thoughts about how has the virus crisis changed your spending or investing behaviour and if you are becoming more risk averse or taking on more risks or no change with your spare cash.
I have been fairly consistently investing my monthly salary into stock markets via ETFs on a quarterly basis if not monthly in the past couple of years. However now I am seriously thinking about saving up.
The main reason is when I read what Buffet and the legendary investors like him, or government heads such as Fed or ECB chairs, I feel that no one has much clue about what’s gonna happen in the next 2-3 years. My company’s CEO (a fairly large financial institution which is well plugged into the world of politics and policies) also said to us in the recent staff townhall that next 2-3 years will be tough. This is not just speaking about capital markets such as stock markets, but in general global economy and employment.
I have no skills to time the market which is why I have been investing steadily over the past. And I don’t plan to time the market going forward. I’m not thinking about hoarding up cash for another crash. But rather, saving up to prepare for any hardships in life such as reduction of pay, loss of jobs or difficulties in finding a new job.
The real issue I have is other than putting cash into stock markets or bond markets, not many other places I can put my cash to. Interest rate is too low so saving up doesn’t make much sense; investing in private markets such as crowdfunding is beyond my risk and liquidity tolerance and even if I do, it will only be a small part of my portfolio; real estate is beyond my pocket size. So this is the same issue that many large institutional investors face as well I think today: I got no where else to put my money so it will have to go to stock markets. Well, I find such argument quite sad and dangerous.
So please I’d love to hear how you are changing the way you deal with your cash at this moment. Are you saving up, spending/investing as usual or spending/investing more than the past, and why?
Edit: realized that I could start a voting function on this.
I am still doing my normal monthly investment in ETFs. The only difference is now I am taking advantage of any low share prices for individual companies and selling them for a profit. Then using the profit to buy more ETFs.
I bought individual equities at the beginning of the ISA year.
I’m considering taking the profits though and holding on to the cash until the market drops and then putting the cash back into ETFs for the long term.
I was watching Buffet’s slides in his 2020 shareholder meeting. He pointed out over time US stock markets go up. But during the 2-3 years where markets go down before they eventually they go up again, individuals’ lives such as savings and employment are seriously impacted, such as the great depression, 1970 cold war times, 2000 tech bubble and 2018 GFC to name a few.
On average, an adult will experience 7 times of 2-3 years of down markets in their lifetime.
But if market goes down by another 40% alone, my and presumable a lot of people’s normal life won’t be impacted much really.
It’s more the employment and economy side of the equation I am thinking more about. In UK alone, furlough pay is holding up many people’s spending behaviours in the short term, but that will change in near future.
The logic is, the markets are being successfully propped up. How can they go down when even junk bonds are being bailed out. Potentially equity etfs to be purchased too, if need be. (Equities have apparently not been purchased yet).
Take the 1930’s depression & blend it with the 2008 financial crises, then add in a successful propping up of the failing markets and take from that what you can.
Me personally, I see at least half of the population returning to their normal ‘buy lots of random items’ habits and the other 50% being hyper savvy financially - especially with the new focus on app based financial services.
The inevitability of falling markets at least once or twice this year, followed by a financial crisis in 2021/22 makes me believe that slow and steady wins the race.
Questions that I find useful: What is the smart money doing and where is the 100trillion in bond investments moving to?
Equities are being purchased all over the world by Central Banks. At one point recently the Swiss National Bank owned more Facebook shares than Mark Zuckerberg.
I expect that there might be some inflation down the line so I am looking into putting my cash into assets such as real estate and stocks (I have more of a dividend portfolio set up). I am also investing in commodities such as copper, oil and uranium. I got in close to the floor so I believe that I have little downside but huge upside.
Bonds are terrible right now with super low yields but I understand that bonds are seen as a hedge and more of a preservation of wealth rather than a generation of wealth.
I have also been purchasing silver and gold (no longer buying gold right now) and this has worked out quite well for me. Finally, I also bought some bitcoin back in March and will add more if it comes back down. I have been reading and learning about bitcoin for a year now and feel comfortable with my decision.
I’ve been thinking about trying to be as diversified as possible. I bought a little gold but (like Daniel ^) feeling a bit cautious about that at the moment. I thought this article was interesting in that long term there is a fairly stable ratio of gold : silver price (Investors make big bets on silver closing giant gap with gold | Financial Times) and currently gold is vastly more expensive than silver. Some well respected investors still seem to think gold is underweighted in institutional funds (Elliot Letter_April 16.2020 Perspectives Paul Singer_Elliott.pdf | DocDroid) which could support an increase in price.
If you do need to hold cash for any reason I think making sure you are at least in a high yield online only account is a must.
Some other ideas:
not to speculate on currency but as a downside hedge against UK inflation / anything else going very wrong in one place - investments denominated in other currencies (e.g. S&P500, ASX200, Japan) might be an interesting play - (looks like there aren’t any ASX trackers on here atm…)
likewise - not in the position to buy real estate but will be interesting to see what happens in next couple of years… Lloyd’s was saying their worst case scenario is a 30% decrease over the next 2-3 years
I did buy some good shares that I can hold for long term but these next few years are going to be unpredictable. I have taken a risk by investing most of my cash even though I am unable to work at home and low paid job. Yes it is a huge risk but I see this as huge opportunity to build up my portfolio and savings for the future. I am just going to do the wait for some of the stocks that I don’t want to go into green and sell them. If the market goes down again, I should be ready.