Author Topic: Why I am reducing mkt exposure+have been since 2015.  (Read 181390 times)

AdrianC

  • Pencil Stache
  • ****
  • Posts: 961
  • Location: Cincinnati
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #450 on: April 27, 2016, 06:25:19 PM »
But we don't need to go there. You could just get rid of Obama Care and start paying us more and return our full time jobs that have health insurance.

And those of us who are FIRE or aspire to be FIRE, where do we get our health insurance?

The "open market"? You have to be kidding.

And small businesses. The "open market" for small companies is a sham.

Why are you against entrepreneurial ventures?

Huh?

Obamacare is, I hope, a step on the way to single-payer health care. Medicare for all. That's how we support small-business - take them out of the health insurance providing business altogether.


Cycling Stache

  • Bristles
  • ***
  • Posts: 471
  • Age: 43
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #451 on: April 27, 2016, 06:28:56 PM »
I think my net worth is up about $100k since this thread started through savings and market returns.  Surely the mental energy is not worth the unlikely achievement of perhaps, maybe, doing a little better than market. 

Save more, buy index funds, repeat, get rich.  Not really that hard.

BlankCheck

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #452 on: April 27, 2016, 07:17:43 PM »

Just wanted to go on record.  I am still bearish, and I now have a put option on the S&P 500 that expires in September.  If I'm wrong, you can all let me have it!


I wouldn't see any reason to "let you have it" any more if you were wrong than if you were right. You are speculating on a market move. Whether you make money or lose money doesn't change the nature of what you are doing and shouldn't change opinion of the action, it would be a single example that proves nothing either way.


Good luck!

Agreed, and thanks for the good luck wishes.  I'll need it!


It would prove timing the market is possible, even doable by an 'average' person.  Or even outside of timing the market, it could show that beating the market returns is doable - this would have huge implications for a FIRE timeline.

No - it would prove that one guy made a correct call one time (and good for him).  It proves nothing about the ability/probability of doing it successfully for multiple market cycles/conditions over a long time period, nor does a one time event have any significant impacts to a FIRE timeline.   

The misnomer that timing proponents seem to have is that nobody disputes that it's reasonably possible to make a correct call on market direction ONE time.  If one of us guessed the market will be higher in September and one guessed lower - someone would be right.  There's just vast empirical evidence to suggest that it's increasingly difficult/impossible to get the correct call on the second, third, fifth, tenth, twentieth time.    In short, if I guessed it was going to rain next Tuesday and it does - it doesn't mean I can now predict the weather.

I should also note that the specific way he is timing the market, his theory can be right but he can still be very 'wrong' in terms of reaping any benefit.  If the S&P does in fact go down as predicted but 'only' by 7% he would be right about the direction and still lose money.  It gets exponentially harder the more variables you are trying to predict, in this case it's up to 3:  the market direction, within a specific timeframe, to at least a specific magnitude.

Yep, agreed. 

To be sure, I'm not trying to prove any market timing theories here.  Rather, I know this thread will be resurrected later if the market goes down, and I want to have a bit of credibility if I mention later that I went short in April.  But yes, while a down market would prove this particular bet "right", in no way does it prove any larger point, nor does it make my bet anything other than speculative.

And yeah Terrestrial, if the market goes down 7% and nothing more, that's a big pile of suck for me.  Unless I have the foresight to sell the option at some point, or leverage it.  But of course I'll have no way of knowing that 7% is the bottom, and actually I'll likely be expecting a further drop.  So yeah, this is a gamble.  But I just don't trust these market levels right now, and don't know what else to do.

My other motivation for posting this is in case someone has any better advice, beyond the obvious suggestion that this is pure speculation, as I already admit.

steveo

  • Handlebar Stache
  • *****
  • Posts: 1944
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #453 on: April 27, 2016, 09:54:43 PM »
I think my net worth is up about $100k since this thread started through savings and market returns.  Surely the mental energy is not worth the unlikely achievement of perhaps, maybe, doing a little better than market. 

Save more, buy index funds, repeat, get rich.  Not really that hard.

It's not just that it's not hard. It's really simple. Plus it works.

Metric Mouse

  • Walrus Stache
  • *******
  • Posts: 5299
  • FU @ 22. F.I.R.E before 23
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #454 on: April 28, 2016, 03:35:23 AM »
It would prove timing the market is possible, even doable by an 'average' person.  Or even outside of timing the market, it could show that beating the market returns is doable - this would have huge implications for a FIRE timeline.

No - it would prove that one guy made a correct call one time (and good for him).  It proves nothing about the ability/probability of doing it successfully for multiple market cycles/conditions over a long time period, nor does a one time event have any significant impacts to a FIRE timeline.   

The misnomer that timing proponents seem to have is that nobody disputes that it's reasonably possible to make a correct call on market direction ONE time.  If one of us guessed the market will be higher in September and one guessed lower - someone would be right.  There's just vast empirical evidence to suggest that it's increasingly difficult/impossible to get the correct call on the second, third, fifth, tenth, twentieth time.    In short, if I guessed it was going to rain next Tuesday and it does - it doesn't mean I can now predict the weather.

I should also note that the specific way he is timing the market, his theory can be right but he can still be very 'wrong' in terms of reaping any benefit.  If the S&P does in fact go down as predicted but 'only' by 7% he would be right about the direction and still lose money.  It gets exponentially harder the more variables you are trying to predict, in this case it's up to 3:  the market direction, within a specific timeframe, to at least a specific magnitude.

No one ever said anything about repeatability. If it's possible to predict the market one time, then it would be possible to predict it again. The events would be completely independent of each other; getting it right this time, or five times in a row, doesn't have any effect on the next time. You're not using statistics correctly to make your point.  I clearly never suggested it as a long term strategy, or endorsed any specific means of timing the market, just stated that if this event occurs, it proves it would be possible.

Beating the market returns over time, by whatever program one chooses to use, would absolutely have a huge impact on a FIRE timeline. These were two separate statements that were also independent of each other.

BattlaP

  • Stubble
  • **
  • Posts: 172
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #455 on: April 28, 2016, 03:49:38 AM »
No one ever said anything about repeatability. If it's possible to predict the market one time, then it would be possible to predict it again. The events would be completely independent of each other; getting it right this time, or five times in a row, doesn't have any effect on the next time. You're not using statistics correctly to make your point.  I clearly never suggested it as a long term strategy, or endorsed any specific means of timing the market, just stated that if this event occurs, it proves it would be possible.

Beating the market returns over time, by whatever program one chooses to use, would absolutely have a huge impact on a FIRE timeline. These were two separate statements that were also independent of each other.

It's possible to predict a coin-toss correctly, that doesn't mean that it's not random.

It actually seems to be you who doesn't understand statistics. One guy making one prediction and one trade on one internet forum doesn't prove anything about anything. The reasons for his prediction don't matter, and the outcome doesn't matter, it's a sample size of one.

Metric Mouse

  • Walrus Stache
  • *******
  • Posts: 5299
  • FU @ 22. F.I.R.E before 23
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #456 on: April 28, 2016, 03:53:23 AM »
No one ever said anything about repeatability. If it's possible to predict the market one time, then it would be possible to predict it again. The events would be completely independent of each other; getting it right this time, or five times in a row, doesn't have any effect on the next time. You're not using statistics correctly to make your point.  I clearly never suggested it as a long term strategy, or endorsed any specific means of timing the market, just stated that if this event occurs, it proves it would be possible.

Beating the market returns over time, by whatever program one chooses to use, would absolutely have a huge impact on a FIRE timeline. These were two separate statements that were also independent of each other.

It's possible to predict a coin-toss correctly, that doesn't mean that it's not random.

It actually seems to be you who doesn't understand statistics. One guy making one prediction and one trade on one internet forum doesn't prove anything about anything. The reasons for his prediction don't matter, and the outcome doesn't matter, it's a sample size of one.

Of course it's possible to predict coin tosses. That's my whole point. I can understand why many people would be afraid to make a bet on a coin toss or the market direction (which is not random) but I can't understand why people would say it's not possible...

BattlaP

  • Stubble
  • **
  • Posts: 172
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #457 on: April 28, 2016, 04:03:37 AM »
Of course it's possible to predict coin tosses. That's my whole point. I can understand why many people would be afraid to make a bet on a coin toss or the market direction (which is not random) but I can't understand why people would say it's not possible...

Because you're not actually predicting them. It's random. You're guessing.

Metric Mouse

  • Walrus Stache
  • *******
  • Posts: 5299
  • FU @ 22. F.I.R.E before 23
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #458 on: April 28, 2016, 04:28:29 AM »
Of course it's possible to predict coin tosses. That's my whole point. I can understand why many people would be afraid to make a bet on a coin toss or the market direction (which is not random) but I can't understand why people would say it's not possible...

Because you're not actually predicting them. It's random. You're guessing.

Ok. I'm sorry for the misunderstanding. I was using this definition of predict:

pre∑dict.
[prəˈdikt]
VERB
1.say or estimate that (a specified thing) will happen in the future or will be a consequence of something.


So if you were using a different definition, then I can understand the confusion and disagreement.

Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 39
  • Location: NYC
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #459 on: April 28, 2016, 05:22:47 AM »
Metric mouse sorry but your reasoning doesn't make any sense.
Of course since an event CAN happen then it can be "predicted" (guessed).
But I mean I do you really need to flip a coin to go "see? I told you it could come out as heads!"

We already know a drop CAN happen (and for sure WILL happen someday).

Duh


Metric Mouse

  • Walrus Stache
  • *******
  • Posts: 5299
  • FU @ 22. F.I.R.E before 23
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #460 on: April 28, 2016, 05:37:11 AM »
Metric mouse sorry but your reasoning doesn't make any sense.
Of course since an event CAN happen then it can be "predicted" (guessed).
But I mean I do you really need to flip a coin to go "see? I told you it could come out as heads!"

We already know a drop CAN happen (and for sure WILL happen someday).

Duh

Wait...so you're agreeing with me...?

The point you are trying to make is not the point that you're making. If you have an issue with predicting the market, then debate that point. Don't say that no one can do it, admit that people can do, and then say that anyone who says it can be done is wrong. Accuracy is important in productive debate.

Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 39
  • Location: NYC
Why I am reducing mkt exposure+have been since 2015.
« Reply #461 on: April 28, 2016, 05:49:39 AM »
You're being extremely sophistic in defending your position.

Can you please explain what use is a "prediction" that has no difference whatsoever with a guess?
If you are stating that you can make "predictions" that are as good as the simple random probabilities then what type of information are you giving us?
What are you bringing to the table?

You are stating the obvious:

It can happen that someone says "event X is going to happen" and then it happens.

Wow thanks for the info

wienerdog

  • Bristles
  • ***
  • Posts: 459
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #462 on: April 28, 2016, 06:36:38 AM »

The strike price is 2000 on the S&P, at a 6.39 premium (actually SPY is the underlying asset, at 209 right now; the strike is actually 200).  So, not at all cheap, but it lasts until September.  I don't need a catastrophe, but I definitely need a significant dip.

We'll see.  I've never shorted the market before.  But I don't want to diminish my holdings any more than I already have.  So I'm hedging instead.

BC could you explain a little more as I know you did but it went over my head.  Maybe use terms for dummies.  lol  Just not familiar with doing this.  Are you using options?  When you say strike price I assume SPY has to reach 200.  If it reaches that by Sep. 1st then what do you get?  What does the 6.39 premium do?  Is that the amount you lose if it doesn't reach the strike point per share?

Also what is your thinking that it will go back down to 200?  I could see if the Feds try to raise rates in June you'll probably get it but at this point that seams risky as they don't seem like they know what they are doing anyway.  Thanks for any more clarification.  Just trying to learn but not interested in doing it myself.  As others said good luck I hope it works out!

Metric Mouse

  • Walrus Stache
  • *******
  • Posts: 5299
  • FU @ 22. F.I.R.E before 23
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #463 on: April 28, 2016, 06:38:55 AM »
You're being extremely sophistic in defending your position.

Can you please explain what use is a "prediction" that has no difference whatsoever with a guess?
If you are stating that you can make "predictions" that are as good as the simple random probabilities then what type of information are you giving us?
What are you bringing to the table?

You are stating the obvious:

It can happen that someone says "event X is going to happen" and then it happens.

Wow thanks for the info

Well, then.... you're welcome?  The point was that the market could be 'guessed' (since you prefer that word). Those that state that it can not be guessed are incorrect. That was the entirety of my point.  I did not advocate, endorse, suggest or describe any particular avenue of guessing the market. This thread is a big discussion over something everyone has agreed on, with the exception of a small number of persons who stated that the market direction could not be guessed...

Yep, agreed. 

To be sure, I'm not trying to prove any market timing theories here.  Rather, I know this thread will be resurrected later if the market goes down, and I want to have a bit of credibility if I mention later that I went short in April.  But yes, while a down market would prove this particular bet "right", in no way does it prove any larger point, nor does it make my bet anything other than speculative.

And yeah Terrestrial, if the market goes down 7% and nothing more, that's a big pile of suck for me.  Unless I have the foresight to sell the option at some point, or leverage it.  But of course I'll have no way of knowing that 7% is the bottom, and actually I'll likely be expecting a further drop.  So yeah, this is a gamble.  But I just don't trust these market levels right now, and don't know what else to do.

My other motivation for posting this is in case someone has any better advice, beyond the obvious suggestion that this is pure speculation, as I already admit.

Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 39
  • Location: NYC
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #464 on: April 28, 2016, 06:46:07 AM »
In the same way that you can "predict" if the roulette will fall on red or black.
Yes it can happen, I could predict that.
If that's the point then I would rather go to the casino, same probability of success (actually higher, since markets go up more often than they go down), plus there's free booze
:)

ender

  • Magnum Stache
  • ******
  • Posts: 4673
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #465 on: April 28, 2016, 06:49:12 AM »
One perspective is that if enough people believed the market would crash later this year, they would be selling stocks and causing prices to slowly go down.

But apparently not a large percentage of people involved in huge funds actually believe this yet.

I don't know how true this is, but it sure seems reasonable to me - people who spend all day every day researching this stuff effectively set stock prices, and they are currently at their current value. This does reflect some speculation, so if people really thought everything was going to crash, the current prices would slowly move to reflect this.

Metric Mouse

  • Walrus Stache
  • *******
  • Posts: 5299
  • FU @ 22. F.I.R.E before 23
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #466 on: April 28, 2016, 07:00:30 AM »
In the same way that you can "predict" if the roulette will fall on red or black.
Yes it can happen, I could predict that.
If that's the point then I would rather go to the casino, same probability of success (actually higher, since markets go up more often than they go down), plus there's free booze
:)

As long as that falls in line with your personal investment strategy, I think you should go for it. I hope you beat the pants off the market! Good luck!

Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 39
  • Location: NYC
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #467 on: April 28, 2016, 07:06:19 AM »
It doesn't, but I'll tag along in case somebody is willing to give it a try (for the free booze obviously)

Squeak825

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #468 on: April 28, 2016, 09:45:53 AM »

The strike price is 2000 on the S&P, at a 6.39 premium (actually SPY is the underlying asset, at 209 right now; the strike is actually 200).  So, not at all cheap, but it lasts until September.  I don't need a catastrophe, but I definitely need a significant dip.

We'll see.  I've never shorted the market before.  But I don't want to diminish my holdings any more than I already have.  So I'm hedging instead.

BC could you explain a little more as I know you did but it went over my head.  Maybe use terms for dummies.  lol  Just not familiar with doing this.  Are you using options?  When you say strike price I assume SPY has to reach 200.  If it reaches that by Sep. 1st then what do you get?  What does the 6.39 premium do?  Is that the amount you lose if it doesn't reach the strike point per share?

I am not sure how many contracts he bought, but let's assume it is just one. He paid someone $639 to control 1 put contract that equates to 100 shares of SPY. His strike price is 200, which means for him to break even, SPY will have to be at 193.41 ($200-$6.39) by Sept expiration date for him to break even. If it is lower than that, he will make $100 for ever additional dollar it is lower. Otherwise, he loses his premium he just paid.

EDIT:

If SPY at expiration is 193.41, he can sell his option back at $639, and be even
If SPY at expiration is 192.41, he can sell his option back at $739, and make $100
If SPY at expiration is 194.41, he can sell his option back at $539, and lose $100
If SPY at expiration is >200, he will lose his entire premium.
« Last Edit: April 28, 2016, 09:52:47 AM by Squeak825 »

wienerdog

  • Bristles
  • ***
  • Posts: 459
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #469 on: April 28, 2016, 10:17:52 AM »
If SPY ends up at $188.41 at expiration where did the $500 come from that he gets?  From other losers I guess that didn't meat the strike point?

Squeak825

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #470 on: April 28, 2016, 10:25:51 AM »
If SPY ends up at $188.41 at expiration where did the $500 come from that he gets?  From other losers I guess that didn't meat the strike point?

Just to be clear, if it is at $188.41, he will get $1159 -- $520 of it profit, and $639 is his premium he paid coming back to him(sorry my math was wrong below his breakeven is $193.61).

Where does it come from? For every buyer of a contract, someone has to sell it. In your scenario, the person that sold that contract (who got paid the $639) will HAVE to buy it back for $1159 -- thus them losing $520.


Terrestrial

  • Bristles
  • ***
  • Posts: 294
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #471 on: April 28, 2016, 11:05:41 AM »
If SPY ends up at $188.41 at expiration where did the $500 come from that he gets?  From other losers I guess that didn't meat the strike point?

Just to be clear, if it is at $188.41, he will get $1159 -- $520 of it profit, and $639 is his premium he paid coming back to him(sorry my math was wrong below his breakeven is $193.61).

Where does it come from? For every buyer of a contract, someone has to sell it. In your scenario, the person that sold that contract (who got paid the $639) will HAVE to buy it back for $1159 -- thus them losing $520.

Correct - I take the 'seller' side of the contract quite often and there's two ways that can happen.  When selling a put you can either directly close it out for the difference (the $520 noted above, a loss to the seller) or you can take assignment (brokerage will take $20k out of your account and give you 100 shares SPY @ 200, your cost basis in those shares is roughly 193.61  (200 - 6.39 premium per share).

I sell puts for 2 primary reasons: to get paid to wait for getting into a position I want to take assignment on at the price I want (you can often yield 1%/monthly while waiting and when you do take assignment you also keep the received premium to apply against your basis), or just to generate income against cash for options I deem likely to expire worthless (speculative cash generation), in which case I will close them out if it's at a loss and not take assignment.  Approx 60-90% of options expire worthless (depends on study/source).
 
« Last Edit: April 28, 2016, 11:07:19 AM by Terrestrial »

dixonge

  • 5 O'Clock Shadow
  • *
  • Posts: 70
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #472 on: April 28, 2016, 02:34:07 PM »

You've got a pretty bad sunk cost fallacy here. You're focusing on how much unrealized losses you have. But how much you bought it at is irrelevant. That's in the past and can't change. What you can do now is either sell it or hold onto it.

Suppose your gold is worth 30k now.
You keep asking yourself should you lock in a 8k loss to pay down the mortgage. That's the wrong question. You should be asking yourself if you had 30k lying around, would you invest it in gold or pay down your mortgage? (You can always sell your gold and then just buy it right back, so this is an equivalent situation)

Can't wait to unload the three gold coins I picked up in mid-2011. I've been holding based on the fallacy you mentioned here, in part. Now to work out how to get a half-day off of work so I can take them into a local dealer.

Excellent advice there. Thanks!

dixonge

  • 5 O'Clock Shadow
  • *
  • Posts: 70
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #473 on: April 28, 2016, 02:42:34 PM »
I can't believe I just read this whole thread!

To Cougar, Keith, etc. Here is the problem, the headwind, that your strategy faces:

Quote
Missing A Few Good Days Will Destroy Your Long-Term Returns

When volatility picks up, it's tempting to trade in and out of the market with the hope you'll protect your wealth. Unfortunately, this increases the risk you'll miss some of the best days in the market. And that can be very costly.

JPMorgan Asset Management illustrated how much an investor's returns collapsed when they missed a few of the best days in the market. They found that if an investor stayed fully invested in the S&P 500 from 1993 to 2013, they would've had a 9.2% annualized return.

However, if trading resulted in missing just the ten best days during that same period, then those annualized returns would collapse to 5.4%.

http://www.businessinsider.com/investors-miss-stock-market-rallies-charts-2014-10

Even if you are insanely lucky and manage to miss all of the big down days, you'll also miss those up days. Add in fees and dividends, and you're left with mediocre returns at best. Staying in avoids all that.

Aphalite

  • Bristles
  • ***
  • Posts: 425
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #474 on: April 28, 2016, 04:25:56 PM »
My other motivation for posting this is in case someone has any better advice, beyond the obvious suggestion that this is pure speculation, as I already admit.

If you're truly motivated to take a valuation approach, then take an actual valuation approach. Study businesses and securities and come up with intrinsic estimates on value. Then buy when they reach your range.

Derivatives and options are truly zero sum games, and there's too many variables governing index prices (as I've said much earlier in the thread, the Shiller P/E is possibly overstating the expensiveness of the "market" due to the low interest rates from govvies, is a 2% premium over govvies unreasonable? Especially compared to the 2000 bubble when Shiller Yield was UNDER govvies?). Buying securities, on the other hand, is not zero sum at all. Companies can grow and make everyone richer. Betting on price movements means there's a winner and a loser.

dandypandys

  • Bristles
  • ***
  • Posts: 425
  • Age: 43
  • Location: USA
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #475 on: April 28, 2016, 06:33:21 PM »

You've got a pretty bad sunk cost fallacy here. You're focusing on how much unrealized losses you have. But how much you bought it at is irrelevant. That's in the past and can't change. What you can do now is either sell it or hold onto it.

Suppose your gold is worth 30k now.
You keep asking yourself should you lock in a 8k loss to pay down the mortgage. That's the wrong question. You should be asking yourself if you had 30k lying around, would you invest it in gold or pay down your mortgage? (You can always sell your gold and then just buy it right back, so this is an equivalent situation)



Can't wait to unload the three gold coins I picked up in mid-2011. I've been holding based on the fallacy you mentioned here, in part. Now to work out how to get a half-day off of work so I can take them into a local dealer.

Excellent advice there. Thanks!
I think this was in reply to me. I sold some of it, but i havent sold the stuff that cost me more yet. one thing that stops me is- if people say not to sell stocks when you panic and they are doing really badly- to stay the course- why is selling gold low a good idea? i dont get that part.. so i am waiting until it goes back up so i can sell it for a little bit more than what i bought it for.
« Last Edit: April 28, 2016, 06:40:07 PM by dandypandys »

johnny847

  • Magnum Stache
  • ******
  • Posts: 3196
    • My Blog
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #476 on: April 28, 2016, 06:56:04 PM »

You've got a pretty bad sunk cost fallacy here. You're focusing on how much unrealized losses you have. But how much you bought it at is irrelevant. That's in the past and can't change. What you can do now is either sell it or hold onto it.

Suppose your gold is worth 30k now.
You keep asking yourself should you lock in a 8k loss to pay down the mortgage. That's the wrong question. You should be asking yourself if you had 30k lying around, would you invest it in gold or pay down your mortgage? (You can always sell your gold and then just buy it right back, so this is an equivalent situation)



Can't wait to unload the three gold coins I picked up in mid-2011. I've been holding based on the fallacy you mentioned here, in part. Now to work out how to get a half-day off of work so I can take them into a local dealer.

Excellent advice there. Thanks!
I think this was in reply to me. I sold some of it, but i havent sold the stuff that cost me more yet. one thing that stops me is- if people say not to sell stocks when you panic and they are doing really badly- to stay the course- why is selling gold low a good idea? i dont get that part.. so i am waiting until it goes back up so i can sell it for a little bit more than what i bought it for.

You're missing the point here.
That advice to not sell stocks when you panic is a statement to avoid market timing - to avoid making decisions based on market conditions. Selling stocks when they're falling, because you're panicking about the fact that they're losing value, is by definition market timing. Oftentimes people believe that they can somehow avoid the big drops and then buy back in at a low point to avoid large losses (and while of course a few people can get lucky and do this, the vast majority of people can not do this reliably).

However, you've decided that gold itself is a bad investment, not based on it's current price, but the fact that it's got no internal rate of return, and it's value is merely based on speculation (correct me if my assessment of your opinion of gold is incorrect). Selling now is not a decision to try to beat the market, it's actually a decision to try to get market returns (by buying a market index fund instead).



Or if you don't like that argument, we can try a different way:

You don't know how long it will take until the gold you bought comes back up to your original buy price. Suppose it takes 3 years, and in that time the gold gained 10% (I don't know what your original buy price is so I made something up). In the meantime, stocks have gone up 30%. Are you really better off waiting until your gold rises to it's original buy price?
Conversely, it could take 1 year, and in that time stocks have dropped 5% (while gold has still gained 10%). In this case, you were better off holding onto your gold.

The problem here is that you simply do not know how gold will perform relative to stocks. What you do know is that gold is a bad investment (again, if my assessment of your opinion on gold is wrong, correct me). Hence, you should sell your gold, regardless of your buy price.


Or if you don't like that argument either, I can try to rephrase my original argument.
Whatever price you bought gold for makes no damn difference. That money is lost. The money you have now is whatever your gold is worth now. You could sell it right now. If you did, would you rather buy back your gold, or buy stocks instead?


Or if you don't like that argument either....
You said you sold the gold that rendered you a profit. But that's nonsense. Gold is gold. It's all fungible. My bar of gold is worth just as much as your bar of gold (assuming they weigh the same). The same way that the $1 bill in my pocket is worth the same as a $1 in your pocket. So for you to say that you only sold the gold that netted you a profit is fallacious. You simply took a profit/loss distributed across all the gold you bought.

That was long winded. Oops.

dandypandys

  • Bristles
  • ***
  • Posts: 425
  • Age: 43
  • Location: USA
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #477 on: April 28, 2016, 07:42:18 PM »
I have been reading a lot on the Golden butterfly threads- both here and on Bogleheads forum.. and if I dont sell, i basically have that portfolio. I also read the whole thread on the 3-fund portfolio- 30 odd pages! on the Bogleheads forum- so weighing these 2 portfolios (which seem to click with me most) I feel the 3 fund portfolio probably suits me better and that is what i have on my 403b- makes it easy to adjust between the 3 categories esp when re-balancing- physical gold is no use for re-balancing my 403b.  I guess the problem is I don't know if it is a bad investment- does anyone? There are so many different opinions on its use in the Golden butterfly thread.. so instead of making any rash decisions i am just reading more and seeing if gold goes up a bit more. It wont take much for it to pass the point for me to be pleased with a sale- i think it is fairly close.
 I did at the time of buying really have 'buy in' to it being a good investment, I read a lot and watch a lot of videos- though in retrospect a lot of what they were saying came out of fear- (2008)  maybe if Trump gets elected (shudder) that fear will come back - not that i wish that as gold doing well, usually means something pretty bad going on elsewhere.

« Last Edit: April 28, 2016, 07:44:05 PM by dandypandys »

BlankCheck

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #478 on: April 28, 2016, 08:39:27 PM »
Thanks for explaining that, Squeak.  Saved me a lot of typing.  Hope that helps you, weinerdog.


If SPY ends up at $188.41 at expiration where did the $500 come from that he gets?  From other losers I guess that didn't meat the strike point?

Just to be clear, if it is at $188.41, he will get $1159 -- $520 of it profit, and $639 is his premium he paid coming back to him(sorry my math was wrong below his breakeven is $193.61).

Where does it come from? For every buyer of a contract, someone has to sell it. In your scenario, the person that sold that contract (who got paid the $639) will HAVE to buy it back for $1159 -- thus them losing $520.

Correct - I take the 'seller' side of the contract quite often and there's two ways that can happen.  When selling a put you can either directly close it out for the difference (the $520 noted above, a loss to the seller) or you can take assignment (brokerage will take $20k out of your account and give you 100 shares SPY @ 200, your cost basis in those shares is roughly 193.61  (200 - 6.39 premium per share).

I sell puts for 2 primary reasons: to get paid to wait for getting into a position I want to take assignment on at the price I want (you can often yield 1%/monthly while waiting and when you do take assignment you also keep the received premium to apply against your basis), or just to generate income against cash for options I deem likely to expire worthless (speculative cash generation), in which case I will close them out if it's at a loss and not take assignment.  Approx 60-90% of options expire worthless (depends on study/source).
 

Terrestrial, this might sound counter-intuitive, but I actually strongly considered selling puts before I decided to buy them.  The reason is, I do ultimately want to replenish my equity holdings.  Your strategy would be a nice way to do that at a lower price, and make a small profit in the meantime.  But in the end, I decided to just bet directly on my forecast.

Yes, the majority of options expire worthless, so I'd love it if I can sell this thing for a relatively small gain or loss at some point (and possibly roll that money into another put to extend my duration).  To actually exercise the option, it seems like the market would have to really be tanking.  Assuming that doesn't happen, I will have to flip the option at some point.  Hell, it's up 10% today - maybe I should flip it now!

I guess I'm basically saying, I don't know that the market will tank, but I think the odds of that happening are more likely than people believe.  So I'm betting more on the market inefficiency rather than betting on a tank (which would be akin to picking a number on the roulette wheel).

bryan

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #479 on: April 29, 2016, 02:21:59 AM »
If one of us guessed the market will be higher in September and one guessed lower - someone would be right.  There's just vast empirical evidence to suggest that it's increasingly difficult/impossible to get the correct call on the second, third, fifth, tenth, twentieth time.

just to nitpick, the vast empirical evidence actually suggests the market will in fact be higher at any given future date. that's the simplest model and whole basis of buy and hold.
« Last Edit: April 29, 2016, 02:25:41 AM by bryan »

Cycling Stache

  • Bristles
  • ***
  • Posts: 471
  • Age: 43
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #480 on: April 29, 2016, 03:53:34 AM »
If one of us guessed the market will be higher in September and one guessed lower - someone would be right.  There's just vast empirical evidence to suggest that it's increasingly difficult/impossible to get the correct call on the second, third, fifth, tenth, twentieth time.

just to nitpick, the vast empirical evidence actually suggests the market will in fact be higher at any given future date. that's the simplest model and whole basis of buy and hold.

This isn't nitpicking.  That's the entire point.  If the market goes up over time, and unpredictably so, statistically the market is likely to go up on any given day.  Thus, as you said, the market is statistically likely to be up at any future date compared to today's price.

That's why the statistically correct move is to lump sum money in.  Of course, because it is unpredictable, people often feel more comfortable dollar cost averaging into the market so that if it happens to go down right after, they don't feel as bad.  But a perfectly rational person should lump sum in for exactly the reason you just said.

Of course, a perfectly rational person probably wouldn't be spending time reading this thread!

Terrestrial

  • Bristles
  • ***
  • Posts: 294
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #481 on: April 29, 2016, 06:50:52 AM »
If one of us guessed the market will be higher in September and one guessed lower - someone would be right.  There's just vast empirical evidence to suggest that it's increasingly difficult/impossible to get the correct call on the second, third, fifth, tenth, twentieth time.

just to nitpick, the vast empirical evidence actually suggests the market will in fact be higher at any given future date. that's the simplest model and whole basis of buy and hold.

I absolutely agree with you, especially the longer the timeframe.  My point in the broader context of the post was that it's much harder to predict consistently over many shorter time periods than few longer ones.

If people had to guess which direction the market will close the next day for 20 days in a row I doubt anybody would get them all right (this is a 'future date' but I doubt someone guessing higher will be right all the time...on a very short term basis he might only be right closer to 1/2 or 2/3 of the time).  If people had to guess if the market will be higher or lower every 5 year increment, there is a much much higher probability they will be right (if the guess 'higher', as you note).

johnny847

  • Magnum Stache
  • ******
  • Posts: 3196
    • My Blog
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #482 on: April 29, 2016, 07:41:44 AM »
I have been reading a lot on the Golden butterfly threads- both here and on Bogleheads forum.. and if I dont sell, i basically have that portfolio. I also read the whole thread on the 3-fund portfolio- 30 odd pages! on the Bogleheads forum- so weighing these 2 portfolios (which seem to click with me most) I feel the 3 fund portfolio probably suits me better and that is what i have on my 403b- makes it easy to adjust between the 3 categories esp when re-balancing- physical gold is no use for re-balancing my 403b.  I guess the problem is I don't know if it is a bad investment- does anyone? There are so many different opinions on its use in the Golden butterfly thread.. so instead of making any rash decisions i am just reading more and seeing if gold goes up a bit more. It wont take much for it to pass the point for me to be pleased with a sale- i think it is fairly close.
 I did at the time of buying really have 'buy in' to it being a good investment, I read a lot and watch a lot of videos- though in retrospect a lot of what they were saying came out of fear- (2008)  maybe if Trump gets elected (shudder) that fear will come back - not that i wish that as gold doing well, usually means something pretty bad going on elsewhere.

Before we can move forward with this discussion you need to decide if you actually want gold as a part of your portfolio or not.

dixonge

  • 5 O'Clock Shadow
  • *
  • Posts: 70
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #483 on: April 29, 2016, 07:44:14 AM »
I think this was in reply to me. I sold some of it, but i havent sold the stuff that cost me more yet. one thing that stops me is- if people say not to sell stocks when you panic and they are doing really badly- to stay the course- why is selling gold low a good idea? i dont get that part.. so i am waiting until it goes back up so i can sell it for a little bit more than what i bought it for.
But I'm not panicking. I've had it for five years. If I were to panic, it would have been during the sharp drops in 2013. I *wish* I had sold then! :(

Since I am unsure if gold will *ever* rise back to the $1500-1600 level, and since I will never invest in gold again, I'm going with the advice above. If I wouldn't buy it now, why hold what I have? I hope to have the wife sell our coins today.

dixonge

  • 5 O'Clock Shadow
  • *
  • Posts: 70
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #484 on: April 29, 2016, 07:54:07 AM »
On a note related to 'timing' - I really like the '3% Signal' method that Jason Kelly cooked up. It's sort of a mechanical timing signal. Instead of looking at charts or any other forward-guessing, it simply looks back at the previous quarter. If you made less than 3%, you move some money from bonds to stocks to move your equity balance up to the 3% line. If you made *more* than 3%, you sell some stocks and move the money to your bonds. You guarantee yourself a 3% gain each quarter, 12%/year. There are special rules for extended bull or bear runs, and yes - you might end up with no cash left over in certain scenarios. So then you just wait until things shift.

It seems like it would work best during a bigger accumulation phase, an alternative to DCA. It gives you a sense of control over when to put money in, theoretically beating straight DCA although I'm not sure what the backtest results are. Also, it's a good balance between pure buy-and-hold and someone who constantly futzes with things. Gives you something to do without constantly moving in/out of the market.

I just happened to get back into the market in mid-February so my balances are all up, but we've got 8 weeks until the end of the quarter.

Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 39
  • Location: NYC
Why I am reducing mkt exposure+have been since 2015.
« Reply #485 on: April 29, 2016, 08:09:49 AM »
On a note related to 'timing' - I really like the '3% Signal' method that Jason Kelly cooked up. It's sort of a mechanical timing signal. Instead of looking at charts or any other forward-guessing, it simply looks back at the previous quarter. If you made less than 3%, you move some money from bonds to stocks to move your equity balance up to the 3% line. If you made *more* than 3%, you sell some stocks and move the money to your bonds. You guarantee yourself a 3% gain each quarter, 12%/year. There are special rules for extended bull or bear runs, and yes - you might end up with no cash left over in certain scenarios. So then you just wait until things shift.

Wait I'm not sure I understand
Let's say beginning of Q1 you had $1000 in stocks
End of Q1 options:
1- if you have say $1050 you move $20 to bonds
2- if you have say $980 you move $50 from bonds to stocks
Is that correct?

If that's the rule, how are you "guaranteeing yourself 3% per quarter"?
It wouldn't make any sense

dixonge

  • 5 O'Clock Shadow
  • *
  • Posts: 70
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #486 on: April 29, 2016, 10:05:36 AM »
On a note related to 'timing' - I really like the '3% Signal' method that Jason Kelly cooked up. It's sort of a mechanical timing signal. Instead of looking at charts or any other forward-guessing, it simply looks back at the previous quarter. If you made less than 3%, you move some money from bonds to stocks to move your equity balance up to the 3% line. If you made *more* than 3%, you sell some stocks and move the money to your bonds. You guarantee yourself a 3% gain each quarter, 12%/year. There are special rules for extended bull or bear runs, and yes - you might end up with no cash left over in certain scenarios. So then you just wait until things shift.

Wait I'm not sure I understand
Let's say beginning of Q1 you had $1000 in stocks
End of Q1 options:
1- if you have say $1050 you move $20 to bonds
2- if you have say $980 you move $50 from bonds to stocks
Is that correct?

If that's the rule, how are you "guaranteeing yourself 3% per quarter"?
It wouldn't make any sense

Makes perfect sense. $1050 would be a 5% gain, so you sell some shares to reduce that to a 3% gain. $20 in this case. But you don't move it to cash, you move it to bonds.

In one sense it is a quarterly rebalancing of asset allocation, using 3% as a 'signal' as to when and how much to rebalance. I'm set up with an 80% stocks/20% bonds AA at this time, but any AA will do. The motivation for this, as stated by Kelly:

Quote
This action, using the unperturbed clarity of prices alone, automates the investment masterstroke of buying low and selling high

http://jasonkelly.com/resources/strategies/ (first section)

So in a sense, it's a tool to help prevent 'fiddlers' from buying and selling willy-nilly and giving them some guidelines. I'm experimenting with it, but if it turns out to be unhelpful I will gladly revert to one big pile of Total Index at Vanguard...

Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 39
  • Location: NYC
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #487 on: April 29, 2016, 11:02:55 AM »
Yes ok but you're rebalancing, that's it.
Plus longer term, since a 12% growth rate is clearly unsustainable, you will get stuck unless you underinvest your monthly savings to keep the stash of cash/bonds full.
I don't know it seems like complicating a very simple thing in my opinion.

1- choose your AA
2- rebalance once per year

dixonge

  • 5 O'Clock Shadow
  • *
  • Posts: 70
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #488 on: April 29, 2016, 12:31:43 PM »
Yes ok but you're rebalancing, that's it.
Plus longer term, since a 12% growth rate is clearly unsustainable, you will get stuck unless you underinvest your monthly savings to keep the stash of cash/bonds full.

If you are still accumulating, you have to put money somewhere until the quarterly adjustment. Generally that will be the bond side, but you can do a 20/80 split with the new funds as well. Accounting for all that might be difficult...

12% was selected as it is a couple of points above the historical market average. So you are guaranteeing yourself to beat the average. As I mentioned, there are special rules for extended bear/bull periods to avoid getting 'stuck' - but you could still drain the bond side down to 0 and have nothing left to put into stocks.

Telecaster

  • Handlebar Stache
  • *****
  • Posts: 1764
  • Location: Seattle, WA
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #489 on: April 29, 2016, 01:07:56 PM »
So in a sense, it's a tool to help prevent 'fiddlers' from buying and selling willy-nilly and giving them some guidelines. I'm experimenting with it, but if it turns out to be unhelpful I will gladly revert to one big pile of Total Index at Vanguard...

I predict it will wind up being unhelpful.  The backtest only goes back to 2002 or so.   Since then,  the stock market has more than doubled, and bond prices steadily increased.   It would be easy to find a 15 year period when that was not the case.  Late 1960s early 1970s for example.  Stocks were mostly flat and bonds tanked.   








Cycling Stache

  • Bristles
  • ***
  • Posts: 471
  • Age: 43
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #490 on: August 06, 2016, 02:10:03 PM »
Took a glance at my Vanguard account and see that my rate of return for the last year is 12.7%, including 13.9% in the taxable account that I've been dumping money into since August 2015.  All index funds.  The taxable account benefitted from steady contributions, including when the market dropped last September and again in January/February. 

Of course, that could all change drastically Monday and the market could plummet, but I was surprised to see the rates of returns given that even though we've just hit an all-time high, my first thought was that the markets haven't really done that much since last August (before the drop).

Food for thought.

Interest Compound

  • Pencil Stache
  • ****
  • Posts: 658
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #491 on: August 06, 2016, 03:56:51 PM »
Thank you for bumping this thread Cycling Stache! I love it when we can point out public examples like this to all the newbies in the forum.

Here's a graph of US Stocks and International Stocks since Feb 6th, when this thread was created, to date:



And a quote from the original post:

As you should know, the financial markets has started off the year terribly and thatís going to continue.

[..]

I could go on and on with this list that itís a bad time to be investing in the market.

[..]

If you wish to go off on me and tell the board how wrong I am and me trying to time the market here is a foolís errand, go ahead. [..] I have given the board my opinion on what would be best for them this year and a solid free reference to follow.

We don't need to tell you it's a fool's errand, the data is there for all to see.

To the newbies of the forum, you'll get used to this. Every-time there's a slight jump down in the market, you'll find threads like this everywhere. "I've been getting out of the market for the past year now! See I'm right! Everyone else hurry and jump out too before it's too late! Doomsday for all!"

Only for them to mysteriously disappear when their predictions don't come true. Here's a quote from the last post Cougar has made anywhere on this forum:

I have tried to stay out of this thread even though I started it because it's not really my responsibility to try and save anyone from losing money in 2016, that decision is up to you

[...]

Again, my question is if you could save money this year by reducing exposure over losing it and having to wait additional years before you could retire because you now have to wait to get back the gains you lost; would you ?

And here's the another graph, how the stock market has moved since that post:



Cougar's last post was quite-literally the bottom. And we haven't seen him/her since. Cougar simply disappeared from the forum. Again, this is not unusual in a financial forum. You'll get used to it. And if he/she comes back next year, or the year after, with more doomsday advice, we will all have forgotten about his/her failed predictions in this thread. More likely, they'll come back with a new username so the previous failure can't be attributed to them.

Just remember this thread the next time you find yourself nodding along to another article/news show/forum post, forecasting doom for the markets. If you don't remember the thread, maybe you'll remember this 30 second clip:


John Bogle: all you need to know about investing in three words

So Cougar, if you're still out there...we have a counter question for you:

How many additional years before you can retire, while you wait to get back the gains you've lost?
« Last Edit: October 07, 2017, 03:05:13 PM by Interest Compound »

steveo

  • Handlebar Stache
  • *****
  • Posts: 1944
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #492 on: August 06, 2016, 05:16:47 PM »
How many additional years before you can retire, while you wait to get back the gains you've lost?

This is the real question isn't it. You are betting one way or the other. If you choose to decrease your stock allocation you are betting the market is going down and if it doesn't you lose out on the gains that do occur.

The point is it's hard to pick what the market is going to do.

Interest Compound

  • Pencil Stache
  • ****
  • Posts: 658
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #493 on: August 06, 2016, 10:24:05 PM »
How many additional years before you can retire, while you wait to get back the gains you've lost?

This is the real question isn't it. You are betting one way or the other. If you choose to decrease your stock allocation you are betting the market is going down and if it doesn't you lose out on the gains that do occur.

The point is it's hard to pick what the market is going to do.

Exactly, and over the short term (and by short term I mean less than 20 years), "Nobody Knows Nothing".









Source: https://github.com/zonination/investing/blob/master/README.md
« Last Edit: August 06, 2016, 10:36:00 PM by Interest Compound »

Tjat

  • Pencil Stache
  • ****
  • Posts: 561
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #494 on: August 07, 2016, 08:19:13 AM »
I thought of this thread too yesterday. My vanguard account went from being down 9% at a point last year to now being up 7.2%. Missing out on those 1000s would've been so painful during my accumulation phase.

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 6724
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #495 on: August 08, 2016, 10:17:06 AM »
If you wish to go off on me and tell the board how wrong I am and me trying to time the market here is a foolís errand, go ahead. Everyone is entitled to their opinion and Iím not a professional money manager. I have given the board my opinion on what would be best for them this year and a solid free reference to follow; best of luck to you all.

The nearly constant stream of doom and gloom epic-market-crash-is-about-to-happen and 4%-WR-is-going-to-fail-this-time-is-different posts get old, but at least they are fairly entertaining.

We are six months in from this post and still....nothing, but more dividends and capital appreciation in my portfolio.

Cougar

  • Bristles
  • ***
  • Posts: 344
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #496 on: August 08, 2016, 01:04:24 PM »
Thank you for bumping this thread Cycling Stache! I love it when we can point out public examples like this to all the newbies in the forum.


So Cougar, if you're still out there...we have a counter question for you:

How many additional years before you can retire, while you wait to get back the gains you've lost?

I just checked this today.

I don't come to mmm very often anymore not because I am hiding but because I read thru many threads on all forums and have concluded that:
1. there is really nothing new for me here.
2. the mmm group is really not committed enough to an early retirement as a whole. if you guys were really committed, you'd be living more like Jacob at ERE.

but since it looks like I am being called out currently; i'll answer.

you guys can brutalize the facts as much as you want; the truth still stands and that is committing a lot of more here into equities and for the past several months is more likely to be lost than gained.

the charts up here were put up to make the posters argument look good; but it's not reality.

unless you started investing march 1st of 2016, you haven't gone much of anywhere. in the past year S+P market is up less than 2.5%.


and most likely would not be up 2.5% if it weren't for central banks liquidity as you can clearly see here:


And you might notice the chart says central bank liquidity is now the highest since 2013.





Now, I did not preach gloom and doom; I merely posted the facts out there and also the charts and thoughts of a local, Houston; professional money manager: https://realinvestmentadvice.com/. This guy only saw the 2008 recession coming in December of 2007 and had people getting out early in 2008 and did not advice people to get back in until March 2009; so yeah; I'm going to listen to what he says over anyone here and not sweat whatever I'm being called.

And now to answer your question:
How many additional years before you can retire, while you wait to get back the gains you've lost?
[/quote]

I will retire before most of you because I am not a market timer, I'm moving average investor; which got me out on December 2015 and back in during march. so while most everyone else here had their accounts decline nearly 10% during that time; mine did not. yeah, I missed a little upside this year but only had to endure about 2% of that correction that started in December(and no, I will not tell you the indicators I use, especially for free).

I'm not waiting to get back any gains, I just avoid most of the losses; and this is the key to investing in equities because over time the market is most of the time(like nearly 90%) gaining back loses and less than 10% making new highs which is clearly evidenced that even with this great rally from March this year; the S+P is not up 3% from a year ago.

All of you that were in the market from December 2015 to March this year are the ones just finally making money this year.

I am sure that I will be lambasted shortly, so be it. August and September are historically the worst months for the mkt and if my indicators say to get out again; i'll post it and when they say to get back in; you guys keep dollar cost averaging.

frugledoc

  • Pencil Stache
  • ****
  • Posts: 636
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #497 on: August 08, 2016, 02:00:41 PM »
Dude, a simple "I was wrong" would have sufficed and saved you wasting time with the essay above.

steveo

  • Handlebar Stache
  • *****
  • Posts: 1944
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #498 on: August 08, 2016, 04:06:15 PM »
I will retire before most of you because I am not a market timer, I'm moving average investor; which got me out on December 2015 and back in during march. so while most everyone else here had their accounts decline nearly 10% during that time; mine did not. yeah, I missed a little upside this year but only had to endure about 2% of that correction that started in December(and no, I will not tell you the indicators I use, especially for free).

Honestly I don't care what indicator you use and I find it pretty funny that you think that indicator is worth money. There are 1000's of indicators out there.

Onto the key point though. I understand that you are trying to state that your approach here actually saved you money but there are lots of issues with this approach:-

1. Will your indicator continue to work this well in the future ?
2. Were there any tax implications of selling and buying stocks ?

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 6724
Re: Why I am reducing mkt exposure+have been since 2015.
« Reply #499 on: August 08, 2016, 04:36:25 PM »
I will retire before most of you because I am not a market timer, I'm moving average investor; which got me out on December 2015 and back in during march.

I didn't see you post that you felt the market was ripe for reinvesting back in March. Did I miss it?