Forum Topics Market decline strategies
Solvetheriddle
Added a month ago

I realise, given the skill and experience of the community, this may be superfluous, but I thought I'd give it a go anyway.

most of us think of stocks as value against a cash holding. that is i have $x and the value of a stock is Y, as markets go down it either hits that value and i deploy the cash or not. fair enough.

coming into this downturn i had 5% cash and 95% stocks. that means i can deploy up to 5% cash into this drawdown which i am doing to some extent.

but what about the 95% held in stocks, drawdowns give big opportunities in the stocks you hold. the key is thinking in relative not absolute values. As markets move, relative values can markedly change and throw up switching opportunities. to me, that is the greatest opportunity in the pullback. with lower SP's there is lower CGT to pay and brings an opportunity to concentrate the portfolio on the strong stories that have been sold off too far and jettison the weak stories that may have held up too well.

given my investment approach I don't have a high turnover, but i notice in these downturns my t/o picks up, i have been more active since (no prizes here) the 2022 downturn. using the change and lower prices to strengthen value/stories and concentrate. the aim is to come out with a portfolio that i intend to hold for years over the next recovery.

good luck everyone.


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Mujo
Added a month ago

As hard as it is, relative value with opportunity cost is all that matters outside of CGT and transaction costs.

Sell the losers and improve the quality and value in your portfolio when you can.

Good reminder.

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Strawman
Added a month ago

Makes perfect sense @Solvetheriddle, and @Mujo summarises it well.

Re tax, i think too many people do silly things in an attempt to avoid it -- even though it often means *lower* after tax returns. We have some family friends who have been (recklessly) exposed to the major banks, but who refuse to sell down because "we'd have to pay a load of tax:. They did insanely well from these investments in the early part of the century, but on average they have had rather lackluster returns over the last decade.

It is entirely possible to pay MORE $ in tax, and still have a greater after tax return.


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edgescape
Added a month ago

Don't forget the holders are probably thinking about the dividend as well from the likes of CBA and WES as well.

You probably can't find that yield and safety anywhere else on the ASX.

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