I started investing a couple of years ago as a means of trying to beat the low interest rates available to ISAs and savings accounts and so far it's working out well with the information available via Stockopedia.
I have one active portfolio consisting of ten stocks across diverse markets, and several other portfolios that I simply monitor to see what would have happened, had I invested in those.
What I've noticed is that as the FTSE index rises and falls, generally ALL of my portfolios respond in the same manner. Over the past twelve months, I've seen my active portfolio swing from £700-£1000 in profit, down to a £400 loss, and bounce back again, and this pattern is generally reflected in the other portfolios.
My question is, is there any merit in selling all of my shares when the FTSE is high, and then buying back/rebalancing when the market takes a downward turn? I estimate over the past twelve months, I could have done this four or five times and cashed in £600-£1000 profit which could then be reinvested in full a month later? I realise there are trading costs and potential loss of dividends to consider.
Am I missing something obvious?
"Am I missing something obvious?"
Yes! Unless you haven't mentioned in your post your psychic ability to call exactly when the top and bottom of the market occurs. It is remarkably easy to make money on the stockmarket when viewing charts in hindsight. The tricky bit is to look at a chart today and say whether it will be higher or lower tomorrow.
There are many techniques to give indications whether the market is rising or falling more or less than expected (that is what 'momentum' deals with). You could also consider the relative strength of the market over a period of time.
To develop your investing skills it may be useful for you to record your prediction about where the FTSE will be in 1 day, 1 week, 1 month along with your reasoning. If you are able to consistently forecast where the market will go then selling on the highs and buying back in on the lows could be a profitable strategy for you.
I wish you a profitable 2016.
