LM portfolio as at 18/03/2022:
| Code | Sector | Date Bought | Cost | Value | Gain/Loss |
|---|---|---|---|---|---|
| LM045 | Gas, Water & Multiutilities | 06/12/2021 | £1280 | £1250 | (1.92%) |
| LM047 LM047-2 |
ETC | 17/01/2022 03/03/2022 |
£2530 | £2760 | 9.02% |
| LM048 | ETC | 31/01/2022 | £1260 | £1420 | 12.42% |
| LM049 | ETC | 07/03/2022 | £1290 | £1210 | (6.54%) |
This week there is good news and there is bad news.
The good news is that I have been able to contribute the full £4,000 into my LISA for the 2021/2022 tax year. This means I will get the full £1,000 bonus and getting an instant, tax-free 25% bonus is always very, very welcome.
The bad news is that the FTSE 250 is still languishing below its 50, 100, 200 and 377 day simple moving average values.
As I have mentioned many times before, this means I will not be buying any shares for the time being.
There has been a mini rally in the UK stock market and, of course, several of the shares I sold off just a couple of weeks ago have been boosted to levels significantly above where I exited.
Typical.
Now, I am not kicking myself that I "missed the boat" or that I made the wrong decision.
Not at all.
Instead, I am happy to wait. In fact, this week I took some time to look back and see what the market had done in years gone by.
We all know that past performance is not indicative of future results - the stock market is unpredictable we are constantly told - but if you look back to see what has previously happened then you are certain to gain a better idea of what could happen.
Looking at the FTSE 250 chart over the last couple of decades there are some interesting things to note. These are some of the completely non-scientific points I noticed on checking the long-term chart and I could be wildly inaccurate in my interpretation. In other words, please take this with a pinch of salt:
(1) The index moved below the 200 day SMA just before September 11th 2001. The market had already been dropping from about June 2001 then, of course, the market slumped drastically after the terrorist attacks. The bottom of that move would only come in March 2003.
(2) Again, in 2008, the price fell below the 200 day SMA before the huge fall from 9,000 to what became the bottom at 5,500.
(3) The FTSE 250 was flying high at the end of 2019 and doing well going into 2020 before plummeting with all the Coronavirus panic in February/March of that year.
So what does this tell us?
I'm not entirely sure...
Maybe it tells us that although some drops are attributed to certain news events, there was already weakness dragging the market down before the event. At the moment the news is largely centred around the current invasion of Ukraine and that is being blamed for the stockmarket falling but I would argue that the FTSE 250 was telling us something was wrong in early January.
Looking at the chart I did notice that this particular index doesn't tend to whipsaw around the 200 day SMA that much. When it does drop below, it often stays below for a long time - months, even years. And that usually coincides with a bear market.
So whilst it may be premature to say we're in for a rough ride for the next few months, I won't be investing in any UK shares for the time being simply because the FTSE 250 is currently below its 200 day simple moving average.
By holding out like this I am not particularly worried about missing potential gains. I know that in this LISA Millionaire experiment I won't ever be buying at the bottom. That is a given because of the way I trade.
But by being out of the market I am not at risk of holding shares in the portfolio that are dropping and losing money.
One of the very first ISA millionaires, Lord Lee, has been quoted as saying that one of his biggest mistakes was not cutting shares when they reached a certain loss. He now uses a 20% stop-loss.
So if one of the most successful ISA investors says that he should've done something, and that not doing it cost him money, it would be foolish not to listen.
Whilst I do abide by a 20% stop-loss (witness the swift chopping of the STEM position - LM044), I am now feeling a little conflicted about also using the 200 day SMA as an indicator for selling single shares. If I had stayed in INVP, SGRO and JTC they would be all still be well in profit but I closed them out when they showed a few days' weakness. Perhaps I should have waited to see if they hit the 20% loss?
Still, they are gone now and there's no point dwelling on it. It's not out of the question that I buy them again in the future.
Another very successful investor, Jim Rogers, said that you should do nothing until there is something to do.
That is advice I will take.