definition of a Really Bad Day?

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feh
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definition of a Really Bad Day?

Post by feh »

For those of you that like to buy equities after a RBD - what is your definition of a Really Bad Day? Is it a certain percentage?

S&P 500 was down 1.25% yesterday. I didn't make any purchases, but it looks like it will be down today also. I'm considering placing an order of US Total Market w/ some cash sitting in our taxable account.
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mhc
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Re: definition of a Really Bad Day?

Post by mhc »

Nice.

My definition of RBD is the day after I buy, since I bought yesterday and today is looking weak.
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FillorKill
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Re: definition of a Really Bad Day?

Post by FillorKill »

mhc wrote:
Nice.

My definition of RBD is the day after I buy, since I bought yesterday and today is looking weak.
It wasn't you. :D InvestorNewb went in big-time yesterday so we're in it deep now... :D

I just bought some VEA - better price than my last buy on Tuesday....
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cheese_breath
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Re: definition of a Really Bad Day?

Post by cheese_breath »

My definition of a RBD has nothing to do with the markets because I know they will eventually come back. I'm thinking more along the lines of something like when the wife is on a tear, and nothing I do pleases her.
The surest way to know the future is when it becomes the past.
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femur
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Re: definition of a Really Bad Day?

Post by femur »

livesoft (a member of the forum) has indicated there is a mathmatical way to determine if it is a RBD (really bad day) or not. Usually when the market is down more than 3%, I log into the forum to see if anybody is talking about a RBD. Here is an example from 2011:

http://www.bogleheads.org/forum/viewtopic.php?t=79719
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lauren_knows
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Re: definition of a Really Bad Day?

Post by lauren_knows »

I don't really define RBD's, as I just tally up our "extra" income at the end of the month and invest in post-tax funds accordingly. My Roth IRA purchase post in the middle of the month, and 401k is every Friday. *shrug*
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Grt2bOutdoors
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Re: definition of a Really Bad Day?

Post by Grt2bOutdoors »

I bought Tuesday - since then we are on track for a down week. On the flip side, this investment is Really Really Long Term Investment account, hopefully it will turn around in 25 years or so.
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TSR
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Re: definition of a Really Bad Day?

Post by TSR »

cheese_breath wrote:My definition of a RBD has nothing to do with the markets because I know they will eventually come back. I'm thinking more along the lines of something like when the wife is on a tear, and nothing I do pleases her.
Sure, but that raises the question of what is the frequency of RBDs in your household? :|
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cheese_breath
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Re: definition of a Really Bad Day?

Post by cheese_breath »

TSR wrote:
cheese_breath wrote:My definition of a RBD has nothing to do with the markets because I know they will eventually come back. I'm thinking more along the lines of something like when the wife is on a tear, and nothing I do pleases her.
Sure, but that raises the question of what is the frequency of RBDs in your household? :|
Fortunately they can be offset by a few RGDs. :wink:
The surest way to know the future is when it becomes the past.
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bogleblitz
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Re: definition of a Really Bad Day?

Post by bogleblitz »

If you have some cash sitting on the sidelines, I would buy today.
livesoft
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Re: definition of a Really Bad Day?

Post by livesoft »

I would not buy today and I did not buy today. I do not have cash sitting on the sidelines, but I do have some bond fund shares. My stock/bond allocation is about where I want it, but if an RBD happened I would definitely be a buyer of some stock fund shares.
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sscritic
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Re: definition of a Really Bad Day?

Post by sscritic »

feh wrote:For those of you that like to buy equities after a RBD
That's too late. You buy on a RBD, not the day after.
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grap0013
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Re: definition of a Really Bad Day?

Post by grap0013 »

feh wrote:For those of you that like to buy equities after a RBD - what is your definition of a Really Bad Day? Is it a certain percentage?

S&P 500 was down 1.25% yesterday. I didn't make any purchases, but it looks like it will be down today also. I'm considering placing an order of US Total Market w/ some cash sitting in our taxable account.
How long has that cash been sitting there? If you bought last year you would've been already up several percent rather than waiting around for a RBD.
There are no guarantees, only probabilities.
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Re: definition of a Really Bad Day?

Post by xram »

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Re: definition of a Really Bad Day?

Post by four7s »

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Re: definition of a Really Bad Day?

Post by am »

These really bad days will not matter for long term investors.
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Re: definition of a Really Bad Day?

Post by EyeYield »

"The stock market is a giant distraction from the business of investing." - Jack Bogle
sscritic
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Re: definition of a Really Bad Day?

Post by sscritic »

am wrote:These really bad days will not matter for long term investors.
Of course they do. If you can get an extra 1% every year for 40 years, what will the difference be? What do you get when you compound at x% and at (x+1)%? If 40 years isn't long enough for you, solve the problem using 50 years.

Do you buy high and sell low? If you want to buy low, you have to buy low.
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Re: definition of a Really Bad Day?

Post by gkaplan »

Yesterday was a bad day. Tuesday night I was so close to hitting my number. Thursday night, not as close. Oh well.
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grap0013
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Re: definition of a Really Bad Day?

Post by grap0013 »

sscritic wrote:
am wrote:These really bad days will not matter for long term investors.
Of course they do. If you can get an extra 1% every year for 40 years, what will the difference be? What do you get when you compound at x% and at (x+1)%? If 40 years isn't long enough for you, solve the problem using 50 years.

Do you buy high and sell low? If you want to buy low, you have to buy low.
sscritic,

Don't tell me Livesoft's got you too?! :)

In order to have some $ to buy on a RBD that means you have to have some money in cash/bonds/something safe. There is an opportunity cost to doing that much akin to thinking your expected returns are higher with a 80:20 stock:bond allocation vs. a 100:0 allocation. I think Larry Swedroe has a good analogy to the tune of someone periodically leaving the carpool lane to sit in slower traffic. I say just take the carpool lane the whole time. Furthermore, even if your trades are commission free, no matter how sneaky and intelligent you think you are, frequent trading will cost you some money in bid/ask spreads. Trading is never really free.

I'm with @am on this one. Maybe it would cost you an extra 1% every year for every 40 years? Put cash to work when you have it and follow rebalancing 5/25% bands with less frequent trading and I bet the results are better.

Only way to put this thing to rest would be for Livesoft to post all his trades for the last few years and I'm not crunching the numbers to see if he outperformed standard buy/hold/rebalancing bands.
There are no guarantees, only probabilities.
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Re: definition of a Really Bad Day?

Post by livesoft »

If folks think that RBD is a trading strategy, let me ask them: How many RBDs were there in all of 2012?
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Re: definition of a Really Bad Day?

Post by sscritic »

grap0013 wrote: sscritic,

Don't tell me Livesoft's got you too?! :)

In order to have some $ to buy on a RBD that means you have to have some money in cash/bonds/something safe. There is an opportunity cost to doing that much akin to thinking your expected returns are higher with a 80:20 stock:bond allocation vs. a 100:0 allocation. I think Larry Swedroe has a good analogy to the tune of someone periodically leaving the carpool lane to sit in slower traffic. I say just take the carpool lane the whole time. Furthermore, even if your trades are commission free, no matter how sneaky and intelligent you think you are, frequent trading will cost you some money in bid/ask spreads. Trading is never really free.

I'm with @am on this one. Maybe it would cost you an extra 1% every year for every 40 years? Put cash to work when you have it and follow rebalancing 5/25% bands with less frequent trading and I bet the results are better.

Only way to put this thing to rest would be for Livesoft to post all his trades for the last few years and I'm not crunching the numbers to see if he outperformed standard buy/hold/rebalancing bands.
First of all, I have to admit to two things: Kool-Aid is my favorite drink (well, Tang might beat it out) and I never rebalance, but I know a lot of people do.

Let's consider rebalancing between stocks and bonds and let's assume you have some of each. If you rebalance at the end of every year, you will sell bonds to buy stocks every time there is a RBY (really bad year). If you rebalance at the end of every month, you will sell bond to buy stocks every time there is a RBM (really bad month). If you use bands, you will sell bonds to buy stocks every time there is a RBB (really bad band, no, not KISS). Whether you use years, months, bands, or days, what is the difference if you sell bonds to buy stocks when stocks are relatively (compared to something) low?

I have no idea why you think a RBD will occur more frequently than a RBM or RBB. I would think a RBY occurs less frequently than a RBD, but there still aren't going to be that many trades, unless I am far off in the number of RBDs a year.
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feh
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Re: definition of a Really Bad Day?

Post by feh »

bogleblitz wrote:If you have some cash sitting on the sidelines, I would buy today.
I had a few thousand dollars sitting my our taxable account and a few thousand in a Roth. I used that money to buy some TM and some VBR.
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SC Hoosier
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Re: definition of a Really Bad Day?

Post by SC Hoosier »

bogleblitz wrote:If you have some cash sitting on the sidelines, I would buy today.
I did. I was going to put it in at the end of the month anyway. Now it's done.
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Xanadu
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Re: definition of a Really Bad Day?

Post by Xanadu »

Definition of a really bad day? I think this book sums it up pretty well.

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xram
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Re: definition of a Really Bad Day?

Post by xram »

Edit.
Last edited by xram on Thu Feb 21, 2013 11:36 pm, edited 1 time in total.
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grap0013
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Re: definition of a Really Bad Day?

Post by grap0013 »

sscritic wrote:
grap0013 wrote: sscritic,

Don't tell me Livesoft's got you too?! :)

In order to have some $ to buy on a RBD that means you have to have some money in cash/bonds/something safe. There is an opportunity cost to doing that much akin to thinking your expected returns are higher with a 80:20 stock:bond allocation vs. a 100:0 allocation. I think Larry Swedroe has a good analogy to the tune of someone periodically leaving the carpool lane to sit in slower traffic. I say just take the carpool lane the whole time. Furthermore, even if your trades are commission free, no matter how sneaky and intelligent you think you are, frequent trading will cost you some money in bid/ask spreads. Trading is never really free.

I'm with @am on this one. Maybe it would cost you an extra 1% every year for every 40 years? Put cash to work when you have it and follow rebalancing 5/25% bands with less frequent trading and I bet the results are better.

Only way to put this thing to rest would be for Livesoft to post all his trades for the last few years and I'm not crunching the numbers to see if he outperformed standard buy/hold/rebalancing bands.
First of all, I have to admit to two things: Kool-Aid is my favorite drink (well, Tang might beat it out) and I never rebalance, but I know a lot of people do.

Let's consider rebalancing between stocks and bonds and let's assume you have some of each. If you rebalance at the end of every year, you will sell bonds to buy stocks every time there is a RBY (really bad year). If you rebalance at the end of every month, you will sell bond to buy stocks every time there is a RBM (really bad month). If you use bands, you will sell bonds to buy stocks every time there is a RBB (really bad band, no, not KISS). Whether you use years, months, bands, or days, what is the difference if you sell bonds to buy stocks when stocks are relatively (compared to something) low?

I have no idea why you think a RBD will occur more frequently than a RBM or RBB. I would think a RBY occurs less frequently than a RBD, but there still aren't going to be that many trades, unless I am far off in the number of RBDs a year.
Bingo. It's a rebalancing strategy with very tight bands. The opportunistic rebalancing article Livesoft sometimes links says 5% bands work better than smaller bands.
There are no guarantees, only probabilities.
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grap0013
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Re: definition of a Really Bad Day?

Post by grap0013 »

Here it is: http://www.irebal.com/docs/Opportunisti ... ancing.pdf

Look how bad the smaller bands perform relative to larger bands. RBD has small bands.
There are no guarantees, only probabilities.
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