Author Topic: moving to cash - market timing - can't believe it  (Read 9161 times)

Mighty-Dollar

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Re: moving to cash - market timing - can't believe it
« Reply #50 on: June 18, 2018, 02:08:22 AM »
But somehow this particular market just seems to be screaming that it is overpriced.
Actually the market looks like it has shook off the little dip that we had from late January to late March. The bull market is resuming.

If you're worried about a correction then I would argue that you're over allocated into stocks to begin with. Put more into your total bond market index fund.

ender

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Re: moving to cash - market timing - can't believe it
« Reply #51 on: June 18, 2018, 07:03:13 AM »
What does your IPS say?

ysette9

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Re: moving to cash - market timing - can't believe it
« Reply #52 on: June 18, 2018, 09:00:48 AM »
"It'll be great!"

hodedofome

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Re: moving to cash - market timing - can't believe it
« Reply #53 on: June 18, 2018, 02:14:56 PM »
frufledoc:
Quote
Are you implying that investment advisors and stock pickers are smart about the market, and actually know something that other, non-market individuals don't? Because the vast majority of them frankly know sweet FA about what the market is going to do in future. Anyone who cares to learn technical analysis can figure out as much.

Just had a thought.  I wonder how many of them guys are doing the FI thing.  They are exposed to money all day.  They see dreams made and lost by Irrational Exuberance.  They see that index funds like the turtle beating the hair are consistent winners.  I can imagine these guys don't like their jobs.  I mean, it's got to get dull after a while selling stocks, bonds and annuities to people who don't know this stuff any better than the crawl space beneath their trailers.  You would think they would be screaming inside to get out, to get out.  Yah,....how many of these financial advisor folk are going after the path to freedom?

A lot of them are glorified salesmen. They have to spend lots of money getting nice clothes, cars, houses; so that their clients believe them to be successful. They have to be members of the country club in order to get in with the wealthy clients. It's not a lifestyle conducive to saving lots of money. Their income can be pretty nice however.

There are many people out there who don't really have a concept of financial freedom. Working, making lots of money and buying lots of stuff is all that's in their frame of mind. 'Not working' is something that's so far off that it doesn't take up their thoughts. Being retired is only something they'll want once their friends are retired and enjoying themselves.
« Last Edit: June 18, 2018, 02:16:27 PM by hodedofome »

PaulMaxime

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Re: moving to cash - market timing - can't believe it
« Reply #54 on: June 18, 2018, 05:16:35 PM »
As lots of other people have said on here. DON'T DO THIS.

Unlike some of the other posters I did not do anything at all before the last crash.

my portfolio peaked in May 2008 and overall for that year was down 43% (!)

but I kept on buying through it all.

in 2009 bottomed out in Feb 2009. Down a total of 56%.

I kept on buying.

The value of the portfolio was totally back above its peak by March of 2010.

Today I have more than 5x the value I had in 2010.

This includes my ongoing contributions, but you can see that it didn't kill me. I didn't have to make the hard calls to get out and get back in.

In fact, I credit the crash of 2008-2009 with being the best thing that ever happened to me financially. I was lucky enough to keep my job, not be in the housing market at all, and able to keep investing the entire time.

Don't try to time the market it's a fool's game.
"When my information changes, I alter my conclusions. What do you do, sir?" - John Maynard Keynes

v8rx7guy

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Re: moving to cash - market timing - can't believe it
« Reply #55 on: June 18, 2018, 05:23:16 PM »
I understand why people are saying you need to get your timing right twice, but at the same time... I don't get it.  Isn't getting back in at any market valuation that is lower than when you got out leave you better off?  Yes, there are better and worse times to get back in and you don't know where the bottom is, but as long as you get back in at a lower market than when you got out you still "successfully timed the market".

That being said, I am never going to try to time the market myself since I'm in for the long haul, but I somewhat disagree with people saying you need to guess right both at the top and the bottom.

Eric

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Re: moving to cash - market timing - can't believe it
« Reply #56 on: June 18, 2018, 05:53:46 PM »
I understand why people are saying you need to get your timing right twice, but at the same time... I don't get it.  Isn't getting back in at any market valuation that is lower than when you got out leave you better off?  Yes, there are better and worse times to get back in and you don't know where the bottom is, but as long as you get back in at a lower market than when you got out you still "successfully timed the market".

While what you say it technically true, it ignores the human behavior.

Market drops 10%.  Do you buy back in or not?  Surely, if you're holding cash, you're expecting the market to drop more than 10%, so you might as well wait until that happens.  Markets rarely move in straight lines though.  So you're always expecting it to drop more and this current upward trend is just a false positive.  Repeat until you've watched years go by as you're sitting cash.
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thunderball

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Re: moving to cash - market timing - can't believe it
« Reply #57 on: June 18, 2018, 06:46:50 PM »

+1

Bicycle_B

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Re: moving to cash - market timing - can't believe it
« Reply #58 on: June 18, 2018, 07:29:18 PM »
I understand why people are saying you need to get your timing right twice, but at the same time... I don't get it.  Isn't getting back in at any market valuation that is lower than when you got out leave you better off?  Yes, there are better and worse times to get back in and you don't know where the bottom is, but as long as you get back in at a lower market than when you got out you still "successfully timed the market".

That being said, I am never going to try to time the market myself since I'm in for the long haul, but I somewhat disagree with people saying you need to guess right both at the top and the bottom.

If you perfectly timed the exit. But if the market went up after you got out, you're still behind, not better off.

I recognized the amazing peak in early 1996, when stocks hit record highs. The past year had gained 25%. The market had nearly tripled in about a decade, the Dow had more than quadrupled in 15 years. Shortly before the Super Bowl, my friend asked me whether to buy; I said "I wouldn't. Stocks are so high."

Aaaand the Dow went up another 25% or more that year. Another 20% plus the following year. Another 15% after that, with a further 10% in year four.  The Dow doubled in four years after reaching its record high!

Had I sold at the time, then bought in later when it dropped, I would still have had only half the money of a buy and hold strategy.

One further detail. There've been two huge crashes since I told my friend not to buy. But they never got low enough for me to buy back in. The "top" that I called is the lowest the Dow has ever been, from then until now. If I'd waited to buy at a lower price, I'd still be in cash.
« Last Edit: June 18, 2018, 07:35:31 PM by Bicycle_B »

PaulMaxime

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Re: moving to cash - market timing - can't believe it
« Reply #59 on: June 18, 2018, 09:20:14 PM »
I understand why people are saying you need to get your timing right twice, but at the same time... I don't get it.  Isn't getting back in at any market valuation that is lower than when you got out leave you better off?  Yes, there are better and worse times to get back in and you don't know where the bottom is, but as long as you get back in at a lower market than when you got out you still "successfully timed the market".

While what you say it technically true, it ignores the human behavior.

Market drops 10%.  Do you buy back in or not?  Surely, if you're holding cash, you're expecting the market to drop more than 10%, so you might as well wait until that happens.  Markets rarely move in straight lines though.  So you're always expecting it to drop more and this current upward trend is just a false positive.  Repeat until you've watched years go by as you're sitting cash.

Have you considered the effects of taxes if this is in a taxable investment account?
"When my information changes, I alter my conclusions. What do you do, sir?" - John Maynard Keynes

CorpRaider

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Re: moving to cash - market timing - can't believe it
« Reply #60 on: June 20, 2018, 06:09:06 AM »
I wouldn't start trying to dance in and out of the market based on your feelings and/or beliefs.  You are going to make a mess of your portfolio. 

If your allocation to stocks is too high and makes you nervous, amend your IPS to change your allocation and rebalance every so often so you feel like you are taking chips off the table (and buying low).  You might need to hire an RIA or use a balanced or target date fund if the discretion to allocate your own assets is making you unsettled and speculative. 

Finally, you could look into a trend following allocation, if you don't want to allocate more to bonds.  At least then you will have rules to apply. 

Scandium

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Re: moving to cash - market timing - can't believe it
« Reply #61 on: June 20, 2018, 07:49:25 AM »
frufledoc:
Quote
Are you implying that investment advisors and stock pickers are smart about the market, and actually know something that other, non-market individuals don't? Because the vast majority of them frankly know sweet FA about what the market is going to do in future. Anyone who cares to learn technical analysis can figure out as much.

Just had a thought.  I wonder how many of them guys are doing the FI thing.  They are exposed to money all day.  They see dreams made and lost by Irrational Exuberance.  They see that index funds like the turtle beating the hair are consistent winners.  I can imagine these guys don't like their jobs.  I mean, it's got to get dull after a while selling stocks, bonds and annuities to people who don't know this stuff any better than the crawl space beneath their trailers.  You would think they would be screaming inside to get out, to get out.  Yah,....how many of these financial advisor folk are going after the path to freedom?

This is so cute and naive:D These are people, like most people, with no concept of "enough". Making more and buying more/better is the most important thing. If they make enough to buy a lexus they want more so they can buy a BMW. Once they do that they want a Jaguar. Extend this to all parts of their lifestyle. That's their "path to freedom", not retiring early with (in their opinion) a measly lifestyle. And if that's what they prefer and choose to do it's no less valid a life than FIRE. I have no problem that choice. Claiming everyone should follow one life path is what cults do..

Also, I doubt many of them see that index funds beat the managed funds. There are many ways they can convince themselves they do better. Smart people are very good at convincing themselves of things they believe for non-smart reasons.

hubcity

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Re: moving to cash - market timing - can't believe it
« Reply #62 on: June 20, 2018, 01:35:25 PM »
...

Pulling my money out before the Great Crash--even though I was absolutely right--is the single biggest investing mistake I have ever made.  So, take all that for what it's worth.

Just a quick thank you to Roothy for posting to this thread.  That was an amazing and helpful comment.

dustinst22

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Re: moving to cash - market timing - can't believe it
« Reply #63 on: June 20, 2018, 04:23:17 PM »
Great thread.  What I gather from your post is that you need to reevaluate your allocation, as it doesn't seem you're comfortable with the current risk threshold your portfolio has.  There is nothing wrong with that, I think many people don't seriously consider this and then panic during a crash.  As Warren Buffet said, "Only when the tide goes out do you discover who's been swimming naked".  Evaluate your allocation, determine if you need to increase your bond percentage and international position as others have mentioned.  Try to diversify your allocations to where you're more comfortable in terms of long term risk threshold.  While good investing is purely a logical exercise, emotions should always be taken into account if they might be prone to lead you astray.  I adjusted my allocation once I hit FI, and as my portfolio hits new levels, I continue to change my allocation/increase bonds as my risk tolerance changes due to being more financially secure. 
« Last Edit: June 20, 2018, 04:26:40 PM by dustinst22 »

boarder42

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Re: moving to cash - market timing - can't believe it
« Reply #64 on: June 21, 2018, 10:22:47 AM »
Great thread.  What I gather from your post is that you need to reevaluate your allocation, as it doesn't seem you're comfortable with the current risk threshold your portfolio has.  There is nothing wrong with that, I think many people don't seriously consider this and then panic during a crash.  As Warren Buffet said, "Only when the tide goes out do you discover who's been swimming naked".  Evaluate your allocation, determine if you need to increase your bond percentage and international position as others have mentioned.  Try to diversify your allocations to where you're more comfortable in terms of long term risk threshold.  While good investing is purely a logical exercise, emotions should always be taken into account if they might be prone to lead you astray.  I adjusted my allocation once I hit FI, and as my portfolio hits new levels, I continue to change my allocation/increase bonds as my risk tolerance changes due to being more financially secure.

i think thats a poor decision - i think better education and understanding of markets to be ok with some volatilty is better than increasing a bond stance from fear of a crash.  most people esp at your age should be more concerned about longevity of money and large bond allocations GREATLY increase that risk.  and the large the bond allocation gets the better you need the markets to do to make your money last.  large bond allocations are overstated here with the safety they provide- they only protect against SORR which is only a major deal in the first 5-10 years of FIRE.
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dustinst22

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Re: moving to cash - market timing - can't believe it
« Reply #65 on: June 21, 2018, 11:36:23 AM »


i think thats a poor decision - i think better education and understanding of markets to be ok with some volatilty is better than increasing a bond stance from fear of a crash.  most people esp at your age should be more concerned about longevity of money and large bond allocations GREATLY increase that risk.  and the large the bond allocation gets the better you need the markets to do to make your money last.  large bond allocations are overstated here with the safety they provide- they only protect against SORR which is only a major deal in the first 5-10 years of FIRE.

Perhaps, but my stache is enough that I only need less than a 2% withdrawl rate to live on.  For that reason, I prefer reducing my exposure to volatility while still getting comparable returns over the long run.  I sacrifice a small amount of returns for more stability, I'll take it since my stache is more than double what I need.  I would take a 4% stable return in a heart beat if it was available.  Doing long term simulations, the drag is very minimal with my bond allocation (and rebalancing) +  the portfolio is more stable.  I'm in the Bogle camp on this one.  Psychology and emotion play a big role when it comes to finances, and I'd like to reduce my stress.  Many people on this forum have never had a substantial amount of assets go through a real crash, it will be interesting to see how they react when that happens -- I think many will be surprised when they find they aren't as comfortable and stoic as they thought they'd be.  Ask anyone who had substantial assets in the great recession.  Certainly I'm not advocating my specific allocation to everyone, the point is that it's very important to understand what you're comfortable with emotionally in combination with where you are at irt portfolio:expenses -- that cannot be stressed enough.  There is nothing worse than going 100% stocks, then realizing you don't have the nerves required in the middle of a crash.  This is very common, and I suspect even in this community there will be many that can't handle it.  For that reason alone, I think it's irresponsible to blindly advise everyone to put everything into stocks.  As Buffet said, let's see when the tide goes out who is naked.
« Last Edit: June 21, 2018, 11:54:11 AM by dustinst22 »

Roland of Gilead

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Re: moving to cash - market timing - can't believe it
« Reply #66 on: June 21, 2018, 04:58:18 PM »
I prefer to leave 95% of our portfolio in the market (index funds and bonds) and trade with 5%.   It gives me a sense of control even if there really is none.

On the plus side though, our overall accounts are up 17% this year almost entirely on the gains of that 5% of our portfolio.  Amazing.

Cashonda

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Re: moving to cash - market timing - can't believe it
« Reply #67 on: June 22, 2018, 12:00:58 PM »
I'm really glad you posted this as I was having some of the same thoughts.

You see, I was burned in 2008. I remember it. It was sucky.

I had just gotten my first well-paying job in 2007 and decided to invest in a bunch of Vanguard funds. I selected some OK ones that seemed really hot and popular.

Then in 2008 I lost up to 50-60% of my original deposits. Not the gains.. the original deposits. Ugh.

Luckily instead of panicking I just stopped logging into Vanguard. I tend to ostrich when things arent going my way.

Ten years later if I look at the numbers I still feel annoyed at the huge losses and the amount of time it took to recover. But if I do the math it seems I earned average 7% annual returns from 2007. Even though my portfolio went straight into the shitter it bounced back. 7% isnt awesome but negative 50% is much worse. haha

This makes me less concerned about trying to time the market. As many others have said it is about time IN the market. Also another important thing to focus on is that the losses/gains are only imaginary until you sell. Let's say I put the money in and never saw the peaks and valleys. Ten years later I could simply say "ooh yay look I have doubled my money!" :)

One lesson from 2008 - I think next time I will try to have some cash reserves so I can buy the dips too.
« Last Edit: June 22, 2018, 12:33:02 PM by Cashonda »

FIRE@50

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Re: moving to cash - market timing - can't believe it
« Reply #68 on: June 22, 2018, 12:09:35 PM »
I prefer to leave 95% of our portfolio in the market (index funds and bonds) and trade with 5%.   It gives me a sense of control even if there really is none.

On the plus side though, our overall accounts are up 17% this year almost entirely on the gains of that 5% of our portfolio.  Amazing.
You've made like 300% in less than 6 months on your 5%? I'm listening.

Roland of Gilead

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Re: moving to cash - market timing - can't believe it
« Reply #69 on: June 22, 2018, 02:17:34 PM »
I prefer to leave 95% of our portfolio in the market (index funds and bonds) and trade with 5%.   It gives me a sense of control even if there really is none.

On the plus side though, our overall accounts are up 17% this year almost entirely on the gains of that 5% of our portfolio.  Amazing.
You've made like 300% in less than 6 months on your 5%? I'm listening.

Well, 900% actually on one stock.   I bought a lot of Endocyte for $1.20 and have been selling it for $13 to $15 a share.

economist

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Re: moving to cash - market timing - can't believe it
« Reply #70 on: June 23, 2018, 06:03:02 AM »
I prefer to leave 95% of our portfolio in the market (index funds and bonds) and trade with 5%.   It gives me a sense of control even if there really is none.

On the plus side though, our overall accounts are up 17% this year almost entirely on the gains of that 5% of our portfolio.  Amazing.
You've made like 300% in less than 6 months on your 5%? I'm listening.

Well, 900% actually on one stock.   I bought a lot of Endocyte for $1.20 and have been selling it for $13 to $15 a share.


I also have a small bit of "fun money" but not in stocks. Last year I put $500 into a political prediction marketplace (predictit). Since I'm kind of a political junkie anyway I figured it'd be fun. I'm up more than 100% so far, but I don't intend to count this as part of my net worth or add new funds to my position. It's just to scratch the gambling itch so I don't do anything foolish with my "real money."

BobTheBuilder

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Re: moving to cash - market timing - can't believe it
« Reply #71 on: June 23, 2018, 07:51:02 AM »
I prefer to leave 95% of our portfolio in the market (index funds and bonds) and trade with 5%.   It gives me a sense of control even if there really is none.

On the plus side though, our overall accounts are up 17% this year almost entirely on the gains of that 5% of our portfolio.  Amazing.
You've made like 300% in less than 6 months on your 5%? I'm listening.

Well, 900% actually on one stock.   I bought a lot of Endocyte for $1.20 and have been selling it for $13 to $15 a share.

Nice catch! I have a similar approach right now, made 80% on Tesla long options in 4 weeks because I saw the greed of the short sellers, and was lucky. But not with a large absolut amount either. I mean honestly, who bets against the best chance of clean future transportation against the guy who invented PayPal and build the Falcon Heavy strongest rocket on EARTH (with boosters returing to base) with a private enterprise for lot less than government agencies? What is to win? Two more decades of shitty ICE cars and the air is getting thicker and thicker.

But back on topic: Serious investing will start in late 2018 for me when I upgraded my job, and I wouldn't mind a bear market that doesn't kill anyone because I'm just starting and also to see what kind of drawdown I could really stomach.

DreamFIRE

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Re: moving to cash - market timing - can't believe it
« Reply #72 on: June 23, 2018, 09:16:19 AM »
Perhaps, but my stache is enough that I only need less than a 2% withdrawl rate to live on.  For that reason, I prefer reducing my exposure to volatility while still getting comparable returns over the long run.  I sacrifice a small amount of returns for more stability, I'll take it since my stache is more than double what I need.

Sounds like my situation.  I have double what I need, but it's what I want to enjoy FIRE, and then after 15 years of FIRE, I will add SS to the mix as well, which will then cut the stash funded income needed to less than half, meaning my original 4% SWR will drop below 2% after 15 years when I start receiving SS.  I'm still 75% to 80% in stock funds but am moving slowly to a lower stock AA over the next year to my target FIRE date.  cFireSIM still gives me 100% success with a more conservative AA.
« Last Edit: June 23, 2018, 09:19:52 AM by DreamFIRE »

Telecaster

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Re: moving to cash - market timing - can't believe it
« Reply #73 on: June 23, 2018, 09:40:32 AM »

Are we there? I don't know. At 25x PE, I am buying only $4 of earnings with every $100. It's not outrageous but it seems steep for the risk involved.


How much risk is there?  Serious question.  If your investing horizon is longer than about 15-20 years (and all of us have investing horizons  longer than that), the chance of losing money in the broad market is very close to, if not actually zero.  You are correct in that your future returns are likely to be lower.  But your actual risk is almost nothing.

You also making a mistake of assuming that because the markets are highly valued, there will be a large correction at some point in the future.  That could be the case, but markets can trend sideways, or simply dribble down slowly over a long period of time too.  That might be what we are seeing right now. In other words, the big drop you are trying to avoid might never happen.


Mr. Green

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Re: moving to cash - market timing - can't believe it
« Reply #74 on: June 23, 2018, 11:12:33 AM »
Then in 2008 I lost up to 50-60% of my original deposits. Not the gains.. the original deposits. Ugh.

Luckily instead of panicking I just stopped logging into Vanguard. I tend to ostrich when things arent going my way.

Ten years later if I look at the numbers I still feel annoyed at the huge losses and the amount of time it took to recover.
It took little more than 2 years to recover from the drop in 2008. Someone who isn't okay with that possibility needs to strongly reconsider whether investing in the stock market is right for them.

I think that earning 7% over the 10-year period that includes the largest drop since the Great Depression is pretty awesome, considering the long term historical average is only about 8.6%.
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DreamFIRE

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Re: moving to cash - market timing - can't believe it
« Reply #75 on: June 23, 2018, 11:33:52 AM »

In 1999, the S&P went over 13 years with no net real gain, which factors in dividends and inflation.  There have been even longer periods where this has happened as mentioned in a couple posts here:

https://forum.mrmoneymustache.com/investor-alley/why-not-do-100-allocation-draw-4-at-retirement-and-yolo-it/msg2023973/#msg2023973

dustinst22

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Re: moving to cash - market timing - can't believe it
« Reply #76 on: June 25, 2018, 08:29:23 PM »


Sounds like my situation.  I have double what I need, but it's what I want to enjoy FIRE, and then after 15 years of FIRE, I will add SS to the mix as well, which will then cut the stash funded income needed to less than half, meaning my original 4% SWR will drop below 2% after 15 years when I start receiving SS.  I'm still 75% to 80% in stock funds but am moving slowly to a lower stock AA over the next year to my target FIRE date.  cFireSIM still gives me 100% success with a more conservative AA.

Yep, and anyone who thinks that they are fine with 100% stock allocation, should read this thread.  Keep in mind that these are people just like those on this forum, that thought they were comfortable with their allocation.  Thinking something in theory is very different than living through something.  The biggest takeaway from this long thread is "My risk tolerance is lower than I thought."

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=28103
« Last Edit: June 25, 2018, 09:06:44 PM by dustinst22 »

gerardc

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Re: moving to cash - market timing - can't believe it
« Reply #77 on: June 25, 2018, 10:09:15 PM »
"seems," "feels," "think," "believe."

Sounds like you are making emotional decisions that you're maybe two/thirds sure of.

Oh, the irony.

Malkynn

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Re: moving to cash - market timing - can't believe it
« Reply #78 on: June 26, 2018, 05:36:36 AM »
frufledoc:
Quote
Are you implying that investment advisors and stock pickers are smart about the market, and actually know something that other, non-market individuals don't? Because the vast majority of them frankly know sweet FA about what the market is going to do in future. Anyone who cares to learn technical analysis can figure out as much.

Just had a thought.  I wonder how many of them guys are doing the FI thing.  They are exposed to money all day.  They see dreams made and lost by Irrational Exuberance.  They see that index funds like the turtle beating the hair are consistent winners.  I can imagine these guys don't like their jobs.  I mean, it's got to get dull after a while selling stocks, bonds and annuities to people who don't know this stuff any better than the crawl space beneath their trailers.  You would think they would be screaming inside to get out, to get out.  Yah,....how many of these financial advisor folk are going after the path to freedom?

Most FAs I know are young punks who took a 3 weekend course, spend too much on clothes to look wealthy, and know A LOT less about personal finance than the average forum member here.
They should really just be called “Mutual Fund Sales Associates” and not Financial Advisors, since many have absolutely zero knowledge of personal finance beyond the minimal education they are required to have about mutual funds and a bit about taxes.

I took the securities course out of personal interest...it took me 4 days and I DO NOT feel like an expert on investing despite having spent the last 5 years learning extensively about personal finance. Meanwhile, my neighbour just finished the course as well as part of his starting a job with a big chain investment company (something like Sunlife or Edward Jones) and he knows less than 5% of what I do about personal finance, taxes, withdrawal strategies, etc...and yet people are supposed to trust him to manage their entire personal wealth.
...cool

I would say that 9 out of 10 of the FAs I met in my 20s and early 30s were virtually clueless about personal finance.
Now that I circulate with a high net worth crowd and work in corporate finance with high net worth clients, I meet mostly really savvy finance people, but I wouldn’t call them the norm. Plus, my job exists because so many high net worth clients get terrible and inappropriate financial advice so often that they’re willing to pay us to help them get decent service.

boarder42

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Re: moving to cash - market timing - can't believe it
« Reply #79 on: June 26, 2018, 09:21:40 AM »
frufledoc:
Quote
Are you implying that investment advisors and stock pickers are smart about the market, and actually know something that other, non-market individuals don't? Because the vast majority of them frankly know sweet FA about what the market is going to do in future. Anyone who cares to learn technical analysis can figure out as much.

Just had a thought.  I wonder how many of them guys are doing the FI thing.  They are exposed to money all day.  They see dreams made and lost by Irrational Exuberance.  They see that index funds like the turtle beating the hair are consistent winners.  I can imagine these guys don't like their jobs.  I mean, it's got to get dull after a while selling stocks, bonds and annuities to people who don't know this stuff any better than the crawl space beneath their trailers.  You would think they would be screaming inside to get out, to get out.  Yah,....how many of these financial advisor folk are going after the path to freedom?

Most FAs I know are young punks who took a 3 weekend course, spend too much on clothes to look wealthy, and know A LOT less about personal finance than the average forum member here.
They should really just be called “Mutual Fund Sales Associates” and not Financial Advisors, since many have absolutely zero knowledge of personal finance beyond the minimal education they are required to have about mutual funds and a bit about taxes.

I took the securities course out of personal interest...it took me 4 days and I DO NOT feel like an expert on investing despite having spent the last 5 years learning extensively about personal finance. Meanwhile, my neighbour just finished the course as well as part of his starting a job with a big chain investment company (something like Sunlife or Edward Jones) and he knows less than 5% of what I do about personal finance, taxes, withdrawal strategies, etc...and yet people are supposed to trust him to manage their entire personal wealth.
...cool

I would say that 9 out of 10 of the FAs I met in my 20s and early 30s were virtually clueless about personal finance.
Now that I circulate with a high net worth crowd and work in corporate finance with high net worth clients, I meet mostly really savvy finance people, but I wouldn’t call them the norm. Plus, my job exists because so many high net worth clients get terrible and inappropriate financial advice so often that they’re willing to pay us to help them get decent service.

they have to be clueless - or else human morals would come into play for too many people and it would be more difficult for them to staff it.  People get up in arms at me scalping tickets.  but yet are so ignorant about finances they will pay people at edward jones and work for companies like EJ and not be phased morally b/c they dont know they are just stealing money from people.  At least the people buying from me are aware of the price they are paying
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ChpBstrd

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Re: moving to cash - market timing - can't believe it
« Reply #80 on: June 27, 2018, 09:27:06 PM »
Why not either:
(a) buy call options expiring in 2.5 years with ~10% of your money and put the rest in safe short term instruments.
(b) enter a protected put position (90% stock, 10% put options)

Either way, you'll catch all but about 10% of the stock market's upside for the next 2.5 years, and have limited your losses to about 10% in the event of a meltdown. You can select your own numbers to some extent. Also, either way you have a re-entry strategy.

jacquespluto

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Re: moving to cash - market timing - can't believe it
« Reply #81 on: June 28, 2018, 09:30:32 AM »
As it relates to this thread, I'd be curious to hear others thoughts on this recent article.  It basically advises to get out of the market at certain moving average crosses (example given is the S&P crossing below the 12 month moving average).   

http://realinvestmentadvice.com/the-myths-of-stocks-for-the-long-run-part-i/
http://realinvestmentadvice.com/the-myths-of-stocks-for-the-long-run-part-ii/
http://realinvestmentadvice.com/the-myths-of-stocks-for-the-long-run-part-iii/
http://realinvestmentadvice.com/copy-of-the-myths-of-stocks-for-the-long-run-part-iv/

The thought is that being out of the market during the huge corrections is more important than missing out on gains during the head fakes.  Yes, I understand this is an attempt at market timing which most folks here strongly disagree with.   I don't necessarily agree with the article, just thought I'd share as I did find it to be an interesting read.
« Last Edit: June 28, 2018, 09:46:36 AM by jacquespluto »
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Re: moving to cash - market timing - can't believe it
« Reply #82 on: June 28, 2018, 11:10:46 AM »
Lance Roberts is a hack who thinks he can beat the market ... http://www.businessinsider.com/lance-roberts-on-hard-assets-2012-4

If you listened to him in 2012 and went in on gold you would of lost 25% of the value today (not including inflation)
.... You would of missed the huge run up also. His charts are exaggerated. Buy and Hold is the best way to come out ahead.

He is a financial adviser radio host with a bad track record
 http://www.city-data.com/forum/investing/407774-lance-roberts-streettalk-advisors-houston-area.html

Telecaster

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Re: moving to cash - market timing - can't believe it
« Reply #83 on: June 28, 2018, 11:37:07 AM »

Are we there? I don't know. At 25x PE, I am buying only $4 of earnings with every $100. It's not outrageous but it seems steep for the risk involved.


How much risk is there?  Serious question.  If your investing horizon is longer than about 15-20 years (and all of us have investing horizons  longer than that), the chance of losing money in the broad market is very close to, if not actually zero.  You are correct in that your future returns are likely to be lower.  But your actual risk is almost nothing.

You also making a mistake of assuming that because the markets are highly valued, there will be a large correction at some point in the future.  That could be the case, but markets can trend sideways, or simply dribble down slowly over a long period of time too.  That might be what we are seeing right now. In other words, the big drop you are trying to avoid might never happen.
This is not correct.  Backtesting historical returns does not produce accurate odds for anticipated future returns.  Markets do not work that way.  if economic growth continues uninterrupted, then yes, very likely.  That however depends on the odds of continued global finance and trade stability...some folks working to mess that up...so I think odds are not  zero.  However, no one actually knows.

Several time periods or specific markets have experienced extended, multi decade stagnation, drops or even complete collapse throughout history. 

Hopefully, we would see it coming and adapt, so i am not worried personally.  BTW, I am about 65% stock, 20% RE and 15% Cash/Debt (munis, corp bonds, savings bonds).

I might be missing what you are saying here (or maybe you are missing what I'm saying).   There has only been one 15-year period when the S&P (with dividends reinvested) had a real return of zero.   So the future would have to be worse than the past for skeptic to actually lose money over the next 15-20 years.   The future being no worse than the past of course is the central assumption of the 4% rule.  The future could be worse than the past of course, but then this years retirement contributions will be the least of any of our problems. 

Valuations also have predictive value.   The current CAPE certainly implies that returns will be below average over the next ten years or so years.

jacquespluto

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Re: moving to cash - market timing - can't believe it
« Reply #84 on: June 28, 2018, 12:29:20 PM »
Lance Roberts is a hack who thinks he can beat the market ... http://www.businessinsider.com/lance-roberts-on-hard-assets-2012-4

If you listened to him in 2012 and went in on gold you would of lost 25% of the value today (not including inflation)
.... You would of missed the huge run up also. His charts are exaggerated. Buy and Hold is the best way to come out ahead.

He is a financial adviser radio host with a bad track record
 http://www.city-data.com/forum/investing/407774-lance-roberts-streettalk-advisors-houston-area.html

Thanks for this info.  Was not familiar with the author.  Looks like another doom and gloomer.
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Telecaster

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Re: moving to cash - market timing - can't believe it
« Reply #85 on: June 29, 2018, 12:04:44 AM »

I think we have common ground, but your statement was that the odds of poor returns was effectively zero, which is not accurate, as no one knows the odds.  Your reasoning I believe is that backtesting performance data over the last 70 years or so (for US stocks) suggests no bad 30 year periods are possible).  Saying this means the odds are zero, I believe is over stating the case. 


Ah, i think I see the disconnect.  I use the definition of "risk" as the chance of permanent loss of capital.  Which I realize is not the way everyone defines it.  Note, I didn't say the "odds of poor returns" was zero.  I said the risk was close to zero.

Which I stand by.  Over the next 15-20 years, I don't see any reason why investing in the broad market is risky, short of an asteroid hit or zombie apocalypse. 



Car Jack

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Re: moving to cash - market timing - can't believe it
« Reply #86 on: June 29, 2018, 07:23:50 AM »
Since you've decided to market time, have you watched the chart of the Dow and the S&P?  Based on you wanting to wait for the dip, then buy, do you see those charts screaming at you right now: BUYBUYBUY!!!!

effigy98

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Re: moving to cash - market timing - can't believe it
« Reply #87 on: June 29, 2018, 06:27:19 PM »
Just get one of these portfolios and stop dancing in and out of the market.
https://portfoliocharts.com/portfolio/golden-butterfly/
https://portfoliocharts.com/portfolio/larry-portfolio/

Also, fidelity found the secret to the highest returns... Die or forget your password...
http://www.businessinsider.com/forgetful-investors-performed-best-2014-9

Bicycle_B

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Re: moving to cash - market timing - can't believe it
« Reply #88 on: June 30, 2018, 08:45:45 AM »
I used to believe the story that dead investors and investors who forgot their accounts performed better. This morning when I tried to track down the source study, I failed. To my sadness, instead I found an article that appears to it:

https://www.marketwatch.com/story/why-the-buy-and-play-dead-investment-strategy-doesnt-work-2015-10-12

The article still agrees that moves should be few. I agree with the many posters who suggest a stable portfolio that can comfortably be maintained in both up and down markets.

mjones1234

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Re: moving to cash - market timing - can't believe it
« Reply #89 on: July 03, 2018, 06:08:55 AM »
So what you're saying is you've been in cash until now and are moving to 100 percent equities?

If you're posting to publicly declare you are converting to cash, I'm here to do the opposite. It'll be interesting to compare in a few years.

RangerOne

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Re: moving to cash - market timing - can't believe it
« Reply #90 on: July 05, 2018, 02:24:52 PM »
It sounds like you have roughly 20 years of investments under your belt with 15-20 years left of working and investing. This is a time where even the most conservative allocation recommendation would likely still have you with nearly 80% of your long term investments sitting in equities.

If you deviate from this path too much you can throw all those long term investment average return numbers out the window and you are in uncharted waters. Sidling 2/3 of your long term investments in cash is slamming the breaks on the long term investment philosophy in favor of speculation.

We all want cash to invest in a crash. This is part of the beauty of recognizing that a crash is an opportunity. But don't let that opportunity lead you into the rocks and crash your ship.

The first reality I think we all have to accept is that the majority of people who will be made rich by the next crash will be people who were already wealthy. They make a lot because they have a lot of liquid cash to invest in a down period. But because they are wealthy the risk they are taking is minimal as the majority of their money was still held in their long term investments.

As much as we would all like to, most of us average Joes can't emulate their future success without taking a massive risk with our long term investments. Cashing out 2/3 of your investments I think qualifies as a major risk.

The best we can hope to do I think is emulate a small portion of a truly rich persons gains in that situation. First figure out how much of your investment money you could truly live with not growing over the next 10-20 years. I doubt you can afford to risk losing money on 2/3's of investments in the form of potentially permanently reducing that moneys potential growth.

- Consider sidelining a much smaller portion of your investments as an opportunity fund to reinvest in something you think is a major opportunity. Like they say, gamble with at most 10%. But the real number is what you can afford to not have invested.

- Consider investing a little less going forward and diverting more money to your liquid savings in CDs or higher interest accounts. Think of it as saving up to buy a fire sale home. Or plunk down $100k on some equities in a recession.

May doing some of those less drastic things will help you feel like you are positioning yourself to turn a crash into a net positive event for yourself. Emotionally I understand that appeal. Realistically we would probably all be better off investing as much as possible while holding just enough cash to keep our emergency fund sound and our checks from bouncing between pay periods.

If you don't need this money to retire. Then by all means speculate away. But keep in mind we could all be very wrong about where the market is going. Don't underestimate our ability to double the market before it tanks. Crashes are built into the long term investment strategy. Ride the wave. If you cash out now and stay out too long you may permanently diverge from the gains that were likely to be yours by sticking to the strategy you have done so well with over the last few decades.

In the words of Admiral Akbar


PaulMaxime

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Re: moving to cash - market timing - can't believe it
« Reply #91 on: July 09, 2018, 08:39:59 PM »
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch

http://awealthofcommonsense.com/2014/08/peter-lynch-stock-market-losses/
"When my information changes, I alter my conclusions. What do you do, sir?" - John Maynard Keynes