Author Topic: When would you get back in?  (Read 11861 times)

chadat23

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When would you get back in?
« on: March 24, 2018, 12:42:51 PM »
A few weeks ago I initiated a transfer of about $90k worth of IRA funds from Betterment to Vanguard. This past Monday funds were liquidated from Betterment. I'm assuming that any day now they'll show up in my Vanguard account. If you were in my shoes, if the money showed up on Monday, how quickly would you move to get back in the market? And that's not to imply that I think I can time the bottom, but is waiting a few days to see if we're plunging off a cliff that naive of an idea? I don't usually think twice about these kinds of ideas, but usually, I don't have such a large chunk of cash waiting to be invested while the market's pulling back from record highs while there's a real threat of a trade war.
« Last Edit: March 24, 2018, 12:46:01 PM by chadat23 »

chasesfish

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Re: When would you get back in?
« Reply #1 on: March 24, 2018, 01:25:37 PM »
I'd invest immediately.

I only keep a little cash lying around...then when the bear rears its ugly head, I throw money at it until it goes away

nereo

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Re: When would you get back in?
« Reply #2 on: March 24, 2018, 01:29:26 PM »
time IN the market is more important than timing the market.

MDM

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Re: When would you get back in?
« Reply #3 on: March 24, 2018, 01:42:38 PM »
If you were in my shoes, if the money showed up on Monday, how quickly would you move to get back in the market?
Monday.  Don't know if that would be correct in hindsight (which is the only way to know), but I'd likely think "Wow, what great luck to have been out of the market last week!" and jump back in ASAP.
Quote
And that's not to imply that I think I can time the bottom, but is waiting a few days to see if we're plunging off a cliff that naive of an idea?
It's not naive, in the sense that one can find plenty of Wall Street "experts" who would agree.  But one could also find plenty of Wall Street "experts" who would not agree.

webguy

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Re: When would you get back in?
« Reply #4 on: March 24, 2018, 07:48:51 PM »
I know everyone says they'd just put it in right away, but if I'm being honest and it was my money then I would probably wait a day or two to feel things out.  I know that's probably not the optimal thing to do, but I'm just being honest.

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Re: When would you get back in?
« Reply #5 on: March 24, 2018, 08:07:37 PM »
Don't try to play the timing game. Consider the drop we just had as a gift and get back in immediately.

gredenko

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Re: When would you get back in?
« Reply #6 on: March 24, 2018, 10:05:11 PM »
I know everyone says they'd just put it in right away, but if I'm being honest and it was my money then I would probably wait a day or two to feel things out.  I know that's probably not the optimal thing to do, but I'm just being honest.

No this is the optimal thing to do, especially if you have time to check on the market more than once a week. Buying without a signal that the drop has ended is how you start your investment off with a major loss.

Toad

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Re: When would you get back in?
« Reply #7 on: March 24, 2018, 10:41:22 PM »

No this is the optimal thing to do, especially if you have time to check on the market more than once a week. Buying without a signal that the drop has ended is how you start your investment off with a major loss.

...and waiting for the correct signal is how you miss out on the upswing.  This is how I missed out on all of 2017.   Finally said F it and tossed it all in (~120k) at the beginning of Feb.  I am sitting at a loss...but you know what?  I am ok with it since I don't need the funds anytime soon.

If you are uncomfortable with throwing it all in stocks now then at least throw it in bonds (AGG or whatever the Vanguard equivalent is) until you get the signal you are looking for.

Edit to add:. I did "scale in" over about 1 week with my funds.  Really it will make no difference in the long run, but if it makes you feel better doing it that way it is still better than sitting on the side and waiting for the "correct" moment since it will only come in hindsight and then you might end up sitting on the sidelines like I did.
« Last Edit: March 24, 2018, 10:46:49 PM by Toad »

privatefarmer

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Re: When would you get back in?
« Reply #8 on: March 24, 2018, 11:51:55 PM »
I know everyone says they'd just put it in right away, but if I'm being honest and it was my money then I would probably wait a day or two to feel things out.  I know that's probably not the optimal thing to do, but I'm just being honest.

No this is the optimal thing to do, especially if you have time to check on the market more than once a week. Buying without a signal that the drop has ended is how you start your investment off with a major loss.

wait, what? I'm assuming your "signal" has either made you the richest person on earth or whomever you learned it from is the richest person on earth. because if anyone had a "signal" that reliably told them when the market was going up or down, they'd very quickly be richer than warren buffett.

no? you're not worth hundreds of billions? then your signal is not working. nobody can predict HUMAN BEHAVIOR which is what drives short-term market returns, not fundamentals. Fundamentals (ie the economy growing) drives long-term stock market returns but day-to-day or even year-to-year volatility is driven almost exclusively by human behavior, which we cannot possibly predict ahead of time.

chadat23

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Re: When would you get back in?
« Reply #9 on: March 25, 2018, 12:52:37 AM »
"Get in ASAP, with everything you can afford, for the long term" is a great rule of thumb, but I'd argue that the most import, typically last, and typically hardest thing to be learned about any rule of thumb is when it's not the best option.

A few things to keep in mind: people rightfully talk about the cost of opportunity but given that I'm only talking about sitting on the sidelines for a few days at most (assuming things don't start going up or really tanking) this is a largely mute point, it's not that hard to get lucky once if you have a few things going in your favor and I'd argue that I do (trade war, interest rates...), I'm only planning on doing this once so neither regression to the mean nor cost of opprotunity considerations are relevant, I'm not trying to pick a top AND a bottom (I got out for unrelated reasons) only the next bit of direction, the fact that the market's behaviors don't repeat with sufficient regularity for people to use them to consistently beat the market doesn't mean that zero insights can be gleaned.

I'm not convinced that this is a good idea, I'm just not convinced that it's an innately bad idea just because it's different from what I do the other 99% of the time since this is a different circumstance from the other 99% of the time (at least for me).
« Last Edit: March 25, 2018, 12:56:14 AM by chadat23 »

nereo

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Re: When would you get back in?
« Reply #10 on: March 25, 2018, 06:08:02 AM »
You asked for advice and we offered it.  You seemed to have made up your mind to wait "a few days" and see what happens.

Here's why waiting "a few days" often doesn't work out.  Suppose first that the market drops another 500 points on Monday the talking heads will start bickering about "is this the start of a bear market,' and you pat yourself on the back for being 'smart.'  BUt hten what?  you wait a few more days and one of two things happens - most of the time (and particularly lately) the market bounces back up and you are left with a bunch of cash on the sidelines.  OR it continues downward, each day bringing a more negative tone from the talking heads and newspapers.  Problem here is there's no way of knowing where the bottom is, and people sitting on the sidelines almost always continue to sit on the sidelines until well past the recovery point.

OR - the dip just happened (as it has multiple times the market has dipped 4-5% in the last 2 years), you've missed out nad you are left with a bunch of cash sitting on the sidelines.

Staying ont eh sidelines for a few days is just a lesser version of market timing.  If you truly wait just a few days the most common result will be a difference of a percent or two.  Over years and years of compounding this will matter little, and it probabably won't be in your favor. The bigger worry is that a few days will become a few weeks, which might be a few months.  THen you miss dividends and anything else that comes along.  This is behavior psychology - the forming of bad habits and convincing yourself that you are smarter than everyone else.

Villanelle

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Re: When would you get back in?
« Reply #11 on: March 25, 2018, 06:26:40 AM »
If you sit for those "few days" and the market goes up, will you still invest?  If the market goes down, will you still invest?  What if it goes way up or way down?  Then is it another "few more days"?  If not, then why is your thinking supposedly sound for the first set of "more day"?  And if you will, then how on earth is this anything other than standard market-timing, which even you seem to admit is to be avoided?  And, more to the point, when will it be down or up "enough" that you stop few-more-day-ing?




privatefarmer

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Re: When would you get back in?
« Reply #12 on: March 25, 2018, 07:16:10 AM »
"Get in ASAP, with everything you can afford, for the long term" is a great rule of thumb, but I'd argue that the most import, typically last, and typically hardest thing to be learned about any rule of thumb is when it's not the best option.

A few things to keep in mind: people rightfully talk about the cost of opportunity but given that I'm only talking about sitting on the sidelines for a few days at most (assuming things don't start going up or really tanking) this is a largely mute point, it's not that hard to get lucky once if you have a few things going in your favor and I'd argue that I do (trade war, interest rates...), I'm only planning on doing this once so neither regression to the mean nor cost of opprotunity considerations are relevant, I'm not trying to pick a top AND a bottom (I got out for unrelated reasons) only the next bit of direction, the fact that the market's behaviors don't repeat with sufficient regularity for people to use them to consistently beat the market doesn't mean that zero insights can be gleaned.

I'm not convinced that this is a good idea, I'm just not convinced that it's an innately bad idea just because it's different from what I do the other 99% of the time since this is a different circumstance from the other 99% of the time (at least for me).

sometimes doing whatever makes you "comfortable" is the best answer, regardless of what history tells us. the bigger question you should be asking yourself is how much of a drawdown can you stick with? if the 5% drawdown we just experienced last week was too much, you should have only a fraction of your portfolio in the market. if you are second guessing yourself or trying to time the market, you likely are over exposed to stocks and should rethink how much volatility you can truly stomach.

Dicey

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Re: When would you get back in?
« Reply #13 on: March 25, 2018, 07:20:47 AM »
Wait! Did OP really make a mute point? I didn't hear it.

ePalmtrees

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Re: When would you get back in?
« Reply #14 on: March 25, 2018, 07:59:35 AM »
I understand your dilemma. On one hand you can now buy with a 5% discount versus a few days ago. I get the urge to wait and see if we are on the side of a cliff. But what if it just goes back up and you lost your 5% discount? I can only say personally timing the market hasn't worked great for me. It never seems to do exactly what I want it to. It does take some experience to prove this to yourself. But I'm personally done with it and would just put the money in.

Indexer

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Re: When would you get back in?
« Reply #15 on: March 25, 2018, 08:14:12 AM »
I think we are confusing two VERY different questions.

Scenario 1: Someone has money sitting in cash, and it's been in cash for awhile. They probably don't have the investing discipline to put it all in tomorrow. Dollar cost averaging lets them put money in over time, without worrying that they will invest at the top of the market.

Chadat, that's not you.

Scenario 2: Someone is fully invested. During a transfer money gets converted to cash. Should they leave it in cash or get back in? GET BACK IN!!!  You aren't changing your allocation by investing the money. If you don't get back in then you are changing your allocation. Being invested = your normal. Not being invested = abnormal. The decision to put the money in cash wasn't driven by your goal or even by you market timing(bad). It was driven by Betterment putting the money in cash(even worse). That's a terrible reason to be sitting in cash. Get back to your allocation. Everyday you aren't you should be thinking, "I need to rebalance! I need to rebalance!"

EngineeringFI

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Re: When would you get back in?
« Reply #16 on: March 25, 2018, 09:03:37 AM »
Wait! Did OP really make a mute point? I didn't hear it.

LOL, it's a huge pet peeve of mine. The expression is "moot point" people, not "mute point". http://www.dictionary.com/e/moot-point-vs-mute-point/

RWD

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Re: When would you get back in?
« Reply #17 on: March 25, 2018, 09:13:07 AM »
Monday.  Don't know if that would be correct in hindsight (which is the only way to know), but I'd likely think "Wow, what great luck to have been out of the market last week!" and jump back in ASAP.

That's exactly what I was thinking. Be happy for your lucky accidental market timing and get right back in.

chadat23

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Re: When would you get back in?
« Reply #18 on: March 25, 2018, 10:59:56 AM »
Regarding the "then what?" comments, I would have to have everything all planned out before the money ends up back in my account or everything gets too emotional in the moment and is ripe for dumb emotion-driven mistakes. That said, I don't see a clear and obviously good solution; this is a real and fundamental problem with this approach which I can't dismiss and part of the reason I initially asked the question rather than just blindly moving forward with it.

While my questioning of the initial answers I was given may have made me look obstinant, to be honest, I'm glad I did because the resulting replies were much more fleshed out and subsequently helpful :) But in retrospect, I suppose that in the OP I should have asked "what would you do and why".

Regarding the "mute point", I'm pretty dyslexic so while I generally put a lot of time into writing even little things to try to avoid these mistakes, some clearly slip through.

Thanks for all the input, it's honestly been very helpful! Well, maybe not so much with the "mute point" stuff ;)

nereo

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Re: When would you get back in?
« Reply #19 on: March 25, 2018, 11:11:14 AM »
Regarding the "then what?" comments, I would have to have everything all planned out ...

THis is the very reason why having an investor policy statement (IPS) is so important.  Presumably you compose it analytically (i.e. non-emotionally), and then you stick to the ISP instead of making decisions based on emotion or the tea leaves or whatever.

gredenko

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Re: When would you get back in?
« Reply #20 on: March 25, 2018, 01:22:13 PM »

No this is the optimal thing to do, especially if you have time to check on the market more than once a week. Buying without a signal that the drop has ended is how you start your investment off with a major loss.

...and waiting for the correct signal is how you miss out on the upswing.  This is how I missed out on all of 2017.   Finally said F it and tossed it all in (~120k) at the beginning of Feb.  I am sitting at a loss...but you know what?  I am ok with it since I don't need the funds anytime soon.

If you are uncomfortable with throwing it all in stocks now then at least throw it in bonds (AGG or whatever the Vanguard equivalent is) until you get the signal you are looking for.

Edit to add:. I did "scale in" over about 1 week with my funds.  Really it will make no difference in the long run, but if it makes you feel better doing it that way it is still better than sitting on the side and waiting for the "correct" moment since it will only come in hindsight and then you might end up sitting on the sidelines like I did.

Well it always depends on your goals and your style of investment. If you are someone who is looking to get in for several years without touching your investment at all, and can afford to risk that money, then the drops of a few hundred points won't affect your investment over the long term very much, and then you definitely should consider jumping in ASAP after a correction like the recent one.  Some people were okay with the last recession because they held and recovered by 2015 or so. Many others couldn't hold on that many years after jumping in too early and lost a lot. So if you are someone who may worry about it and maybe are more involved day to day or week to week, your goals may be different. I'm sure most people here are looking for the longer term so yes you are correct in that regard. I hear the housing bubble is pretty much where it was a decade ago or worse, and so another massive correction is not implausible. Time will tell.

I know everyone says they'd just put it in right away, but if I'm being honest and it was my money then I would probably wait a day or two to feel things out.  I know that's probably not the optimal thing to do, but I'm just being honest.

No this is the optimal thing to do, especially if you have time to check on the market more than once a week. Buying without a signal that the drop has ended is how you start your investment off with a major loss.

wait, what? I'm assuming your "signal" has either made you the richest person on earth or whomever you learned it from is the richest person on earth. because if anyone had a "signal" that reliably told them when the market was going up or down, they'd very quickly be richer than warren buffett.

no? you're not worth hundreds of billions? then your signal is not working. nobody can predict HUMAN BEHAVIOR which is what drives short-term market returns, not fundamentals. Fundamentals (ie the economy growing) drives long-term stock market returns but day-to-day or even year-to-year volatility is driven almost exclusively by human behavior, which we cannot possibly predict ahead of time.

oh you must think price moves are completely random... my apologies. carry on
« Last Edit: March 25, 2018, 01:28:32 PM by gredenko »

davisgang90

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Re: When would you get back in?
« Reply #21 on: March 25, 2018, 01:52:46 PM »
It absolutely cracks me up that it is still possible for folks in this forum to think that timing the market is a good idea "just this one time".

Don't time the market.

waltworks

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Re: When would you get back in?
« Reply #22 on: March 25, 2018, 04:36:54 PM »
oh you must think price moves are completely random... my apologies. carry on

Erm, other than the general upward trend, yes, they are very very random.

-W

Mighty-Dollar

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Re: When would you get back in?
« Reply #23 on: March 26, 2018, 01:22:17 AM »
Great entry point now that stocks have dropped about 10%. I'd get in 100%.

soccerluvof4

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Re: When would you get back in?
« Reply #24 on: March 26, 2018, 03:04:09 AM »
Great entry point now that stocks have dropped about 10%. I'd get in 100%.




^ this. +1

bob999

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Re: When would you get back in?
« Reply #25 on: March 26, 2018, 03:31:03 AM »

Stelpy

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Re: When would you get back in?
« Reply #26 on: March 26, 2018, 11:06:23 AM »
Correct me if I'm wrong but I think the idea of "timing the market" gets misunderstood here. Here are two scenarios :

1. You always try to gauge the entry/exit points and profit from it which is impossible to do unless you have insights from those in power.

2. You evaluate overall condition of the market and base your decisions on that. Eg. right now we have several warning signs that were not present in the previous years, which are

end of the cycle
extreme growth of 2017
overvalued stocks
huge blips in stock prices
drops in dow, s&p500
interest rates increase

None of those warnings sings were present in 2010, 11, 12, 14 or 15, which means the market is much more risky now than it was before.

Surely, you could lose a few % if the market goes up a bit more before eventually correcting itself but at the same time you could gain a lot if it drops 50+%.

RWD

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Re: When would you get back in?
« Reply #27 on: March 26, 2018, 11:50:45 AM »
Correct me if I'm wrong but I think the idea of "timing the market" gets misunderstood here. Here are two scenarios :

1. You always try to gauge the entry/exit points and profit from it which is impossible to do unless you have insights from those in power.

2. You evaluate overall condition of the market and base your decisions on that. Eg. right now we have several warning signs that were not present in the previous years, which are

end of the cycle
extreme growth of 2017
overvalued stocks
huge blips in stock prices
drops in dow, s&p500
interest rates increase

None of those warnings sings were present in 2010, 11, 12, 14 or 15, which means the market is much more risky now than it was before.

Surely, you could lose a few % if the market goes up a bit more before eventually correcting itself but at the same time you could gain a lot if it drops 50+%.

"The market can remain irrational longer than you can remain solvent." -- John Maynard Keynes

We're not misunderstanding the idea of timing the market. What you're suggesting is exactly what is being warned against. There may be tons of warning signs but it can still be a long time before the market drops. Or it could be tomorrow. But keeping your capital sidelined while waiting for the big drop is not a good strategy.
http://jlcollinsnh.com/stock-series/

See also, Bob the world's worst market timer:
http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

Travis

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Re: When would you get back in?
« Reply #28 on: March 26, 2018, 11:53:41 AM »
Correct me if I'm wrong but I think the idea of "timing the market" gets misunderstood here. Here are two scenarios :

1. You always try to gauge the entry/exit points and profit from it which is impossible to do unless you have insights from those in power.

2. You evaluate overall condition of the market and base your decisions on that. Eg. right now we have several warning signs that were not present in the previous years, which are

end of the cycle
extreme growth of 2017
overvalued stocks
huge blips in stock prices
drops in dow, s&p500
interest rates increase

None of those warnings sings were present in 2010, 11, 12, 14 or 15, which means the market is much more risky now than it was before.

Surely, you could lose a few % if the market goes up a bit more before eventually correcting itself but at the same time you could gain a lot if it drops 50+%.

1. True statement.
2. None of what you just wrote makes any sense or predicates a course of action.  In fact it's just a wordy version of #1.

-End of the cycle: which cycle? When did "it" end? What about this cycle makes it a good time to get out or conversely when does this cycle restart to get back in?
-Extreme growth of 2017. What about it? 2016 wasn't exactly a down year either. Why wasn't that the time to get out? Why would a great 2017 mean 2018 is going to suck?
-Overvalued stocks. YMMV. To many, stocks have been overvalued for most of the last decade. They can remain overvalued for another decade if that's what the market feels like.
-Huge blips in stock prices. What's the difference between a blip and an overvaluation?
-Drops in Dow, S&P500. If a drop in the market is your trigger to get out, you're too late. You've already lost. The market just went down.
-Interest rate increase.  How much of an increase is your trigger?

You forgot to add one of the most important things to your list: What deep research are you doing to decide when the correction is over with and get back in?  None of these variables come with a ready-made equation for reacting to them. All of this presumes you can predict the future. See #1.

Take any or all of these variables and put a date on the calendar for pulling out of the market and getting back in. If you can't, then it's a pointless mental exercise that will only add stress to your day.

Three out of every four years the market is up.  Your nightmare scenario happens one year in ten.  If you can't accept your investments going up 75-90% of the time, then don't play.

Eric

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Re: When would you get back in?
« Reply #29 on: March 26, 2018, 11:59:28 AM »
Correct me if I'm wrong but I think the idea of "timing the market" gets misunderstood here. Here are two scenarios :

1. You always try to gauge the entry/exit points and profit from it which is impossible to do unless you have insights from those in power.

2. You evaluate overall condition of the market and base your decisions on that. Eg. right now we have several warning signs that were not present in the previous years, which are

end of the cycle
extreme growth of 2017
overvalued stocks
huge blips in stock prices
drops in dow, s&p500
interest rates increase

None of those warnings sings were present in 2010, 11, 12, 14 or 15, which means the market is much more risky now than it was before.

Surely, you could lose a few % if the market goes up a bit more before eventually correcting itself but at the same time you could gain a lot if it drops 50+%.

Hi!  Welcome to the MMM forums.  You're in luck, because we have old threads where posters like yourself definitely thought that the bull run was over in all of those years you mentioned.  Many people have missed out on tons of gains waiting for that inevitable correction.

This is my personal favorite, but there are hundreds of them filled with people that made poor investment decisions because they thought they could predict market movements. 

https://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/

It's probably time to read A Random Walk Down Wall Street.

Eric

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Re: When would you get back in?
« Reply #30 on: March 26, 2018, 02:01:35 PM »
Well, hopefully you learned your lesson.  The markets were all up at least 2.5% today.  What a day!  Would've been a shame to miss that!

SubL stache

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Re: When would you get back in?
« Reply #31 on: March 26, 2018, 02:17:41 PM »
Well, hopefully you learned your lesson.  The markets were all up at least 2.5% today.  What a day!  Would've been a shame to miss that!
lol, as soon as I saw the results from today I came to check this thread.

ZMonet

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Re: When would you get back in?
« Reply #32 on: March 26, 2018, 03:20:34 PM »
Well, hopefully you learned your lesson.  The markets were all up at least 2.5% today.  What a day!  Would've been a shame to miss that!
lol, as soon as I saw the results from today I came to check this thread.

Same here.  I'm assuming OP couldn't have gotten back in by this morning even if they wanted because their funds hadn't cleared. Well, now you have a real decision to make.  There has been a bounce...but it probably won't continue...so you probably should hold off on getting back in.


JUST KIDDING.  Get back in.

Stelpy

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Re: When would you get back in?
« Reply #33 on: March 26, 2018, 07:24:55 PM »

"The market can remain irrational longer than you can remain solvent." -- John Maynard Keynes

We're not misunderstanding the idea of timing the market. What you're suggesting is exactly what is being warned against. There may be tons of warning signs but it can still be a long time before the market drops. Or it could be tomorrow. But keeping your capital sidelined while waiting for the big drop is not a good strategy.

Yeah, I know and understand this quote. But you will lose all those irrational gains when the market goes back to sensible evaluations and unless you could to exit at the peak (which would be timing the market) these would be just paper gains anyway.

Stelpy

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Re: When would you get back in?
« Reply #34 on: March 26, 2018, 07:38:29 PM »
-End of the cycle: which cycle? When did "it" end? What about this cycle makes it a good time to get out or conversely when does this cycle restart to get back in?

Economical cycle usually lasts 7-12 years, we're at year 10 after 2008 downturn.

-Extreme growth of 2017. What about it? 2016 wasn't exactly a down year either. Why wasn't that the time to get out? Why would a great 2017 mean 2018 is going to suck?

Extreme growth occurs right before the crash. That's a typical sign of a bubble.

-Overvalued stocks. YMMV. To many, stocks have been overvalued for most of the last decade. They can remain overvalued for another decade if that's what the market feels like.

Every of those evaluations will be wiped out when the market turns and assuming you won't be able to quit in time they're just paper gains at this point.

-Huge blips in stock prices. What's the difference between a blip and an overvaluation?

Stocks haven't dip 5%+ in the previous years, which means now the market started questioning the prices and testing them while before it was steadily going up.

-Drops in Dow, S&P500. If a drop in the market is your trigger to get out, you're too late. You've already lost. The market just went down.

The drop is not a trigger but a smoke of the fire to come which was not there in the previous years.

-Interest rate increase.  How much of an increase is your trigger?

Doesn't matter "how much", what matter is it STARTED to increase and was steady/decreasing before. This means the money has become more expensive and the availability will decrease. Hence the stock prices won't be able to have gain so easily as before.

You forgot to add one of the most important things to your list: What deep research are you doing to decide when the correction is over with and get back in?  None of these variables come with a ready-made equation for reacting to them. All of this presumes you can predict the future. See #1.

Take any or all of these variables and put a date on the calendar for pulling out of the market and getting back in. If you can't, then it's a pointless mental exercise that will only add stress to your day.

It doesn't need to be over as every significant drop in valuations and you getting in at cheaper costs is already a win. So, there's no need to predict the future.

Stelpy

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Re: When would you get back in?
« Reply #35 on: March 26, 2018, 07:42:17 PM »
Hi!  Welcome to the MMM forums.  You're in luck, because we have old threads where posters like yourself definitely thought that the bull run was over in all of those years you mentioned.  Many people have missed out on tons of gains waiting for that inevitable correction.

This is my personal favorite, but there are hundreds of them filled with people that made poor investment decisions because they thought they could predict market movements. 

https://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/

It's probably time to read A Random Walk Down Wall Street.

Thanks, Eric. Reading all of it.

So, you suggesting right now is as good of a time to start investing as it was back in 2009? Even though none of those warning signs were present?

chadat23

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Re: When would you get back in?
« Reply #36 on: March 26, 2018, 08:16:02 PM »
FYI the money still hasn't shown up in my account so I'm still on the sidelines regarding that chunk of money.

And I haven't put much more thought into my re-entry strategy (the default option is reentring ASAP so a lack of planning plus the simplicity of it will presumably push me to that) because I've been reading about what to do with it long term; that seems more fruitful. Short term it'll end up 90/10 VTSAX/VBMFX (about like the majority of my money) but I've been reading some about Modern Portfolio Theory and have been weighing my love for the math vs my scepticism for the relative lack of historical data.

Travis

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Re: When would you get back in?
« Reply #37 on: March 26, 2018, 08:18:41 PM »
-End of the cycle: which cycle? When did "it" end? What about this cycle makes it a good time to get out or conversely when does this cycle restart to get back in?

Economical cycle usually lasts 7-12 years, we're at year 10 after 2008 downturn.

-Extreme growth of 2017. What about it? 2016 wasn't exactly a down year either. Why wasn't that the time to get out? Why would a great 2017 mean 2018 is going to suck?

Extreme growth occurs right before the crash. That's a typical sign of a bubble.

-Overvalued stocks. YMMV. To many, stocks have been overvalued for most of the last decade. They can remain overvalued for another decade if that's what the market feels like.

Every of those evaluations will be wiped out when the market turns and assuming you won't be able to quit in time they're just paper gains at this point.

-Huge blips in stock prices. What's the difference between a blip and an overvaluation?

Stocks haven't dip 5%+ in the previous years, which means now the market started questioning the prices and testing them while before it was steadily going up.

-Drops in Dow, S&P500. If a drop in the market is your trigger to get out, you're too late. You've already lost. The market just went down.

The drop is not a trigger but a smoke of the fire to come which was not there in the previous years.

-Interest rate increase.  How much of an increase is your trigger?

Doesn't matter "how much", what matter is it STARTED to increase and was steady/decreasing before. This means the money has become more expensive and the availability will decrease. Hence the stock prices won't be able to have gain so easily as before.

You forgot to add one of the most important things to your list: What deep research are you doing to decide when the correction is over with and get back in?  None of these variables come with a ready-made equation for reacting to them. All of this presumes you can predict the future. See #1.

Take any or all of these variables and put a date on the calendar for pulling out of the market and getting back in. If you can't, then it's a pointless mental exercise that will only add stress to your day.

It doesn't need to be over as every significant drop in valuations and you getting in at cheaper costs is already a win. So, there's no need to predict the future.

-So we're either late for a downturn or we still have a couple years. So worry now? Take action now?
-"Extreme growth" is certainly in the eye of the beholder. 2017 was a great year. So was the year immediately following the 2008 crash. In fact, 2013 was the highest, not 2017.
-Lock in your losses when it goes down (but before an undetermined bottom) and wing it on when to get back in.

Sorry, but I won't be making any serious financial decisions off of that advice.

And the market went back up nearly 3% today anyways. 

Stelpy

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Re: When would you get back in?
« Reply #38 on: March 26, 2018, 08:43:07 PM »
-So we're either late for a downturn or we still have a couple years. So worry now? Take action now?

It's not a race but a marathon, right? =)

-"Extreme growth" is certainly in the eye of the beholder. 2017 was a great year. So was the year immediately following the 2008 crash. In fact, 2013 was the highest, not 2017.

Year after 2008 was the 1st year after the recession when the market "usually" bounces back not the 10th one when the cycle "usually" ends. Again, 2013 was the 5th year after 2008 crash not the 10th year as it is now. You never look at a single factor but take several into account when making the ground for a decision.

-Lock in your losses when it goes down (but before an undetermined bottom) and wing it on when to get back in.

Don't they call it "catching a falling knife"?

Sorry, but I won't be making any serious financial decisions off of that advice.

I'm in no position to give a financial advice. Just trying to put my Masters Degree in System Analysis to good use =)

And the market went back up nearly 3% today anyways.

I'm talking about the bigger picture, 10+ years span.

Travis

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Re: When would you get back in?
« Reply #39 on: March 26, 2018, 09:00:39 PM »


I'm talking about the bigger picture, 10+ years span.

As are we all, which is why trying to predict when to get in and out is a waste of time and money. 

So taking all these factors into account that seem important to you, when are you pulling your money out?

Stelpy

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Re: When would you get back in?
« Reply #40 on: March 26, 2018, 11:29:43 PM »
As are we all, which is why trying to predict when to get in and out is a waste of time and money. 

So taking all these factors into account that seem important to you, when are you pulling your money out?

I'm waiting to get in and would hate to lose 50%+ right at the entrance =) Especially, if there is a potential for a downturn to last any significant amount of time.

waltworks

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Re: When would you get back in?
« Reply #41 on: March 27, 2018, 07:53:39 AM »
Well, good luck. Rallies don't have to end with a crash, you know. Even if you're right about the market being at a peak, the road back to 15 P/E (assuming that's what you're waiting for) could be via stagnating prices and increasing earnings for a few years.

50% drops are incredibly rare. If you're really waiting for that, you may very well never put your money in.

-W

ooeei

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Re: When would you get back in?
« Reply #42 on: March 27, 2018, 08:57:25 AM »
I'd get back in ASAP.

I play an online game where you open crystals to get certain prizes of varying rarity. It's shocking the strategies people come up with, despite the devs being very clear that the probabilities are constant from crystal to crystal. Some people open them 1 at a time, some open 10 at a time, some open 1 until they get something good then open 10. Some open at certain times of day, or when someone else gets something good. It's all nonsense and confirmation bias, you should see the confidence people get when their strategy "works". They'll never change it again.

This forum is full of posts talking about how the top is in, the market has peaked, the bubble is soon to burst, etc. They come around every few months. Unfortunately most of them get lost in the mix, but if you search hard enough you can find them. This one was started in April of last year, we're currently up approximately 13% from the day it was posted. You can find them going all the way back to the start of the forum if you care to look. Most of them have very convincing theories about how we're overdue for a recession (been saying that since about 2012), the P/E ratio is inflated compared to historical averages (again, since probably 2012), America is dying due to foreign competition, etc etc.

https://forum.mrmoneymustache.com/investor-alley/top-is-in/

Here's one from 2013, just went back through pages and randomly found it:

https://forum.mrmoneymustache.com/investor-alley/doom-and-gloom/

Another one:

https://forum.mrmoneymustache.com/investor-alley/stock-market-expensive-now-alternatives/

While the Shiller PE isn't near historical highs your statement is a little misleading/misinformed as there really are only three periods in the history where the Shiller PE was higher than now - right before the great depression and before the dot com crash and just slightly above where we are prior to the financial crisis. 

So there may be room to run and push the markets but history is not on the side of good returns from this point. 

We're up 51% since this post was made. A year after this post was made the market was up 15%. 2 months after this post was made the market was up 4.5%. The S&P 500 has never been lower than it was on Oct 28, 2013, since Oct 28, 2013 (at least, based on the resolution in my yahoo chart). Anyone who waited starting then lost money, no matter how perfect they timed a future drop.

I could post dozens of these threads, maybe hundreds, since this forum was started. Occasionally some of them will be right, but the problem is you don't know that until the time is past. Most of them are wrong. Most don't have actionable intel, just general negative feelings that you can't really act on in a productive way. Knowing that the market will probably crash in the next 1-5 years, or might just stagnate or have numerous small corrections, doesn't really help you. The most reliable information we have is the market usually goes up. Because of that long term trend, it's always better to get in as soon as you can, provided you don't need the money soon.


"Get in ASAP, with everything you can afford, for the long term" is a great rule of thumb, but I'd argue that the most import, typically last, and typically hardest thing to be learned about any rule of thumb is when it's not the best option.

A few things to keep in mind: people rightfully talk about the cost of opportunity but given that I'm only talking about sitting on the sidelines for a few days at most (assuming things don't start going up or really tanking) this is a largely mute point, it's not that hard to get lucky once if you have a few things going in your favor and I'd argue that I do (trade war, interest rates...), I'm only planning on doing this once so neither regression to the mean nor cost of opprotunity considerations are relevant, I'm not trying to pick a top AND a bottom (I got out for unrelated reasons) only the next bit of direction, the fact that the market's behaviors don't repeat with sufficient regularity for people to use them to consistently beat the market doesn't mean that zero insights can be gleaned.

I'm not convinced that this is a good idea, I'm just not convinced that it's an innately bad idea just because it's different from what I do the other 99% of the time since this is a different circumstance from the other 99% of the time (at least for me).

If you actually have some sort of insight that gives you the ability to time the market this time, why would you assume you can't do it any other time? Either you can do it or you can't.

Which is more likely:

You have a newfound ability to time the market one time that just so happens to exactly coincide with when your work plan was cashed out.

You see a big chunk of money and are getting a bit greedy/fearful because now it's cash and you have to make a decision. You're for some reason treating it differently than two weeks ago when it was already invested, and presumably you weren't talking about pulling it out to cash (the same decision in reverse) to prevent losses from a drop.
« Last Edit: March 27, 2018, 09:18:16 AM by ooeei »

Eric

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Re: When would you get back in?
« Reply #43 on: March 27, 2018, 09:40:19 AM »
Hi!  Welcome to the MMM forums.  You're in luck, because we have old threads where posters like yourself definitely thought that the bull run was over in all of those years you mentioned.  Many people have missed out on tons of gains waiting for that inevitable correction.

This is my personal favorite, but there are hundreds of them filled with people that made poor investment decisions because they thought they could predict market movements. 

https://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/

It's probably time to read A Random Walk Down Wall Street.

Thanks, Eric. Reading all of it.

So, you suggesting right now is as good of a time to start investing as it was back in 2009? Even though none of those warning signs were present?

Now is a great time to start.  You've mentioned in other posts that you're investing for the long term.  Do you really not think the market will be higher in 20 years than it is today?

The idea that there were no "warning signs" in 2009 is pretty funny.  The whole fucking world was melting down.  Everything was on its way to zero.  This was the "new normal" that we'd all have to get used to.

There will always, always be reasons not to invest.  And yet, in the long run, the stock market has consistently made great returns for those willing to ignore them.

waltworks

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Re: When would you get back in?
« Reply #44 on: March 27, 2018, 11:33:28 AM »
The idea that there were no "warning signs" in 2009 is pretty funny.  The whole fucking world was melting down.  Everything was on its way to zero.  This was the "new normal" that we'd all have to get used to.

True story, in 2009 after reading too much financial news, I freaked out and went to Costco and loaded the car with bags of rice. No joke. Like $200 worth of rice (which is a LOT of rice at Costco prices).

I put it in the basement. A year later my wife got sick of looking at it and we put it all on Craigslist for free, once I figured out civilization wasn't collapsing.

-W

Eric

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Re: When would you get back in?
« Reply #45 on: March 27, 2018, 11:51:52 AM »
The idea that there were no "warning signs" in 2009 is pretty funny.  The whole fucking world was melting down.  Everything was on its way to zero.  This was the "new normal" that we'd all have to get used to.

True story, in 2009 after reading too much financial news, I freaked out and went to Costco and loaded the car with bags of rice. No joke. Like $200 worth of rice (which is a LOT of rice at Costco prices).

I put it in the basement. A year later my wife got sick of looking at it and we put it all on Craigslist for free, once I figured out civilization wasn't collapsing.

-W

I think I would need a bigger apartment to fit $200 worth of rice!  That's a good story. 

It's weird that people look back at 2009 in hindsight and think "what a great time to start investing".  I mean, yes, that's technically true, but if you can't invest in a bull market, you'll never have the guts to buy (or even hold) in a meltdown like that.  It was truly nerve racking and scary.  Everywhere you turned, someone was freaking out.  But yes, what a great time to invest (in rice)!  lol

2Birds1Stone

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Re: When would you get back in?
« Reply #46 on: March 27, 2018, 01:34:57 PM »
I would hold off, according to this credible source we are headed for a major recession.

ymmv

https://www.cnbc.com/2018/03/27/investment-chief-of-250-billion-firm-says-financial-markets-are-on-a-collision-course-for-disaster.html

MDM

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Re: When would you get back in?
« Reply #47 on: March 27, 2018, 01:54:50 PM »

davisgang90

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Re: When would you get back in?
« Reply #48 on: March 27, 2018, 05:56:04 PM »
I'm putting everything in Beanie Babies again.

woopwoop

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Re: When would you get back in?
« Reply #49 on: March 27, 2018, 06:12:26 PM »
I'm cashing out my 401k and starting a tulip farm.