Author Topic: How does the Greek default affect your short term investment strategy?  (Read 18103 times)

a1smith

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It doesn't change a thing. I just keep buying every paycheck. If I was RE, I would just keep doing whatever I was doing. If I were RE and they went off the Euro, I might go visit. They would have some bargains.

Greece GDP is less than 2% of Euro GDP and about 0.4% of global GDP.  You should worry about as much as you'd fret if the US lost South Dakota.
That 0,4% caused some panic last week when the market dropped around 2-3%

And then it went back up. Markets are irrational. Don't join them in that.

"Markets are irrational."  I agree.  So much for EMH!  :-D

I didn't change any investment plans due to this.  As others have mentioned,  Greece's economy, sizewise, is small.

There are lots of travel deals!  Ryanair just announced EU 4 fares for domestic Greek flights and 30% discount on trans-Atlantic flights.  Unfortunately, they don't fly to US.

nobodyspecial

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Seems China and Greece are fighting each other to see who can get more headlines the past few weeks.
I think Greece is hoping for the pay-per-click $
 

CanuckExpat

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"Markets are irrational."  I agree.  So much for EMH!  :-D

I didn't change any investment plans due to this.  As others have mentioned,  Greece's economy, sizewise, is small.

Just add in a mix of behavioral economics, say herd behavior, and you might have a reasonable explanation:
https://en.wikipedia.org/wiki/Efficient-market_hypothesis#Behavioral_psychology
http://www.investopedia.com/university/behavioral_finance/behavioral2.asp
http://www.economist.com/node/14030296

I'm an index investor and mainly ignore these short term blips. If you are an active investor, this might make you have to do some buying or selling. If you are an index investor and these market gyrations are causing you to worry or do anything, it is probably time to re-evaluate your asset allocation and if it is appropriate for your risk tolerance.

ScroogeMcDutch

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Amen CanuckExpat

To be honest, I am an index investor as well, and as a Dutch citizen, the Greek situation has me worried immensely. I also really don't like the resolution.

As I haven't experienced a market crash, or the type of uncertainty like this nearby while I was invested in the market I did withdraw some money from the indexes over the past month. I will take this as a learning experience to gauge my risk tolerance, and revise my asset allocation. Without a proper frame of reference and my emotional reactions, I think I was too aggressive in my initial allocation (80/20).

That said, money I withdrew also has another goal (buying a house) in the near future (2-3 years) so that was a way of justifying it for myself as well.

I know my actions were not rational as advocated here on the forums, but I also need to learn to behave rationally and know this is a major pitfall in any strategy.

I still do have a substantial amount invested (40% of the original amount) but I am still combatting the Greed/Fear duo.

As for the 'resolution' for Greece, this is a terrible midway solution. I think us as Europe should either bite the bullet and initiate a European tax system, -or- let go of the Euro as a whole, and re-introduce local currencies or north/south currencies. I like the first solution best, and can see a staggered introduction of that, by initiating the EU fiscal system, and having Greece as the first country which is in that system. Any future country that fails to meet the criteria in the stability pact for a longer period of time (say 5 years) then can be integrated into that system. It will mean a transfer of weath from the richer countries to the poorer, but hey, that's how the US functions as well? Germany also needs to sell stuff to Italy and Spain, and guess what, those countries aren't exactly powerful themselves.

To be honest, I am very very doubtful the suggested set of measures will pass Greek Parliament.
« Last Edit: July 13, 2015, 02:25:17 AM by ScroogeMcDutch »

fb132

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Amen CanuckExpat

To be honest, I am an index investor as well, and as a Dutch citizen, the Greek situation has me worried immensely. I also really don't like the resolution.

As I haven't experienced a market crash, or the type of uncertainty like this nearby while I was invested in the market I did withdraw some money from the indexes over the past month. I will take this as a learning experience to gauge my risk tolerance, and revise my asset allocation. Without a proper frame of reference and my emotional reactions, I think I was too aggressive in my initial allocation (80/20).

That said, money I withdrew also has another goal (buying a house) in the near future (2-3 years) so that was a way of justifying it for myself as well.

I know my actions were not rational as advocated here on the forums, but I also need to learn to behave rationally and know this is a major pitfall in any strategy.

I still do have a substantial amount invested (40% of the original amount) but I am still combatting the Greed/Fear duo.

As for the 'resolution' for Greece, this is a terrible midway solution. I think us as Europe should either bite the bullet and initiate a European tax system, -or- let go of the Euro as a whole, and re-introduce local currencies or north/south currencies. I like the first solution best, and can see a staggered introduction of that, by initiating the EU fiscal system, and having Greece as the first country which is in that system. Any future country that fails to meet the criteria in the stability pact for a longer period of time (say 5 years) then can be integrated into that system. It will mean a transfer of weath from the richer countries to the poorer, but hey, that's how the US functions as well? Germany also needs to sell stuff to Italy and Spain, and guess what, those countries aren't exactly powerful themselves.

To be honest, I am very very doubtful the suggested set of measures will pass Greek Parliament.
You should really revise your investment plans if you are worried with what's going on with Greece. The fact you withdrew at the worst possible time is proof. Call me optimist, but the stock market has gone through tougher shit than what is currently going on in Greece. It survived the great depression, world war 1 and 2, 1973 stock market drops....and just recently the dot com bubble and the 2008 crash. The stock market will always have moments where things look like the world is ending, but it has a tendancy to always come out of it stronger. In short term, China's problem's could cause more havoc than Greece...but I still believe the stock market will rebound as it did not too long ago....just like it always has. The only time the market will die is when the end of the world is near, at that point you are better off finding a gun, ammo and food supplies.

By the way, if you are planning to purchase a home in 2-3 years, it is not a good idea to put it in the stock market.
« Last Edit: July 13, 2015, 08:18:45 AM by fb132 »

ScroogeMcDutch

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You should really revise your investment plans if you are worried with what's going on with Greece. The fact you withdrew at the worst possible time is possible. Call me optimist, but the stock market has gone through tougher shit than what is currently going on in Greece. It survived the great depression, world war 1 and 2, 1973 stock market drops....and just recently the dot com bubble and the 2008 crash. The stock market will always have moments where things look like the world is ending, but it has a tendancy to always come out of it stronger. In short term, China's problem's could cause more havoc than Greece...but I still believe the stock market will rebound as it did not too long ago....just like it always has. The only time the market will die is when the end of the world is near, at that point you are better off finding a gun, ammo and food supplies.

By the way, if you are planning to purchase a home in 2-3 years, it is not a good idea to put it in the stock market.

I know the 2nd item is more important than the 1st. That was also the main driver for me to take it out, the unrest was just the trigger. I didn't knee-jerk on the news the past 2 weeks, but rather the signals I got before that and sold 4 weeks ago. I don't want to confirmation-bias anything, but the indexes were higher then than they are now.

I suppose the fact that that money already has a different destination was a major factor for me to reduce risk. I feel comfortable with the amount now invested, and am going to take my actions as input for revising my IPS and applying what I have learned to make a more robust plan.


Merrie

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Timing the market is not my thing, but we do intend to put another few k in an IRA some time before next April, and hubby thinks we should do it soon if the market dips. I suppose now is as good a time as any? FIRE is way off for us so whenever we put it in we'll leave it in for a while.

Wolf359

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The Greek default doesn't affect my short-term investment strategy at all.

I've been on vacation and not following the news.  The day I got back, the headlines were about the China stock market crash, the Greek crisis, the Puerto Rico bankruptcy crisis, and the NYSE shutting down for "technical reasons."

As I parsed through it, the Greek crisis affects the US least.  A failure of the Chinese economy would affect the US, depending on how bad it gets and whether or not it results in social unrest.  (Critics of the system there still have to worry about "getting their water meters checked.")  The Puerto Rico bankruptcy by definition affects the US.  While it doesn't directly affect most Vanguard muni funds, it may increase costs for municipal issues in general.  The technical difficulties are also worrisome.  If people lose faith in the ability of a major index to execute trades, well, that would be bad.

Actionable items - none.  Maybe try to increase cash flows to invest more in the market on dips (but I try to do that regardless of the reason.)  Double-check my plan for tax loss harvesting if stocks drop enough. 

It's really been educational about how much calmer I am when invested in the total stock market.  In my life, I've already seen individual stock holdings decline by 90% before going to zero.  I can't foresee that happening to every stock in the world simultaneously. 

sunday

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It seems to me the Greek vote was pretty much an abstract/pointless vote since Greece agreed to austerity terms anyway. Glad to hear it doesn't change people's investment strategies or outlook. I figured it wouldn't, since most of the MMM crowd, like myself, are buy and hold investors.

milesdividendmd

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Even if you are an active investor, such news really shouldn't effect your strategy.
(Though changing market conditions may effect your actions.)

johnny847

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Timing the market is not my thing, but we do intend to put another few k in an IRA some time before next April, and hubby thinks we should do it soon if the market dips. I suppose now is as good a time as any? FIRE is way off for us so whenever we put it in we'll leave it in for a while.

So basically you're saying...
1) I don't believe in timing the market
2) I think we should try to time the market this time though.

Its not about timing the market, it's about time in the market. As soon as you have money available to invest, invest it.

Merrie

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Timing the market is not my thing, but we do intend to put another few k in an IRA some time before next April, and hubby thinks we should do it soon if the market dips. I suppose now is as good a time as any? FIRE is way off for us so whenever we put it in we'll leave it in for a while.

So basically you're saying...
1) I don't believe in timing the market
2) I think we should try to time the market this time though.

Its not about timing the market, it's about time in the market. As soon as you have money available to invest, invest it.

Good point. Thanks for your perspective. Right now it's more about "Should we put the money in the market, or leave it in the new furnace fund?" I'm sure we can pull together another few k before we miss our window to fund the IRA in 2015, but I'm not sure we can get the new furnace this fall if we pull out of that fund to put in the market now, so I would only want to do it if I had a compelling reason. Not exactly the dilemma of most people posting on this board, but we are baby investors at best. 

BBub

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"Should we put the money in the market, or leave it in the new furnace fund?"

...I'm not sure we can get the new furnace this fall if we pull out of that fund to put in the market now...

No, you shouldn't put the furnace money in the market if you plan to use it this fall.  Money in the mkt should have a long term time horizon.

fb132

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Well look at that, after the last 2 weeks where the stock market looked like was going downhill, now it has gone back way up.

zephyr911

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What Greek default? ;)

fb132

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Proof that you shouldn't invest based on short term panics or when it goes up. Just invest...period, regardless how it's doing.

 

Wow, a phone plan for fifteen bucks!