Stock, the economy and the Fed for 2023

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BLADEMDA said:
This is a great time to buy into Bond funds/ETFs. With interest rate hikes over, you get the return on the fund/etf plus extra return due to any interest rate cuts. These "cuts" are already happening based on the market prediction 3 rate cuts in 2024. The 10 year will get to 3.75% well before the Fed actually cuts rates to that level. My best guess is we see 3.75% 10 year Treasury by May ahead of the first rate cut.

“Bonds remain our preferred asset class and the Fed’s actions support our view that the bond market has further to rally in 2024. We forecast 10-year US treasury yields to end 2024 at 3.5%,” wrote Mark Haefele, chief investment officer of UBS Global Wealth Management in a research note on Thursday.

"For 2024, we do forecast both short-term and long-term rates will be coming down. Our current forecast in the short term is that the Fed will start cutting the federal-funds rate. We expect that to get down to a range of 3.75% to 4.00% by the end of the year. In fact, we expect that to continue to keep coming down in 2025, getting down to 2.25%. On the longer end of the curve, our forecast is for the 10-year to average 3.60% over the course of 2024, also remaining on a downward trend going into 2025 and averaging about 2.75% in 2025."

Morningstar.com
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Which bond ETF do you recommend?
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JiPo said:
Which bond ETF do you recommend?
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I recommend a quality, low risk bond fund as opposed to high yield/junk or trying to get a home run. Rather, a quality ETF like BND, FBND, JCPB or BYLD.
All are excellent ETFs and should make you money in 2024 and 2025.
 
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linkin06 said:
View attachment 379833
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I agree with the overall premise that dollar cost averaging is probably the best strategy but this chart is much too zoomed in to prove anything. And it excludes the single biggest event of the last 2 to 3 decades, covid.

The covid bear market was essentially complete in about 12 weeks, and recovered completely if you look at price alone in about 7 months. Since then for 3 years nearly most funds have just oscillated sideways without gains until 4 weeks ago...

Why they have left this out of their chart is very unusual...

But yeah, I think 90% dca, 10% play money however you wish is probably the way forward
 
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PpfSuxTube said:
I agree with the overall premise that dollar cost averaging is probably the best strategy but this chart is much too zoomed in to prove anything. And it excludes the single biggest event of the last 2 to 3 decades, covid.

The covid bear market was essentially complete in about 12 weeks, and recovered completely if you look at price alone in about 7 months. Since then for 3 years nearly most funds have just oscillated sideways without gains until 4 weeks ago...

Why they have left this out of their chart is very unusual...

But yeah, I think 90% dca, 10% play money however you wish is probably the way forward
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buying 1 share of VTI on the first of the month since 2020 would get you an average of ~$210/share. 3 years of constant DCA investing netted you a total 10% gain. it really has been a flat market for the new grads and it puts into perspective how remarkable the bull run post housing crash was.
 
GoBeers said:
buying 1 share of VTI on the first of the month since 2020 would get you an average of ~$210/share. 3 years of constant DCA investing netted you a total 10% gain. it really has been a flat market for the new grads and it puts into perspective how remarkable the bull run post housing crash was.
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3 yrs seems like a long time when you’re young.

I know the reply, “okay boomer!”
 
A prolonged down or sideways market is great for someone who is early in their accumulation phase. You want to get as much into the market as you can before the line goes up.
 
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Buy all the time.

Market timing requires you to be right 2x.

Can you do it?

Consistently?
 
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GonnaBeADoc2222 said:
Buy all the time.

Market timing requires you to be right 2x.

Can you do it?

Consistently?
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80-90% DCA then the remainder for the "dips." But, the caveat is you must BUY on the dips. If you are the type that hesitates or simply thinks "it will go lower" you will miss out on this strategy. For most people, DCA means put the buying on auto pilot and move on. I prefer a more active strategy and take advantage of the bear markets. Market timing per se is not what I'm advocating but rather using volatility to your advantage. One more thing there isn't any selling as part of this strategy unless it's to rebalance your portfolio after a huge market run.

10% corrections or larger happen to the s&p once every 1.8 years on average. These are the "buy the dip" moments imo. These moments often have the ticker dip below it's 200 day trailing average.

5% drops or larger can happen 3 times a year on average. These are small fry. Not bad to buy in on those 5 percenters
 
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linkin06 said:
Buy the dips
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With this strategy you catch the small moves and miss the big one. It also involves emotion so you might not even catch all the dips...

You will sit on the sideline waiting for a dip while we have a 15% run like in the last 6 weeks.
 
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Even in the short term, buying during the dip is far superior to waiting [2] You would have lost money by waiting but made positive returns over even a 3-year and 5-year period if you had continued to invest - and the profits of the “double” strategy are almost 2x that of the “hold” strategy where you stop investing.

The message is clear - Buy the dip if you can afford to.
 
PpfSuxTube said:
With this strategy you catch the small moves and miss the big one. It also involves emotion so you might not even catch all the dips...

You will sit on the sideline waiting for a dip while we have a 15% run like in the last 6 weeks.
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Can you read? Nobody can actually buy every dip with good timing. This means you need to DCA 80% of your money. It takes a super trader to invest only 50% and then try to time the other 50%. Instead, the data suggests 20% kept in reserves to buy 10% corrections. But, you must actually buy those market corrections. This isn't about individual stocks but rather the S and P 500, the NAsdaq, or the entire market. The best fund managers use this technique and very successful investors as well. Again, will you be too afraid during market corrections to buy?
 
PpfSuxTube said:
With this strategy you catch the small moves and miss the big one. It also involves emotion so you might not even catch all the dips...

You will sit on the sideline waiting for a dip while we have a 15% run like in the last 6 weeks.
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No. I remained invested in 2022 and 2023. I have been tested many times during bear markets. You must invest during bear markets not just bull markets.
This is where AI would be the superior investor. No emotions. The computer would DCA 80% then invest the remainder when the market corrected 10%. The returns would be superior over a 20 year period vs 100% DCA.
 
BLADEMDA said:
No. I remained invested in 2022 and 2023. I have been tested many times during bear markets. You must invest during bear markets not just bull markets.
This is where AI would be the superior investor. No emotions. The computer would DCA 80% then invest the remainder when the market corrected 10%. The returns would be superior over a 20 year period vs 100% DCA.
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Enemy of good is better
 
BLADEMDA said:
No. I remained invested in 2022 and 2023. I have been tested many times during bear markets. You must invest during bear markets not just bull markets.
This is where AI would be the superior investor. No emotions. The computer would DCA 80% then invest the remainder when the market corrected 10%. The returns would be superior over a 20 year period vs 100% DCA.
Click to expand...
DCA works if you are investing current income every month. If you have a lump sum, investing it all at once then dca going forward will usually beat sitting on cash for the sake of dca.
What’s your basis for saying sitting on 20% and investing after a 10% drop is better than investing everything? You could miss out on years and years of gains with the 20% you hold back waiting for a drop.
 
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triggermaster said:
DCA works if you are investing current income every month. If you have a lump sum, investing it all at once then dca going forward will usually beat sitting on cash for the sake of dca.
What’s your basis for saying sitting on 20% and investing after a 10% drop is better than investing everything? You could miss out on years and years of gains with the 20% you hold back waiting for a drop.
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There has been detailed analysis of this theory of buying the dips. It only leads to superior returns if you follow the math all the time. Most people will let their emotions get in the away and never invest that 20% until the market recovers. So, you are correct that this strategy will lead to lower returns most of the time. However, the math doesn't lie and if you had the fortitude to follow the strategy for 20 years you would exceed pure DCA.

Have you not seen the number of 10% or more corrections since 2000? This includes just last year as an example.
 
When was the last stock market correction?

You may be surprised to know that we had four stock market corrections in 2022 and one stock market correction in 2023 as illustrated in the chart below.
While we did not experience a stock market correction in 2021, we experienced five stock market corrections in 2020 alone!

Corrections occur more frequently than crashes.
On average, the market declined 10% or more every 1.2 years since 1980, so you could even say corrections are common.
Again, it’s not clockwork, but that should help you put things in context when the market drops.
 
1702851591138.png


FIGURE 1 shows the effects of three different historical approaches to volatility. Each assumes $10,000 invested on 12/31/79 into the S&P 500 Index2 and no taxes or transaction costs. The opportunistic investor added $2,000 in stocks each time the market dropped 8% or more in a month, the buy-and-hold investor made no portfolio changes, and the apprehensive investor shifted assets into cash in the face of volatility. Ultimately, the opportunistic investor had a return that was significantly higher by December 2022.
 
BLADEMDA said:
There has been detailed analysis of this theory of buying the dips. It only leads to superior returns if you follow the math all the time. Most people will let their emotions get in the away and never invest that 20% until the market recovers. So, you are correct that this strategy will lead to lower returns most of the time. However, the math doesn't lie and if you had the fortitude to follow the strategy for 20 years you would exceed pure DCA.

Have you not seen the number of 10% or more corrections since 2000? This includes just last year as an example.
Click to expand...
I suspect it depends entirely on when you start the analysis which is a lot easier in hindsight.

What do you do after the first dip? Invest your 20%? How do you re-accumulate your 20% sideline money? Not investing for years and failing to dca after that one event? Do you miss all the corrections in the meantime? Do you just rebalance out of stocks to get 20% available to buy future dips? What’s the timing or trigger for that?

There are a lot of details that make this doubtful. I’m sure if your start time for this approach comes before a time period with a 10% drop or a few 10% drops, it works out great. If you start this approach right before sustained gains it’s probably a disaster.
 
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triggermaster said:
I suspect it depends entirely on when you start the analysis which is a lot easier in hindsight.

What do you do after the first dip? Invest your 20%? How do you re-accumulate your 20% sideline money? Not investing for years and failing to dca after that one event? Do you miss all the corrections in the meantime? Do you just rebalance out of stocks to get 20% available to buy future dips? What’s the timing or trigger for that?

There are a lot of details that make this doubtful. I’m sure if your start time for this approach comes before a time period with a 10% drop or a few 10% drops is works out great. If you start this approach right before sustained gains it’s probably a disaster.
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This strategy is very simple. Let's say you have $10,000 to invest every month. The first month you put all $10,000 to work. Month 2, you set aside $2,000 until the market corrects 10%. Month 3, you do the same thing. On month 4, 1/2 way through the month, the market corrects 10% over the next 2 weeks. You put that "cash" to work by deploying the $6,000 into the market. Simple.

The second approach is where you want 100% exposure to equities but keep 20% in fixed income until there is a correction. When the mark drops 10% you sell the fixed income ETF and buy equities. You then resume your 80/20 allocation with all "new" money and repeat the process.
 
Some people may need a 100% stock portfolio to meet their goals. Some people may also need to highly leverage their lives by borrowing against the house in order to invest more. Others may need a highly leveraged real estate portfolio to get what they want. But the chances of you needing to do that to reach your goal are probably pretty low. A typical young attending physician reading this site simply doesn't need to take those kinds of risks to retire early as a multi-millionaire. At a certain point, you've got to ask yourself why you're taking risks you don't need to take. Is 24% more volatility worth it to retire in 29 years instead of 30? Would you be better off cutting back your lifestyle a tiny bit and working an occasional extra shift so you could save a little more money and use a 75/25 portfolio rather than a 100/0 portfolio? Probably. These aren't risks that folks like us need to take. Don't take risks you don't have to.

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7 Reasons Not to Use an All Stock Portfolio | White Coat Investor

Should you use a 100% stock portfolio? Historically high rates of return are tempting compared to pesky low-returning bonds. Here's the risk you're taking.
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With yields today the 60/40 portfolio is back. But, when and I mean when fixed income goes back to 3% or less annual returns the proper % for me will be 70/30. The risk reward favors equities when yields are low like they will be in late 2025 or 2026. Until then fixed income is a "decent" investment as part of a balanced portfolio.
 
As you approach age 50, and certainly past age 50, some fixed income should be part of your portfolio. The amount depends on your risk tolerance, your anticipated retirement age and of course your "number" to retire with a reasonable withdrawal rate like 3.5-4%. For some of you the only way to reach that number is to be in 100% equities while for others a 70/30 or 80/20 portfolio wins the race.
 
BLADEMDA said:
This strategy is very simple. Let's say you have $10,000 to invest every month. The first month you put all $10,000 to work. Month 2, you set aside $2,000 until the market corrects 10%. Month 3, you do the same thing. On month 4, 1/2 way through the month, the market corrects 10% over the next 2 weeks. You put that "cash" to work by deploying the $6,000 into the market. Simple.

The second approach is where you want 100% exposure to equities but keep 20% in fixed income until there is a correction. When the mark drops 10% you sell the fixed income ETF and buy equities. You then resume your 80/20 allocation with all "new" money and repeat the process.
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Gotcha. I mean once your account total gets high, setting aside 20% of your savings each month would be a negligible percentage of your total and make almost no difference, but it might work early on.
 
1702866913370.png



Safe Withdrawal rate at retirement. 90% chance of success of not running out of money. That's why I prefer 3.5% or less. Morningstar.com
I use 25-30 years of retirement just to be on the safe side.
 
triggermaster said:
Gotcha. I mean once your account total gets high, setting aside 20% of your savings each month would be a negligible percentage of your total and make almost no difference, but it might work early on.
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Don't forget that as the portfolio builds wealth there is a tendency to add fixed income- at least 10%. This gives you the opportunity to deploy some of that 10% during market corrections or bear markets without selling any equities. Typically, 7 figure portfolios do have some fixed income but maybe not here on SDN.
I'll likely add to equities when we get the next 10% correction in 2024 because I am bullish about the end of next year and 2025.
 
BLADEMDA said:
This strategy is very simple. Let's say you have $10,000 to invest every month. The first month you put all $10,000 to work. Month 2, you set aside $2,000 until the market corrects 10%. Month 3, you do the same thing. On month 4, 1/2 way through the month, the market corrects 10% over the next 2 weeks. You put that "cash" to work by deploying the $6,000 into the market. Simple.

The second approach is where you want 100% exposure to equities but keep 20% in fixed income until there is a correction. When the mark drops 10% you sell the fixed income ETF and buy equities. You then resume your 80/20 allocation with all "new" money and repeat the process.
Click to expand...

Second approach makes much more sense to me.

The first approach is the "dry powder" approach, where you save cash to invest during dips. The problem is the cash drags your portfolio returns down, probably more then buying the dip helps
www.whitecoatinvestor.com

Dry Powder Finance & Investing | White Coat Investor

Will a strategy of keeping "dry powder" or cash available to invest in a downturn increase your returns? Crunching the data to see if it can actually work.
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The second approach is more in line with rebalancing your portfolio. If you're 80/20, and equities are down 10% and bonds are stable, now your're 72/20 and you want to sell bonds and buy equities to rebalance. You're not sitting on "dry powder" 80/20 was your planned portfolio.
 
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DoctwoB said:
Second approach makes much more sense to me.

The first approach is the "dry powder" approach, where you save cash to invest during dips. The problem is the cash drags your portfolio returns down, probably more then buying the dip helps
www.whitecoatinvestor.com

Dry Powder Finance & Investing | White Coat Investor

Will a strategy of keeping "dry powder" or cash available to invest in a downturn increase your returns? Crunching the data to see if it can actually work.
www.whitecoatinvestor.com www.whitecoatinvestor.com

The second approach is more in line with rebalancing your portfolio. If you're 80/20, and equities are down 10% and bonds are stable, now your're 72/20 and you want to sell bonds and buy equities to rebalance. You're not sitting on "dry powder" 80/20 was your planned portfolio.
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I agree, but periodic rebalancing is different than treating 10% dips as a magic number. I guess you could rebalance to 80/20 every 6 months and change your target allocation to 100% equities after a 10% dip, but at that point you are just trying to time the market which typically fails. Like you said the cash (or bonds) drag your portfolio returns down more than buying the dips helps.
 
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triggermaster said:
I agree, but periodic rebalancing is different than treating 10% dips as a magic number. I guess you could rebalance to 80/20 every 6 months and change your target allocation to 100% equities after a 10% dip, but at that point you are just trying to time the market which typically fails. Like you said the cash (or bonds) drag your portfolio returns down more than buying the dips helps.
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An 80/20 portfolio offers excellent risk/reward longer term. With fixed income paying 5% the bond portion is back.
 
Too much pontification.

Here is a real and simple answer. If you are in your accumulation phase, you actually never have to look at the stock market and what it's doing, you just dump your money into us stock index fund every time you have money to dump in it.

And in 30 years, you win.
 
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ChiDO said:
Too much pontification.

Here is a real and simple answer. If you are in your accumulation phase, you actually never have to look at the stock market and what it's doing, you just dump your money into us stock index fund every time you have money to dump in it.

And in 30 years, you win.
Click to expand...

And use Vanguard funds.
 
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triggermaster said:
And use Vanguard funds.
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1. Vanguard ETFs and Mutual Funds
2. Dimensional Funds ETFs
3. iShares (yes, they are good as well)
4. Fidelity ETFs for certain bond funds
5. Fidelity Mutual Funds- Bonds
6. Dodge and Cox Mutual Funds (IRA or 401k)

That's my 30+ years of investing in a nutshell. (I still use T.Rowe Price and American Century in my retirement accounts and 401K)
 
I don’t think ‘good’ is the word for Blackrock/iShares (and I’m sure it’s about as far from you politically as it gets), but yes they sell various products.
 
BLADEMDA said:
View attachment 379955

I like Dimensional Funds ETFs and recommend them particularly for International exposure and US Small Caps.
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Never heard of Dimensional…

Looks like their expense ratios are 5-6 times that of vanguards funds in some cases?

I’m sure someone will say “it doesn’t matter…” but it makes me want to choose vanguard on principle alone.
 
Fidelity ZERO funds - no expense ratios

If you got $500k in VTI you could be saving >$150/yr if you had it in FZROX instead.
 
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