Is anybody getting out and moving to Cash?

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Qprkid
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Is anybody getting out and moving to Cash?

Post by Qprkid » Thu Nov 28, 2013 12:53 pm

I know, I know. You can't time the market.

Faithful Boglehead lurker here.

But I'm sitting here up 30+% for the year, having recouped all of my Great Recession losses plus some. Ahead of all of my financial goals, and thinking what's the downside?

A few extra percent that I might be able to squeeze out of this Bull market ride? Can you say Greedy?

I can swing back in in a couple months (yeah, I know, but just when do you do so) and ride out the close of the year and see what happens.

Have never played the market timing game, but I'm ready to pull the trigger on Friday.

Thoughts?

Call_Me_Op
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Re: Is anybody getting out and moving to Cash?

Post by Call_Me_Op » Thu Nov 28, 2013 12:57 pm

My thought is that you need an IPS.
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livesoft
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Re: Is anybody getting out and moving to Cash?

Post by livesoft » Thu Nov 28, 2013 1:03 pm

If you are a lurker, then you have already read all the threads that answer your question including the two (yes 2!) recent threads.

So you tell us, WHY did you ask this question? SOMETHING must've caused you to uncloak and expose yourself. WHAT was it?
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TheTimeLord
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Re: Is anybody getting out and moving to Cash?

Post by TheTimeLord » Thu Nov 28, 2013 1:05 pm

S&P 500 up 25+% ytd. I think up 166% since 2009 low.
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Toons
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Re: Is anybody getting out and moving to Cash?

Post by Toons » Thu Nov 28, 2013 1:08 pm

Been "In"for 35 years,,why bail out on corporate American Now?Stay invested for life,,, :happy
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reggiesimpson
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Re: Is anybody getting out and moving to Cash?

Post by reggiesimpson » Thu Nov 28, 2013 1:16 pm

Why Friday? Do you know something the rest of us dont? Is this the antidote to too much Turkey? Ok so i am just kidding. I happen to agree with you. I will be selling within the next few days myself. I believe Bernsteins thoughts are discussed on the Personal Consumer thread regarding this notion.

Qprkid
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Re: Is anybody getting out and moving to Cash?

Post by Qprkid » Thu Nov 28, 2013 1:24 pm

livesoft wrote:If you are a lurker, then you have already read all the threads that answer your question including the two (yes 2!) recent threads.

So you tell us, WHY did you ask this question? SOMETHING must've caused you to uncloak and expose yourself. WHAT was it?
[OT comment removed by admin LadyGeek]

I saw one on rebalancing, and another on the upcoming Black Friday, but not quite the same as pulling out, sitting on cash, and reengaging at a later time.

I've been "In" for 30 years. But this moment, at this time, just seems to be ripe to really consider the option.

That's all.

Thanks to the others with productive posts on Keeping The Faith.

livesoft
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Re: Is anybody getting out and moving to Cash?

Post by livesoft » Thu Nov 28, 2013 1:30 pm

[OT comment removed by admin LadyGeek]
I asked you some serious questions that I wanted to know the answers to.

Here are threads you may wish to read:

http://www.bogleheads.org/forum/viewtop ... 0&t=127159
http://www.bogleheads.org/forum/viewtop ... 0&t=127240
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Ed 2
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Re: Is anybody getting out and moving to Cash?

Post by Ed 2 » Thu Nov 28, 2013 1:52 pm

Qprkid wrote:I know, I know. You can't time the market.

Faithful Boglehead lurker here.

But I'm sitting here up 30+% for the year, having recouped all of my Great Recession losses plus some. Ahead of all of my financial goals, and thinking what's the downside?

A few extra percent that I might be able to squeeze out of this Bull market ride? Can you say Greedy?

I can swing back in in a couple months (yeah, I know, but just when do you do so) and ride out the close of the year and see what happens.

Have never played the market timing game, but I'm ready to pull the trigger on Friday.

Thoughts?
first, I doubt that you outperformed S&P for this year since you are stated that you just have recouped and "plus some" [you have to make much more than that ],but I digress, anyway not knowing your age hard to comment on your statement.
I would never sell anything since I started investing in a year 2000. My past average for 10 years is ~ 9.5%. last 5 years 13%. Big gain this year 21% + and even if I will loose 30% of it next year I will gladly increase my DCA's into my Index Funds,because I've got at list 20+ years till retirement. Meanwhile I will never stop dollar cost averaging weakly despite higher prices. I do NOT play market timing game - looser's game .
Good luck,Ed
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Re: Is anybody getting out and moving to Cash?

Post by Sconie » Thu Nov 28, 2013 1:57 pm

The chances that you are going to be able to get back into the market at just the right time are probably somewhere between slim to none.

If you want to (gradually) reduce your exposure to the equities market, vis-a-vis, a new portfolio allocation, by all means do so---but to bail-out entirely? Me thinks that is market timing and not a good, sound, decision. Why not, alternatively, cut-back on Friday by 10%----and then ponder the matter in greater depth, looking at it in another 30 or 60 days?
I know that you think you understand what you thought I said, but I don't think you realize that what I said is necessarily what I meant......

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nedsaid
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Re: Is anybody getting out and moving to Cash?

Post by nedsaid » Thu Nov 28, 2013 1:58 pm

I certainly would not "get out" and go to cash. What one should do is take advantage of higher equity prices and rebalance their portfolios.

Spurred on by Boglehead threads, I have been doing mild rebalancing from stocks to bonds since July. The markets have been strong enough that my asset allocation has not changed.

I don't like cash as you get almost zero percent for your money. I have stayed the course with investment grade Intermediate-Term Bonds. I have some years to reinvest the interest.
A fool and his money are good for business.

tibbitts
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Re: Is anybody getting out and moving to Cash?

Post by tibbitts » Thu Nov 28, 2013 2:06 pm

What's your re-entry trigger, other than that the market (by whatever measure) has to be lower than it is now?

What if you get 10 years of 3% steady equity market growth, 3% inflation, and 0% on your cash? We're kind of conditioned to huge swings, but you could certainly have a decade or two where essentially nothing happens. Not predicting that, but you have be prepared for how you'd handle it.

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Taylor Larimore
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Experts answer your question.

Post by Taylor Larimore » Thu Nov 28, 2013 2:08 pm

Have never played the market timing game, but I'm ready to pull the trigger on Friday.

Thoughts?
Oprkid:

Before you "pull the trigger," I suggest you read what experts say:
"The stock market will fluctuate, but you can't pinpoint when it will tumble or shoot up. If you have allocated your assets properly and have sufficient emergency money, you shouldn't need to worry." (AAII Guide to Mutual Funds)

"Endless tinkering is unlikely to improve performance, and chasing last period's stellar achiever is a losing strategy." (Frank Armstrong, author and adviser)

"It must be apparent to intelligent investors--if anyone possessed the ability to do so (market time) he would become a billionaire--quickly--." (David Babson, author, adviser)

"What it really takes to improve your returns and diminish your risks is a willingness to stop focusing exclusively on the movement of the markets." (Baer & Ginsler, The Great Mutual Fund Trap)

"If we haven't said it enough, we'll say it again: Market timing is dangerous." (Barron's Guide to Making Investment Decisions.)

"Only liars manage to always be "out" during bad times and "in' during good times. (Bernard Baruch, famed investor)

"You have to keep reminding yourself. We don't know what's going to happen with anything, ever." (Peter Bernstein)

"There are two kinds of investors, be thay large or small: those who don't know where the market is headed, and those who don't know that they don't know." (Wm Bernstein, author and adviser)

"After nearly 50 years in this business, I do not know of anybody who has done market timing successfully and consistently. I don't even know anybody who knows anybody who has done it successfully and consistently." (Jack Bogle, Vanguard founder)

The Boglehead (forecasting) Contest began in 2001. Of 99 Diehard guesses that year, only 11 even guessed the direction of the stock market. In the 2013 Contest (to date) less than 5% of Bogleheads guessed how high the market would go.

"If you're determined to succeed at investing, make it your first priority to become a buy-and-hold investor." (Jack Brennan, Straight Talk on Investing)

"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two." (Warren Buffet)

"Market timing is an ineffective strategy for mutual fund investors." (CDA/Wiesenberger)

"Any investment method that relies on predicting the future is doomed to fail." (Chandan & Sengupta, financial authors)

"A successful investor has a good knowledge base, a well-defined investment plan, and nerves of steel to stick with it." (Andrew Clarke, financial author)

"Dalbar research has found that both stock and bond investors tend to overreact to events, moving money in and out of mutual funds with breathtakingly bad timing." (Consumer Reports)

"Most investors are unable to profitably time the market and are left with equity fund returns lower than inflation." (2003 Dalber Study)

"Take my word on it. Buy-and-hold is still your best long-run strategy." (Jonathan Clements, author & journalist)

"Market-timing is bunk." (Pat Dorsey, M* Director of Fund Analysis."

"The performance of 185 tactical asset allocation mutual funds was compared with buy-and-hold strategies and equity mutual funds over the years 1985-97. Over this period the S&P 500 Index increased 734%, average equity funds increased 598%, and tactical asset allocation funds increased 384%." (David Dreman, author)

"Market timing is a wicked idea. Don't try it-ever." (Charles Ellis author of The Loser's Game)

"Forget market timing in any form." (Paul Farrell, (CBS Marketwatch.com)

"The best practice for investors is to design a long-term globally diversified asset allocation based on present and future financial needs. Then follow that plan religiously, through all markets good and bad." (Rick Ferri, author and adviser)

"Benjamin Graham spent much of his career trying to devise a goodformula for when to get into--and out of--the stock market. All formulas, he concluded, failed." (Forbes, 12-27-99)

"Buy and hold. Diversify. But your money in index funds. Pay attention to to the one thing you can control--costs." (Fortune Investor's Guide 2003)

"Dont' sell out of fear or buy out of greed. Just keep making investments, and let the market take its course over the long-term." (Norman Fosback, author, researcher)

"The only function of economic forecastng is to make astrology look respectful." (John Kenneth Galbraith, Economist)

"I've learned that market timing can ruin you." (Elaine Garzarelli)

"Staying on course may be just as difficult in bull markets as in bear markets." (Good & Hermansen, Index Your Way to Investment Success)

"For most investors the odds favor a buy-and-hold strategy." (Carol Gould, author & financial columnist)

"If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting that's going to happen to the stock market." (Benjamin Graham)

"From June 1980 through December 1992, 94.5% of 237 market timing investment newsletters had gone of business." (Graham/Campbell Study)

"Your very refusal to be active, and your renunciation of any pretended ability to predict the future, can become your most powerful weapon." (Graham & Zweig, The Intelligent Investor)

"The best advice: buy and hold." (John Haslem, author and researcher)

"Even in a bear market, market-timing and actively managed mutual funds generally hurt investment performance more than they help it." (Mark Hulbert, N.Y.Times columnist)

"After receiving the Nobel Prize, Daniel Kahneman, was asked by a CNBC anchorman what investment tips he had for viewers. His answer: "Buy and hold."

"Timing the market is for losers. Time IN the market will get you to the winner's circele, and you'll sleep better at night." (Michael Leboeuf, author)

"No one is smart enough to time the market's ups and downs." (Arthur Levitt, former SEC chairman)

"It never was my thinking that made the big money for me. It always was my sitting." (Jesse Livermore, author & famed investor)

"Nobody can predict interest rates, the future direction of the economy or the stock market." (Peter Lynch)

"Buying-and-holding a broad-based market index fund is still the only game in town." (Burton Malkiel, Random Walk Down Wall Street)

"At the peak of the bull market in March of 2000 only 0.7% of all recommendations on stocks issued by Wall Street brokerages and investment banks were to "Sell." (Miami Herald, 1-26-03)

"If you can't handle the short term, if the uncertainty is stressful and the headlines are unbearable, then the markets are too hot for you: get out of the kitchen." (Moshe Milevsky, author & researcher)

"We're not keen on market-timing. It just doesn't work." (Morningstar Course 106)

"We've yet to find anyone who can accurately and consistently predict the market's short-term moves." (Motley Fools)

"Odean and Barber tested over 66,400 investors between 1991 and 1997. Their findings: "The most active traders earned 7% less annually than buy-and-hold investors."

"Forget trying to time the market and do something productive instead." (Gerald Perritt, financial author)

"The market timer's Hall of Fame is an empty room." (Jane Bryant Quinn)

"Countless studies have proved that no one is able to time the market effectively." (Mary Roland, author & journalist)

"Trading is based on the rather arrogant belief that the trader knows more than the buyers and sellers with whom he is trading." (Ron Ross, The Unbeatable Market)

"In the long run it doesn't matter much whether your timing is great or lousy. What matters is that you stay invested." (Louis Rukeyser, TV host)

"For the 10 years that ended 12-31-2000, only one newsletter out of the 112 that Timers Digest follows managed to beat the S&P 500 Benchmark." (Jim Schmidt, editor)

"I have learned the hard way that market timing and trying to pick a fund that will out-perform the market are both losing strategies." (Larry Schultheis, author and advisor)

"I'm a strong advocate of buying and holding." (Charles Schwab)

"It turns out that I should have just bought them (securities), and thereafter I should have just sat on them like a fat, stupid peasant. A peasant however, who is rich beyond his limited dreams of avarice." (Fred Schwed Jr., 'Where are the Customers' Yachts?)

"If you are not going to stick to your chosen investment method through thick and thin, there is almost no chance of your succeeding as an investor. (Chandan Sengupta, financial author)

"Investors should look with a jaundiced eye at any market timing system being peddled by its guru-creator." (W. Scott Simon, financial author)

"Buying and holding a few broad market index funds is perhaps the most important move ordinary invests can make to supercharge their portfolios." (Stein & DeMuth, (authors & advisor)

"It's my belief that it's a waste of time to try to time any market decline, or try to pinpoint a market bottom." (James Stewart, Smart Money columnist)

"It's a staple of personal finance advice: Buy-and-hold, because trading the stock market is a sucker's bet." Larry Swedroe, author and adviser.

"People should stop chasing performance and just put together a sensible portfolio regardless of the ups and downs of the market." (David Swensen, Yale Investments)

"Trust in time and forget market timing. Allow time to work its compounding magic for you. Let market timing inflict its miseries on someone else." (Tweddell & Pierce, financial authors)

"Stay invested. Not only does buy-and-hold investing offer better returns, but it's also less work." (Eric Tyson, author, Mutual Funds for Dummies."

"Few if any investors manage to be consistently successful in timing markets." (Wall Street Journal Lifetime Guide to Money)

"If you're considering doing your own market timing, the best advice is this: Don't." (John Waggoner, USA Today financial columnist)

"If you buy, and then hold a total-stock-market index fund, it is mathematically certain that you will outperform the vast majority of all other investors in the long run." (Jason Zweig, author)
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

The Wizard
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Re: Is anybody getting out and moving to Cash?

Post by The Wizard » Thu Nov 28, 2013 2:10 pm

Sconie wrote:The chances that you are going to be able to get back into the market at just the right time are probably somewhere between slim to none.

If you want to (gradually) reduce your exposure to the equities market, vis-a-vis, a new portfolio allocation, by all means do so---but to bail-out entirely? Me thinks that is market timing and not a good, sound, decision. Why not, alternatively, cut-back on Friday by 10%----and then ponder the matter in greater depth, looking at it in another 30 or 60 days?
I agree with this approach. It might be good to develop a formulaic approach: 60% in stocks when valuations (P/E10) are "normal", and then begin tapering back to 45% stocks once P/E10 gets over some threshold.
Then begin ramping up on stocks again once it gets below a different threshold.
Would have to do some homework on this using past results to see what happens...
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Re: Is anybody getting out and moving to Cash?

Post by pkcrafter » Thu Nov 28, 2013 3:57 pm

Qprkid wrote:I know, I know. You can't time the market.

Faithful Boglehead lurker here.

But I'm sitting here up 30+% for the year, having recouped all of my Great Recession losses plus some. Ahead of all of my financial goals, and thinking what's the downside?

A few extra percent that I might be able to squeeze out of this Bull market ride? Can you say Greedy?

I can swing back in in a couple months (yeah, I know, but just when do you do so) and ride out the close of the year and see what happens.

Have never played the market timing game, but I'm ready to pull the trigger on Friday.

Thoughts?
It would be good to get a little better picture of your situation. You say you're up 30+% YTD, so your portfolio must be very aggressive. What does your portfolio look like, including account types, and what is your age?



Paul
Last edited by pkcrafter on Thu Nov 28, 2013 4:50 pm, edited 1 time in total.
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: Is anybody getting out and moving to Cash?

Post by am » Thu Nov 28, 2013 4:30 pm

Not sure I understand the rationale behind changing asset allocation in response to market highs or valuations such as PE10. After all, we all believe that over our investing lifetimes, the market will go higher otherwise we would not invest. So what is the goal of taking money off the table? To avoid short term fluctuations? Eventually the market will go down and then back up and so on. But we all have faith and believe that eventually when the time comes for us to use the money, there will be more there than now. How do we know that the Dow will not go to 23000 over the next 3 years and then crash to 17000, will still be better off than if you stayed out.

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Re: Is anybody getting out and moving to Cash?

Post by John3754 » Thu Nov 28, 2013 5:18 pm

I love these posts that start with "I know you can't time the market, but I'm going to time the market". Duhhhh.

To the OP, you say you're going to get out now and then get back in in a few months, so what happens if the market is higher in a few months than it is now?

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Phineas J. Whoopee
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Re: Is anybody getting out and moving to Cash?

Post by Phineas J. Whoopee » Thu Nov 28, 2013 5:24 pm

Welcome to the forum Qprkid.

You must understand, and if you've been lurking certainly do understand, that "getting out and moving to Cash" is both silly and a frequent topic.

I'll just tell you what I've concluded about myself:

1) If I can successfully time the market I should.
2) I can't successfully time the market.
3) If I can get rich quickly I should.
4) I can't get rich quickly.
5) It isn't guaranteed that I can get rich slowly, but I can vastly improve my odds by avoiding nonsensical portfolio changes.
6) (As recently disclosed) My portfolio value has finally exceeded 30 times projected expenses so I modestly reduced risk.
7) Oh, Man! was that a long hard slog.
8) I'd still like to get to a multiple of 35.

PJW

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Re: Is anybody getting out and moving to Cash?

Post by JRA » Thu Nov 28, 2013 5:55 pm

I think it is perfectly appropriate for you to reassess your need to take risk and adjust your IPS appropriately. An IPS is a living document that should evolve as we evolve as investors. I have made more money since 2009 than I could have ever imagined and have reduced my exposure to equities accordingly. Because of the good fortune that I have experienced in the market this year, I reassessed my IPS and reduced my equity exposure by 2%. I have not yet reached my goal, but I am getting closer and am more concerned about preserving what I have saved and earned. As a result, I am now contemplating reducing my equity exposure an additional 3% and maybe even 8%. Market timing? Perhaps, but my interests lie in reducing my risk exposure as I move toward my goal. I have no idea how the original poster stands with respect to his financial goals, but I see nothing un-Bogle-like about walking away from the table when you have won the game. I, however, would caution against completely divesting oneself of equities. In this interest rate environment (and probably in almost every environment), a significant percentage in equities is probably necessary to keep ahead of inflation (25%-30%?). I would also caution against trying to predict market swings; I have friends who sold most of their stocks at the bottom in 2008-9 and only recently got back into the market. I seriously doubt that their strategy will turn out well. Construct an IPS, follow it, and reassess it as your circumstances change, especially your need and ability to take risk. Otherwise, simply stay the course.

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Re: Is anybody getting out and moving to Cash?

Post by RNJ » Thu Nov 28, 2013 7:22 pm

No, not getting out and moving to cash. Planning a rebalance (according to IPS) and a small increase in fixed income, from 33% (which is now closer to 30%) to 35% (also according to IPS). If you are ahead of schedule, then maybe it's a reasonable time for you to reassess and change your AA. But is that what you're talking about? Have you checked your IPS?

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Re: Is anybody getting out and moving to Cash?

Post by z3r0c00l » Thu Nov 28, 2013 7:59 pm

I hate to pile on, but this needs to be said. The logic behind this thread would have you selling your stocks and getting into cash around 1993 at DOW 3700. And you would have gotten back in... when exactly?

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Phineas J. Whoopee
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Re: Is anybody getting out and moving to Cash?

Post by Phineas J. Whoopee » Thu Nov 28, 2013 8:02 pm

RNJ wrote:No, not getting out and moving to cash. Planning a rebalance (according to IPS) and a small increase in fixed income, from 33% (which is now closer to 30%) to 35% (also according to IPS). If you are ahead of schedule, then maybe it's a reasonable time for you to reassess and change your AA. But is that what you're talking about? Have you checked your IPS?
As you may note, my response was not to the thread you started, but to Qprkid's, which explicitly asked, including in its title, whether anybody is "getting out and moving to cash."

I have checked my IPS, which isn't to say so much that I literally have, but that mine is so simple I don't need to go back and read it very often.

As one approaches a portfolio value which will likely meet their needs, I advocate reducing risk.

With regard to an IPS, I advocate one which takes into account one's likely financial needs as well as one's age.

An IPS is not at all the same thing as a guarantee of a long life. It just provides some level of comfort that even if one has spent decades becoming the world's most accomplished cellphone engineer, and if mind-to-mind communication, with security in hand, renders one's skills obsolete, it isn't a matter of starving on the street a few days after the fruit vendors buy into the mindset that everybody deserves the financial outcome they get. Why were you too lazy to become a fruit vendor? What a waste of carbon!

PJW

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TheTimeLord
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Re: Is anybody getting out and moving to Cash?

Post by TheTimeLord » Thu Nov 28, 2013 8:22 pm

Phineas J. Whoopee wrote:As one approaches a portfolio value which will likely meet their needs, I advocate reducing risk.
Why? Isn't risk more a function of time horizon than asset class?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: Is anybody getting out and moving to Cash?

Post by staythecourse » Thu Nov 28, 2013 8:54 pm

Phineas J. Whoopee wrote:As one approaches a portfolio value which will likely meet their needs, I advocate reducing risk.
I think this depends on what you want to do with that money after you pass away. If you are big on giving to heirs and/ or charity then you may find yourself the same level of aggressiveness or even more. If you are just yourself with no kids and no interest in charity, as an example, then it would make sense to cut back on risk.

The problem with "likely meets your needs" is not broad enough. Folks mostly think of that as "do I have enough to live a comfortable life until I and my significant pass on". That is more then reasonable, but doesn't apply to everyone.

I, for one, have already realized at the rate I save and my age I am already wondering what to do with my investments for AFTER my wife and I pass away. Save for heirs? Set up an endowment fund? Set up a trust to give money away and have my child sit on the board? All of this has led me to use my 1 yr. kid's time horizon as my time horizon.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: Is anybody getting out and moving to Cash?

Post by TheTimeLord » Thu Nov 28, 2013 9:05 pm

staythecourse wrote:
Phineas J. Whoopee wrote:As one approaches a portfolio value which will likely meet their needs, I advocate reducing risk.
I think this depends on what you want to do with that money after you pass away. If you are big on giving to heirs and/ or charity then you may find yourself the same level of aggressiveness or even more. If you are just yourself with no kids and no interest in charity, as an example, then it would make sense to cut back on risk.

The problem with "likely meets your needs" is not broad enough. Folks mostly think of that as "do I have enough to live a comfortable life until I and my significant pass on". That is more then reasonable, but doesn't apply to everyone.

I, for one, have already realized at the rate I save and my age I am already wondering what to do with my investments for AFTER my wife and I pass away. Save for heirs? Set up an endowment fund? Set up a trust to give money away and have my child sit on the board? All of this has led me to use my 1 yr. kid's time horizon as my time horizon.

Good luck.
Plus you could live to 105 and need quite a bit of care over the last decade or so of your life.
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Re: Is anybody getting out and moving to Cash?

Post by BolderBoy » Thu Nov 28, 2013 10:00 pm

Qprkid wrote:But I'm sitting here up 30+% for the year...
Hmmmm. If you are up 30%+ YTD, then YES, you should absolutely get out because it means you are 100%+ in stocks. Is that really the AA you want to have?

As for a BH, no - not getting out; staying the course.

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Re: Is anybody getting out and moving to Cash?

Post by MoonOrb » Thu Nov 28, 2013 10:06 pm

If you've won the game, get out. Have you won the game? Because if you haven't, the only way you can win is to play, and the way you play is by staying in the market.

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Re: Is anybody getting out and moving to Cash?

Post by leonard » Thu Nov 28, 2013 11:36 pm

So you say you understand you can't time the market. But, you are going to time the market.

Any cognitive dissonance for you? Believing "A" and "not A" at the same time?
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

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Re: Is anybody getting out and moving to Cash?

Post by berntson » Fri Nov 29, 2013 12:24 am

Bad investment habits, like diving in and out of the markets, persist for a reason. Everyone knows by now (or everyone should know) that bad investment habits cause most individual investors to significantly underperform relative to the sorts of funds they hold. Why does the bad behavior continue even after we know that it's bad behavior?

I've been slowly coming to the conclusion that this time is the exception thinking is the main culprit. Investors should set an asset allocation and stick to it except when interest rates on bonds are exceptionally low. Investors should stay the course with equities except when the CAPE ratio is above 25. The problem is that every period in the markets is exceptional. There is no normal. If best investment practices always come with a disclaimer saying that they don't apply in abnormal market environments, they won't ever apply and investors are left flying by the seat of their pants.

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Re: Is anybody getting out and moving to Cash?

Post by The Wizard » Fri Nov 29, 2013 9:11 am

berntson wrote:
... Investors should set an asset allocation and stick to it except when interest rates on bonds are exceptionally low. Investors should stay the course with equities except when the CAPE ratio is above 25...
And what should an investor with a nominal 60/40 AA do once the CAPE ratio is above 25, as it is presently?
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scone
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Re: Is anybody getting out and moving to Cash?

Post by scone » Fri Nov 29, 2013 9:30 am

I'm not "getting out of the market," but I might gradually reduce my stock allocation from 30% to 25%, and take the reduction from classes that have gone through the roof, like the S & P and domestic small caps. At a 25% stock allocation, my "down standard deviation" is likely to be very small indeed, well within my comfort zone.

However, I like to look at the risk in dollars rather than percentages. So I take the dollar amount I have in stocks, and imagine how I would feel if I lost half of that amount. I've found that there is a specific dollar amount loss that I can tolerate, and anything larger literally makes my blood pressure rise too much!

In addition, getting completely out would eventually mean a lot of erosion of the money due to inflation, which is just as painful a loss as a fall in the markets. I hope we never have to experience a situation like the '70s again, but you never know.

So my advice, FWIW, is "sell down to your sleeping point," but no more. A low stock allocation is likely safer than all cash.
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore

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Re: Is anybody getting out and moving to Cash?

Post by RadAudit » Fri Nov 29, 2013 9:44 am

Pull the trigger when the shoeshine boy and / or taxi cab driver start either offering you stock tips or telling you how much money they've made trading stocks in their down time.

Right now some of the talking heads on the financial news (?) channels are actually pushing the idea of taking something off the table. I'd wait until they are all raving about how it's a mistake to leave anything in cash when you can make so much more by being all in.

Either way best of luck.
FI is the best revenge. LBYM. Invest the rest. Stay the course.

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Re: Is anybody getting out and moving to Cash?

Post by Blues » Fri Nov 29, 2013 9:51 am

scone wrote:I'm not "getting out of the market," but I might gradually reduce my stock allocation from 30% to 25%, and take the reduction from classes that have gone through the roof, like the S & P and domestic small caps. At a 25% stock allocation, my "down standard deviation" is likely to be very small indeed, well within my comfort zone.

However, I like to look at the risk in dollars rather than percentages. So I take the dollar amount I have in stocks, and imagine how I would feel if I lost half of that amount. I've found that there is a specific dollar amount loss that I can tolerate, and anything larger literally makes my blood pressure rise too much!

In addition, getting completely out would eventually mean a lot of erosion of the money due to inflation, which is just as painful a loss as a fall in the markets. I hope we never have to experience a situation like the '70s again, but you never know.

So my advice, FWIW, is "sell down to your sleeping point," but no more. A low stock allocation is likely safer than all cash.
Well said, scone. I find from having read many of your posts that we are often on the same page. I have recently pared our portfolio back to 27.5% from 30%, splitting the difference between your stated 30% and 25% equity allocations. (And using the same reasoning as well. "Need" for any additional risk, potential for (at least temporary) loss of 50% of the value of our equity holdings during the next serious market drop, and preserving a goodly portion of the gains produced during the current run up. All changes were effected via tax deferred / exempt accounts.)

At this point, ten years into retirement at 61, I'm more interested in preserving what we have and keeping up with inflation than I am in trying to amass a fortune. We live well within our means and this conservative approach to risk management allows us to avoid worrying about where the markets are heading.
“Tactics without strategy is the noise before defeat.” - Sun Tzu | "Everybody has a plan until they get punched in the mouth." - Mike Tyson

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Phineas J. Whoopee
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Re: Is anybody getting out and moving to Cash?

Post by Phineas J. Whoopee » Fri Nov 29, 2013 10:03 am

The Wizard wrote:
berntson wrote:
... Investors should set an asset allocation and stick to it except when interest rates on bonds are exceptionally low. Investors should stay the course with equities except when the CAPE ratio is above 25...
And what should an investor with a nominal 60/40 AA do once the CAPE ratio is above 25, as it is presently?
Unless my scarcasm detector is broken, you've taken two of berentson's sentences out of context and interpreted them in the opposite way he intended. I do like the ellipses, though.
PJW

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sperry8
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Re: Is anybody getting out and moving to Cash?

Post by sperry8 » Fri Nov 29, 2013 10:18 am

Qprkid wrote:I know, I know. You can't time the market.

Faithful Boglehead lurker here.

But I'm sitting here up 30+% for the year, having recouped all of my Great Recession losses plus some. Ahead of all of my financial goals, and thinking what's the downside?

A few extra percent that I might be able to squeeze out of this Bull market ride? Can you say Greedy?

I can swing back in in a couple months (yeah, I know, but just when do you do so) and ride out the close of the year and see what happens.

Have never played the market timing game, but I'm ready to pull the trigger on Friday.

Thoughts?
I just sold some stock to lighten my load... I was up to 73% equities and that was too much for my risk tolerance. I sold stock today and that brought me down to 69% equities. I may do some more selling to get me into the 65% range, but I'm hesitant to sell and incur even more capital gains (although I do have a lot of carry forward losses to burn).
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Re: Is anybody getting out and moving to Cash?

Post by The Wizard » Fri Nov 29, 2013 10:43 am

Phineas J. Whoopee wrote:
The Wizard wrote:
berntson wrote:
... Investors should set an asset allocation and stick to it except when interest rates on bonds are exceptionally low. Investors should stay the course with equities except when the CAPE ratio is above 25...
And what should an investor with a nominal 60/40 AA do once the CAPE ratio is above 25, as it is presently?
Unless my scarcasm detector is broken, you've taken two of berentson's sentences out of context and interpreted them in the opposite way he intended. I do like the ellipses, though.
PJW
Actually, it looks like I read berntson's post too quickly.

But yes, when bond FUNDS are yielding negative returns, the simple answer (in my case) is to move money from bonds into TIAA Traditional yielding 3.0% or into CDs yielding less but still > 0%.
Very easy to get back into bond funds once there's a good reason to.

I'm less confident about doing anything drastic with stocks, but that's why I posed it as a question, even if misguided...
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Re: Is anybody getting out and moving to Cash?

Post by Grt2bOutdoors » Fri Nov 29, 2013 10:46 am

Why yes! I was just about to get out and move to get some cash - I was thinking $20 ought to do it for the next couple of days, at least. :P
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

scone
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Re: Is anybody getting out and moving to Cash?

Post by scone » Fri Nov 29, 2013 11:21 am

"At this point, ten years into retirement at 61, I'm more interested in preserving what we have and keeping up with inflation than I am in trying to amass a fortune. We live well within our means and this conservative approach to risk management allows us to avoid worrying about where the markets are heading."

Me, too. I worry that when you cut off the "bad" left tail, you are cutting off the "good" right tail as well. Less risk, less reward, that's the tradeoff. I worry that by lowering my stock allocation, I'm increasing my risk of not keeping up with future inflation. I've been pounding away on several different simulators to try to get a handle on this. For example, the Simba backtester "says" that a low stock allocation just barely stayed even with inflation during the '70's, and that's with a big tilt to small, value, and emerging markets. So evidently, going for a less risky portfolio overall is not just about lowering the stock allocation! I suppose after we retire I can look into buying TIPs, commodities, and maybe even a little gold.
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore

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Re: Is anybody getting out and moving to Cash?

Post by Blues » Fri Nov 29, 2013 11:44 am

scone wrote:"At this point, ten years into retirement at 61, I'm more interested in preserving what we have and keeping up with inflation than I am in trying to amass a fortune. We live well within our means and this conservative approach to risk management allows us to avoid worrying about where the markets are heading."

Me, too. I worry that when you cut off the "bad" left tail, you are cutting off the "good" right tail as well. Less risk, less reward, that's the tradeoff. I worry that by lowering my stock allocation, I'm increasing my risk of not keeping up with future inflation. I've been pounding away on several different simulators to try to get a handle on this. For example, the Simba backtester "says" that a low stock allocation just barely stayed even with inflation during the '70's, and that's with a big tilt to small, value, and emerging markets. So evidently, going for a less risky portfolio overall is not just about lowering the stock allocation! I suppose after we retire I can look into buying TIPs, commodities, and maybe even a little gold.
I keep our portfolio relatively simple as far as domestic and international stock and bond index funds for the most part and just this morning spent some time re-testing scenarios in FIRECalc and the Vanguard "Retirement Nest Egg" calculator.

I entered our portfolio value, a 27% allocation to equities, a withdrawal period of 35 years and a withdrawal rate of 2.5%. Tested with 3% inflation, CPI and 4% inflation. Each test came back with 100% success rates.

While this is certainly no guarantee of success, it's better than getting back flashing red warning lights stating that all of our initial assumptions were half baked. If 27% allocated to equities will get the job done, I see no compelling reason to take on additional risk absent evidence to the contrary.
“Tactics without strategy is the noise before defeat.” - Sun Tzu | "Everybody has a plan until they get punched in the mouth." - Mike Tyson

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Re: Is anybody getting out and moving to Cash?

Post by trrb » Fri Nov 29, 2013 7:34 pm

Looking at a first time rebalancing back to a Retiree's overall 60%Treasuy Bonds/40%Equities original allocation that now has migrated to a current 53% Treasury Bonds/47% Equities.

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Re: Is anybody getting out and moving to Cash?

Post by sperry8 » Fri Nov 29, 2013 8:30 pm

Sold a bit more yesterday... Down to 67% equities now. Was at 73% the day before. Weird... but moving it just 6% and I feel a lot better. I used to be worried about the market crashing... and now I'm worried I'll miss more upside. But, I'd rather miss some upside. I can now safely handle a Nenu rule of equities down 50% and still meet my retirement needs. Via FireCalc, i'm at 100% success rate now - and should a 50% loss occur I'd be at 92.2%. Still quite high - and I could dial back spending if necessary in the event of such a significant loss of assets.
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Re: Is anybody getting out and moving to Cash?

Post by trrb » Fri Nov 29, 2013 10:11 pm

Thinking along the same line targeting two transfers in December to preserve a little of the 2013 gains and reduce a little potential 2014 risk. The 2014 performance is anybody's guess.

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Re: Is anybody getting out and moving to Cash?

Post by Bustoff » Sat Nov 30, 2013 7:12 am

Blues wrote: I keep our portfolio relatively simple as far as domestic and international stock and bond index funds for the most part and just this morning spent some time re-testing scenarios in FIRECalc and the Vanguard "Retirement Nest Egg" calculator.

I entered our portfolio value, a 27% allocation to equities, a withdrawal period of 35 years and a withdrawal rate of 2.5%. Tested with 3% inflation, CPI and 4% inflation. Each test came back with 100% success rates.

While this is certainly no guarantee of success, it's better than getting back flashing red warning lights stating that all of our initial assumptions were half baked. If 27% allocated to equities will get the job done, I see no compelling reason to take on additional risk absent evidence to the contrary.
+1
Why take all the downside risk in exchange for having all the upside when you don't "need" the all the upside anymore.

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Re: Is anybody getting out and moving to Cash?

Post by Wagnerjb » Sat Nov 30, 2013 9:36 am

I rebalaned yesterday, selling US and International equities, and buying fixed income (TIPs). This got my equity AA back to target and also got my fixed income AA (50/50 split between regular and inflation bonds) back to target.

Best wishes.
Andy

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Re: Is anybody getting out and moving to Cash?

Post by john94549 » Sat Nov 30, 2013 9:21 pm

I sold 10 shares of VTI a few days back. Does that count? Got me back to 50/50 in my "fun money" trading account at Schwab.

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Re: Is anybody getting out and moving to Cash?

Post by M_to_the_G » Sun Dec 01, 2013 1:12 pm

Honestly, I don't think it's that people think they are different or smarter than the market. To the contrary, I think they know better... but lack the maturity and/or the good judgment to do what they know they have to. People exhibit this behavior in every aspect of life. I know very intelligent people who date abuser losers. Oh, they know. They just can't help themselves. It's a compulsion that drives them. They are their own worst enemy.

I suspect that a large percentage -- perhaps the majority -- of BH members have less than half a dozen posts. I don't have access to this forum's metrics, but I'd be interested in knowing if I'm correct. And I suspect a large percentage -- perhaps the majority -- of those came here looking for advice, already half-knowing what people would say. They got their advice, waffled about it, and decided not to implement the suggestions and then quietly disappeared to go continue market-timing or trying the next hot get-rich stock-pick or fad.

One thing that I don't see a lot of here is new people coming for advice and then posting a few months later with the results of having implemented a solid plan suggested by knowledgeable members. I suspect very few people who ever come here go through with that.
"It’s basically the plot of 'Charlie and the Chocolate Factory.' If you stick around, doing nothing, while everyone around you ****s up, you’re going to win big." - John Oliver

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Re: Is anybody getting out and moving to Cash?

Post by TheTimeLord » Sun Dec 01, 2013 2:30 pm

Ended up adding to my International Ex-US, Total Bond and US REIT funds Friday from cash.
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Re: Is anybody getting out and moving to Cash?

Post by Browser » Sun Dec 01, 2013 3:54 pm

If you've won the game, stop playing or at least dial back (advice courtesy of Bill Bernstein). If you haven't won the game yet then you might have to stay on the field, unless you've lost the desire or ability to play on. It's a matter of your need, your ability, and your willingness to play Risk with your savings. The lowest of these personal risk factors should determine your decision.
We don't know where we are, or where we're going -- but we're making good time.

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