Shares are getting hammered these days. Not just shares but cryptocurrencies too. It’s hard to know when things might stop falling. Is today a good buying opportunity or a good time to offload before things get even worse?
The markets right now look like jumping off a diving board and not knowing when you are going to hit the water. It’s that feeling of falling, the terror and fear of hitting yourself hard that paralyses your thinking for a second or two and the total loss of control that you have that fills me with pure dread.
I am fortunate in a way because I didn’t benefit greatly from the boom in tech stocks. I thought that they were overpriced long ago and I avoided them, and avoided them and kept avoiding them. Now that seems like a good decision but it’s not like there any safer options out there for your money.
Shelter from the Storm?
I heard newbie investors wailing about worthless NFTs, and old men with broken SIPPs, after taking the CETVs, did you understand the risks you took, your names written there, you’ve sworn. “come on” you say, “is there no shelter from the storm?”
Where is a safe place for your money in today’s world of deflating asset prices? If you have the money and don’t spend it (if you can avoid that type of inflation) where should you put it?
I’m torn. I could keep up the old strategy of drip feeding into Pensions, LISAs and ISAs. Except I’ve filled up our LISAs and ISAs this year and Pensions risk the LTA for me. I’m not sure on JISAs as I don’t like the idea of giving kids money.
Also, I think that perhaps share prices might fall for some time and some distance – and the difference between valuing a company at a P/E of 12 (as is traditional) and a pie-in-the-sky future P/E of 100 is quite big!
I could build up a cash buffer to invest when things get worse.
Another option that I’ve thought of is to save up to pay off my mortgage. And it’ starting to look like an attractive option.
Paying off the Mortgage – pros
If I paid off the mortgage, I’d reduce my mortgage interest from £200 per month to nothing @ today’s interest rate. But rates might jump to 3% by the end of the year (when the 5 year term is up) and that’s £350 a month (plus capital) saved. (That’s a pretty cert saving I’d be making).
It’s risk free and stress free and I can probably do it.
Whilst I think I’m a good credit risk, the mortgage company might not agree and that can be a faff.
It should be possible to do so without selling many investments that we hold and it might help tidy up our non-ISAs investments up at the same time.
Paying off the Mortgage – cons
The mortgage is about 10% of our net worth and liquidating it would consume a lot of our cashflow.
Also, the return from investments should outperform the interest rate on the pension. A mortgage even at 4% interest is a steal if you can invest and get an 8% return.
Keeping the mortgage (and even switching to IO) and investing into a LISA or SIPP and paying off with the 25% tax free lump sum in 17/20 year’s time is mathematically the optimal way to do it. But I’m just not sure if it’s right for me.
And that’s the dilemma that I have. I am tempted to cash in my chips, quit while I’m ahead and miss the bloodbath.
But maybe selling now will be a missed opportunity to buy at reasonable prices whilst everyone is broke.
The mortgage decision is for December – today’s choices are hard to know what to do.
I don’t want to throw good money after bad, but I have a bit of money right now looking for a home and prices look good. The macroeconomic outlook can’t be that bad, can it?
So, I’m torn. I suppose I am just rubbernecking because there will be lots of people nursing massive losses. All those crypto slash tech bros who made it big will be nursing huge losses – especially if leverage is involved.
I’ve not been so lucky, so I don’t have the same worries.