Sharemarkets are up and down like a yo-yo. My my, what IS the Fed going to do today? Interest rates are going higher, regardless of the RBA. The voices of doom and gloom are getting louder. Plenty of potential dominos still to fall in the debt world. And the 'odds of recession' are getting higher.
You know what I'm going to do? Exactly the same as if the above wasn't happening. I'm going to keep saving money, keep watching my cashflow, and buy property and shares when I see value, for the long term.
And I honestly believe we'll have a recession soon: falls in US consumption, coupled with more credit problems, causing China's structural issues to surface, which will cause a drop in resource demand. The size of the decrease in demand is in some ways irrelevant: it's the hit on consumer sentiment, the simple act of someone saying 'I won't buy that new car or go out as much until things are clearer' multipled a billion times across the world that will kill the economy. I believe we're near that psychological tipping point: certainly in the US, if not here.
So given that I think all this, why not sell everything and wait for price to get cheaper before buying back in? For me, the main reason is simple: I'm still in the building phase. That means at this stage my objective is to have as much money in the market working for me as I can. As a normal human, I find it very hard to put money into the market. When it is rising, I fear I've missed the boat. When it's falling, I fear it'll fall further. If I sell everything (paying a load of CGT), when do I go back in? If it falls further, I'll breathe a sigh of relief. Then what? When do I think it'll hit bottom? More likely I'll just miss the rebound as well. Instead, I might as well just keep the money working in the market, turn on the DRPs, and let it ride. I have no margin loans, by the way.
It's the same with property. I hold what I have, watch the rents go up, and research to buy more.
Because I'm still in the building phase, my current portfolio is only a fraction of its future size. In other words, the sort of money I'm losing now is nothing compared to the portfolio I will have in the future. And how do I build that big portfolio? By continuing to put money into the market. I'm going to keep buying and just ride it out.
Will you do better if sell out and buy back in at the right time? Yes. Do I have the skills / guts / experience to do that? No. And I suspect most of you don't, either. Instead, you'll just end up botching the timing AND get ulcers.
There will be traders, etc on the forum who disagree with the above. But I really don't mind, nor do I care. I have a plan, I'll stick to it whatever the market does, and you know what? With the markets gyrating the way the have, I've barely glanced at my portfolio. I sleep at night, and I certainly don't worry about it. Instead I feel excited about being able to buy in this market: everything I've read about rich people (and compounding) tells me that it's the assets you buy in the downmarket that makes you the most money.
If you want to and/or know how to trade, go ahead. If, like me, you're just a normal person wanting to get rich in a reasonable amount of time but don't want too much stress, I suggest this. Stop watching cnbc. Forget how many shares you have. Just stick to the plan (now would be a good time to create one). Get a handle on your cashflow. Keep saving money. Study the market, and when you see something that you see value in for the long term, go buy it. Don't go crazy with debt: just pick up assets gradually. Then go have a good night's sleep secure in the belief that you'll be rich over the long run.
Alex
You know what I'm going to do? Exactly the same as if the above wasn't happening. I'm going to keep saving money, keep watching my cashflow, and buy property and shares when I see value, for the long term.
And I honestly believe we'll have a recession soon: falls in US consumption, coupled with more credit problems, causing China's structural issues to surface, which will cause a drop in resource demand. The size of the decrease in demand is in some ways irrelevant: it's the hit on consumer sentiment, the simple act of someone saying 'I won't buy that new car or go out as much until things are clearer' multipled a billion times across the world that will kill the economy. I believe we're near that psychological tipping point: certainly in the US, if not here.
So given that I think all this, why not sell everything and wait for price to get cheaper before buying back in? For me, the main reason is simple: I'm still in the building phase. That means at this stage my objective is to have as much money in the market working for me as I can. As a normal human, I find it very hard to put money into the market. When it is rising, I fear I've missed the boat. When it's falling, I fear it'll fall further. If I sell everything (paying a load of CGT), when do I go back in? If it falls further, I'll breathe a sigh of relief. Then what? When do I think it'll hit bottom? More likely I'll just miss the rebound as well. Instead, I might as well just keep the money working in the market, turn on the DRPs, and let it ride. I have no margin loans, by the way.
It's the same with property. I hold what I have, watch the rents go up, and research to buy more.
Because I'm still in the building phase, my current portfolio is only a fraction of its future size. In other words, the sort of money I'm losing now is nothing compared to the portfolio I will have in the future. And how do I build that big portfolio? By continuing to put money into the market. I'm going to keep buying and just ride it out.
Will you do better if sell out and buy back in at the right time? Yes. Do I have the skills / guts / experience to do that? No. And I suspect most of you don't, either. Instead, you'll just end up botching the timing AND get ulcers.
There will be traders, etc on the forum who disagree with the above. But I really don't mind, nor do I care. I have a plan, I'll stick to it whatever the market does, and you know what? With the markets gyrating the way the have, I've barely glanced at my portfolio. I sleep at night, and I certainly don't worry about it. Instead I feel excited about being able to buy in this market: everything I've read about rich people (and compounding) tells me that it's the assets you buy in the downmarket that makes you the most money.
If you want to and/or know how to trade, go ahead. If, like me, you're just a normal person wanting to get rich in a reasonable amount of time but don't want too much stress, I suggest this. Stop watching cnbc. Forget how many shares you have. Just stick to the plan (now would be a good time to create one). Get a handle on your cashflow. Keep saving money. Study the market, and when you see something that you see value in for the long term, go buy it. Don't go crazy with debt: just pick up assets gradually. Then go have a good night's sleep secure in the belief that you'll be rich over the long run.
Alex
