Author Topic: My Adventures in Market Timing  (Read 4380 times)

MyOtherBrotherDarryl

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My Adventures in Market Timing
« on: December 19, 2019, 10:01:50 PM »
I am a college professor. I have a PhD and everything. This means that I am a Very Smart Person.

Or so I've been told.

After all, if I appear on television as a Very Important Talking Head, my name on the screen is either preceded by "Dr." or postscripted with "PhD." The only other professionals routinely accorded that level of deference are doctoral-level healthcare practitioners like physicians and veterinarians.

Yes, veterinarians are healthcare practitioners. Fight me.

Alas, my salary is not as inflated as my ego. We net in the mid-five-figure range, which is more than enough for the very LCOL area we call home, but certainly less than I would like. Nonetheless, we've managed to save a tidy sum.

What's that?

Oh, yes.

"We."

I'm married with two kids. My wife and I are in our early 40s. Our kids are in grade school. I teach full-time at a public university. She works part-time. We have no debts save for a mortgage that's about to drop from six figures to five. I am mostly sober as I write this. The fall semester ended a little while back. Happy Thursday.

My adventures in market timing are thus:

Our retirement funds, held in a mix of Vanguard-administered Roth IRAs and accounts safeguarded by the good people at TIAA-CREF, are invested 100% in stocks. Index funds where we could get them, the closest available if they weren't. Some benighted souls at a previous job of mine limited their TIAA-CREF options to a bare handful that didn't include an index fund. A pox on their houses.

I am not attempting to time the market with our retirement money. I would do nothing so foolish. I am, remember, a Very Smart Person. Our retirement money is going to stay 100% in equities for at least the next 15 years, after which we will begin slowly shifting into bonds. Make regular contributions, stay the course,  etc.

Our state's pension system, too, is relatively healthy, surprisingly so given the state of public pensions in general these days. Unlike many of you, I have no plans to FIRE unless I manage to follow in the footsteps of Doris Kearns Goodwin and write a book that Spielberg turns into a movie.

She now does corporate consulting on the side. Charges $40,000 an hour. Good work if you can get it.

I like my work, I like my students, and I like my library privileges. I expect to retire in 25-ish years with a mix of pension funds, my own healthy savings, and - dare I say it - Social Security. Even without Social Security, though, we'll be just fine.

However.

My adventures in market timing involve my kids' 529 money. With, of course, my wife's full knowledge and consent. Very Smart People do not anger those who sleep next to them and have access to power tools.

My kids' plans had been 100% in Vanguard's S&P 500 index from the beginning. The second decade of the millennium has been very kind to them. I left them alone, they left me alone. During that decade, they grew and grew.

In late 2017, however, I started thinking that the American economy was overdue for a correction. When coupled with our chief executive's wallet-rattling at China, I thought that correction was due very soon. So in January, 2018, when the S&P was cresting 2800, I shifted all of my kids' 529 money into Vanguard's Total Bond Market Index fund. Almost immediately, the S&P started dropping.

Most of you know the story of 2018 so I won't rehash it here. But I patted myself on the back for my foresight. I patted myself on the back so much I wrenched my shoulder and sprained my wrist, thus depriving me of two forms of self-gratification: patting myself on the back and patting myself on the front.

Yes, friends, I was indeed a Very Smart Person. Besides, I don't need my shoulder. My wife can pat me on the back. And do that other thing. Better than me, actually.

The S&P 500 didn't recover to its January, 2018 high for nearly 18 months. The bond fund, meanwhile, did well. I had no trouble sleeping at night. Smug as a bug in a self-satisfied rug. My kids hadn't lost a penny.

But then the S&P 500 started to recover. It continues to recover. It has, in fact, recovered spectacularly well. And my kids' 529 continues to sit in bonds. I've missed the last run-up. But I'm not as bothered as I thought I'd be.

The other part of this adventure was gauging my own emotional reactions to swings in the market. How would I react if the market started jumping up past the point where I'd sold? Would I feel remorse? Sorrow? Apathy? Would I want to jump back in because, oh my God, everyone's getting rich but me? Or would I hold firm? And would holding firm end up being a wise or a foolish decision?

So far, I've held firm and believe it's been the wise choice.

According to the 529 account page, the bond index fund's YTD growth has been roughly 8.5%, compared with the Total Stock Market Index Fund's growth rate of 15%. I am good with this. Why? Because our circumstances are somewhat different from the average American looking ahead to paying for college.

1. My older kid has over $100K in her 529 plan. My older kid is ten years old. My younger one is seven and has over $80,000. If the stock market continues to soar, I'll keep buying bonds low and locking in our savings. If the market falters, their value goes up. If the market does fine, there's still plenty in the account and it's reasonably secure. Either way, my risk of loss is very low.

2. My public university offers a 75% discount off the in-state tuition rate for full-time employees and their dependents. That's 75% off a tuition rate of some $8,000 a year. Moreover, our institution cannot raise in-state tuition above a certain rate each year without permission from the state legislature, a body that is as mercurial as it is tight-fisted. Answerable to the taxpayer and all that, and wisely so. Assuming then that we raise tuition at the maximum allowable rate each year for the next decade, and assuming my kids qualify for exactly zero scholarships, we're still looking at a discounted tuition of rate of no more $3,000 a year. We can cash-flow that with ease, even if books and fees double that figure.

3. On paper, we make little enough that if lightning strikes and my kids get into Harvard, Yale, or their ilk, we'll qualify for a tremendous amount of need-based aid. In fact, I sometimes wonder if having such a fat 529 plan might not be a liability in the financial aid game. It's not my field of expertise so I can't say for sure but the rules of collegiate financial aid are even more fluid than the direction of the stock market. Attempting to time the college financial aid market is perhaps the greatest folly of them all.

So my adventures in market timing are less about growth and more about preserving wealth and testing my own emotional mettle, predicated on the possibly-erroneous analysis that a significant correction is still coming. I see the growing income gap, the increase in the number of people holding multiple jobs just to get by, the increase in the homeless population, the increase in the under-employed population, the growth of student loan debt, the new growth in personal and consumer debt, and I can't help but think that something is going to give.

Do I wish I'd kept their money in stocks? In retrospect, sure. Do I regret that I didn't? Absolutely not. I was serious when I said I sleep fine at night. Their college money has multiple backstops. And 8.5% is a pretty damn good rate of return, even for the stock market. For bonds, it's well above the historic norm - the bond index's three-year average is 4.05% while the ten-year is 3.41% - so I'm not complaining.

I'm one of the lucky ones. I have a secure job teaching people how to get their own secure jobs in a field that, nationally, has more openings than qualified applicants as well as a graying workforce. I work at a well-regarded public university that can compete effectively on price and has a solid, well-earned reputation. I'd be perfectly happy sending my own children there.

Like I said, my circumstances are very different from those of the average American looking at sending a kid to college. I'm in the fortunate position of being able to take some risks with my kids' college money without too much risk of loss. Soon enough, it'll be our own retirement money that we'll be looking at preserving and the risks there are rather a bit higher.

Legend holds that at the Temple of Apollo at Delphi was an inscription bearing the words, "know thyself." My adventure in market timing is part of a quest to do exactly that. I'm watching the equities rise from the front row rather than being in the show myself. But I'm okay with that. I've locked in a healthy amount for my kids with time enough left to grow it a bit more. I don't envy the growing wealth of others in this market, which is a relief - I sincerely wondered if I would care about others' fortunes. It turns out I don't. My wife and I remain frugal and communicate constantly about money. We track every penny of our income and expenses. And since I'm keeping a cool head and sticking to the plan now, I'm fairly certain that when retirement looms, we'll be okay.

If you've made it this far, thank you. If you have any thoughts or reactions, I'm always happy to read them. One of the joys of browsing this forum is the wealth of experiences and backgrounds reflected in the posts. They are a constant reminder that I am never as smart as I think I am.

TL;DR I thought I'd be bummed about shifting my kids' college money from stock to bonds in early 2018, before the recent run-up in equities. Turns out I'm not.

MustacheAndaHalf

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Re: My Adventures in Market Timing
« Reply #1 on: December 20, 2019, 01:17:47 AM »
One worthwhile thing for others to see: timing the market requires two correct decisions: when to switch investments, and when to switch back.  Getting out before a bad year isn't enough: from the start of 2018 to now, bonds gained +4.4% / year while stocks gained +10.1% / year.  Even knowing a correction is coming isn't enough - you need to know when the recovery will occur.

Why do you allocate 0% international?  The tradeoff between U.S. and international shows that some decades the U.S. wins, some decades international wins.  There's a diversification benefit to having both.  I'd suggest 1/5th of your equities are in international, like Vanguard Total International Stock Index Fund Admiral Shares (VTIAX).  That 20%, according to a Vanguard white paper, offers the highest chance of a benefit from diversification.

You might be surprised that 100% bonds is more risky than 90% bonds.  Although stocks are volatile, many times stocks and bonds move in opposite directions.  When that happens, a 90% bond / 10% equity portfolio is actually more stable than 100% bonds.

Vashy

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Re: My Adventures in Market Timing
« Reply #2 on: December 20, 2019, 01:29:02 AM »
Posted to follow - really enjoy your writing style, @MyOtherBrotherDarryl !

AdrianC

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Re: My Adventures in Market Timing
« Reply #3 on: December 20, 2019, 06:40:35 AM »
Alas, my salary is not as inflated as my ego. We net in the mid-five-figure range, which is more than enough for the very LCOL area we call home, but certainly less than I would like. Nonetheless, we've managed to save a tidy sum.
You must be a teacher of philosophy ;-) I have a friend in a similar profession, similar salary, about 10 years ahead of you. I don't believe he has any regrets about career choice. He'd like to make more money, obviously, but there's a lot to be said for doing what you love rather than whatever makes the most money.

You've done well.

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According to the 529 account page, the bond index fund's YTD growth has been roughly 8.5%, compared with the Total Stock Market Index Fund's growth rate of 15%. I am good with this. Why? Because our circumstances are somewhat different from the average American looking ahead to paying for college.

Something wrong there. Total US market is up about 29% for the year, international about 21%.

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Like I said, my circumstances are very different from those of the average American looking at sending a kid to college. I'm in the fortunate position of being able to take some risks with my kids' college money without too much risk of loss. Soon enough, it'll be our own retirement money that we'll be looking at preserving and the risks there are rather a bit higher.

Actually you're taking less risk, unless you're thinking about the risk of not having enough, which doesn't seem to be the case. You switched your kids money to a lower risk allocation, and you can do that - you've won the game, so why keep playing? Unless you think your kids will go onto Phds and such, in which case maybe you do need to take more risk?

My oldest is in 11th grade. Her 529 is 45% bonds, 55% stock. Been switching 15% to bonds the last three years. I'll do one more 15% switch next year. That should give her enough in bonds to get her through 4 years of undergrad. The remaining 40% will stay in stocks for a couple of years, hopefully to grow a bit more. She's going to need it if she pursues her goal of med school and beyond.

My other two kids are 6th and 8th grade. They're 100% stocks. I'll do the same gradual switch to bonds starting 9th grade. I don't believe I can time the market, I just know that I shouldn't have money in stocks that we're going to need in the next 3 or 4 years.

ChpBstrd

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Re: My Adventures in Market Timing
« Reply #4 on: December 20, 2019, 09:28:04 AM »
Interesting. Your retirement funds are invested on the assumption of continuing US economic growth at a healthy pace, while the kidsí 529s are invested as if you believe Japanification and a disinflationary spiral will occur within the next 8 years. It is as if you have two conflicting forecasts and have bet 100% of each pot on one of them rather than holding a blended asset allocation in all your baskets. Is there some contingency plan you havenít mentioned? For example, in the growth scenario pitching into the kidsí college funds from retirement savings, and in the disinflationary scenario at least your kids wonít have to take out loans whose burden grows from deflation?

MyOtherBrotherDarryl

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Re: My Adventures in Market Timing
« Reply #5 on: December 20, 2019, 10:43:48 AM »
One worthwhile thing for others to see: timing the market requires two correct decisions: when to switch investments, and when to switch back.  Getting out before a bad year isn't enough: from the start of 2018 to now, bonds gained +4.4% / year while stocks gained +10.1% / year.  Even knowing a correction is coming isn't enough - you need to know when the recovery will occur.

That is indeed the conundrum. Like with betting on a roulette wheel, each bet increases your chance of losing. In other words, you're statistically far more likely to hit twice in a row than eight times in a row. I hit once. I haven't hit twice. I might salvage that on the next correction but only time will tell.

Why do you allocate 0% international?  The tradeoff between U.S. and international shows that some decades the U.S. wins, some decades international wins.  There's a diversification benefit to having both.  I'd suggest 1/5th of your equities are in international, like Vanguard Total International Stock Index Fund Admiral Shares (VTIAX).  That 20%, according to a Vanguard white paper, offers the highest chance of a benefit from diversification.

I went back and double-checked because something seemed off when I wrote my OP. And you're right. I have about 10% of my retirement money in Vanguard's international index. 20% is a bit high for my comfort. What can I say - I'm a homer.

You might be surprised that 100% bonds is more risky than 90% bonds.  Although stocks are volatile, many times stocks and bonds move in opposite directions.  When that happens, a 90% bond / 10% equity portfolio is actually more stable than 100% bonds.

The 529 plan has a variety of blends available. I've been considering moving into one or another and may yet do so.

You must be a teacher of philosophy ;-)

Did you miss the part about how I teach in a field with job prospects?

According to the 529 account page, the bond index fund's YTD growth has been roughly 8.5%, compared with the Total Stock Market Index Fund's growth rate of 15%. I am good with this. Why? Because our circumstances are somewhat different from the average American looking ahead to paying for college.

Something wrong there. Total US market is up about 29% for the year, international about 21%.

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I have only the reported numbers from the plan and Vanguard to go with, effective the end of last month. They're probably a bit out of date.

I wish you all the best with your kids and that they score all the free money they can get their hands on.

Interesting. Your retirement funds are invested on the assumption of continuing US economic growth at a healthy pace, while the kidsí 529s are invested as if you believe Japanification and a disinflationary spiral will occur within the next 8 years. It is as if you have two conflicting forecasts and have bet 100% of each pot on one of them rather than holding a blended asset allocation in all your baskets. Is there some contingency plan you havenít mentioned? For example, in the growth scenario pitching into the kidsí college funds from retirement savings, and in the disinflationary scenario at least your kids wonít have to take out loans whose burden grows from deflation?

Fair points, all. This is part of the experiment. Long term, I see continued healthy growth for the American economy. Short term... who freakin knows? I regard the shift to bonds as nothing more than locking in my kids' gains, which were well into the double digits. I have no other backstops besides what I mentioned, although I like to think those backstops are adequate.

Barring a convincing argument based on specific, achievable career goals, my kids will not take out any loans for their undergraduate degrees. If they wish to pursue graduate education, that's another matter.

MustacheAndaHalf

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Re: My Adventures in Market Timing
« Reply #6 on: December 20, 2019, 01:30:25 PM »
One worthwhile thing for others to see: timing the market requires two correct decisions: when to switch investments, and when to switch back.  Getting out before a bad year isn't enough: from the start of 2018 to now, bonds gained +4.4% / year while stocks gained +10.1% / year.  Even knowing a correction is coming isn't enough - you need to know when the recovery will occur.

That is indeed the conundrum. Like with betting on a roulette wheel, each bet increases your chance of losing. In other words, you're statistically far more likely to hit twice in a row than eight times in a row. I hit once. I haven't hit twice. I might salvage that on the next correction but only time will tell.
The approach of switching to bonds is -11% behind and counting.  Try not to view that as a coin flip, with equal chance of bonds or stocks winning.  Stocks usually win, and often by more than bonds.  The longer you wait, the less chance of catching up - even if a correction occurs.

It's also worth pointing out bonds are not absolutely safe, only relatively safer than equities.  When bond yields go up, the old bonds don't look so good.  They drop in value until they provide the same yield as the new bonds.  Vanguard Total Bond Market has a duration of 6 years, which means a +0.5% increase in yield will cause it to lose about -3%.

Buffaloski Boris

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Re: My Adventures in Market Timing
« Reply #7 on: December 20, 2019, 08:13:33 PM »
@MyOtherBrotherDarryl : thanks for the very entertaining post you are indeed a Very Smart Person. And welcome to the MMM forums. In essence you diversified your portfolio based on the shorter timeframe until when you plan to use your 529 assets. I donít look at it as market timing, I look it as diversification. Which is usually a good thing.

I donít like to give investment advice because I know my limitations, the biggest one being that I see the world through a very different prism. Thatís a liability when youíre trying to predict common human behavior, which is pretty much what youíre trying to do when predicting the market. And letís face it, Iím probably a Very Stupid Person as well. However even a blithering idiot can see that from a tax perspective youíll have to eventually pay a 10% tax penalty plus any taxes on earnings for what isnít used for educational expenses in those 529 accounts.  If Iím in the enviable position of having $180K in 529 accounts plus a way to send kids to college on the cheap, then Iím probably chilling on future contributions in favor of maybe a Roth.

MyOtherBrotherDarryl

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Re: My Adventures in Market Timing
« Reply #8 on: December 20, 2019, 09:14:59 PM »
@MyOtherBrotherDarryl : thanks for the very entertaining post you are indeed a Very Smart Person. And welcome to the MMM forums. In essence you diversified your portfolio based on the shorter timeframe until when you plan to use your 529 assets. I donít look at it as market timing, I look it as diversification. Which is usually a good thing.

I donít like to give investment advice because I know my limitations, the biggest one being that I see the world through a very different prism. Thatís a liability when youíre trying to predict common human behavior, which is pretty much what youíre trying to do when predicting the market. And letís face it, Iím probably a Very Stupid Person as well. However even a blithering idiot can see that from a tax perspective youíll have to eventually pay a 10% tax penalty plus any taxes on earnings for what isnít used for educational expenses in those 529 accounts.  If Iím in the enviable position of having $180K in 529 accounts plus a way to send kids to college on the cheap, then Iím probably chilling on future contributions in favor of maybe a Roth.

Thank you for that warm welcome. And I would never call you stupid. Ignorance is circumstantial happenstance that can be easily remedied. Stupid is a choice. As far as I can tell, very few people on the MMM board meet the latter criterion.

Regarding the tax penalty, I'm not aware - and please, PLEASE correct me if I'm in error - of any deadline regarding when said money has to be spent to avoid the tax penalty. Moreover, 529 accounts can be transferred and I have no doubt that if fortunate smiles on my children, I will have other deserving family members who could use the money.

I suppose time will tell. Stay tuned.

nancyfrank232

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Re: My Adventures in Market Timing
« Reply #9 on: December 20, 2019, 09:54:09 PM »
Cool story bro

Buffaloski Boris

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Re: My Adventures in Market Timing
« Reply #10 on: December 21, 2019, 07:57:23 AM »
@MyOtherBrotherDarryl : thanks for the very entertaining post you are indeed a Very Smart Person. And welcome to the MMM forums. In essence you diversified your portfolio based on the shorter timeframe until when you plan to use your 529 assets. I donít look at it as market timing, I look it as diversification. Which is usually a good thing.

I donít like to give investment advice because I know my limitations, the biggest one being that I see the world through a very different prism. Thatís a liability when youíre trying to predict common human behavior, which is pretty much what youíre trying to do when predicting the market. And letís face it, Iím probably a Very Stupid Person as well. However even a blithering idiot can see that from a tax perspective youíll have to eventually pay a 10% tax penalty plus any taxes on earnings for what isnít used for educational expenses in those 529 accounts.  If Iím in the enviable position of having $180K in 529 accounts plus a way to send kids to college on the cheap, then Iím probably chilling on future contributions in favor of maybe a Roth.

Thank you for that warm welcome. And I would never call you stupid. Ignorance is circumstantial happenstance that can be easily remedied. Stupid is a choice. As far as I can tell, very few people on the MMM board meet the latter criterion.

Regarding the tax penalty, I'm not aware - and please, PLEASE correct me if I'm in error - of any deadline regarding when said money has to be spent to avoid the tax penalty. Moreover, 529 accounts can be transferred and I have no doubt that if fortunate smiles on my children, I will have other deserving family members who could use the money.

I suppose time will tell. Stay tuned.

Any deadlines would be implemented by the state plan in question. Iím not aware of any overarching deadlines that operate for all 529s and the funds in a 529 remain your asset, unlike a Coverdell.

The funds in that plan are in that plan. My point is that moving forward were it I, would consider putting funds in a Roth before putting more in the 529s. Keeping in mind that any contributions, but not earnings, could be withdrawn at a later date without tax or penalty to fund whatever I want.

Here in the Commonthievery of Virginia, there is a very generous state tax deduction for 529 contributions. So that somewhat changes the Investment Order For us. Those recommendations can be seen in the Investment Order sticky thread at the top of the investor alley section.

Wrenchturner

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Re: My Adventures in Market Timing
« Reply #11 on: December 21, 2019, 12:21:27 PM »
I think Very Smart People with decent financial situations tend to diversify, but I wouldn't know, myself.

MyOtherBrotherDarryl

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Re: My Adventures in Market Timing
« Reply #12 on: December 21, 2019, 06:43:19 PM »
@MyOtherBrotherDarryl : thanks for the very entertaining post you are indeed a Very Smart Person. And welcome to the MMM forums. In essence you diversified your portfolio based on the shorter timeframe until when you plan to use your 529 assets. I donít look at it as market timing, I look it as diversification. Which is usually a good thing.

I donít like to give investment advice because I know my limitations, the biggest one being that I see the world through a very different prism. Thatís a liability when youíre trying to predict common human behavior, which is pretty much what youíre trying to do when predicting the market. And letís face it, Iím probably a Very Stupid Person as well. However even a blithering idiot can see that from a tax perspective youíll have to eventually pay a 10% tax penalty plus any taxes on earnings for what isnít used for educational expenses in those 529 accounts.  If Iím in the enviable position of having $180K in 529 accounts plus a way to send kids to college on the cheap, then Iím probably chilling on future contributions in favor of maybe a Roth.

Thank you for that warm welcome. And I would never call you stupid. Ignorance is circumstantial happenstance that can be easily remedied. Stupid is a choice. As far as I can tell, very few people on the MMM board meet the latter criterion.

Regarding the tax penalty, I'm not aware - and please, PLEASE correct me if I'm in error - of any deadline regarding when said money has to be spent to avoid the tax penalty. Moreover, 529 accounts can be transferred and I have no doubt that if fortunate smiles on my children, I will have other deserving family members who could use the money.

I suppose time will tell. Stay tuned.

Any deadlines would be implemented by the state plan in question. Iím not aware of any overarching deadlines that operate for all 529s and the funds in a 529 remain your asset, unlike a Coverdell.

The funds in that plan are in that plan. My point is that moving forward were it I, would consider putting funds in a Roth before putting more in the 529s. Keeping in mind that any contributions, but not earnings, could be withdrawn at a later date without tax or penalty to fund whatever I want.

Here in the Commonthievery of Virginia, there is a very generous state tax deduction for 529 contributions. So that somewhat changes the Investment Order For us. Those recommendations can be seen in the Investment Order sticky thread at the top of the investor alley section.

As a former resident of Virginia myself, I can see your point. And thank you for the reminder re. the sticky.

I will add, also, that our Roth contributions have been at their annual limit for quite a few years now. I've been looking at backdoor Roth contributions but that's for another thread.

I think Very Smart People with decent financial situations tend to diversify, but I wouldn't know, myself.

But I am diversified. I keep my savings in both bills and coins.

Although perhaps I should consider branching out a bit more. I wonder how palladium futures are doing right now...

Wrenchturner

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Re: My Adventures in Market Timing
« Reply #13 on: December 21, 2019, 10:28:00 PM »
Although perhaps I should consider branching out a bit more. I wonder how palladium futures are doing right now...
...I was thinking more along the lines of some ratio of equities:bonds.  @ChpBstrd made this point more clearly.  Why are you doing an "experiment" with your children's 529s?  Market timing is still dumb.  Looking for thrills?  Talk to your wife.

Joe Schmo

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Re: My Adventures in Market Timing
« Reply #14 on: December 22, 2019, 08:38:42 AM »
I have youngsters. More younger than yours with 529s and Iím wondering with your 529 balances and the fact that your in state tuition could be basically free...are you overfunded or are you planning on buying them mansions to live in while theyíre away at college and using the 529 money for that? Is there some backdoor means by which you could recoup (without taxes) the unspent 529 money that is not used for college expenses? Forgive me...Iím not a very smart person.

AdrianC

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Re: My Adventures in Market Timing
« Reply #15 on: December 23, 2019, 08:02:23 AM »
You must be a teacher of philosophy ;-)
Did you miss the part about how I teach in a field with job prospects?
I did, but to be fair, that was way, way down in a post that is extremely long by MMM standards. And I was joking!

My college professor friend does teach philosophy and like you say, has few job prospects. He makes about $60K plus benefits at a small private school.

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I have only the reported numbers from the plan and Vanguard to go with, effective the end of last month. They're probably a bit out of date.

You got your quoting messed up in your first reply post. You can go back and edit your post to fix it.

Regarding market returns,  you're probably looking at an annual return rather than YTD.

https://investor.vanguard.com/mutual-funds/profile/performance/vtsax

Average annual return as of 11/30/2019: 15.34%
Year-to-date as of 11/30/2019: 27.16%

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I wish you all the best with your kids and that they score all the free money they can get their hands on.
Thanks, you too.

Our kids will get the 529 money and maybe some academic scholarships. There won't be any needs-based money. I already know the FAFSA will be a waste of time for us.

We value education very highly but also think it's a huge advantage to come out of it with little debt. Both my wife and I had insignificant college debt. She because her parents paid and she worked summers, me because I grew up in a country that provided tuition free college to qualified students and I worked summers. We hope our kids will get the same - they earn their own fun money, the 529 will mostly pay for college.

BicycleB

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Re: My Adventures in Market Timing
« Reply #16 on: December 26, 2019, 05:57:50 PM »

Regarding market returns,  you're probably looking at an annual return rather than YTD.

https://investor.vanguard.com/mutual-funds/profile/performance/vtsax

Average annual return as of 11/30/2019: 15.34%
Year-to-date as of 11/30/2019: 27.16%


Good note, @AdrianC. Last year's December dip made a huge difference.

MyOtherBrotherDarryl, even the time from your investment to now is a short period to judge an investment strategy. Longer historical data are probably more predictive than the example of this year, or the period from your 529s' switch to bonds until now. Like others, I suspect a mix of stocks and bonds would be safer than pure bonds. A low amount of stocks (10 to 40 percent) can be pretty powerful.

If you want to consider what is safest, the thread on "Portfolio Design: Idiots v. Gurus" offers an intriguing set of data for perspective.

Fwiw, somewhere I also read that an idiot-style portfolio (even-ish portions of bonds, cash, gold, REITs) with less stock (about 43%, not 73%, I think with stock split evenly between large cap US small cap US and foreign index) has shown high stability with good returns.

Hard to predict the future, of course. Anyway, good luck.

MyOtherBrotherDarryl

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Re: My Adventures in Market Timing
« Reply #17 on: December 29, 2019, 10:44:24 AM »

Regarding market returns,  you're probably looking at an annual return rather than YTD.

https://investor.vanguard.com/mutual-funds/profile/performance/vtsax

Average annual return as of 11/30/2019: 15.34%
Year-to-date as of 11/30/2019: 27.16%


Good note, @AdrianC. Last year's December dip made a huge difference.

MyOtherBrotherDarryl, even the time from your investment to now is a short period to judge an investment strategy. Longer historical data are probably more predictive than the example of this year, or the period from your 529s' switch to bonds until now. Like others, I suspect a mix of stocks and bonds would be safer than pure bonds. A low amount of stocks (10 to 40 percent) can be pretty powerful.

If you want to consider what is safest, the thread on "Portfolio Design: Idiots v. Gurus" offers an intriguing set of data for perspective.

Fwiw, somewhere I also read that an idiot-style portfolio (even-ish portions of bonds, cash, gold, REITs) with less stock (about 43%, not 73%, I think with stock split evenly between large cap US small cap US and foreign index) has shown high stability with good returns.

Hard to predict the future, of course. Anyway, good luck.

I'll take a closer look at that thread. Thank you for sharing it.

As I noted above, this experiment was as much about my own emotional/rational reactions to market swings with real money at stake as it was about growing/preserving wealth.  The 529 plan I use offers a variety of investment options but they're all fixed ratios. The plan also restricts - sensibly in my opinion - account owners to two transactions a year. So I have a couple of days in which to make a change without affecting my ability to do so in 2020, assuming I want to.

That said, I went through all of 2019 without a single change to the plan. I certainly won't make any changes now just because the market is in an upswing. I'll take a look at my options over the next two days and go from there. Odds are good that I'll continue to stand pat but mixing in a small percentage of stocks does make sense upon closer inspection. My concern, knowing me, is that I'll obsess over finding the "perfect" ratio, which is like trying to identify which of a SCUBA diver's bubbles contains the fart.

I realize, too, that 529 money is very different from retirement money. I expect to burn it in a fixed timeframe and don't need to make it last for X decades after contributions cease. So I feel comfortable taking the risks inherent in more conservative investments. I rode a decade's worth of gains into 2018 so if all I missed was the past 6 months' rally, I can live with it. I could run the numbers on how much I left on the table but what would be the point? I know some here want to squeeze out every penny of gains and sock them away and I certainly don't blame them. And I'm more than happy to be greedy.

Within reasonable limits.

I'll keep looking into it. Meanwhile, friends, thanks for all the feedback. I'm starting to like it here. I came for the Anti-Mustachian schadenfreude. I stayed for the same thing.

Here's to a prosperous 2020 for us all.
« Last Edit: December 29, 2019, 10:46:01 AM by MyOtherBrotherDarryl »

MyOtherBrotherDarryl

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Re: My Adventures in Market Timing
« Reply #18 on: March 21, 2020, 10:18:54 PM »
I had bean soup today. The side effects - not to crack the wind of a poor phrase - reminded me that I hadn't posted here in a while.

Hi.

Earlier this week, this Very Smart Person did A Thing. Whether it was a Very Smart Thing or a Very Dumb Thing remains to be seen.

With the S&P 500 flirting with 2200 and Wall Street yowling like Minnie Driver in Goldeneye, I swapped out my kids' bond funds for an S&P 500 index fund. While I wouldn't be surprised to see the market continue moving downward in the near term, I don't think the dizzying drops we've seen over the past couple of weeks will repeat. I also figured that I have hit the limit of my market prognostication abilities and would never be able to fine-tune a trade to catch The Bottom of this market. So, with my oldest still several years removed from college,I've gone all-in on stocks again.

For the time being.

Sometime in the next three years, I will start swapping back into bonds to lock in some of what I fervently hope are the gains that will arise from this week's decision. I will swap regularly into bonds until the first tuition bill is due, by which time I expect to be at least 90% fixed income/bonds.

My Very Smart Wife, who still pats me on the front better than I ever could, has given her blessing.

For my part, I'm optimistic. I'm naturally bullish - I agree with Jack Bogle's precept of "buy American business and hold it forever" - and believe that the market will recover to its 2020 high within the next three years. I could be wrong, of course. But history suggests I'm not.

I suppose we'll find out.

Edit: grammar
« Last Edit: March 22, 2020, 08:41:21 PM by MyOtherBrotherDarryl »

Jack0Life

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Re: My Adventures in Market Timing
« Reply #19 on: March 22, 2020, 12:25:57 AM »
I enjoyed your original post. YES I read the entire thing. Very well written.

marty998

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Re: My Adventures in Market Timing
« Reply #20 on: March 22, 2020, 05:24:43 AM »
The OP engaged in something akin to "liability matching" that Insurance companies do, to match expected policy liabilities with investments that will likely grow to cover said expected liability.

Since the portfolio had grown over the decade to cover substantially all of the expected college expenses for his children, he had no need for growth, but did have a need for portfolio stability.

I commend the OP for his decision. It's a perfect, textbook case of investing to meet one's goals.

Having said that, I absolutely condemn his decision to get back in. You cashed in your chips when you won the game and now like an addicted poker machine player you've come back for more.

It ain't worth it the stress my friend.

BicycleB

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Re: My Adventures in Market Timing
« Reply #21 on: March 22, 2020, 05:49:27 PM »
Thanks for the update. Good to know your move; I hope it goes well.

MyOtherBrotherDarryl

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Re: My Adventures in Market Timing
« Reply #22 on: March 22, 2020, 08:43:34 PM »
I enjoyed your original post. YES I read the entire thing. Very well written.

Thank you.

The OP engaged in something akin to "liability matching" that Insurance companies do, to match expected policy liabilities with investments that will likely grow to cover said expected liability.

Since the portfolio had grown over the decade to cover substantially all of the expected college expenses for his children, he had no need for growth, but did have a need for portfolio stability.

I commend the OP for his decision. It's a perfect, textbook case of investing to meet one's goals.

Having said that, I absolutely condemn his decision to get back in. You cashed in your chips when you won the game and now like an addicted poker machine player you've come back for more.

It ain't worth it the stress my friend.

I appreciate your thoughts and grant that I could well be wrong. This move was part of my original strategy - to wit, if stocks fell, I was buying back in. Given my investment horizon, I would've been foolish not to.

Thanks for the update. Good to know your move; I hope it goes well.

Me, too.

MyOtherBrotherDarryl

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Re: My Adventures in Market Timing
« Reply #23 on: December 31, 2020, 07:00:50 PM »
As of close of business on the last day of 2020, my kids' college funds are up 57.33% YTD. I'd post screenshots, but I don't want to.

That money is staying right where it is for at least the next two years.

This is The Way.

Friends, I am no longer a Very Smart Person. I am now an Investing Genius. All I needed was that one weird old trick. Fund managers hate me.

My retirement money? No, I made no changes to how I invest my retirement money. Of course I didn't. I have a plan. I'm sticking to the plan. Why would I change the plan? What am I, verklempt? What, you think my kids are going to support me in my old age? Do you think I want them picking out my nursing home with memories of "no, I'm not wasting our money on a Netflix subscription" ringing in their heads?

Are YOU verklempt?

Here in the Darryl household, we await the next round of federal stimulus money. Personally, I would love to see that money targeted to those in greater need than ourselves... but this is not the place for politics so I will leave it at that.

Mrs. Darryl, who is a much better person than I am, is directing her share to some worthy causes. I, being less charitable, am going to gamble with my share. Yes, friends, I am going to gamble with it in the greatest casino humanity has ever devised: the equities market. And just like a casino, I enter with no ATM card. When the money's gone, it's gone and I leave.

What's the appeal of casinos, anyway? I've been to two in my life. Wasted two bucks on slots at one. Hung out and watched and got depressed while watching at the other. I just don't get it.

One of my resolutions for the New Year is to select my own individual investments. I've been looking more closely into a couple of sectors that I've been following for many years. Eventually, after I get the hang the broader context in which specific firms in that sector function, I may choose to buy their stock. Or not. I expect to make my first purchase by June 30, 2021. Or not.

I also have the benefit of having grown up in two very different countries. The currencies of these countries has fluctuated a great deal relative to one another over the past 40 years but I can tell you on any given day what the exchange rate is and how the political situation of those countries has affected it. So if stocks look too boring, I may instead decide to dabble in forex. Surely an Investing Genius like me can't help but make money in forex. Fees? Only the little people pay fees.

Okay, so maybe I am a little verklempt.

Man, I love that word so much.

And I'm not even circumcised.

I'll stop here. I read back over my post just now and saw that I misspelled nothing. You know what this mean, right? Yeah. It means I'm getting dangerously close to sobriety and need to remedy this appalling state of affairs.

May 2021 be as kind to your wallets as it has been to my kids' college money, if not more. And stay safe out there.
« Last Edit: December 31, 2020, 07:09:14 PM by MyOtherBrotherDarryl »

BicycleB

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Re: My Adventures in Market Timing
« Reply #24 on: January 01, 2021, 04:34:04 PM »
I had forgotten about this thread!

Welcome back, @MyOtherBrotherDarryl. Re-reading, I notice that you timed your return to stocks almost perfectly to match the year's bottom for the S&P 500. Obviously the 57% return is basically textbook for that - you really did need "just one weird trick".

Forex makes me a little queasier. If you do try it, and you're not just joking, let us know how you avoid fees. :)

MyOtherBrotherDarryl

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Re: My Adventures in Market Timing
« Reply #25 on: January 01, 2021, 07:51:17 PM »
I had forgotten about this thread!

Welcome back, @MyOtherBrotherDarryl. Re-reading, I notice that you timed your return to stocks almost perfectly to match the year's bottom for the S&P 500. Obviously the 57% return is basically textbook for that - you really did need "just one weird trick".

Forex makes me a little queasier. If you do try it, and you're not just joking, let us know how you avoid fees. :)

Thank you. It's good to be back. I'm actually on MMM quite often but I follow Mark Twain's adage about staying silent and thought a fool instead of speaking and removing all doubt. So I don't post much.

Re forex, I'm both serious and not. On the one hand, my parents live in one of the countries to which I alluded above. Whenever we visit them or vice versa, we exchange cash at prevailing rates. On a bigger scale, I'm sure I could sweet-talk them into accepting grandkid time as a fee.

On the other hand, I actually am seriously looking into it but as an investment strategy, it's more butter than bread. And frankly, I don't have enough in other assets to make the hedge worthwhile. I imagine the measly few thousand I have to spare for this endeavor will be quickly eaten by fees if I try to play the forex market. So unless I do find that magical place where I can swap $US for $AM, I think it unlikely that forex is in my future.

But I'm going to look for such a place anyway. Seriously. If I find it, I'll report back.

BicycleB

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Re: My Adventures in Market Timing
« Reply #26 on: January 03, 2021, 11:31:57 AM »
Is "$AM" a typo for "$AU"?

(I usually see that written "AU$". Not an expert though.)


MyOtherBrotherDarryl

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Re: My Adventures in Market Timing
« Reply #27 on: January 03, 2021, 12:30:18 PM »
Is "$AM" a typo for "$AU"?

(I usually see that written "AU$". Not an expert though.)

No, it was a Terry Pratchett reference.

BicycleB

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Re: My Adventures in Market Timing
« Reply #28 on: January 03, 2021, 03:13:19 PM »
Ah.

(processes)

Lol!

MyOtherBrotherDarryl

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Re: My Adventures in Market Timing
« Reply #29 on: January 23, 2021, 06:56:06 PM »
Change of plan: I will not be spending a penny on the purchase of individual stocks. A close friend has experienced a medical setback so the money I had blocked aside for equities speculation has gone to a cause much worthier than the fluffing of my own ego.

Should I come into more unexpected funds, I may yet get back into the individual stock game. It appears, however, that I will remain a mere spectator for the foreseeable future. Under the circumstances, I wouldn't have it any other way.