After the very fruitful years of 2013, 2014 & 2015 when plenty of gains were made, we have found ourselves in the uncertainty of early 2016 where a number of issues are having a negative effect on market sentiment. Possibly the greatest fear at the moment is the slowdown in China; do we believe the Chinese projections, are they credible or indeed are they known and understood? Well over the years I have developed a philosophy that focused on only worrying about the things that I can control whilst at the same time making the best of the aspects of my environment/world that I cannot control.
Well, that’s the Rab C. Nesbitt philosopher bit done; so practically how do I intend to act until the markets sort themselves out and for sure at the time of writing, I don’t know when that may be.
Do we have a correction, a serious correction or a bear market? Who knows and for sure there will be many experts with an opinion that at some time in the future will be crowing about how right they were etc.
My view at the moment is that there is a serious risk to some considerable gains that I have accumulated over recent years; seems obvious really given that the FTSE has fallen from a high of 7100 at the end of April 2015 to the value at the time of writing, 5673; a pretty decent 20% fall but maybe that’s being a touch over dramatic. What we do know is that the FTSE 200 day MA has taken a prolonged downward path since mid-August 2015 and we probably have not seen that sort of thing since the second half of 2011. Additionally we have had the Chinese worries during August giving a 12% fall, an early December 9% fall followed by a touch of recovery and now a 10% drop since the end of December 2015. I can’t control that stuff and, therefore, try not to waste mental energy worrying about something I have absolutely no influence over.
What can I control? Well as a private investor I can control the positions I have open in the market. Firstly I have to take a view on what might happen with the markets over coming weeks, what the risk may be and how I may wish to mitigate that risk. My view currently is that there is a very real risk to my accumulated stock market dosh and, therefore, I have taken steps to mitigate that risk. The steps are:
The net effect of all of the above is that I now have in excess of a 55% cash position in my ISA and non-ISA trading accounts. Whether this is wise or not is fairly immaterial to me, what is material is the fact that I feel comfortable with this position at the moment and I really look forward to when the markets have sorted themselves out and possibly the nasty bear has gone back into hibernation. I will then have a very healthy pile of cash to hopefully invest in an appreciating market.
In my view, it’s all about doing what you as an investor feel comfortable with and in my case it’s about the mitigation of risk and keeping my powder or, at least, a healthy amount of it, dry for another day.
Happy investing; well hopefully!
Welcome to my Blog Page - I hope you find my whittling on to be of some interest. I am a private investor who is happy to share thoughts on the market and individual stocks. Please remember that I am definitely not offering tips or investment advice.