I think I got out toooooo early :(

[luckystripes]

I'm in my 20's and my portfolio is still kind of young and I have yet to experience the recession on my portfolio like the parents have.

So low-and-behold - when the NK news struck yesterday - I thought this was the beginning of the correction - and I cashed out everything... So far - this year I had a good 13% gain on my portfolio - and I thought that was good enough before the correction.

Granted all these were in tax-advantaged accounts - so I don't worry about any capital gains.

I think I messed up my timing - and now I have sold all my stocks and index funds that are still going up...

So with all this cash... what now?

[theolympians]

Get back in and put it on auto-pilot.

There is always a chance of a down-turn at any time, but at your age it will be forgotten in ten years.

[fattest_foot]

Get back in and put it on auto-pilot.

There is always a chance of a down-turn at any time, but at your age it will be forgotten in ten years.

This. It will end up being an incredibly cheap lesson on market timing.

[Bracken_Joy]

Undo what you did, swallow the consequences, and never do it again.

=)

[luckystripes]

Get back in and put it on auto-pilot.

There is always a chance of a down-turn at any time, but at your age it will be forgotten in ten years.

Isn't the bull-market in general kind of long in the tooth right now? if I do auto-pilot it will fly right into the correction/recession won't it?

[dycker1978]

Get back in and put it on auto-pilot.

There is always a chance of a down-turn at any time, but at your age it will be forgotten in ten years.

Isn't the bull-market in general kind of long in the tooth right now? if I do auto-pilot it will fly right into the correction/recession won't it?

Yup we will hit rescission again, sometime.  Then you get to buy stocks on sale.  keep everything on auto pilot, you will win in the long run.

[luckystripes]

Yup we will hit rescission again, sometime.  Then you get to buy stocks on sale.  keep everything on auto pilot, you will win in the long run.

when you say long run - you mean after I come out of the recession with everything on auto-pilot.

so my index funds may very well take a good beating going into it right?

[dycker1978]

Yup we will hit rescission again, sometime.  Then you get to buy stocks on sale.  keep everything on auto pilot, you will win in the long run.

when you say long run - you mean after I come out of the recession with everything on auto-pilot.

so my index funds may very well take a good beating going into it right?

That is just it.  It doesn't matter if they "take a beating"  There are many threads here that show that.  You will not time the market right.  What happens if the market goes up 20% now that you are not in it?  Then the rescission comes, but it only drops 15%?  You are still buying at 5% higher then now.  Best to invest on a schedule and ride it out, you will win every time like this.  Besides that being in your 20's you have lots of time. 

[scottish]

Yep.   If you've diversified with fix income as well as stocks it won't be a huge beating though.

Waiting through a bear market is better than missing a bull market.

[cpa cat]

I recommend reading A Random Walk Down Wallstreet.

[thenextguy]

Buy back in and stop doing that. Lesson learned and rather cheaply, to be honest.

[Eric]

I think I messed up my timing - and now I have sold all my stocks and index funds that are still going up...

Your timing is great.  You've barely fucked anything up with your market timing blunders, so now you can learn a lesson that was not very expensive at all.  Don't try to time the market.  It's a loser's game.  This forum is littered with threads of people who thought they were smarter than the market.  Turns out they're just poorer.

[GuitarStv]

If you're worried about timing at all . . . You've already fucked up.  Stop trying to time the market.

[LAGuy]

Agree with never timing the market. Moreover, if you WERE going to time the market North Korea is the worst reason to do so. These guys pop their heads up every few months/years to make a pest of themselves, but nothing bad ever really happens. Watch the South Koreans if you want to know when to panic,  but the sad, cold, hard calculus of North Korea is that the worst case scenario is basically the US wipes them off the face of the planet. No big loss, since NK doesn't contribute to world GDP. And that would be the end of the story. China won't go to war with the US over NK. Afterall, all of their elite children are attending US Ivy League schools. They're like willing hostages.

[ChpBstrd]

It's time to think ahead and decide in advance what circumstances would cause you to make this error again. For example, all of the following are very likely to occur within the next five years:*

-Riots
-A recession and/or correction over 10%
-The U.S. will start or enter a war.
-An act of terrorism
-Political turmoil, power struggles, and crimes
-A disputed election
-Rising oil prices
-Either rising inflation or the risk of deflation
-Great Orange Dictator will tweet something distressing and set off a panic

If any of these events would cause you to hit the "sell" button, you'll be hitting "sell" quite a few times in the next few years. Thus, you're already set up to sell low and buy back high, just like you're doing today. It is your destiny because of your current mindset plus being invested in volatile equities. The goal state is to stay invested in an appropriate-for-you portfolio regardless of what happens. Even better if you can set it and forget it, and focus your energies on growing your earning potential and saving more money. Build a spreadsheet and note the difference that saving an extra $5k a year makes vs. earning an extra 1% by successfully timing the market against all odds every year. At this age, focus on income. When I was 28 I was trying to time the market to make or save the amount I now deposit each week! What a waste!

Use this episode as a motivator to learn more about the history and functioning of markets, investments and their pros/cons, behavioral finance, discounted cash flows, securities analysis, bonds, scams and fallacies, etc.

Finally, there is a way to get back in the market and earn back what you lost today. It's selling an at-the-money put! But that's NOT a strategy for someone who hasn't done the homework described above.

*(note that all the bad things described above occurred within the LAST 5 years).

[MrGreen]

Get back in and put it on auto-pilot.

There is always a chance of a down-turn at any time, but at your age it will be forgotten in ten years.

Isn't the bull-market in general kind of long in the tooth right now? if I do auto-pilot it will fly right into the correction/recession won't it?

Bull markets don't die of old age.

[Heckler]

Darn, I missed this NK blip by a day.  Autoinvest goes in tomorrow 45% off the paycheck.

[luckystripes]

It's time to think ahead and decide in advance what circumstances would cause you to make this error again. For example, all of the following are very likely to occur within the next five years:*

-Riots
-A recession and/or correction over 10%
-The U.S. will start or enter a war.
-An act of terrorism
-Political turmoil, power struggles, and crimes
-A disputed election
-Rising oil prices
-Either rising inflation or the risk of deflation
-Great Orange Dictator will tweet something distressing and set off a panic

If any of these events would cause you to hit the "sell" button, you'll be hitting "sell" quite a few times in the next few years. Thus, you're already set up to sell low and buy back high, just like you're doing today. It is your destiny because of your current mindset plus being invested in volatile equities. The goal state is to stay invested in an appropriate-for-you portfolio regardless of what happens. Even better if you can set it and forget it, and focus your energies on growing your earning potential and saving more money. Build a spreadsheet and note the difference that saving an extra $5k a year makes vs. earning an extra 1% by successfully timing the market against all odds every year. At this age, focus on income. When I was 28 I was trying to time the market to make or save the amount I now deposit each week! What a waste!

Use this episode as a motivator to learn more about the history and functioning of markets, investments and their pros/cons, behavioral finance, discounted cash flows, securities analysis, bonds, scams and fallacies, etc.

Finally, there is a way to get back in the market and earn back what you lost today. It's selling an at-the-money put! But that's NOT a strategy for someone who hasn't done the homework described above.

*(note that all the bad things described above occurred within the LAST 5 years).

Are you saying I sold low right now and the market still has plenty of uptrend? I haven't bought back anything yet - it's still in cash - so technically I haven't bought back anything "high" or "low".

[davisgang90]

Don't time the market.  Set your AA and forget it!

[flyersman]

Do as Ron Popeil says.

SET IT AND FORGET IT

[Bracken_Joy]

It's time to think ahead and decide in advance what circumstances would cause you to make this error again. For example, all of the following are very likely to occur within the next five years:*

-Riots
-A recession and/or correction over 10%
-The U.S. will start or enter a war.
-An act of terrorism
-Political turmoil, power struggles, and crimes
-A disputed election
-Rising oil prices
-Either rising inflation or the risk of deflation
-Great Orange Dictator will tweet something distressing and set off a panic

If any of these events would cause you to hit the "sell" button, you'll be hitting "sell" quite a few times in the next few years. Thus, you're already set up to sell low and buy back high, just like you're doing today. It is your destiny because of your current mindset plus being invested in volatile equities. The goal state is to stay invested in an appropriate-for-you portfolio regardless of what happens. Even better if you can set it and forget it, and focus your energies on growing your earning potential and saving more money. Build a spreadsheet and note the difference that saving an extra $5k a year makes vs. earning an extra 1% by successfully timing the market against all odds every year. At this age, focus on income. When I was 28 I was trying to time the market to make or save the amount I now deposit each week! What a waste!

Use this episode as a motivator to learn more about the history and functioning of markets, investments and their pros/cons, behavioral finance, discounted cash flows, securities analysis, bonds, scams and fallacies, etc.

Finally, there is a way to get back in the market and earn back what you lost today. It's selling an at-the-money put! But that's NOT a strategy for someone who hasn't done the homework described above.

*(note that all the bad things described above occurred within the LAST 5 years).

Are you saying I sold low right now and the market still has plenty of uptrend? I haven't bought back anything yet - it's still in cash - so technically I haven't bought back anything "high" or "low".

Don't try to 'buy low, sell high'. That's terrible advice. Buy all the time, sell never is closer to accurate. Aka, buy and hold. Repeat after me: "I will not try to time the market"

[I'm a red panda]

Buy all the time.
Sell when you need the money for whatever these investments are for (so sell when you need to draw down for your retirement, when you need to make a large purchase and plan to use the money in the account, when you pay for college using your investments, etc).  What the market is doing shouldn't have any bearing on when you sell.

[Maenad]

As they say, more money is lost trying to anticipate and avoid losing money in a correction, than is lost in the corrections themselves.

I originally saw this chart of Bull and Bear Markets somewhere on the MMM forums, and I'm starting to think we should pin/sticky it. It shows how short bear markets really are:

https://www.ftportfolios.com/Common/ContentFileLoader.aspx?ContentGUID=4ecfa978-d0bb-4924-92c8-628ff9bfe12d

Stop trying to guess when the next bear market will hit. If you're that nervous, switch to a more bond-heavy AA.

[seattlecyclone]

You've only been out of the market for a few days. Get back in, keep investing extra cash until you're ready to retire, and sell nothing before that.

[BTH7117]

Behold the tale of Bob, the world's worst market timer, who invests only at the peak of the market and still comes out quintupling his money.

Time in the market > Timing the market

[Retire-Canada]

So low-and-behold - when the NK news struck yesterday - I thought this was the beginning of the correction - and I cashed out everything.

Any time you think you can predict the future you are wrong. You may occasionally guess something correctly, but be clear that's pure luck and not skill or cunning. So any investment plan that hinges on you predicting not one, but two future events [crash AND recovery] is most likely going to fail and leave you wish less money than if you had just bought and held.

[ysette9]

I think you need a personal investment policy statement to provide you a guide and give you something to reference when you have these little moments of irrational panic. https://www.bogleheads.org/wiki/Investment_policy_statement

Read through the wiki article above and maybe some real-world examples. Notice that none of them say anything about making adjustments in response to how the market is doing, except perhaps rebalancing to maintain the target asset allocation. The Bogleheads people are a stogy, conservative, better-just-work-one-more-year-to-be-sure lot, but they are also very knowledgeable and very good at getting rich. I recommend spending some time reading the many great articles in the Bogleheads wiki so you can make a more rational and less emotional decision next time the market inevitably does its up and down dance.

[dougules]

Get back in and put it on auto-pilot.

There is always a chance of a down-turn at any time, but at your age it will be forgotten in ten years.

Isn't the bull-market in general kind of long in the tooth right now? if I do auto-pilot it will fly right into the correction/recession won't it?

I think it probably is long in the tooth, but it was in 2014, too.  If you'd pulled out then, you'd still be sitting with cash losing dividends and watching inflation eating it away.  We're also about where we were in 1997.  Everybody knows that was a bubble, but if you'd pulled out in 1997, you'd have been worse off by the bottom in 2002, and that's even if you could have guessed when the exact bottom was.  Point is that even if we are in a bubble, you don't know how or when we'll get out of it.  Nobody younger than 50 remembers massive inflation.  It could come back. 

And yes you might fly right into a recession, but if you're young and still working that's actually a good thing.  If you go to the store and peaches are on sale for $0.50/lb, do you get upset the peaches on your counter are worth less, or do you buy more? 

Unless the end of the world comes, we'll eventually get out of any recession just like we eventually got out of the Depression and last recession.  You're young so you have plenty of time. 

[libertarian4321]

I'm in my 20's and my portfolio is still kind of young and I have yet to experience the recession on my portfolio like the parents have.

So low-and-behold - when the NK news struck yesterday - I thought this was the beginning of the correction - and I cashed out everything... So far - this year I had a good 13% gain on my portfolio - and I thought that was good enough before the correction.

Granted all these were in tax-advantaged accounts - so I don't worry about any capital gains.

I think I messed up my timing - and now I have sold all my stocks and index funds that are still going up...

So with all this cash... what now?

You failed to properly time the market?

Shocking!

Look at the bright side.  Warren Buffett can't time the market, either.  He doesn't even try- he considers attempting to time the market the worst mistake people can make- so you are in good company.

[ChpBstrd]

Are you saying I sold low right now and the market still has plenty of uptrend? I haven't bought back anything yet - it's still in cash - so technically I haven't bought back anything "high" or "low".

There's still a chance that when your buy order gets executed, the S&P will be 0.8% lower than it is today - back to where it was Friday - and you will have broken even (not counting commissions or taxes).

We can even quantify the probability that SPY, for example, will be back to its last-Friday levels. Based on the delta of call options on SPY at the time I type this, the odds of tomorrow's price being 244.50 or lower are roughly 14.7%. The odds of that happening by Friday are about 23%. This quantifies the mistake - the odds are against a successful sell high - buy low move.

On the other hand, the chance of the market being higher at those future times than it is at this moment is about 50%.

So in terms of coming out ahead by this Friday, the "wait to buy on a 0.8% price drop" strategy will win about 23% of the time, and the "get back in right this instant" strategy will win about 50% of the time. Pick your move.

Over short timeframes, the market behaves like random pulls from a probability distribution. Over very long timeframes, it has an upward tendancy. The reason everybody trashes the idea of short-term trading is that doing so is picking the short-term random distribution of outcomes rather than the long-term distribution that has an upward bias. It's choosing to invest in luck rather than business outcomes.

So no, you haven't lost yet, but you probably will and it only gets worse with time. I spent months of this 8-year-so-far historic rally sitting in cash, waiting for the markets to fall so that I could pounce in and buy low (how I thought money was made). I even read SeekingAlpha and Yahoo Finance to confirm my views! I estimate my compound losses over time from this strategy at around $250,000, or about five years of my life stuck in a cubicle.

[moof]

If you want to day trade, go for it.  Successful day traders are few and far between, the successful ones spend gobs of time researching their trades, i.e. tons of work.  Even then you are up against trading fees, such that you have to outperform the market just to match it.  You also get to pay lots of short term capital gains along the way, making it even hard just to match the market.

Consistently the best bet is to buy based on a plan, then leave it the hell alone.  Fidelity shared a nice analysis of their best performing customers, who mostly turned out to have forgotten about their accounts, or were dead.  Chew on that before you time the market.

So if you are a long way off from retirement (20+ years until you need the money), buy a low fee stock index fund, then leave it alone.  If you are close to retirement mix in 20-40% bond funds depending on the strength of your stomach (your stomach's strength has proven weak, aim for 40%).

A good friend of mine is a financial adviser.  Some of his clients trust him, and he basically gets 1% a year to annually rebalance among a few funds, gradually moving to more bonds as his clients approach their planned age.  He also has clients that call him in a panic at every blip and have him move things to bonds or cash for a while (they still pay 1% annually).  He has historical data showing that the panicky crowd does relatively poorly compared to those that trust him to buy-and-hold using the same set of funds.

[marty998]

A good friend of mine is a financial adviser.  Some of his clients trust him, and he basically gets 1% a year to annually rebalance among a few funds, gradually moving to more bonds as his clients approach their planned age.  He also has clients that call him in a panic at every blip and have him move things to bonds or cash for a while (they still pay 1% annually).  He has historical data showing that the panicky crowd does relatively poorly compared to those that trust him to buy-and-hold using the same set of funds.

Sheesh.... Some advisor he is.

Wait... are you having a go at the advisor? On face value it's the clients here who need a slap...

Are you perhaps saying the advisor should go against the clients wishes and stick to the buy and hold? That would be a dangerous precedent... Imagine if an advisor didn't switch to cash and a client lost 50% staying in equities, when the client said "I want to go in cash because I think the market will fall and I need the money for xyz in a few months"

[DavidAnnArbor]

I had a friend who seemed to time it right regarding pulling out before the big crash of 2008, but he never could figure out when to buy back into the market. He missed the market bottom of March 2009, and then he proceeded to miss the bull market for the next few years. I told him about how I just stayed invested, and even bought a little more, and then I also would rebalance and move bonds into equity index funds. He wasn't impressed with my strategy, but slowly as my strategy ultimately outpaced his he became jealous, and eventually stopped being my friend.

[TheAnonOne]

I had a friend who seemed to time it right regarding pulling out before the big crash of 2008, but he never could figure out when to buy back into the market. He missed the market bottom of March 2009, and then he proceeded to miss the bull market for the next few years. I told him about how I just stayed invested, and even bought a little more, and then I also would rebalance and move bonds into equity index funds. He wasn't impressed with my strategy, but slowly as my strategy ultimately outpaced his he became jealous, and eventually stopped being my friend.

Friendship based on market returns?

[MrGreen]

I had a friend who seemed to time it right regarding pulling out before the big crash of 2008, but he never could figure out when to buy back into the market. He missed the market bottom of March 2009, and then he proceeded to miss the bull market for the next few years. I told him about how I just stayed invested, and even bought a little more, and then I also would rebalance and move bonds into equity index funds. He wasn't impressed with my strategy, but slowly as my strategy ultimately outpaced his he became jealous, and eventually stopped being my friend.

Friendship based on market returns?

That's some serious butthurt right there.

[Dicey]

Gotta say I'm impressed with all the great responses. It's clear what luckystripes should do, but will they? Will we ever know? If not, let's hope others will learn from this colossal blunder.

[runewell]

Behold the tale of Bob, the world's worst market timer, who invests only at the peak of the market and still comes out quintupling his money.

Time in the market > Timing the market

That's a good article.  Looks like the annualized return is 9.4%-9.5%. 

[caracarn]

Yes lucky seems to have vanished.  Perhaps spinning a bottle or picking petals of daisies to decide, "buy" "don't buy" "buy" "don't buy"

Always fascinating to watch the train wreck that is a deluded market timer.  Ah, but most of us were once where they were, so our agony to get them to see the light is so much greater......

[luckystripes]

Yes lucky seems to have vanished.  Perhaps spinning a bottle or picking petals of daisies to decide, "buy" "don't buy" "buy" "don't buy"

Always fascinating to watch the train wreck that is a deluded market timer.  Ah, but most of us were once where they were, so our agony to get them to see the light is so much greater......

I'm still holding onto the cash right now. whats interesting is several of my index funds and stocks are actually losing money right - if I had stayed in... its kind of like a lava field right now...

[frugledoc]

You are probably best not investing until you learn a bit more. 

Stay in cash, go to bogleheads and read jcollinsh stock series then choose an asset allocation and stay the course

[Eric]

Yes lucky seems to have vanished.  Perhaps spinning a bottle or picking petals of daisies to decide, "buy" "don't buy" "buy" "don't buy"

Always fascinating to watch the train wreck that is a deluded market timer.  Ah, but most of us were once where they were, so our agony to get them to see the light is so much greater......

I'm still holding onto the cash right now. whats interesting is several of my index funds and stocks are actually losing money right - if I had stayed in... its kind of like a lava field right now...

Yes, sometimes they go down.  Sometimes even for periods longer than a week.  But on the balance, they go up.  Unlike cash, which is guaranteed to lose money.

You need to get out of this short term mindset.  It's poison.

[Goldielocks]

If you're worried about timing at all . . . You've already fucked up.  Stop trying to time the market.

This.

Also,  if you ever are undecided about what to do-- there is nothing wrong with buying half or selling half -- you know, split the decision.

[h82goslw]

Yes lucky seems to have vanished.  Perhaps spinning a bottle or picking petals of daisies to decide, "buy" "don't buy" "buy" "don't buy"

Always fascinating to watch the train wreck that is a deluded market timer.  Ah, but most of us were once where they were, so our agony to get them to see the light is so much greater......

I'm still holding onto the cash right now. whats interesting is several of my index funds and stocks are actually losing money right - if I had stayed in... its kind of like a lava field right now...

Every single person who has responded to your original question has said the same thing, that you shouldn't have sold....yet you still question them and posit that you've done the right thing by selling everything.

[caracarn]

Yes lucky seems to have vanished.  Perhaps spinning a bottle or picking petals of daisies to decide, "buy" "don't buy" "buy" "don't buy"

Always fascinating to watch the train wreck that is a deluded market timer.  Ah, but most of us were once where they were, so our agony to get them to see the light is so much greater......

I'm still holding onto the cash right now. whats interesting is several of my index funds and stocks are actually losing money right - if I had stayed in... its kind of like a lava field right now...

As others have pointed out, your mindset is not one that will likely lead to successful investing.  We're all experts when we look back and see what our investments could have done,  Down is a normal part of the process, not a reason to be out.  The simple truth has been stated time and again here and the resources mentioned throughout like jcollins etc., do a terrific job giving you data to work with.  The likelihood that you will know when to get back "in" is virtually zero.  The likelihood that you go "out" at the right time was also shown to be wrong by your original "woe is me" post.  Now a little longer things had gone back down and you feel vindicated......until days from know they go up and you were still caught sitting on the sideline and missed the ride up.  No simpler way to say it.  Market timing is s fool's game.  Get back in and stay in and add more on a regular basis and you will have the best chance for success.

[luckystripes]

If you're worried about timing at all . . . You've already fucked up.  Stop trying to time the market.

This.

Also,  if you ever are decided about what to do-- there is nothing wrong with buying half or selling half -- you know, split the decision.

Thats actually what I am thinking about - instead of rebuying all my original same positions back - I can actually just buy back half of the original percent of my positions (and maybe even get it a bit cheaper now than when I sold it)...

[Goldielocks]

If you're worried about timing at all . . . You've already fucked up.  Stop trying to time the market.

This.

Also,  if you ever are undecided about what to do-- there is nothing wrong with buying half or selling half -- you know, split the decision.

Thats actually what I am thinking about - instead of rebuying all my original same positions back - I can actually just buy back half of the original percent of my positions (and maybe even get it a bit cheaper now than when I sold it)...

The reason the "half" decision works for me, is sometimes I just do nothing because I can't decide, even when it is part of a long term asset rebalance plan or another long term decision goal.    The "half" means I am always half right.

[GuitarStv]

If you don't trust your hunch enough to wager 100% of your money on it, why would you trust it enough to wager 50%?

[JAYSLOL]

If you're worried about timing at all . . . You've already fucked up.  Stop trying to time the market.

This.

Also,  if you ever are decided about what to do-- there is nothing wrong with buying half or selling half -- you know, split the decision.

Thats actually what I am thinking about - instead of rebuying all my original same positions back - I can actually just buy back half of the original percent of my positions (and maybe even get it a bit cheaper now than when I sold it)...

Re-buy half now.  Today.  Then dollar cost average the rest in over the next 3-6 months.  Set it to contribute weekly automatically and forget all this.  Yeah, we might be seeing corrections on the horizon, but sometimes what we see is just a mirage that leaves us stranded in the financial desert.   

[dougules]

One other thing, you should think of buying stocks/mutual funds/ETFs like you were buying a business... because that's exactly what you are doing.  If you bought the corner store in your neighborhood, you wouldn't sell it 3 months later hoping to buy it back cheap a few months after that.  You would keep it and let the profits roll in.  The same logic applies to stocks since that is buying a business, too.  It's just that you're buying a piece instead of the whole thing.   The same applies to mutual funds and ETFs, too, since they're just a bundle of several stocks. 

[luckystripes]

If you don't trust your hunch enough to wager 100% of your money on it, why would you trust it enough to wager 50%?

Well its cause my index funds were basically the S&P500 - which was about 60% of my total allocation - and that thing is going down right now even lower than I sold it...

I think the dollar-cost average back into the S&P500 makes some sense - especially right now... I can just get back into it little by little..