I've just seen a report about RBS (Royal Bank of Scotland) advising people to sell everything. EVERYTHING. That quite some advice to get from such a large institution. Do you think they're right? Is the market heading for a large correction?
yes, because panic selling always works out well for investors. I would have very few recommendations right now, today, on something to definitely sell. I think the biggest companies I would avoid are things like drillers, but they are so beaten down that right now selling is probably not even worth it. One thing, which is my research project for next weekend is copper mining companies especially second tier companies like equipment makers. Copper prices have dropped significantly for similar reasons as oil.. weakness in China and added supply... but the mining companies and equipment makers have not fallen proportionally. I think there is opportunity to make money in put options in some of those companies as they are going to have weak earnings over the next year.
Pardon me but I don't think that irresponsible statement can be attributed to Royal Bank of Scotland. Maybe it was issued by the government's finance department to stir up the economy. Stagnant money makes for a dull economy. But I agree that panic sellling is an advantage to investors since they have the money to buy and those selling will go even for a lower price of their property.
Can't speak for RBS, but going to 100% cash is almost always going to be a bad idea for many reasons. Since no one can predict the future, no one knows for sure where the broad markets will go from here. Although the markets nearly tripled over a 6 year period from early '09 through early 2014, it was certainly no guarantee that they would continue such a remarkable climb for any further length of time. And no one was certain exactly when and just how much and how long the 2 double digit corrections would be that we've seen in the last 5 months or so would be. And no one is certain from here what we'll see in the near and mid term. Some believe we're entering a bear market. Yet no one can be certain how far down, how long, etc one would be. The best thing to do if you are investing for mid to longterm growth or for current income needs is to basically stay the course. If you sell everything in a taxable account, expect a big tax bill if you've made any profits. And if you're investing for income, you're probably not going to see quite the volatility you would in a growth-oriented portfolio - you're still going to need the income from the dividends and bond interest that you won't get in CD's and deposit accounts. One caveat might be high yield bonds - there could be at least a little danger there. This is why diversification is so important. Trying to time the broad market to such a degree that you'd either be heavily levered up to a dangerous degree on investments OR in anywhere near 100% cash is a fool's errand. Diversify. Dollar cost average. Keep at least a little cash onhand. Avoid much in the way of leverage. Don't be afraid to take at least a little off of your winners that have become less than cheap - particularly if they are more speculative, volatile stocks with less-than-amazing fundamentals. And don't be afraid to buy and buy more of good companies with solid fundamentals that become cheaper as markets sell off.
I'm not an expert at all when it comes to investing but this is actually the first time I heard of an institution that actually advises investors to sell everything. As what JR said, I also don't think it's really a good idea to convert everything to cash. And at this time when most stocks are down, it's hard for me to even think of selling at all. I'm more on the buying mood right now but I'm still figuring out which industry is good to buy into at this time.
It's pretty unusual for an established bank like RSB to issue advice like this, I must admit, but I think they were just talking about this year, 2016, and telling people to minimize exposure for the next 12 months, then reassess and see how the market lies after that. It might be very sage advice, actually, but like JR says, going 100% cash would be just ridiculous - find a balance, as always, in investment.
Something sound fishy. As always, if you have enough stock in one company that it would destroy you to have them go down, then your portfolio wasn't strong enough. It might be a crummy set back, but it shouldn't be a total loss.
Sell everything? Won't inflation itself eat away your savings? Stocks will rebound at any time so value investing would in the long term be more profitable than holding onto your cash because you are terrified you'll lose most of it.
While I'm not doubting the word of the OP, I'd like to see the actual wording of the report by RBS in which it allegedly tells everyone to sell everything. Sometimes these wordy reports can get lost in translation a bit, and if it does actually tell people to sell everything investment they've got, I'd be slightly concerned by what they haven't told us...why we should do that now on their say so...
