More market talk

[caligas]

not trying to start a big debate about market timing, but who’s pulling back on equities? Record highs, various financial time bombs afloat.....

I’m 43, recently pulled back from 95 to 75% equities. Probably where I should have been anyway and what better time to do it.

One barrier is that I prefer to keep “bonds in taxable” (another debate I don’t want to trigger). But if I sell equities in taxable I trigger capital gains. Ahhh...doctor problems.

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[Twiggidy]

I was looking at my portfolio the other day and thinking the same thing but that capital gains tax though.....damnit Obama (don't start. that was meant as a joke)

 

[caligas]

I was looking at my portfolio the other day and thinking the same thing but that capital gains tax though.....damnit Obama (don't start. that was meant as a joke)

I transitioned to bonds in tax deferred accounts. I figure having bonds in tax deferred is the lesser of two evils, the other being paying 20+% in capital gains.

Hopefully I’ll be able to work out the allocations where I want them in the future.

 

[DoctwoB]

not trying to start a big debate about market timing, but who’s pulling back on equities? Record highs, various financial time bombs afloat.....

I’m 43, recently pulled back from 95 to 75% equities. Probably where I should have been anyway and what better time to do it.

One barrier is that I prefer to keep “bonds in taxable” (another debate I don’t want to trigger). But if I sell equities in taxable I trigger capital gains. Ahhh...doctor problems.

Well of course equities will go down, the bull market won't continue forever. The questions is when. Now? 6 months from now? 1 year? We can't say. Selling too early is just as bad as selling too late. I would ride the wave and rebalance appropriately to your desired asset allocation. 95% does seem a bit high, depending on your retirement horizon.

 

[btbam]

I'm 35 in 100% equties. At this point in my life I see no need to be in bonds. I have decades to recover from any looming market pullbacks.

 

[deleted126335]

I'm 35 in 100% equties. At this point in my life I see no need to be in bonds. I have decades to recover from any looming market pullbacks.

"Like all of life’s rich emotional experiences, the full flavor of losing important money cannot be conveyed by literature. There are certain things that cannot be adequately explained to a virgin by words or pictures.”

-Fred Schwed

Being 100% stocks is very likely the right thing for you at your age....if you have the stomach for it. You won't really know if you do till you suffer a major pullback.

 

[BLADEMDA]

not trying to start a big debate about market timing, but who’s pulling back on equities? Record highs, various financial time bombs afloat.....

I’m 43, recently pulled back from 95 to 75% equities. Probably where I should have been anyway and what better time to do it.

One barrier is that I prefer to keep “bonds in taxable” (another debate I don’t want to trigger). But if I sell equities in taxable I trigger capital gains. Ahhh...doctor problems.

Enjoy the ride through X mas then sell some equities, maybe 10%, bringing you to 85%. The goal is long term capital gains and not short term. This is a good problem to have in your portfolio.

Alternatively, allocate all new money to conservative positions and begin to shift your allocation that way. It's your call.

 

[dchz]

I'm 31, a resident that is maxing out Roth IRA every year.

100% of my investments are sitting in cash.

"no one can time the market", but i'm timing the market.

The plan is to go in 100% on the lowest cost index fund when the market corrects.

 

[GA8314]

Funny you should bring this question up. After much talk about how I'll snooze like Doze during a market correction, I suddenly realized that I may not have the stomach for it and perhaps have become too attached to the number I've worked so hard to build the past few years.

So, I'm still totally vested (not sitting on much cash at all), but I've rebalanced all accounts towards a more or less 55/45 at the moment. Plan is to ride that out, fully vested, and continue to make a roughly 50/50 or 60/40 allocation and then increase equities after what seems to be an inevitable correction.

That said, I probably won't do as well with this meddling in the long run, but I am now feeling better about riding out a correction, albeit more conservatively (at least I think).

This market may not correct for a year...... Lots of potential for missed opportunities to not have some stock exposure, even after this run up..... Then again, what do I know....

 

[deleted126335]

I'm 31, a resident that is maxing out Roth IRA every year.

100% of my investments are sitting in cash.

"no one can time the market", but i'm timing the market.

The plan is to go in 100% on the lowest cost index fund when the market corrects.

Your motto (Avoiding the Dunning-Kruger) is a perfect irony.

 

[WholeLottaGame7]

I'm 31, a resident that is maxing out Roth IRA every year.

100% of my investments are sitting in cash.

"no one can time the market", but i'm timing the market.

The plan is to go in 100% on the lowest cost index fund when the market corrects.

Define "correction." Are you going to buy when it drops 10%? 20%? 40%? What if you buy when it drops 20 and then it drops 40%? What if it doesn't "correct" for another 5 years?

Probably doesn't matter for you since we're probably not talking large sums of money, but if you had several mil sitting around, missing out on 5 years of 10-15% returns is a lot of opportunity cost.

 

[nimbus]

I'm 31, a resident that is maxing out Roth IRA every year.

100% of my investments are sitting in cash.

"no one can time the market", but i'm timing the market.

The plan is to go in 100% on the lowest cost index fund when the market corrects.

You’ve already missed out on a lot of gains. What you’re doing makes no sense at your age.

 

[btbam]

You’ve already missed out on a lot of gains. What you’re doing makes no sense at your age.

Agreed. The whole "catching a falling knife" plan is just terrible. You will never be able to time the bottom, because literally no one knows where the bottom is. A very smart attending I work with pulled all of his money out of the market in sheer panic in 2009 and then sat on the sidelines for years cause he was convinced it would continue to slide. Meanwhile the S&P500 has almost tripled I believe since that time.

 

[nimbus]

I'm 31, a resident that is maxing out Roth IRA every year.

100% of my investments are sitting in cash.

"no one can time the market", but i'm timing the market.

The plan is to go in 100% on the lowest cost index fund when the market corrects.

Also 3 words: dollar cost average

You still have lots of time.

 

[sevoflurane]

I try and buy Muni bonds or tax exempt ETFs (even leveraged bond funds) during big dips and live in a state that doesn't collect state tax.
Bought a lot of leveraged muni bond funds on the last July bond dip and has been a nice run with an great return. Rebalanced last week.
I'm not holding back on equities. Still dollar cost averaging and buying heavier on dips (although not many lately).
Even so, still want a big dip to happen so I can pull some other bonds and CDs into the market.

 

[sevoflurane]

One thing is for sure... this market has...
Been
on
Fire

 

[sevoflurane]

Those who have been on the sidelines have missed one of the greatest bull markets ever.

No one knows anything... so keep to your plan.

 

[Timeoutofmind]

I'm 31, a resident that is maxing out Roth IRA every year.

100% of my investments are sitting in cash.

"no one can time the market", but i'm timing the market.

The plan is to go in 100% on the lowest cost index fund when the market corrects.

Idiotic

 

[GA8314]

I think that the best overall strategy for asset allocation is the one which will allow you to stay vested over the long haul. This is why I just "rebalanced" while staying fully vested, to a much more "conservative" asset allocation 55/45 and 60/40 than I normally would have. I do not know if this will work out, and it goes against my knowledge that market timing is not a successful strategy. I'm justifying it, however, based upon some high multiples and a nearly 10 year bull market. Continuing to pile into equities at this moment was making me FEEL (terrible word for investing.....) uncomfortable, and my tolerance for what I perceived as risk wasn't as high as I thought.

My goal is to stay conservative for now, while staying vested, and having still quite a bit of equity exposure, and then lean back more heavily into equities at lower prices. I have no idea if this will be successful in the long run but I'm o.k. with it.....

 

[BLADEMDA]

I think that the best overall strategy for asset allocation is the one which will allow you to stay vested over the long haul. This is why I just "rebalanced" while staying fully vested, to a much more "conservative" asset allocation 55/45 and 60/40 than I normally would have. I do not know if this will work out, and it goes against my knowledge that market timing is not a successful strategy. I'm justifying it, however, based upon some high multiples and a nearly 10 year bull market. Continuing to pile into equities at this moment was making me FEEL (terrible word for investing.....) uncomfortable, and my tolerance for what I perceived as risk wasn't as high as I thought.

My goal is to stay conservative for now, while staying vested, and having still quite a bit of equity exposure, and then lean back more heavily into equities at lower prices. I have no idea if this will be successful in the long run but I'm o.k. with it.....

Good plan but the key is to bite the bullet and buy more equities when the market does correct. I can tell you it is VERY hard to buy when all you see is red on the screen. But, that is the time to step up to the plate. Buy some at a 10% correction, some more at 15% and the rest at 20%. That's what I did during the crash and I totally missed timing the bottom which was like a 40% drop. Still, the plan worked and I benefited from the correction.

I see the same thing happening all over again. Real Estate prices are too high again and the market is over-heated. I agree about maintaining an allocation of let's say 60/40 or even 70/30 but this works only if you are willing to step up to the plate during market corrections.

Doze doesn't time the market but he does REBALANCE when the market corrects over 10%.

Dollar cost averaging is very smart as is a reasonable allocation in an over-heated market. I'm still over 50% equities but feel comfortable "missing out" on that 25% which is sitting in CDs.

 

[BLADEMDA]

 

[BLADEMDA]

 

[BLADEMDA]

 

[txhorn]

Anyone dabbling in crypto? The next couple of weeks leading up to the hard fork will be very interesting for bitcoin and altcoins.

 

[caligas]

I fear like we are in a “be fearful” situation now, which is in part why I pulled back to 70/30. (Also due to the fact that I have worked really hard to accumulate wealth and I dont want to be so exposed). I would be enthusiastic to go back to a higher equity level during a correction and agree with blade that you don’t have to time it perfectly if you are in for the long haul.

I suppose this could be considered market timing but I think it’s a reasonable strategy.

 

[btbam]

What are we supposed to be getting from this table?

 

[btbam]

Anyone dabbling in crypto? The next couple of weeks leading up to the hard fork will be very interesting for bitcoin and altcoins.

Outside of my normal investments I am a gambler. I like sports betting, options trading etc... But Bitcoin is a bubble of absurd proportions. Sure it's easy to look back two years ago when it was $500 and say woulda shoulda, but I GUARANTEE a massive correction is coming soon and it won't be pretty.

 

[nimbus]

What are we supposed to be getting from this table?

Don’t be sitting on the sidelines in cash.

 

[GA8314]

Good plan but the key is to bite the bullet and buy more equities when the market does correct. I can tell you it is VERY hard to buy when all you see is red on the screen. But, that is the time to step up to the plate. Buy some at a 10% correction, some more at 15% and the rest at 20%. That's what I did during the crash and I totally missed timing the bottom which was like a 40% drop. Still, the plan worked and I benefited from the correction.

I see the same thing happening all over again. Real Estate prices are too high again and the market is over-heated. I agree about maintaining an allocation of let's say 60/40 or even 70/30 but this works only if you are willing to step up to the plate during market corrections.

Doze doesn't time the market but he does REBALANCE when the market corrects over 10%.

Dollar cost averaging is very smart as is a reasonable allocation in an over-heated market. I'm still over 50% equities but feel comfortable "missing out" on that 25% which is sitting in CDs.

That's the plan. I'll "rebalance" back when stocks come on sale. I also have a steady stream of investment savings, and so I will DCA along the way.

Meantime, I may miss out on some gains (still greater than 50% equity exposure) but will hopefully preserve capital when the sale comes, while not missing out totally on any further gains. We'll see. I don't know how well this will work but I'll stick with it. Was just getting nervous with a nearly 90% equity exposure.......

 

[GA8314]

I fear like we are in a “be fearful” situation now, which is in part why I pulled back to 70/30. (Also due to the fact that I have worked really hard to accumulate wealth and I dont want to be so exposed). I would be enthusiastic to go back to a higher equity level during a correction and agree with blade that you don’t have to time it perfectly if you are in for the long haul.

I suppose this could be considered market timing but I think it’s a reasonable strategy.

I'm with you, though "rebalanced" to an even more conservative (I think) bond position than you. I suppose it's not exactly market timing but a mix of that and rebalancing a bit. After all the time to rebalance is after a portion of your assets have really run up. We probably are both struggling with that, however, in that most of my own investment assets are equities and while I will build in some further diversification, my TARGET has never been 55/45 or 60/40 (where I'm at now), and thus it's not a pure rebalance. Also, that a pure rebalance shouldn't be motivated by some trepidation, I suppose.....

 

[BLADEMDA]

What are we supposed to be getting from this table?

My portfolio tanked 40% in 2008. I bought equities throughout the crash and went "all in" when the market dropped by 20%. I missed the "bottom" by a wide margin yet still benefited from the rebound by sticking to my strategy. In summary, you can make a lot of money even if you totally miss the bottom as long as you have RULES in place. Doze has these rules and he follows them which makes him a bad-ass investor and not a market timer/trader.

The bigger your portfolio the more important is to have a rules based strategy in place. If you are young and just starting out then 100% with DCA is just fine. Once that nest egg starts exceeding 1/2 your retirement goal (that magic number we all have in our heads which means we are there)
I think some prudence in is in order.

 

[BLADEMDA]

 

[BLADEMDA]

 

[BLADEMDA]

 

[le_purrde]

Why do people always mention "record highs" when justifying pulling out of the market? It's almost always at a "record high".. which is exactly why we keep investing in it. 3-4 years ago people were saying they should pull out of the market because it was at a "record high", look how well that worked out for them. Simply put, timing the market is almost always a mistake. Unless you're nearing retirement, just keep yourself invested and stay the course, and you will statistically outperform those who try and buy low / sell high.

 

[dchz]

I fear like we are in a “be fearful” situation now, which is in part why I pulled back to 70/30. (Also due to the fact that I have worked really hard to accumulate wealth and I dont want to be so exposed). I would be enthusiastic to go back to a higher equity level during a correction and agree with blade that you don’t have to time it perfectly if you are in for the long haul.

I suppose this could be considered market timing but I think it’s a reasonable strategy.

No one can time the market.

 

[dchz]

Isn't he heavily invested in coca-cola?

 

[BLADEMDA]

I'm going to explain my comments in more detail here then simply move on. I want to start by stating each individual must decide on an allocation strategy for him/herself. This means the first step is understanding risk/reward and volatility vs likely gains over 2 plus decades. A full market cycle or even two is really needed to see things in a good perspective. This means a "timing" based strategy is likely to fair worse than an allocation based one with the use of fair value as another metric.

Let's say you are 33 and have been investing for 2 years. As far as you are concerned the market is fantastic and one should be fully invested in equities. But, is this accurate? What does the evidence say about the risk/reward of 100% equity exposure? What about fair value or the Shiller P/E? Is there any evidence out there about the best allocation strategy for A young investor? even if you choose 100% equity exposure how will you diversify across the various sectors? What about Foreign equities or real estate or precious metals/virtual currencies?

Now, let's suppose you are 46 years old and have reached the 1/2 milestone for your nest egg. Do you still want 100% equity exposure? What is the proper allocation strategy at this point? What does the evidence say about the highest probability of reaching your desired goal of retirement at age 61 with the least amount of risk?

Anyone who wants to paint an allocation based strategy which incorporates some fair value metric as "market timing" is mistaken. The whole point of an allocation based strategy is to re-balance the portfolio to decrease risk while maximizing gains; this results in good returns with less volatility.

At this point of the market cycle it would be wise to re-balance in January or 12/30/17 to the allocation YOU have decided upon. Use that rules based strategy to keep volatility under control. For some, this means changing their dollar cost averaging strategy to perhaps a 50/50 allocation so the overall portfolio becomes 90/10 equity vs bonds/cash/cds by the end of 2018. For others, they will sell some equities at the end of the year while for others it's 100% equity until the next market crash.

I have no idea when the next major market correction will occur. But, I do know with certainty that one will happen within the next few years. I hope the correction is mild (10-15% drop) and short in duration (6-12 months) because my long term plan is dependent on decent market returns of 4.5% over the next decade. However, if the correction is severe I have the cash reserves readily available to take advantage of a severe correction while riding out the downturn. I use 2008 as an example of such a correction.

The best advice I have is that Bear markets are painful and the human response is to panic at just the wrong time. Develop a strategy for long term investing (you can also trade a little if that entertains you) based on the historical data and your tolerance for risk/volatility.

 

[BLADEMDA]

Okay, Please pick one for your portfolio:

 

[BLADEMDA]

 

[BLADEMDA]

At this point in my career I can't RISK losing 68% of my portfolio in one year (market crash). Perhaps, you can weather the storm because your time horizon is 30 years until retirement:

 

[BLADEMDA]

I've tilted International in my portfolio since 2016. It's been a good move so far. I am about 30% USA vs 20% International for equity exposure. I still like the International side for growth even though the volatility is higher. I also have Real estate, Gold, Silver and Commodities in my portfolio. The cash and short term bond/CDs are MONEY losers vs inflation but that's the price I pay for safety in my portfolio:

 

[BLADEMDA]

So, here is a professional portfolio that I like for ME at this point in my career and at this point in the market cycle:

 

[BLADEMDA]

 

[BLADEMDA]

No one can time the market.

One must stay invested at all times. The allocation based strategy is NOT a timing one but does allow you to raise cash/CDs/short term bonds when Fair value reaches all times highs and your percentage of equity exposure exceeds YOUR model.

 

[BLADEMDA]

I'm advocating a larger exposure to International stocks particularly international small cap. That's where the growth is and where you will be be rewarded for the high volatility.

 

[dchz]

Define "correction." Are you going to buy when it drops 10%? 20%? 40%? What if you buy when it drops 20 and then it drops 40%? What if it doesn't "correct" for another 5 years?

Probably doesn't matter for you since we're probably not talking large sums of money, but if you had several mil sitting around, missing out on 5 years of 10-15% returns is a lot of opportunity cost.

Completely agree, I also see it. In the end I know what i'm getting myself into, I assessed the risks, and I firmly believe the benefit is more than the risk. whether or not this is dunning-kruger is up to you to interpret.

Why? well to be honest, i don't have the best rationales. My best friend is in investing and he is doing the same. so i'm following his lead. also note the bolded portion. My DCA of my portfolio 10 years from now will be minimally impacted.

Why does my genius best friend think it's too expensive? Schiller's adjusted PE ratio. It's not meant to be used as market predictor, but it does by definition says the market as a whole is too expensive to buy right now. What are the evidence against this? well interest rate is still low right now, and we have a president that knows barely just enough economics to want to appoint a fed chair to keep it low as long as possible. What does that mean for the market if it's expensive and the interest is artificially low? i think in the end the market forces will overcome, but no one knows what it will do 100% of the time. keynsian economics says we will hit an asymptote on marginal interest rate induce growth, and the market will still correct even if interest rate stays low.

All of the above may be bull****.

 

[dchz]

It's amazing what blade can write up in the same time it takes me to sum up my BS argument...

My investment horizon is long and i'm doing a very bold strategy while i know exactly what i'm risking.

it's only stupid or "idiotic" if it DOESN'T WORK.

 

[GA8314]

Anyone dabbling in crypto? The next couple of weeks leading up to the hard fork will be very interesting for bitcoin and altcoins.

I don't fully understand it, but considering that the US government has taken out entire regimes which have threatened the petro-dollar, as well as the overall speculative frenzy in that sector, I'm staying far away from it.

 

[GA8314]

I think this is highly appropriate. Literally, the definition of rebalancing.

The reason some find it "difficult" is that many investors find it very hard to sell assets which have been performing (the key word being "been"). Rebalancing, theoretically, allows you to sell high and buy low......