Author Topic: "Buying stocks on sale"  (Read 5772 times)

GlassStash

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"Buying stocks on sale"
« on: February 22, 2014, 10:49:54 AM »
A lot of people on this forum have been discussing previous drops in the stock market and "buying stocks on sale." To me, the implication is that these people had extra money sitting around and they were waiting for such a "stock market sale" to buy more stock for cheap. Basic allocations include % equities, % bonds, maybe % REITs and then a certain amount in an EF.

Questions:

1) Where is the extra money coming from to purchase these "stocks on sale"?

2) Wouldn't the money that is saved for "stocks on sale" be better utilized as invested in the market as available and for the long term, as opposed to holding on to it and waiting for market slumps?

3) Is the aforementioned strategy really any different than market timing?
« Last Edit: February 22, 2014, 10:52:02 AM by GlassStache »

warfreak2

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Re: "Buying stocks on sale"
« Reply #1 on: February 22, 2014, 10:53:22 AM »
I don't think sensible people keep cash around for that possibility, but rather it's a way to feel better about stocks falling, even if you own a lot of them - you're getting a better deal on the same stocks you would have been buying anyway.

I guess some people deliberately cut discretionary spending in order to take advantage, too.

KingCoin

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Re: "Buying stocks on sale"
« Reply #2 on: February 22, 2014, 11:49:37 AM »

GlassStash

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Re: "Buying stocks on sale"
« Reply #3 on: February 22, 2014, 12:13:32 PM »
I think this was hashed through pretty thoroughly here:
http://www.mrmoneymustache.com/forum/investor-alley/be-greedy-when-others-are-fearful/

I think you are right, but even since then there have been countless comments and a few threads about buying on sale. Maybe the newest thread just ruffled my feathers.

foobar

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Re: "Buying stocks on sale"
« Reply #4 on: February 22, 2014, 12:20:59 PM »
I don't know about you but I am stocking up on Blackberry stock. They are have a 95% off sale right now.....

Nothing wrong with being a market timer. The odds are just stacked against you making money by doing it.

I think this was hashed through pretty thoroughly here:
http://www.mrmoneymustache.com/forum/investor-alley/be-greedy-when-others-are-fearful/

I think you are right, but even since then there have been countless comments and a few threads about buying on sale. Maybe the newest thread just ruffled my feathers.

GlassStash

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Re: "Buying stocks on sale"
« Reply #5 on: February 22, 2014, 12:25:08 PM »
I don't know about you but I am stocking up on Blackberry stock. They are have a 95% off sale right now.....

Nothing wrong with being a market timer. The odds are just stacked against you making money by doing it.


Isn't that the entire point though? That's like saying "there's nothing wrong with being a gambler, the odds are just stacked against you." While both statements are true, they are both awful methods of investing for retirement. 

beltim

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Re: "Buying stocks on sale"
« Reply #6 on: February 22, 2014, 12:29:20 PM »
There are plenty of people who change asset allocation based on market fundamentals as well.  If stocks are expensive, they may hold more bonds or cash.  If they go on sale, they can reallocate to better position their portfolio.

Also, another large group who talk about stocks being on sale are talking about individual stocks.

soccerluvof4

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Re: "Buying stocks on sale"
« Reply #7 on: February 22, 2014, 12:34:55 PM »
I think the problem at least when i have explained what i do is when i say i like to have some drypowder its a very small percentage that i use in a trading account which I actively trade in daily.  Every month I take my excess income and put money into my trading account and that along with profits after a month I want to take, i transfer over to my index funds. This in all is under 10% of my portfolio.   But i have been trading for 15+ years and enjoy it. So technically I am adding monthly to my index fund but it goes through my trading platform first is all. I know in the past i havent been clear on that.

GlassStash

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Re: "Buying stocks on sale"
« Reply #8 on: February 22, 2014, 12:50:11 PM »
I think the problem at least when i have explained what i do is when i say i like to have some drypowder its a very small percentage that i use in a trading account which I actively trade in daily.  Every month I take my excess income and put money into my trading account and that along with profits after a month I want to take, i transfer over to my index funds. This in all is under 10% of my portfolio.   But i have been trading for 15+ years and enjoy it. So technically I am adding monthly to my index fund but it goes through my trading platform first is all. I know in the past i havent been clear on that.

If a person likes to day trade, there's nothing wrong with that. It's just when I see commenters responding to asset allocation/beginner investment questions with this type of approach, it makes no sense. It serves to mislead those who ask that this is the optimal (or even an optional) way to invest, when in fact, it's more of a personal gamble.

soccerluvof4

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Re: "Buying stocks on sale"
« Reply #9 on: February 22, 2014, 01:06:51 PM »
I think the problem at least when i have explained what i do is when i say i like to have some drypowder its a very small percentage that i use in a trading account which I actively trade in daily.  Every month I take my excess income and put money into my trading account and that along with profits after a month I want to take, i transfer over to my index funds. This in all is under 10% of my portfolio.   But i have been trading for 15+ years and enjoy it. So technically I am adding monthly to my index fund but it goes through my trading platform first is all. I know in the past i havent been clear on that.

If a person likes to day trade, there's nothing wrong with that. It's just when I see commenters responding to asset allocation/beginner investment questions with this type of approach, it makes no sense. It serves to mislead those who ask that this is the optimal (or even an optional) way to invest, when in fact, it's more of a personal gamble.


Thats why keep putting it out there till you feel comfortable in the direction YOU want to go. People feel strongly in the way they do things so perhaps they feel they are giving you the best answer. I doubt anyone is trying to do you an injustice but any kind of investing there is some risk. Find your risk level and invest that way. One size does not fit all. You ask 100 people you will probably get 100 different answers BUT you will also see a lot of similarity and maybe that's where you pick from.

In either case you seem to be determined and I am sure you will make the right decisions for you and do quite well! and Good Luck!

GlassStash

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Re: "Buying stocks on sale"
« Reply #10 on: February 22, 2014, 01:15:57 PM »
I think the problem at least when i have explained what i do is when i say i like to have some drypowder its a very small percentage that i use in a trading account which I actively trade in daily.  Every month I take my excess income and put money into my trading account and that along with profits after a month I want to take, i transfer over to my index funds. This in all is under 10% of my portfolio.   But i have been trading for 15+ years and enjoy it. So technically I am adding monthly to my index fund but it goes through my trading platform first is all. I know in the past i havent been clear on that.

If a person likes to day trade, there's nothing wrong with that. It's just when I see commenters responding to asset allocation/beginner investment questions with this type of approach, it makes no sense. It serves to mislead those who ask that this is the optimal (or even an optional) way to invest, when in fact, it's more of a personal gamble.


Thats why keep putting it out there till you feel comfortable in the direction YOU want to go. People feel strongly in the way they do things so perhaps they feel they are giving you the best answer. I doubt anyone is trying to do you an injustice but any kind of investing there is some risk. Find your risk level and invest that way. One size does not fit all. You ask 100 people you will probably get 100 different answers BUT you will also see a lot of similarity and maybe that's where you pick from.

In either case you seem to be determined and I am sure you will make the right decisions for you and do quite well! and Good Luck!

Thanks! But to be clear, I'm not talking about advice given to me. I'm no expert, but I've learned quite a bit from bogleheads and jlcollinsnh over the past years. My comments concern people who briefly visit the forum in search of beginner investing advice. To those people, there is a realm of useful advice and appropriate answers.

matchewed

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Re: "Buying stocks on sale"
« Reply #11 on: February 22, 2014, 02:17:05 PM »
I think the problem at least when i have explained what i do is when i say i like to have some drypowder its a very small percentage that i use in a trading account which I actively trade in daily.  Every month I take my excess income and put money into my trading account and that along with profits after a month I want to take, i transfer over to my index funds. This in all is under 10% of my portfolio.   But i have been trading for 15+ years and enjoy it. So technically I am adding monthly to my index fund but it goes through my trading platform first is all. I know in the past i havent been clear on that.

If a person likes to day trade, there's nothing wrong with that. It's just when I see commenters responding to asset allocation/beginner investment questions with this type of approach, it makes no sense. It serves to mislead those who ask that this is the optimal (or even an optional) way to invest, when in fact, it's more of a personal gamble.


Thats why keep putting it out there till you feel comfortable in the direction YOU want to go. People feel strongly in the way they do things so perhaps they feel they are giving you the best answer. I doubt anyone is trying to do you an injustice but any kind of investing there is some risk. Find your risk level and invest that way. One size does not fit all. You ask 100 people you will probably get 100 different answers BUT you will also see a lot of similarity and maybe that's where you pick from.

In either case you seem to be determined and I am sure you will make the right decisions for you and do quite well! and Good Luck!

Thanks! But to be clear, I'm not talking about advice given to me. I'm no expert, but I've learned quite a bit from bogleheads and jlcollinsnh over the past years. My comments concern people who briefly visit the forum in search of beginner investing advice. To those people, there is a realm of useful advice and appropriate answers.

Also it's not that anyone is trying to do an injustice, but if they don't consider their audience in their answer they may be giving advice that is a bit too over the head and then inadvertently do an injustice. When someone is asking what their asset allocation should be I'm doubting they're in a position of financial savviness to need dry powder. They just need a foundation of sound investment strategy so that they can start to research other more complex strategies and whether they even want to do it.

Nords

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Re: "Buying stocks on sale"
« Reply #12 on: February 22, 2014, 06:56:51 PM »
Thanks! But to be clear, I'm not talking about advice given to me. I'm no expert, but I've learned quite a bit from bogleheads and jlcollinsnh over the past years. My comments concern people who briefly visit the forum in search of beginner investing advice. To those people, there is a realm of useful advice and appropriate answers.
Yes, but beginners don't read old threads.  They're the first person in the history of the world to discover the issue that they're posting about, and anyway someone else's thread on the subject somehow just doesn't apply to them and anyway is hopelessly out of date.

How many times does someone on the Bogleheads have to direct the newbies to the wiki?  I can't count the number of times that Early-Retirement.org newbies had no idea that the forums included a FAQ section.

GlassStash

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Re: "Buying stocks on sale"
« Reply #13 on: February 22, 2014, 07:29:08 PM »
Thanks! But to be clear, I'm not talking about advice given to me. I'm no expert, but I've learned quite a bit from bogleheads and jlcollinsnh over the past years. My comments concern people who briefly visit the forum in search of beginner investing advice. To those people, there is a realm of useful advice and appropriate answers.
Yes, but beginners don't read old threads.  They're the first person in the history of the world to discover the issue that they're posting about, and anyway someone else's thread on the subject somehow just doesn't apply to them and anyway is hopelessly out of date.

How many times does someone on the Bogleheads have to direct the newbies to the wiki?  I can't count the number of times that Early-Retirement.org newbies had no idea that the forums included a FAQ section.

Beginners don't need to read old threads to get bad advice/suggestions. Their new posts are receiving the comments I'm talking about. 

wtjbatman

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Re: "Buying stocks on sale"
« Reply #14 on: February 23, 2014, 01:57:13 PM »
There is no one way to invest that is best for everyone, and there's no harm in telling people that. Although index investing is probably the easiest/safest for the expected return, so even as someone who is not an index investor, I always advise new people to start reading up with Jcollin's stock series and Bogleheads. Then if they still have questions, go from there.

GlassStash

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Re: "Buying stocks on sale"
« Reply #15 on: February 23, 2014, 02:25:25 PM »
There is no one way to invest that is best for everyone, and there's no harm in telling people that. Although index investing is probably the easiest/safest for the expected return, so even as someone who is not an index investor, I always advise new people to start reading up with Jcollin's stock series and Bogleheads. Then if they still have questions, go from there.

I don't disagree with any of this. If someone chooses not to be an index investor, or chooses to "market time," that is certainly their decision (although I personally think these methods have too much risk and not enough reward in comparison to index investing). The latter part of your statement is very important, as it takes a requisite amount of knowledge to justifiably move beyond index investing and the advice given by jlcollins and bogleheads.

Vjklander

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Re: "Buying stocks on sale"
« Reply #16 on: February 24, 2014, 12:07:01 PM »
Before anyone invests in anything, I always recommend reading Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay.

http://www.gutenberg.org/files/24518/24518-h/24518-h.htm