Comment and opinion for retail investors in the UK
(about 2500 words, 13 minutes or less estimated read time)
I have commented before that September and October are statistically volatile months for equity market investors, so I thought you might want to have some prompts looking at the risks and opportunities that are present or on the horizon as we head into Autumn. The next few headings cover a few of topics that have been worrying me, so to be honest I am not going to be dwelling much on opportunities!
I know from recent conversations that not all readers find the time to plough through my longer articles and at this time of year, when traditionally not much significant happens in markets – crises are much more common in September and October – some will not look at the NotHarry site at all. Other subscribers enjoy reading all my posts, even when they are not offering especially new content.
Allowing for this mix of preferences, this post offers a commentary from someone other me, easily consumed over a cup of coffee as a YouTube video that runs for less than 11 minutes.
I had decided a while back to use this publication slot to offer some illustrative numbers to support my often stated opinion that for most investors ‘buy and hold’ is not, on its own, the most advanatageous of options, even though I have no doubt at all that attempting to ‘time the market’ is a very unwise strategy. My proposition has been for a long time that staying in the market with the right assets, well diversified, is always going to make you richer in the long run, but you can enhance your returns and reduce your risk by taking profits when valuations look stretched, and then topping up your investments after a correction is obviously set in and the bad news is well and truly ‘in the price’.
Here we are considering the systemic risks and the trend in whole equity market valautions (although I use a focused equity market to make the point), not the relative value of different assets in the portfolio mix, although the principles adapt well to trading in and out of asset classes of all sorts, not just equities and cash.
This is one approach of contrarian investing and I have seen the merits of it for decades, although that is not to say that I am evangelical about the style – it is just a technique worth knowing about and using if you want to be just a little more advanced as an investor. Not adopting the methodology I propose will not damage portfolios that are well desingned to start with over the longer term, any more than driving a gas guzzler car will stop you reaching your destination in comfort: it is just that my suggested trading style improves efficiency and gives you more miles per gallon, or maybe Pounds per month.
I should mention that data which follows will not be easy to read on a phone and I recommend viewing on a large tablet or screen.
The IPO of Space X is one of the most blatant corruptions of the regulations and institutions supposedly there to protect the public, a set of maneuvres akin to the trickery of the snake oil salesman. That is not my sole opinion, but one of many independent professional commentators and publishers.
In this article, published slightly early as the facts change so quickly that it might be stale in a few days, I want to follow up on my April mid-month post comment stating that I believe that whatever behavioural factors are driving stock market valuations, in the end fundamental factors will serve to restore prices to levels that make sense in an investment world where owning one sort of asset is always at the opportunity cost of owning another with different risk and return characteristics. In other words, an overvalued asset class will always eventually be sold off to buy into a cheaper one – we just don’t know when that will happen.
What I thought might be useful would be to list out some of the fundamental data that suggest that equity markets have become detached from reality. You can make a judgment as to what, taken all together, this information implies for the immediate future and whether or not those implications would prompt action on your part to defend or enhance your personal wealth.