Discussion Topic |
|
This thread has been locked |
blahblah
Gym climber
Boulder
|
|
Yes that will be "losing" money compared to inflation. But it's a hedge against a looming down turn (I don't short stocks so cash is a hedge for me). I will re-enter after that happens. I'm happy to hear other ideas :)
Do what you want and I'm not a money manager, but I'll give you the standard conservative advice.
Forget your market timing plans and just put whatever you have to invest for retirement in a target date fund (Vanguard is fine). Max out 401k of course. Yes you'll have swings and there will undoubtedly be bear markets, as there always have been.
But market timing is like casino gambling: sure there's a chance you'll win, but odds are you'll lose (compared to buy and hold).
Listen to the pros like Buffet and Bogle (not me and not your buddy who brags about some trade).
For almost all of us, investing should be very simple: things like target date retirement funds, index funds (mostly US equities, perhaps some international), asset allocation depending on your risk appetite and timing of anticipated withdrawals.
Real estate is another option, if you're into it.
There are no "tricks" for average joe; the only trick is for money manager types to get more of your money without adding real value.
(As a detail, if you're sitting on a bunch of cash, I'm not saying put it all in the market today. You'd likely dollar cost average into the asset allocation you'd like.)
|
|
Reilly
Mountain climber
The Other Monrovia- CA
|
|
All valid points which is why I am staying the course. Yes, it’s gonna hurt to lose money when the correction comes but by pulling out now I would miss out on making money that is, in effect, a cushion for the correction. As I have pointed out before recessions are becoming less frequent and their tenure is decreasing to an average of 14 months IIRC. If you stay invested 18 months is also about the length of time it will take to see your portfolio back to its pre-dip level. If you try to time things that time period WILL expand considerably. OK, back to my Mandelbrot.
|
|
briham89
Big Wall climber
santa cruz, ca
|
|
I'm not a market timer in the sense of selling high. I only contribute to my target retirement fund and a couple other index funds and individual stocks. However, I feel that contributing right now may be mistimed and it's worth waiting for a dip....ya I know that is market timing, but I'm trying to get one side of it, the down. It would seem that there are many factors pointing towards this looming....but I could be totally wrong sitting on the sideline.
So I haven't sold anything in this high time, I'm just hesitant to add right now, and instead stick the cash I would invest in a money market fund and then add to more volatile index funds / stocks as dips occur. Or do you think even this type of market timing is not worth it in the long wrong and when I'm 60+ I'll be laughing that I was trying to time dips now?
|
|
blahblah
Gym climber
Boulder
|
|
So I haven't sold anything in this high time, I'm just hesitant to add right now, and instead stick the cash I would invest in a money market fund and then add to more volatile index funds / stocks as dips occur. Or do you think even this type of market timing is not worth it in the long wrong and when I'm 60+ I'll be laughing that I was trying to time dips now?
I'm not an expert but I've been fortunate enough (or cursed enough) to have an office job that's given me resources to invest for a long time, so I've certainly thought about this.
I do actually think that "buy the dips" can be a way to juice your returns a bit. That's different from waiting for a market crash; waiting for the crash is a riskier IMO as you may sit on the sidelines for a crash that never comes, or at least doesn't come in a way that is particularly helpful to you. I suppose I've got no problem with "buy the dips," even though I'm being a bit hypocritical as I've just said don't market time!
If I were you I'd think about dollar cost averaging, starting now, as painful as that may be if/when the market declines, understanding full well that you're in a bit of a gamble no matter what you do. A natural question would be the time frame to DCA--I'm not sure I know enough to say anything really helpful on that point; a lot of people would pick monthly purchases over one year I suppose, but that's very arbitrary.
|
|
Reilly
Mountain climber
The Other Monrovia- CA
|
|
briham, if I were you I would certainly wait. When it happens it will be obvious. Of course,
the bottom won’t be but I think I would try to discipline myself to buy at the -20% level. If it
goes down another 5-10% NBD.
|
|
Brian in SLC
Social climber
Salt Lake City, UT
|
|
Whew...record highs in the DOW.
Looking back at historical low spots (say, last 40 years) and their recovery time periods...I dunno. Could be a cliff on the way? Could be two years, 4 years out?
I could ride my large cap pony for a dip. I'd hate to have to survive a large correction.
Oh, for that crystal ball...
Any indicators that folks recommend paying attention to? Market seems fairly robust right now, and, I'm worried about tariffs, nationalism, debt...and its been bumpy, but, continues to rise...for now.
Ugh.
|
|
blahblah
Gym climber
Boulder
|
|
briham, if I were you I would certainly wait. When it happens it will be obvious. Of course,
the bottom won’t be but I think I would try to discipline myself to buy at the -20% level. If it
goes down another 5-10% NBD.
I won't at all say the above is bad advice or even that I disagree with it. But the devil can be in the details. Is the plan to buy when there is a 20% dip in the markets, valued as of today? (Obviously today is arbitrary, but have to have some date.) What if that 20% dip never happens? Or to buy when there is a 20% dip from any record high (in other words, pretending the Dow is the market, let's say the Dow goes to 30k, then the plan is to buy if the Dow goes to 24k?). Seems almost certain there will be a 20% dip sometime, but it's not so certain there will be a 20% dip before there's a 20% gain, and so it could be a wash at best to wait for that dip. In my example, you'd be better off waiting for the Dow to get to 30k and then buying compared to buying today. But what if the Dow gets to 35k before the dip? Be pretty close to a wash. What if Dow goes higher?
In either case, the poster could be out of the market for a lot of time and miss a lot of gains, as who knows when that 20% will come. And you could at least theoretically buy in at a 20% dip which turn that turn into an even bigger dip with a very long recovery, so you could "lose" that way too.
My main point is there is no super easy / obvious answer, and you're taking some risks no matter what you do, including sitting on cash.
|
|
Toker Villain
Big Wall climber
Toquerville, Utah
|
|
When the 25% tariffs kick in in January look for housing (and many other) stocks to take a hit.
|
|
Reilly
Mountain climber
The Other Monrovia- CA
|
|
Is the plan to buy when there is a 20% dip in the markets, valued as of today?
Or yesterday, or tomorrow, or from the all time high, whenever that may occur. He has to have a plan and the discipline to stick to it. He’s out and he’s planning to get in so he HAS to plan for that, even if it is an imperfect plan. A more conservative advisor might say wait for a 15% dip. A wild and crazy guy might say 30%. What if 30% never happens? That’s why I threw out 15-20%. He couldn’t go too wrong with those numbers, unless it doesn’t dip that much, which is virtually inevitable, right? If he gets in on a 15% dip and it goes down another 10 then it’s NBD given what I think is his timeline. If it doesn’t dip for two more years then he could be out some significant gains. That’s why a truly conservative guy would say get in now if your timeline is 20+ years. That wild horse ain’t gonna get broke ifn ya don’t git on him!
|
|
Splater
climber
Grey Matter
|
|
Quite right about the difficulty of timing markets. I missed several periods of large rises before learning any lesson.
Partly this was due to bad luck investments just before recessions, which tends to make you overly cautious afterwards.
|
|
Fritz
Social climber
Choss Creek, ID
|
|
|
Topic Author's Reply - Oct 2, 2018 - 08:04pm PT
|
Thank you all & especially BlahBlah, (who I disagree with on politics) for the good advice on staying invested & not trying to time the market.
I absolutely agree. However, in Oct. 2007, it was obvious that schist was happening in the U.S. housing market & would likely affect the stock market. Our 2001 investment in Vanguard's Energy Fund had done amazingly well & our position in it was suddenly about 15% of our portfolio.
I sold all of it, at what I recall was close to its all-time high, which came 7 months later in May 2008. The only other stock we sold during the drops of the great recession of 2008, was a small position in Wells Fargo, which was simply panic on our part.
I have read repeated advice, that it is very easy to sell stocks, but much harder for folks to accept the risk of re-entering the stock market.
Happily, after the big sell-off of the "great recession" we bought more "Blue Chip" stocks in early 2009, because they were so compellingly cheap compared to their valuations before the bust. I also bought back about half the shares I had sold of Vanguard Energy, but have since transferred that investment into Vanguard Bond Funds.
It was totally accidental market timing.
Stay invested my friends!
S & P 500 index since 1996.
S&P 500 gains & losses by year since since 2007
|
|
ms55401
Trad climber
minneapolis, mn
|
|
question for Vanguard investors:
if I submit a buy order before the market close, is the NAV calculated at market close of that day, or at the next day?
|
|
Reilly
Mountain climber
The Other Monrovia- CA
|
|
At the close
|
|
blahblah
Gym climber
Boulder
|
|
Minor point to ms:
You may want to consider an ETF rather than a mutual fund.
They're very similar, but one difference (and advantage) of ETFs is that the price changes throughout the trading day, not just at close like a mutual fund.
If you're buy and hold (or even just a long term investor), this distinction may not matter much, but seems to me to be a clear advantage for the ETF.
|
|
Fritz
Social climber
Choss Creek, ID
|
|
|
Topic Author's Reply - Oct 9, 2018 - 11:38am PT
|
I've been aware for ages that as bond yields rise, stocks are not as attractive to investors.
Damn if Bank of America hasn't quantified that rule of thumb. Of course their new rule will be tested.
Bonds will become more attractive than stocks only when the 10-year Treasury note yield reaches 5 percent, according to Bank of America Merrill Lynch equity strategists.
With interest rates rising, Wall Street has been handicapping how high yields can go before the stock market begins really suffer, and some analysts say the market could start to get nervous as soon as the 10-year touches 3.5 percent. The 10-year reached 3.26 percent early Tuesday before retreating.
But the B of A strategists say it's 5 percent, where the return on equity investments is challenged by the ability to earn yield in the bond market.
"Asset allocation is a dynamic process, and we would hate to oversimplify. But we tested a few frameworks to determine the 10-yr yield breakpoint at which bonds look more attractive than stocks, and they all spit out the same number: 5%," the B of A strategists wrote.
The analysts said they ran tests to see where Wall Street allocations to stocks peaked.
Five percent "is the level of the 10-yr at which our market derived equity risk premium framework indicates that stocks trade at fair value to bonds, all else equal," they wrote. "5% is the expected return of the S&P 500 over the next decade, based on our valuation framework… And 5% on the 10-yr is the level at which the reward to risk ratio for stocks vs. bonds skews more favorably toward bonds."
"If the 10yr Treasury, the so-called "risk-free" rate, climbs to the level of expected equity returns, the decision between stocks and bonds would be clear cut," the strategists noted.
Sell bonds on rising rates
Stocks have been selling off in recent sessions, as the 10-year yield broke out to new 7-year highs after Fed Chairman Jerome Powell said the Fed is no where near neutral with its rate hiking. Neutral is a level that where interest rates neither stimulate or stasll the economy.
Despite the run up in rates, B of A analysts say it is not time to sell equities.
"We think stocks, especially large caps, are attractive amid rising rates based on historical analysis and the output of our other models. Rising rates are a more definitive reason to sell bonds, in our view," they noted .
http://www.msn.com/en-us/money/markets/bank-of-america-dont-worry-about-stocks-until-10-year-yield-hits-5-percent/ar-BBOa13Y?pfr=1
|
|
Reilly
Mountain climber
The Other Monrovia- CA
|
|
Despite the run up in rates, B of A analysts say it is not time to sell equities.
“It ain’t time to sell equities, until it is.” - Yogi Berra
Vanguard envisions 5.5% returns on equities ‘for a while’. I’ll take that.
Emerging market funds are real cheap now, but they could get cheaper.
Italian bond yields hit 3.63 the other day - not nearly high enough to merit that risk level.
|
|
EdwardT
Trad climber
Retired
|
|
|
Oct 10, 2018 - 01:17pm PT
|
What a day!
|
|
SteveW
Trad climber
The state of confusion
|
|
|
Oct 10, 2018 - 01:18pm PT
|
Market's only down 830 or so. A minor adjustment. . .
|
|
Toker Villain
Big Wall climber
Toquerville, Utah
|
|
|
Oct 10, 2018 - 01:27pm PT
|
The guy that goes broke in a big way never misses any meals.
It's the poor guy shy half a slug that has to tighten his belt.
My biggest one day loss, but its only numbers on paper if I don't sell.
|
|
|
SuperTopo on the Web
|
Let us know!