Author Topic: Ready for a Correction  (Read 89751 times)

Kaspian

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Re: Ready for a Correction
« Reply #200 on: August 27, 2015, 10:28:54 AM »
"PANIC ON WALL STREET!!"

"RALLY ON WALL STREET!!"

Meanwhile passive investors be like:


sol

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Re: Ready for a Correction
« Reply #201 on: August 27, 2015, 10:51:18 AM »
I think lots of people were expecting a market correction at some point.  Even hoping for it, as a natural part of market growth cycles that had to happen before the market can move higher.

I'm just not sure that a one week long correction/recovery really satisfies that criteria.  Like does a flash crash count?  How about a slightly slower flash crash?

If the market does continue to trend up in the short term, I suggest the media start calling this the flash correction.  So fast most investors entirely missed it.

Retire-Canada

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Re: Ready for a Correction
« Reply #202 on: August 27, 2015, 10:54:12 AM »
I am kind of pissed, I usually invest the first of every month and if it continues this way, it would mean I have missed out on any correction :(

You need a low interest rate line of credit. Then you can invest any time there is a good opportunity and just pay it off when you get paid. Interest costs are negligible if you are carrying the debt for only a week or two.
« Last Edit: August 27, 2015, 11:19:57 AM by Vikb »

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Re: Ready for a Correction
« Reply #203 on: August 27, 2015, 10:58:57 AM »
I am kind of pissed, I usually invest the first of every month and if it continues this way, it would mean I have missed out on any correction :(

You need a low interest rate line of credit. Than you can invest any time there is a good opportunity and just pay it off when you get paid. Interest costs are negligible if you are carrying the debt for only a week or two.
Why didn't I think of it. Next time I guess. Can someone explain me why we crashed on monday only to be back to where we were before the crash on thursday?
« Last Edit: August 27, 2015, 12:13:20 PM by fb132 »

Kaspian

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Re: Ready for a Correction
« Reply #204 on: August 27, 2015, 12:49:22 PM »
Can someone explain me why we crashed on monday only to be back to where we were before the crash on thursday?

Because fear & greed, baby!  What makes our current world go round.  ....Fear & greed.  :/

Retire-Canada

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Re: Ready for a Correction
« Reply #205 on: August 27, 2015, 03:08:43 PM »

Because fear & greed, baby!  What makes our current world go round.  ....Fear & greed.  :/

This is true.

mpg350

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Re: Ready for a Correction
« Reply #206 on: August 27, 2015, 03:18:52 PM »
 

I couple more days like today (so far) and yesterday... I guess by next week the correction will be "corrected" and we will be back to all time highs?

WE have a ways to go to reach all time highs...it was expected the market would go back up it was way oversold and now it will run into resistance.  Also volume going up has been avg so we are far from out of the woods...if we fail and go past old low things will get ugly fast.

Mr. Green

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Re: Ready for a Correction
« Reply #207 on: August 27, 2015, 08:31:10 PM »
I think lots of people were expecting a market correction at some point.  Even hoping for it, as a natural part of market growth cycles that had to happen before the market can move higher.

I'm just not sure that a one week long correction/recovery really satisfies that criteria.  Like does a flash crash count?  How about a slightly slower flash crash?

If the market does continue to trend up in the short term, I suggest the media start calling this the flash correction.  So fast most investors entirely missed it.
I'm in agreement. If the market goes back to where it was before then I don't consider this the needed correction. It was a great buying opportunity that I took advantage of but I think there needs to be something that lingers for weeks or a couple months. With the newly revised GDP data and the Fed backtracking on their rate raising language the wind has been taken out of the fearmongers' sails a little bit.

a1smith

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Re: Ready for a Correction
« Reply #208 on: August 27, 2015, 08:36:26 PM »
You cherry pick three charts (with different time frames!) and no relationship to the statement in question as proof that reversion to the mean does not apply to currencies.

Your charts provide no such proof of your original statement and do not prove that reversion to the mean does not apply to currency trading, (it's actually a common approach to trading currencies.)

If you have actual evidence that reversion to the mean does not apply to currency trades, please share it.  I'd love to learn something new. 

Your current evidence is analogous to saying that markets don't appreciate because of Russia. china, and germany which have all had stock markets go to zero.

You're complaining that my three data points (literally the first three I looked up, so it's cherry picking in name recognition I suppose) is insufficient to disprove your claim that you support with NO data?

Okay. First, you prove your claim, or even supply a modicum of evidence, and then I'll respond. Until then, your assertion is worth exactly the same as the evidence you've supplied - zero.

http://actuaries.asn.au/Library/fsf06_paper_asher_mean%20reversion.pdf

(yawn)

The paper is "Mean reversion in investment markets: a survey"; we're talking about currency markets.  ;-)

Perhaps a more thorough reading of the paper (ie reading more than just the title) would be helpful here?

Let me help you out.  Perhaps your computer is not so good at opening attachments.  Section 2.1 is entitled "currency markets" and its conclusion is...

Small deviations from PPP present little in the way of profitable arbitrage
opportunities, and can remain for some time. Large deviations from the productivity weighted
PPP do however produce a speedy and measurable mean reversion.


And if you read it a little more you will see that the mean reversion is to PPP, not to some fixed exchange rate.  So, the CADUSD plots above could very well be plots of the PPP.  Do you have proof that the exchange rate is deviating from PPP?  If so, what are you using to measure the deviation?

Left

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Re: Ready for a Correction
« Reply #209 on: August 29, 2015, 02:04:06 PM »
bumping to ask a question and didn't think it needed another thread.

since I've decided to call this a flash correction... since it seems to recover fairly quickly, it seems like it wasn't worth the bother to well, bother with. Over on bogleheads and online, I see people asking if they should have used the correction to "rebalance". In a flash correction (not that they wouldn't have known it would end so quickly), is there a point to rebalance if you normally do it at year end? I mean if they decided to rebalance last week, and sold bonds to buy stocks, and now all of the sudden, their stocks are "out of balance" again, they need to rebalance yet again. This seems to create another taxable event.

So like with dollar cost averaging and such, do people really "time" the market to rebalance when they think it is going to be a down market? Or does rebalancing on a set date keep with the "staying the course" plan? IE, the plan is 80/20 and to invest once a year on the new years week. And also use that time to rebalance. No matter what else happens during the year, don't touch the account. If that was the plan, does rebalancing outside that first week time frame count against the investor, is it market timing if all you do is rebalance?

I didn't rebalance, just wondering about the timing of doing it.
« Last Edit: August 29, 2015, 02:08:17 PM by eyem »

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Re: Ready for a Correction
« Reply #210 on: August 29, 2015, 03:08:37 PM »
bumping to ask a question and didn't think it needed another thread.

since I've decided to call this a flash correction... since it seems to recover fairly quickly, it seems like it wasn't worth the bother to well, bother with. Over on bogleheads and online, I see people asking if they should have used the correction to "rebalance". In a flash correction (not that they wouldn't have known it would end so quickly), is there a point to rebalance if you normally do it at year end? I mean if they decided to rebalance last week, and sold bonds to buy stocks, and now all of the sudden, their stocks are "out of balance" again, they need to rebalance yet again. This seems to create another taxable event.

So like with dollar cost averaging and such, do people really "time" the market to rebalance when they think it is going to be a down market? Or does rebalancing on a set date keep with the "staying the course" plan? IE, the plan is 80/20 and to invest once a year on the new years week. And also use that time to rebalance. No matter what else happens during the year, don't touch the account. If that was the plan, does rebalancing outside that first week time frame count against the investor, is it market timing if all you do is rebalance?

I didn't rebalance, just wondering about the timing of doing it.
My personal take (if you disagree please let me know) is that I rebalance only once a year, meaning if one of my ETF's is off by 5%, I rebalance, but if in the same calendar year it goes off again by 5%, I don't do anything until the following calendar year if it remains that way.

Retire-Canada

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Re: Ready for a Correction
« Reply #211 on: August 29, 2015, 10:51:18 PM »
bumping to ask a question and didn't think it needed another thread.

I didn't rebalance, just wondering about the timing of doing it.

Are you still accumulating investments?

I'm buying more with my savings each month so I put the new money into whichever asset is undervalued based on my asset allocation. So I'm tweaking the balance each month.

I got my monthly injection into my investments a bit early this month to take advantage of the dip in prices.

Unless things get totally out of balance I'll keep nudging my asset allocation back towards the correct ratios each month.

johnny847

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Re: Ready for a Correction
« Reply #212 on: August 29, 2015, 11:10:09 PM »
bumping to ask a question and didn't think it needed another thread.

I didn't rebalance, just wondering about the timing of doing it.

Are you still accumulating investments?

I'm buying more with my savings each month so I put the new money into whichever asset is undervalued based on my asset allocation. So I'm tweaking the balance each month.

I got my monthly injection into my investments a bit early this month to take advantage of the dip in prices.

Unless things get totally out of balance I'll keep nudging my asset allocation back towards the correct ratios each month.

Yeah I do this too. I have yet to find myself not being able to correct my portfolio's AA, if it hit a rebalancing threshold, with my new monthly contribution (in fact, I'm pretty sure I've never hit a rebalancing threshold yet!). Then again, I started investing in 2013.

You can apply this principle in reverse too - if you are retired and making withdrawals, withdraw from the asset which is relatively overweighted according to your AA. Of course, with the typical Mustachian's low level of spending, rebalancing this way may not always be possible, and may actually require you to sell some of your relatively overweighted assets to buy your relatively underweighted assets ;)

mrpercentage

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Re: Ready for a Correction
« Reply #213 on: August 29, 2015, 11:39:29 PM »
The crystal ball is too hazy. I expect turbulence, take advantage of good offers, and position myself into "don't give a crap what it does cause I got good stuff."

Edited for language. I cuss like a sailor because I was one. Working on it
« Last Edit: August 29, 2015, 11:44:04 PM by mrpercentage »

Roland of Gilead

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Re: Ready for a Correction
« Reply #214 on: August 30, 2015, 09:31:22 AM »
I made a few trades during the flash correction which eased some pain, but our overall portfolio is still down along with the market.  I have a decent amount of cash built up for living expenses but could not react fast enough to get the super hot deals (Apple for $95, Gilead for $90).

I am a little better positioned for the next flash correction, which should happen in the next few weeks based on economic conditions that are not solved yet, but still have a ton of money in the market because I see as through a glass darkly.

a1smith

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Re: Ready for a Correction
« Reply #215 on: August 30, 2015, 10:35:14 AM »
bumping to ask a question and didn't think it needed another thread.

since I've decided to call this a flash correction... since it seems to recover fairly quickly, it seems like it wasn't worth the bother to well, bother with. Over on bogleheads and online, I see people asking if they should have used the correction to "rebalance". In a flash correction (not that they wouldn't have known it would end so quickly), is there a point to rebalance if you normally do it at year end? I mean if they decided to rebalance last week, and sold bonds to buy stocks, and now all of the sudden, their stocks are "out of balance" again, they need to rebalance yet again. This seems to create another taxable event.

So like with dollar cost averaging and such, do people really "time" the market to rebalance when they think it is going to be a down market? Or does rebalancing on a set date keep with the "staying the course" plan? IE, the plan is 80/20 and to invest once a year on the new years week. And also use that time to rebalance. No matter what else happens during the year, don't touch the account. If that was the plan, does rebalancing outside that first week time frame count against the investor, is it market timing if all you do is rebalance?

I didn't rebalance, just wondering about the timing of doing it.

Here is John Bogle's take on rebalancing (watch the second video that shows up in the search):

http://johncbogle.com/wordpress/?s=rebalancing

Summary is to set wide bands for rebalancing; don't set rules for when it needs to be done; and in general he doesn't think it needs to be done.  He says that if someone wants to rebalance he won't tell them not to do it.  Over a 25 year time period sometimes a rebalanced portfolio will win and sometimes it won't.

I've seen other interviews with John Bogle where he mentioned he had not rebalanced his own portfolio for over three years.  He said something to the effect of letting the winners run.

Left

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Re: Ready for a Correction
« Reply #216 on: August 30, 2015, 10:40:33 AM »
I let the winners run mostly out of laziness to bother rebalancing :S

I just do it with new money, I invest 1 or 2 times a year, whenever I have $10k saved up. I have my dividend reinvestments set to the % that I want the portfolio but that isn't a good way to do it, but it's how I've done for the past 2-3 years (I haven't invested all that long)

johnny847

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Re: Ready for a Correction
« Reply #217 on: August 30, 2015, 10:40:50 AM »
bumping to ask a question and didn't think it needed another thread.

since I've decided to call this a flash correction... since it seems to recover fairly quickly, it seems like it wasn't worth the bother to well, bother with. Over on bogleheads and online, I see people asking if they should have used the correction to "rebalance". In a flash correction (not that they wouldn't have known it would end so quickly), is there a point to rebalance if you normally do it at year end? I mean if they decided to rebalance last week, and sold bonds to buy stocks, and now all of the sudden, their stocks are "out of balance" again, they need to rebalance yet again. This seems to create another taxable event.

So like with dollar cost averaging and such, do people really "time" the market to rebalance when they think it is going to be a down market? Or does rebalancing on a set date keep with the "staying the course" plan? IE, the plan is 80/20 and to invest once a year on the new years week. And also use that time to rebalance. No matter what else happens during the year, don't touch the account. If that was the plan, does rebalancing outside that first week time frame count against the investor, is it market timing if all you do is rebalance?

I didn't rebalance, just wondering about the timing of doing it.

Here is John Bogle's take on rebalancing (watch the second video that shows up in the search):

http://johncbogle.com/wordpress/?s=rebalancing

Summary is to set wide bands for rebalancing; don't set rules for when it needs to be done; and in general he doesn't think it needs to be done.  He says that if someone wants to rebalance he won't tell them not to do it.  Over a 25 year time period sometimes a rebalanced portfolio will win and sometimes it won't.

I've seen other interviews with John Bogle where he mentioned he had not rebalanced his own portfolio for over three years.  He said something to the effect of letting the winners run.

Yeah that's true, but rebalancing is about managing risk, not returns. People decide on an asset allocation because they want to limit the risk they take on. If it was purely about returns, everybody would just be 100% stocks.

a1smith

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Re: Ready for a Correction
« Reply #218 on: August 30, 2015, 01:12:03 PM »
bumping to ask a question and didn't think it needed another thread.

since I've decided to call this a flash correction... since it seems to recover fairly quickly, it seems like it wasn't worth the bother to well, bother with. Over on bogleheads and online, I see people asking if they should have used the correction to "rebalance". In a flash correction (not that they wouldn't have known it would end so quickly), is there a point to rebalance if you normally do it at year end? I mean if they decided to rebalance last week, and sold bonds to buy stocks, and now all of the sudden, their stocks are "out of balance" again, they need to rebalance yet again. This seems to create another taxable event.

So like with dollar cost averaging and such, do people really "time" the market to rebalance when they think it is going to be a down market? Or does rebalancing on a set date keep with the "staying the course" plan? IE, the plan is 80/20 and to invest once a year on the new years week. And also use that time to rebalance. No matter what else happens during the year, don't touch the account. If that was the plan, does rebalancing outside that first week time frame count against the investor, is it market timing if all you do is rebalance?

I didn't rebalance, just wondering about the timing of doing it.

Here is John Bogle's take on rebalancing (watch the second video that shows up in the search):

http://johncbogle.com/wordpress/?s=rebalancing

Summary is to set wide bands for rebalancing; don't set rules for when it needs to be done; and in general he doesn't think it needs to be done.  He says that if someone wants to rebalance he won't tell them not to do it.  Over a 25 year time period sometimes a rebalanced portfolio will win and sometimes it won't.

I've seen other interviews with John Bogle where he mentioned he had not rebalanced his own portfolio for over three years.  He said something to the effect of letting the winners run.

Yeah that's true, but rebalancing is about managing risk, not returns. People decide on an asset allocation because they want to limit the risk they take on. If it was purely about returns, everybody would just be 100% stocks.

I agree.  The wide bands for rebalancing John Bogle mentioned was 5% which is what many people use.  He was saying you don't have to use 0.1% bands.  I don't agree with his statement that it doesn't need to be done as do many others (should have mentioned that before.)

Here is a nice whitepaper from Vanguard - Best practices for portfolio rebalancing

Some quotes:

1st paragraph of executive summary
Quote
The primary goal of a rebalancing strategy is to minimize risk relative to a target asset allocation, rather than to maximize returns. A portfolio’s asset allocation is the major determinant of a portfolio’s risk-and-return characteristics. Yet, over time, asset classes produce different returns, so the portfolio’s asset allocation changes. Therefore, to recapture the portfolio’s original risk-and-return characteristics, the portfolio should be rebalanced.

Conclusion
Quote
Just as there is no universally optimal asset allocation, there is no universally optimal rebalancing strategy. The only clear advantage as far as maintaining a portfolio’s risk-and-return characteristics is that a rebalanced portfolio more closely aligns with the characteristics of the target asset allocation than with a never-rebalanced portfolio. As our analysis shows, the risk-adjusted returns are not meaningfully different whether a portfolio is rebalanced monthly, quarterly, or annually; however, the number of rebalancing events and resulting costs increase significantly. As a result, we conclude that a rebalancing strategy based on reasonable monitoring frequencies (such as annual or semiannual) and reasonable allocation thresholds (variations of 5% or so) is likely to provide sufficient risk control relative to the target asset allocation for most portfolios with broadly diversified stock and bond holdings.

So, it seems like there is no optimal rebalancing method.  One point they do make is to not rebalance too often in an after tax account due to tax implications and to also use dividends and income to rebalance to minimize portfolio turnover.

I use more of the threshold criterion (I use <=5%, depends on what market is doing) and not so much of the time criterion.  They evaluate both of these and also time+threshold criterion.

johnny847

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Re: Ready for a Correction
« Reply #219 on: August 30, 2015, 04:19:13 PM »
Here is John Bogle's take on rebalancing (watch the second video that shows up in the search):

http://johncbogle.com/wordpress/?s=rebalancing

Summary is to set wide bands for rebalancing; don't set rules for when it needs to be done; and in general he doesn't think it needs to be done.  He says that if someone wants to rebalance he won't tell them not to do it.  Over a 25 year time period sometimes a rebalanced portfolio will win and sometimes it won't.

I've seen other interviews with John Bogle where he mentioned he had not rebalanced his own portfolio for over three years.  He said something to the effect of letting the winners run.

Yeah that's true, but rebalancing is about managing risk, not returns. People decide on an asset allocation because they want to limit the risk they take on. If it was purely about returns, everybody would just be 100% stocks.

I agree.  The wide bands for rebalancing John Bogle mentioned was 5% which is what many people use.  He was saying you don't have to use 0.1% bands.  I don't agree with his statement that it doesn't need to be done as do many others (should have mentioned that before.)

Here is a nice whitepaper from Vanguard - Best practices for portfolio rebalancing

Some quotes:
[removed for brevity]

So, it seems like there is no optimal rebalancing method.  One point they do make is to not rebalance too often in an after tax account due to tax implications and to also use dividends and income to rebalance to minimize portfolio turnover.

I use more of the threshold criterion (I use <=5%, depends on what market is doing) and not so much of the time criterion.  They evaluate both of these and also time+threshold criterion.

Haha I should have read the link before I responded.

I use a 5% rebalancing threshold as well, but I've never had to sell to rebalance since I'm still in my wealth accumulation stage.

mrpercentage

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Re: Ready for a Correction
« Reply #220 on: August 31, 2015, 02:02:01 AM »

ShoulderThingThatGoesUp

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Re: Ready for a Correction
« Reply #221 on: August 31, 2015, 03:59:51 AM »
I'm planning on rebalancing when gains become long-term, which is September 10th. This is the first year I've really had an investment strategy.

johnny847

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Re: Ready for a Correction
« Reply #222 on: August 31, 2015, 05:38:09 AM »
I'm planning on rebalancing when gains become long-term, which is September 10th. This is the first year I've really had an investment strategy.

If you have losses, you want to harvest your losses before they go long term, as short term losses are more valuable than long term ones.

forummm

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Re: Ready for a Correction
« Reply #223 on: August 31, 2015, 08:42:27 AM »
The future says buy, buy, buy!

http://www.cnbc.com/pre-markets/?trknav=dw:topnav:markets:premarkets:100746233

And the market opened slightly down and is still down so far.

I'm ready for another correction! :)

Pooperman

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Re: Ready for a Correction
« Reply #224 on: August 31, 2015, 08:58:22 AM »
The future says buy, buy, buy!

http://www.cnbc.com/pre-markets/?trknav=dw:topnav:markets:premarkets:100746233

And the market opened slightly down and is still down so far.

I'm ready for another correction! :)

Correction + correction = bear market!

nobodyspecial

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Re: Ready for a Correction
« Reply #225 on: August 31, 2015, 09:36:38 AM »
Correction + correction = bear market!
Unless it's a correction to the correction = the same place we were a month ago

Pooperman

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Re: Ready for a Correction
« Reply #226 on: August 31, 2015, 10:06:05 AM »
Correction + correction = bear market!
Unless it's a correction to the correction = the same place we were a month ago

The "up" variety doesn't really have a name (beyond bull market) where the "down" variety has several!

Chuck

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Re: Ready for a Correction
« Reply #227 on: August 31, 2015, 12:26:55 PM »
I'm glad I at least got a little piece of correction prices before everything shot back up 20%

ShoulderThingThatGoesUp

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Re: Ready for a Correction
« Reply #228 on: August 31, 2015, 12:45:14 PM »
I'm planning on rebalancing when gains become long-term, which is September 10th. This is the first year I've really had an investment strategy.

If you have losses, you want to harvest your losses before they go long term, as short term losses are more valuable than long term ones.

Makes sense, but I need to rebalance away from stuff where I have gains.

forummm

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Re: Ready for a Correction
« Reply #229 on: August 31, 2015, 01:21:50 PM »
The future says buy, buy, buy!

http://www.cnbc.com/pre-markets/?trknav=dw:topnav:markets:premarkets:100746233

And the market opened slightly down and is still down so far.

I'm ready for another correction! :)

Correction + correction = bear market!
A bear market at least every other Friday would be great!

Mr. Green

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Re: Ready for a Correction
« Reply #230 on: August 31, 2015, 01:27:02 PM »
I put 75% of my cash position in right at the bottom. Of course that bottom is relative. Things could head south again and go lower than where I bought, which is why I don't make a habit of timing things. I'll take my 10% lower price tag and be happy with it.

sirdoug007

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Re: Ready for a Correction
« Reply #231 on: September 01, 2015, 08:13:53 AM »
And September starts with an early session selloff. 

I think this volatility will be around for a while folks.  Buckle up!

fb132

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Re: Ready for a Correction
« Reply #232 on: September 01, 2015, 08:15:26 AM »
And September starts with an early session selloff. 

I think this volatility will be around for a while folks.  Buckle up!
Right on time, I just transfered my money from my bank account to Questrade, tomorrow I will be buying stocks on sale :)

sirdoug007

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Re: Ready for a Correction
« Reply #233 on: September 01, 2015, 08:18:55 AM »
Better keep that cash coming, I think there will be a lot of "sales" as the stock markets bounce around in September.

Giro

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Re: Ready for a Correction
« Reply #234 on: September 01, 2015, 09:12:58 AM »
I still plan on buying heavy throughout September.  I have a feeling we are going to see a rocky month. 

kind of excited!!

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Re: Ready for a Correction
« Reply #235 on: September 01, 2015, 09:18:40 AM »

I'm planning on rebalancing when gains become long-term, which is September 10th. This is the first year I've really had an investment strategy.

If you have losses, you want to harvest your losses before they go long term, as short term losses are more valuable than long term ones.

Can I ask you is that?
Just a technical question.
Thanks!

Pooperman

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Re: Ready for a Correction
« Reply #236 on: September 01, 2015, 09:30:17 AM »

I'm planning on rebalancing when gains become long-term, which is September 10th. This is the first year I've really had an investment strategy.

If you have losses, you want to harvest your losses before they go long term, as short term losses are more valuable than long term ones.

Can I ask you is that?
Just a technical question.
Thanks!

Short-term capital gains are taxed as ordinary income, where long-term capital gains have special rates as low as 0%. This only applies to gains. Losses count against income, so it only matters to wait when you have gains.
« Last Edit: September 01, 2015, 09:33:55 AM by Pooperman »

Seppia

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Re: Ready for a Correction
« Reply #237 on: September 01, 2015, 11:36:28 AM »
Exactly that's what I knew, obviously you want all the eventual gains to be long term, but a loss is a loss, short or long term doesn't make a difference.
But maybe I missed something I'm not American and I've only been here 5 years.
Just wanted to be sure, thanks

Cougar

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Re: Ready for a Correction
« Reply #238 on: September 01, 2015, 11:41:38 AM »
And September starts with an early session selloff. 

I think this volatility will be around for a while folks.  Buckle up!
Right on time, I just transfered my money from my bank account to Questrade, tomorrow I will be buying stocks on sale :)

please don't do that, please wait until October. this ride down is not going to stop this week; major support and trends have broken. best thing now is to hold you extra cash. if you are contributing automatically with every paycheck, sure keep that up; but putting extra savings in the market now is a bad idea.

you don't have to believe me, but read someone that knows charts and supports and you'll see more downside is coming.

I suggest: http://www.channelsandpatterns.com/ or getting the http://streettalklive.com/ newsletter.


Pooperman

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Re: Ready for a Correction
« Reply #239 on: September 01, 2015, 11:45:18 AM »
Exactly that's what I knew, obviously you want all the eventual gains to be long term, but a loss is a loss, short or long term doesn't make a difference.
But maybe I missed something I'm not American and I've only been here 5 years.
Just wanted to be sure, thanks

The reason short term is better for a loss is that it cancels out short-term gains first before income. Long-term can only cancel out long-term gains before income, and the income is limited to $3k losses per year (carries over).

Let's say you had $5k gains this year from rebalancing earlier in the year (short-term), then the market goes to shit and you rebalance again. Let's also say that if you rebalance today it's short-term and if you do it tomorrow, it's long-term. You will incur $10k of losses in the rebalancing.

If you rebalance today, you get $10k of short-term losses, which cancels out the $5k of gains and leaves you with $5k to write off on your taxes ($3k this year, $2k next year) or cancel future short-term gains. If you rebalance tomorrow, you get $10k in long-term losses, which you can write off against income ($3k for three years, $1k the final year) or future long-term gains. Note that long-term losses do not cancel out all of the short-term gains. You'd still pay taxes on the $2k and be unable to reduce income farther.

Hopefully that helps to better understand it.

thd7t

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Re: Ready for a Correction
« Reply #240 on: September 01, 2015, 11:45:33 AM »
And September starts with an early session selloff. 

I think this volatility will be around for a while folks.  Buckle up!
Right on time, I just transfered my money from my bank account to Questrade, tomorrow I will be buying stocks on sale :)

please don't do that, please wait until October. this ride down is not going to stop this week; major support and trends have broken. best thing now is to hold you extra cash. if you are contributing automatically with every paycheck, sure keep that up; but putting extra savings in the market now is a bad idea.

you don't have to believe me, but read someone that knows charts and supports and you'll see more downside is coming.

I suggest: http://www.channelsandpatterns.com/ or getting the http://streettalklive.com/ newsletter.
I looked at channelsandpatterns.  These are some tough data to read.  They need to go back and read their Tufte!

fb132

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Re: Ready for a Correction
« Reply #241 on: September 01, 2015, 12:48:29 PM »
And September starts with an early session selloff. 

I think this volatility will be around for a while folks.  Buckle up!
Right on time, I just transfered my money from my bank account to Questrade, tomorrow I will be buying stocks on sale :)

please don't do that, please wait until October. this ride down is not going to stop this week; major support and trends have broken. best thing now is to hold you extra cash. if you are contributing automatically with every paycheck, sure keep that up; but putting extra savings in the market now is a bad idea.

you don't have to believe me, but read someone that knows charts and supports and you'll see more downside is coming.

I suggest: http://www.channelsandpatterns.com/ or getting the http://streettalklive.com/ newsletter.
I actually do like MMM says "not to time the market, whenever you have the money to invest, invest it now". I usually invest in the beginning of every month, so even if the market didn't drop today, I would of still invested tomorrow (it takes 24 hours for my money to transfer to Questrade. Next month will be the samething, on the first I will invest and if the markets still go down, hooray, if not, it's ok, I am already buying my ETF's at a rebate.

Kaspian

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Re: Ready for a Correction
« Reply #242 on: September 01, 2015, 01:17:18 PM »
I can't help but see the irony in so many people using products Jack Bogle invented yet not listening to one of his primary messages:  "Do nothing!"  If you missed the thread it's at:

http://forum.mrmoneymustache.com/investor-alley/john-bogle-a-mustachian-man-in-an-industry-of-hustlers/

You tinker when markets move around you're bound to sooner or later fail.  Set it forget it, go snack and have a nap.  Listen to the advice of a man who's smarter at money than you'll likely ever be.  (Note: It's not me either.)   Watch the video below.  Watch cat videos on YouTube.  Go for a swim.  Stare at a wall with your hands in your pockets. But for the love of God stop messing around with your portfolios/allocations/balances when you have no clue what's going on.

http://time.com/money/3956351/jack-bogle-index-fund/
« Last Edit: September 01, 2015, 01:19:11 PM by Kaspian »

Roland of Gilead

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Re: Ready for a Correction
« Reply #243 on: September 01, 2015, 01:30:58 PM »
please don't do that, please wait until October. this ride down is not going to stop this week; major support and trends have broken. best thing now is to hold you extra cash. if you are contributing automatically with every paycheck, sure keep that up; but putting extra savings in the market now is a bad idea.

you don't have to believe me, but read someone that knows charts and supports and you'll see more downside is coming.

I suggest: http://www.channelsandpatterns.com/ or getting the http://streettalklive.com/ newsletter.

Wow, if you actually believed in what you are saying you would be buying puts left and right and profiting from this downtrend that you are so 100% sure is going to happen because the charts say so.

Pooperman

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Re: Ready for a Correction
« Reply #244 on: September 01, 2015, 01:37:19 PM »
And September starts with an early session selloff. 

I think this volatility will be around for a while folks.  Buckle up!
Right on time, I just transfered my money from my bank account to Questrade, tomorrow I will be buying stocks on sale :)

please don't do that, please wait until October. this ride down is not going to stop this week; major support and trends have broken. best thing now is to hold you extra cash. if you are contributing automatically with every paycheck, sure keep that up; but putting extra savings in the market now is a bad idea.

you don't have to believe me, but read someone that knows charts and supports and you'll see more downside is coming.

I suggest: http://www.channelsandpatterns.com/ or getting the http://streettalklive.com/ newsletter.

Momentum also predicted a crash in 2010 and 2011 but they were just corrections.

Seppia

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Re: Ready for a Correction
« Reply #245 on: September 01, 2015, 01:43:32 PM »

Exactly that's what I knew, obviously you want all the eventual gains to be long term, but a loss is a loss, short or long term doesn't make a difference.
But maybe I missed something I'm not American and I've only been here 5 years.
Just wanted to be sure, thanks

The reason short term is better for a loss is that it cancels out short-term gains first before income. Long-term can only cancel out long-term gains before income, and the income is limited to $3k losses per year (carries over).

Let's say you had $5k gains this year from rebalancing earlier in the year (short-term), then the market goes to shit and you rebalance again. Let's also say that if you rebalance today it's short-term and if you do it tomorrow, it's long-term. You will incur $10k of losses in the rebalancing.

If you rebalance today, you get $10k of short-term losses, which cancels out the $5k of gains and leaves you with $5k to write off on your taxes ($3k this year, $2k next year) or cancel future short-term gains. If you rebalance tomorrow, you get $10k in long-term losses, which you can write off against income ($3k for three years, $1k the final year) or future long-term gains. Note that long-term losses do not cancel out all of the short-term gains. You'd still pay taxes on the $2k and be unable to reduce income farther.

Hopefully that helps to better understand it.

Thanks a lot for the explanation, super clear and very good to know.
I actually almost never sell and rebalance only through buying so it never made a difference for me

milesdividendmd

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Re: Ready for a Correction
« Reply #246 on: September 01, 2015, 01:44:17 PM »

I can't help but see the irony in so many people using products Jack Bogle invented yet not listening to one of his primary messages:  "Do nothing!"  If you missed the thread it's at:

http://forum.mrmoneymustache.com/investor-alley/john-bogle-a-mustachian-man-in-an-industry-of-hustlers/

You tinker when markets move around you're bound to sooner or later fail.  Set it forget it, go snack and have a nap.  Listen to the advice of a man who's smarter at money than you'll likely ever be.  (Note: It's not me either.)   Watch the video below.  Watch cat videos on YouTube.  Go for a swim.  Stare at a wall with your hands in your pockets. But for the love of God stop messing around with your portfolios/allocations/balances when you have no clue what's going on.

http://time.com/money/3956351/jack-bogle-index-fund/

Great advice.

In other words if you are a buy and hold indexer, stick to your system.

Everyone thinks they can make small improvements in their plan but the small improvements usually cause big damage. We are wired to fail.

The same is true for any systematic approach really.

Mr. Green

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Re: Ready for a Correction
« Reply #247 on: September 01, 2015, 02:03:59 PM »
Charts don't show fear, and fear is what's moving the needle right now. Since it looks like the downturn wasn't a flash correction after all I invested the remaining 25% of my cash position today and liquidated some I-Bonds that were earning me nothing with the intent of investing them over the next fear days if I'm feeling it.

ZiziPB

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Re: Ready for a Correction
« Reply #248 on: September 01, 2015, 02:27:58 PM »

I can't help but see the irony in so many people using products Jack Bogle invented yet not listening to one of his primary messages:  "Do nothing!"  If you missed the thread it's at:

http://forum.mrmoneymustache.com/investor-alley/john-bogle-a-mustachian-man-in-an-industry-of-hustlers/

You tinker when markets move around you're bound to sooner or later fail.  Set it forget it, go snack and have a nap.  Listen to the advice of a man who's smarter at money than you'll likely ever be.  (Note: It's not me either.)   Watch the video below.  Watch cat videos on YouTube.  Go for a swim.  Stare at a wall with your hands in your pockets. But for the love of God stop messing around with your portfolios/allocations/balances when you have no clue what's going on.

http://time.com/money/3956351/jack-bogle-index-fund/

Great advice.

In other words if you are a buy and hold indexer, stick to your system.

Everyone thinks they can make small improvements in their plan but the small improvements usually cause big damage. We are wired to fail.

The same is true for any systematic approach really.

+1 for the above advice.  I would just make one exception to the "do nothing" message: harvest your tax losses if you can.

mpg350

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Re: Ready for a Correction
« Reply #249 on: September 01, 2015, 03:23:26 PM »
Charts don't show fear, and fear is what's moving the needle right now. Since it looks like the downturn wasn't a flash correction after all I invested the remaining 25% of my cash position today and liquidated some I-Bonds that were earning me nothing with the intent of investing them over the next fear days if I'm feeling it.

Actually charts do show fear.  You will see a market that ran up for like 6 years and in the last year go sideways as we had a equal amount of buyers and sellers and now more sellers than buyers and why you see the markets on the charts moving down.

Look at the big charts the 5 year charts and a 200 day moving avg that is the most important moving avg of all for long term investing.
When markets break the 200 day moving avg it usually means we are going into a bear market 90% of the time...unless it was a quick bounce off the 200 day moving avg.

I moved my 401k into a money market fund 4 weeks ago and will await to see what happens but right now I would say I am 90% certain we are going into a bear market...unless the FED announces another QE.

Those in the market turn off the computer and don't look at your balances things could get ugly....worst thing you could do is sell 3-5 months into a bear market.  Either you got out awhile ago or just wait the storm out.