Buy Low, Don't Sell

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Ron Scott
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Buy Low, Don't Sell

Post by Ron Scott » Sat Feb 03, 2018 9:37 pm

When people talk about making significant mistakes in investing its usually related to nervousness that ends in selling low, at a loss, when the market is in a correction.

I'm more concerned with not buying low--when the market is in a correction.

I know most of you will rail against market timing of any kind and probably with good reason. I'm wondering some of you have adopted a strategy of buying the correction and holding; how you do it and what your experience has been.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

software
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Re: Buy Low, Don't Sell

Post by software » Sat Feb 03, 2018 9:41 pm

That is one error but there are countless threads of people sitting on the sidelines with either cash or bonds waiting to buy into a correction that doesn’t come.

That behavioral error can be equally as devastating to returns.

randomguy
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Re: Buy Low, Don't Sell

Post by randomguy » Sat Feb 03, 2018 10:10 pm

Ron Scott wrote:
Sat Feb 03, 2018 9:37 pm
When people talk about making significant mistakes in investing its usually related to nervousness that ends in selling low, at a loss, when the market is in a correction.

I'm more concerned with not buying low--when the market is in a correction.

I know most of you will rail against market timing of any kind and probably with good reason. I'm wondering some of you have adopted a strategy of buying the correction and holding; how you do it and what your experience has been.

When markets are going up I invest my money every month. When markets are going down, I invest my money every month. I don't buy the correction cause I don't have any money laying around. If I had money I wanted in the market, it would be in the market.

If you think about adjusting your AA based on market conditions, you need to think about what both your entry and exit conditions are. I have a feeling most of the time, you make a lot of money by buying on the tips. There are 100s of 5-10% drops that rapidly get erased. The questions is will when those 5% drops turn into 40% ones, will you lose most of those gains.

Historically making big adjustments after huge losses (say 40-50%) has worked out pretty well. But those are also events that only happen every 15-20 years.

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Alexa9
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Re: Buy Low, Don't Sell

Post by Alexa9 » Sat Feb 03, 2018 10:18 pm

Rebalancing does this well. Even better if it's automatic so there's no hesitation. Lifestrategy and Target Date Funds do this.

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arcticpineapplecorp.
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Re: Buy Low, Don't Sell

Post by arcticpineapplecorp. » Sat Feb 03, 2018 10:46 pm

Why don't people buy low? Because they're afraid the market will go lower and they'll be "throwing good money after bad". It's true that markets that go low can go lower still. Look no further than the Great Recession. While the stock market (U.S.) lost 38% in 2008 it fell further in the first quarter of 2009 before starting to go up again. So people who bought at the end of 2008 or the beginning of 2009 (you know those who want to fully fund their Roth IRAs on the first day of the year...Jan 2, technically since the market's closed Jan 1) would have seen their investment on 1/2/09 drop in Feb/March of 2009.

But here's the thing...the market in 2009 ended up about 28.82% (see link below). So even though you bought at a low...which went lower, it eventually went up. That's what buy and hold means. You buy and hold for the long term. If you needed the money in 2009 you had no business adding to the stock market then did you? But if you were say 10 or more years from retirement (remember stocks are a LONG TERM investment) then everything worked out fine.

source: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

This is just one example. Markets go up and markets go down. They've gone up more than they've gone down. But there are usually declines INTRA YEAR even though markets have ended higher than they started 2 out of every 3 years (in the past). See link below (it shows that there were losses in most years (as much as 14.2% on average) even though the market ended higher 28 out of 37 years (that was 76% of the time):

Image

Investing is a marathon, not a sprint. Does that help?
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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arcticpineapplecorp.
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Re: Buy Low, Don't Sell

Post by arcticpineapplecorp. » Sat Feb 03, 2018 10:59 pm

The other thing to remember is buying at lower prices tend to lead to higher returns, while buying at higher prices tends to lead to lower returns. It doesn't mean you get negative returns, just lower. Take the following (extreme) example:

FIrst Friday of the month Investor A buys fund with $100 and shares are selling for $50 each. He buys 2 shares. Does he have $100? No he exchanged the $100 for the two shares at $50 each.

Second Friday of the month, Investor B buys fund with $100 but shares are now selling for $25 each. She buys 4 shares. Does she have $100? No, she exchanged the $100 for the four shares at $25 each.

What does Investor A have now that share prices are $25? If you say he has $50 you'd be wrong. He still has 2 shares. He didn't lose anything he had just because the price fell by half. Now if this investor sells his two shares he'd only get $50 (2 shares for $25 each) and then would have created his own loss.

Several days later the price of the fund not only bounces back but actually climbs to $100 each (no additional shares were puchased. I said this was an extreme example to illustrate a point). What does each have? The same shares they always had:

Investor A has 2 shares and Investor B has 4 shares.

But if each share is now worth $100 then:
Investor A has 2 shares worth $100 each
Investor B has 4 shares worth $100 each

Neither has made any money, because you only make money when you sell your shares. But if they sold their shares, Investor A would get $200 and Investor B would get $400 even though they both originally invested $100 and no more.

See how they both would have made money...but Investor B made twice as much, because she bought her shares at half the price?

Buying shares at lower prices tends to lead to higher returns than buying shares at higher prices.

That's why you want to buy low. You must bring yourself to do so, because that's where you make your money. You just won't know it until much later in the future.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

youngpleb
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Re: Buy Low, Don't Sell

Post by youngpleb » Sat Feb 03, 2018 11:10 pm

Ron Scott wrote:
Sat Feb 03, 2018 9:37 pm
When people talk about making significant mistakes in investing its usually related to nervousness that ends in selling low, at a loss, when the market is in a correction.

I'm more concerned with not buying low--when the market is in a correction.

I know most of you will rail against market timing of any kind and probably with good reason. I'm wondering some of you have adopted a strategy of buying the correction and holding; how you do it and what your experience has been.
The best (and easiest) strategy is just to put the same amount of money into the same funds at set interval periods. That way you still lower your average share cost through DCA while not having to worry about timing the market hills and valleys. Just keep it simple!

ImaBeginner
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Re: Buy Low, Don't Sell

Post by ImaBeginner » Sun Feb 04, 2018 6:22 am

Look at Friday as an example. DJIA dropped 666!
Say I had 100,000 at the beginning of the year. I buy 50,000 of “the market” Jan 2, and save the other 50,000 for when there is a dip. Friday was a dip, so I buy. What is the difference in value between both?
Bought Jan 1=51,700
Bought Friday at last second=50,000

I have learned to just buy, except in the portion I call “fun.” Until the DJIA goes below 24824, that was the right choice for this year, but I haven’t quite figure out when that is yet.

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BuyAndHoldOn
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Re: Buy Low, Don't Sell

Post by BuyAndHoldOn » Sun Feb 04, 2018 8:12 am

Good posts in this thread. And to the OP's point: Yes, buying into weakness is a good plan. And it is good to be prepared and willing to act in such situations. (And this assumes you are not *waiting* for market volatility on the downside before investing. Too many folks wait for a 15% pullback, only to miss out on a 30% gain that went on just before).

That being said....

As has been pointed out: It's just as hard to call the bottom as the top. What is a correction; when is it a bear market? You may run out of dry powder (or at I least I have!) before things look better in the market, if you are "buying on the way down." If you have a job and a good financial situation, that's not really a problem: But life is uncertain and I know the feeling of unexpected expenses when the market is being volatile.

In another thread, a poster made the comment to the OP [of that thread]: "You've never been through a bear market, have you?"

Context was: The poster would chase dips, and then find himself waiting YEARS to get back to even. For example: There was market weakness in 2007, and it looked like a buying opportunity. You know what happened next...and that money [purportedly] did not get "above water" until 2015. Same thing in 2001, only to wait till 2003 for markets to move up again. (That looks like a short time in hindsight; feels like a long time in real life).

I have [had] the issue of running out of dry powder too early on. Not an issue if I am solvent, right? But life throws unexpected things at you; maybe volatility clustering is a life scenario as well. I remember in early 2016 wanting to invest more, but only having the bare-bones in dry powder as I was having an unexpected car expense.

Topic Author
Ron Scott
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Re: Buy Low, Don't Sell

Post by Ron Scott » Sun Feb 04, 2018 11:39 am

youngpleb wrote:
Sat Feb 03, 2018 11:10 pm
The best (and easiest) strategy is just to put the same amount of money into the same funds at set interval periods. That way you still lower your average share cost through DCA while not having to worry about timing the market hills and valleys. Just keep it simple!
software wrote:
Sat Feb 03, 2018 9:41 pm
...there are countless threads of people sitting on the sidelines with either cash or bonds waiting to buy into a correction that doesn’t come.
Alexa9 wrote:
Sat Feb 03, 2018 10:18 pm
Rebalancing does this well.
arcticpineapplecorp. wrote:
Sat Feb 03, 2018 10:46 pm
Why don't people buy low? Because they're afraid the market will go lower and they'll be "throwing good money after bad".
BuyAndHoldOn wrote:
Sun Feb 04, 2018 8:12 am
As has been pointed out: It's just as hard to call the bottom as the top. What is a correction; when is it a bear market?
Each point here is valid and good money has obviously been made with these in mind.

I am looking for an approach beyond rebalancing. I don't do it, in part because I don't want or need to sell equities. I'd like to take advantage of market drops and TAKE THESE POINTS INTO CONSIDERATION.

How about this for clear and simple and devoid of emotion: When the S&P 500 falls by 25%, BUY into it.
And a supplemental rule: Buy an amount equal to 4% of non-equity holdings. (You pick the percentage.)
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

dbr
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Re: Buy Low, Don't Sell

Post by dbr » Sun Feb 04, 2018 11:51 am

Ron Scott wrote:
Sun Feb 04, 2018 11:39 am


How about this for clear and simple and devoid of emotion: When the S&P 500 falls by 25%, BUY into it.
And a supplemental rule: Buy an amount equal to 4% of non-equity holdings. (You pick the percentage.)
Using what money?

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Toons
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Re: Buy Low, Don't Sell

Post by Toons » Sun Feb 04, 2018 11:56 am

" I'm wondering some of you have adopted a strategy of buying the correction and holding"

Not me,takes too much wasted mental energy to try and guess.
Just buying and holding for decades as early in life as you can works for me.








;-)
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

Topic Author
Ron Scott
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Re: Buy Low, Don't Sell

Post by Ron Scott » Sun Feb 04, 2018 12:05 pm

dbr wrote:
Sun Feb 04, 2018 11:51 am
Ron Scott wrote:
Sun Feb 04, 2018 11:39 am


How about this for clear and simple and devoid of emotion: When the S&P 500 falls by 25%, BUY into it.
And a supplemental rule: Buy an amount equal to 4% of non-equity holdings. (You pick the percentage.)
Using what money?

"non-equity holdings"
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

dbr
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Re: Buy Low, Don't Sell

Post by dbr » Sun Feb 04, 2018 12:13 pm

Ron Scott wrote:
Sun Feb 04, 2018 12:05 pm
dbr wrote:
Sun Feb 04, 2018 11:51 am
Ron Scott wrote:
Sun Feb 04, 2018 11:39 am


How about this for clear and simple and devoid of emotion: When the S&P 500 falls by 25%, BUY into it.
And a supplemental rule: Buy an amount equal to 4% of non-equity holdings. (You pick the percentage.)
Using what money?

"non-equity holdings"
Sorry. I should have read more carefully.

So the scheme is to invest 4% of whatever is not already in equities into equities whenever you detect a 25% decline. I would say that such an opportunity is so infrequent and the amount you propose to invest is so small that the effect would be totally negligible. Things also depend on the rate at which one is adding to the non-equity allocation and how large that allocation is. The actual answer is that one would have to configure a model calculation with % decline, % shifted out of equities, starting amount in non-equities, contribution to non-equities and then either back test the result against a history of the S&P 500 or simulate using a Monte-Carlo method assuming some distribution for S&P 500 returns.

tesuzuki2002
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Re: Buy Low, Don't Sell

Post by tesuzuki2002 » Sun Feb 04, 2018 12:16 pm

Ron Scott wrote:
Sat Feb 03, 2018 9:37 pm
When people talk about making significant mistakes in investing its usually related to nervousness that ends in selling low, at a loss, when the market is in a correction.

I'm more concerned with not buying low--when the market is in a correction.

I know most of you will rail against market timing of any kind and probably with good reason. I'm wondering some of you have adopted a strategy of buying the correction and holding; how you do it and what your experience has been.
Start buying.... and keep buying... rebalance to your IPS... keep buyung... you will appreciate your results years down the road. Don’t stop buying!!!

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arcticpineapplecorp.
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Re: Buy Low, Don't Sell

Post by arcticpineapplecorp. » Sun Feb 04, 2018 12:56 pm

Ron Scott wrote:
Sun Feb 04, 2018 11:39 am
How about this for clear and simple and devoid of emotion: When the S&P 500 falls by 25%, BUY into it.
If you take a look at the chart below, you would have only had 5 such opportunites when the S&P 500 fell at least 25%...over a 37 year period. You feel like waiting? You realized you would have missed out a lot over that period, right? The first time from 1980 you would have had to wait 8 years for such a dip to appear. Then another 14 years. It's time in the market, not timing the market that matters.

Image
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

gotester2000
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Re: Buy Low, Don't Sell

Post by gotester2000 » Sun Feb 04, 2018 12:57 pm

A simple strategy even if you are indexing the boglehead way that will hardly take 5 minutes of your time:-

Look at the market every month using indicators like PE, PEG , 200 dma etc. Say invest when PE is between 5 and 25. Say you want to invest 1k in the market every month. If market PE is 25 invest 0, PE is 20 invest 25% of 1k is 250,
PE is 10 invest 75% of 1k is 750, PE is 5 invest 100% of 1k is 1k.
You can select your own parameters, periods and amounts. This will give you significant downside protection as you put more money when market is low.
Blindly automating SIP even when market is at peak is not a wise strategy that will fetch good returns - it is a great way for the fund to make regular commissions from you.

scdevon
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Re: Buy Low, Don't Sell

Post by scdevon » Sun Feb 04, 2018 1:33 pm

Average in any sideline / dry powder money rather than jumping in all at once during market pullbacks. I've observed that stocks often have a double pullback. A selloff followed by a "sucker's rally", then a bigger selloff. Diving all in all at once can disappoint you when you see that new money immediately turn red.

chevca
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Re: Buy Low, Don't Sell

Post by chevca » Sun Feb 04, 2018 1:41 pm

gotester2000 wrote:
Sun Feb 04, 2018 12:57 pm
A simple strategy even if you are indexing the boglehead way that will hardly take 5 minutes of your time:-

Look at the market every month using indicators like PE, PEG , 200 dma etc. Say invest when PE is between 5 and 25. Say you want to invest 1k in the market every month. If market PE is 25 invest 0, PE is 20 invest 25% of 1k is 250,
PE is 10 invest 75% of 1k is 750, PE is 5 invest 100% of 1k is 1k.
You can select your own parameters, periods and amounts. This will give you significant downside protection as you put more money when market is low.
Blindly automating SIP even when market is at peak is not a wise strategy that will fetch good returns - it is a great way for the fund to make regular commissions from you.
What do you do with the rest of the $1000 in those months it doesn't go all in? When does it go all in?

Doesn't seem like a wise strategy. Someone doing that likely wouldn't have invested at all, or very little over the last 5 years or so and missed a lot of gains.

H-Town
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Re: Buy Low, Don't Sell

Post by H-Town » Sun Feb 04, 2018 1:53 pm

Ron Scott wrote:
Sat Feb 03, 2018 9:37 pm
When people talk about making significant mistakes in investing its usually related to nervousness that ends in selling low, at a loss, when the market is in a correction.

I'm more concerned with not buying low--when the market is in a correction.

I know most of you will rail against market timing of any kind and probably with good reason. I'm wondering some of you have adopted a strategy of buying the correction and holding; how you do it and what your experience has been.
I save at every paycheck.

When the market crashed in 2007/2008, I tightened up budget and get more savings. I also exchanged bonds funds to equity funds at a pre-defined band, and I reduced emergency funds in half in an effort to buy stocks at discount.

I believe that nothing beats staying the course and contributing at every paycheck. There are another school of thought: trend followers. To me, it sounds like sell at mid-low point, and buy at mid-high point. I'm still skeptical with this method because I don't trust myself being able to successfully execute this method.

MindBogler
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Re: Buy Low, Don't Sell

Post by MindBogler » Sun Feb 04, 2018 2:03 pm

The stock market is the ultimate Rorschach test. Never has so much human effort been expended in search of patterns that simply don't exist. The notion of "I'll buy when it is down" is based on a self-delusion [that you'll know when]. There is plenty of evidence to support the notion that duration of investment is a superior strategy to waiting for "dips" which, incidentally, are often higher than had you been invested all along in the first place. The point has been made several times but I'll make it again: Set a reasonable asset allocation, pay yourself first and invest automatically, rebalance according to a pre-determined plan and then stop worrying about it!

evestor
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Re: Buy Low, Don't Sell

Post by evestor » Sun Feb 04, 2018 2:20 pm

This is the justification for my auto-buy that I have used for years. I dump money in to my taxable accts with regularity and have an auto-buy that fires weekly. When the market does well, it's an error. When the market does poorly, I feel brilliant. And if my (usually wrong) human emotion thinks the market is at a relative low, I just buy more than I would have otherwise by doing additional buys beyond the auto-buy. But no matter how I feel, I don't cancel the auto-buy.
And of course 401K money has this property somewhat naturally (thanks to gradual investment across the year).

This for me has been the nice balance between wanting to be invested and being afraid of investing it all on some random Tuesday.

For the last 9 years, this has generally been a poor strategy. For the 2 years before that, it was a great strategy.
But it helps me sleep at night.
You be the judge.

deikel
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Re: Buy Low, Don't Sell

Post by deikel » Sun Feb 04, 2018 2:46 pm

I look at it a bit simplistic, but whenever the market corrects itself I look at a chart covering 10 years or more and go back to when the current price had the same price of the stock in the past - and when I buy in, its basically like I invested much earlier in life, so I can correct past mistakes of not investing enough for retirement when I was younger ......that worked wonderful in the 2009-11 range

The current correction is just a blib in the larger scale of things and last Friday would only bring me back to December....peanuts so far.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

Topic Author
Ron Scott
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Re: Buy Low, Don't Sell

Post by Ron Scott » Sun Feb 04, 2018 2:51 pm

dbr wrote:
Sun Feb 04, 2018 12:13 pm
Ron Scott wrote:
Sun Feb 04, 2018 12:05 pm
dbr wrote:
Sun Feb 04, 2018 11:51 am
Ron Scott wrote:
Sun Feb 04, 2018 11:39 am


How about this for clear and simple and devoid of emotion: When the S&P 500 falls by 25%, BUY into it.
And a supplemental rule: Buy an amount equal to 4% of non-equity holdings. (You pick the percentage.)
Using what money?

"non-equity holdings"
Sorry. I should have read more carefully.

So the scheme is to invest 4% of whatever is not already in equities into equities whenever you detect a 25% decline. I would say that such an opportunity is so infrequent and the amount you propose to invest is so small that the effect would be totally negligible. Things also depend on the rate at which one is adding to the non-equity allocation and how large that allocation is. The actual answer is that one would have to configure a model calculation with % decline, % shifted out of equities, starting amount in non-equities, contribution to non-equities and then either back test the result against a history of the S&P 500 or simulate using a Monte-Carlo method assuming some distribution for S&P 500 returns.
Thanks.

I certainly need to play with this some more, but the general direction is appealing to me. I've essentially decided not to rebalance and that seems liberating to me. So the question of when to buy equities is answered by the behavior of the market and not my own swings in AA. I can buy on market declines and not violate my own investment plan.

Maybe the 25% target is too high. Corrections of 10% or more happen quite often and don't last long. If I set it to 10% I may be buying every year?

Maybe the investment amount is too low. I have to balance my needs for living expenses with what I consider dry powder. And I'm not trying to make a fortune, just invest wisely--buy low and hold.

I will work on it.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

Topic Author
Ron Scott
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Re: Buy Low, Don't Sell

Post by Ron Scott » Sun Feb 04, 2018 2:54 pm

deikel wrote:
Sun Feb 04, 2018 2:46 pm
I look at it a bit simplistic, but whenever the market corrects itself I look at a chart covering 10 years or more and go back to when the current price had the same price of the stock in the past - and when I buy in, its basically like I invested much earlier in life, so I can correct past mistakes of not investing enough for retirement when I was younger ......that worked wonderful in the 2009-11 range

The current correction is just a blib in the larger scale of things and last Friday would only bring me back to December....peanuts so far.
I love the mindset! Last week was nothing...and I'd want a REAL drop to consider buying.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

delamer
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Re: Buy Low, Don't Sell

Post by delamer » Sun Feb 04, 2018 3:04 pm

Ron Scott wrote:
Sun Feb 04, 2018 2:51 pm
dbr wrote:
Sun Feb 04, 2018 12:13 pm
Ron Scott wrote:
Sun Feb 04, 2018 12:05 pm
dbr wrote:
Sun Feb 04, 2018 11:51 am
Ron Scott wrote:
Sun Feb 04, 2018 11:39 am


How about this for clear and simple and devoid of emotion: When the S&P 500 falls by 25%, BUY into it.
And a supplemental rule: Buy an amount equal to 4% of non-equity holdings. (You pick the percentage.)
Using what money?

"non-equity holdings"
Sorry. I should have read more carefully.

So the scheme is to invest 4% of whatever is not already in equities into equities whenever you detect a 25% decline. I would say that such an opportunity is so infrequent and the amount you propose to invest is so small that the effect would be totally negligible. Things also depend on the rate at which one is adding to the non-equity allocation and how large that allocation is. The actual answer is that one would have to configure a model calculation with % decline, % shifted out of equities, starting amount in non-equities, contribution to non-equities and then either back test the result against a history of the S&P 500 or simulate using a Monte-Carlo method assuming some distribution for S&P 500 returns.
Thanks.

I certainly need to play with this some more, but the general direction is appealing to me. I've essentially decided not to rebalance and that seems liberating to me. So the question of when to buy equities is answered by the behavior of the market and not my own swings in AA. I can buy on market declines and not violate my own investment plan.

Maybe the 25% target is too high. Corrections of 10% or more happen quite often and don't last long. If I set it to 10% I may be buying every year?

Maybe the investment amount is too low. I have to balance my needs for living expenses with what I consider dry powder. And I'm not trying to make a fortune, just invest wisely--buy low and hold.

I will work on it.
Just to reiterate the obvious, a 10% correction on July 1 — for example — doesn’t even mean that you will be buying at a lower price than you would have if you bought on January 1. If the market goes up 20% from January 2 through June 30, you’d have bought cheaper on January 1.

gotester2000
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Re: Buy Low, Don't Sell

Post by gotester2000 » Mon Feb 05, 2018 1:11 pm

chevca wrote:
Sun Feb 04, 2018 1:41 pm
gotester2000 wrote:
Sun Feb 04, 2018 12:57 pm
A simple strategy even if you are indexing the boglehead way that will hardly take 5 minutes of your time:-

Look at the market every month using indicators like PE, PEG , 200 dma etc. Say invest when PE is between 5 and 25. Say you want to invest 1k in the market every month. If market PE is 25 invest 0, PE is 20 invest 25% of 1k is 250,
PE is 10 invest 75% of 1k is 750, PE is 5 invest 100% of 1k is 1k.
You can select your own parameters, periods and amounts. This will give you significant downside protection as you put more money when market is low.
Blindly automating SIP even when market is at peak is not a wise strategy that will fetch good returns - it is a great way for the fund to make regular commissions from you.
What do you do with the rest of the $1000 in those months it doesn't go all in? When does it go all in?

Doesn't seem like a wise strategy. Someone doing that likely wouldn't have invested at all, or very little over the last 5 years or so and missed a lot of gains.
The rest of $1000 can go to a debt fund. It will give you some return than trying to SIP without looking at the market - and you can use this money to fund future monthly installments.

This strategy is for long term, any market phase - you can use it even while selling, just reverse it. SIP looks great in a bull market - those gains are not gains unless you realize them. I am invested into EMs and this has given me great downside protection.

Topic Author
Ron Scott
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Re: Buy Low, Don't Sell

Post by Ron Scott » Mon Feb 05, 2018 11:53 pm

delamer wrote:
Sun Feb 04, 2018 3:04 pm
Just to reiterate the obvious, a 10% correction on July 1 — for example — doesn’t even mean that you will be buying at a lower price than you would have if you bought on January 1. If the market goes up 20% from January 2 through June 30, you’d have bought cheaper on January 1.
Sure, but everyone who is not allocated at 100/0 faces this. If you’re interested in increasing your equity holdings the question is when to buy. You can choose to ”just jump all in now”, DCA, rebalance per plan, or buy at a relative low.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

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eye.surgeon
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Re: Buy Low, Don't Sell

Post by eye.surgeon » Tue Feb 06, 2018 12:00 am

Ron Scott wrote:
Sun Feb 04, 2018 2:54 pm
deikel wrote:
Sun Feb 04, 2018 2:46 pm
I look at it a bit simplistic, but whenever the market corrects itself I look at a chart covering 10 years or more and go back to when the current price had the same price of the stock in the past - and when I buy in, its basically like I invested much earlier in life, so I can correct past mistakes of not investing enough for retirement when I was younger ......that worked wonderful in the 2009-11 range

The current correction is just a blib in the larger scale of things and last Friday would only bring me back to December....peanuts so far.
I love the mindset! Last week was nothing...and I'd want a REAL drop to consider buying.
Your wish has been granted.
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JoMoney
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Re: Buy Low, Don't Sell

Post by JoMoney » Tue Feb 06, 2018 6:32 am

Always buying... it's always "low" relative to where I expect it will be 10 years from now.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Scott S
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Re: Buy Low, Don't Sell

Post by Scott S » Tue Feb 06, 2018 10:34 am

JoMoney wrote:
Tue Feb 06, 2018 6:32 am
Always buying... it's always "low" relative to where I expect it will be 10 years from now.
+1. When I started down the path toward becoming a Boglehead, I happened upon this article from Motley Fool that really inspired my attitude toward the whole thing: You Missed the Best Day to Buy :beer
My Plan: (Age-10)% in bonds until I reach age 60, 50/50 thereafter. Equity split: 50/50 US/Int'l, Bond split: 50/50 TBM/TIPS.

delamer
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Re: Buy Low, Don't Sell

Post by delamer » Tue Feb 06, 2018 10:45 am

JoMoney wrote:
Tue Feb 06, 2018 6:32 am
Always buying... it's always "low" relative to where I expect it will be 10 years from now.

Amazing how people ignore this.

At some point in your investing career, you will look back at the S&P 500 on Thursday, February 1 and think “I wish I had bought then. It was so cheap.”

The point of being the market is that you believe, over the long term, that its value will climb.

If you don’t think that, you shouldn’t be in at all.

SocalLiving
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Re: Buy Low, Don't Sell

Post by SocalLiving » Tue Feb 06, 2018 11:31 am

evestor wrote:
Sun Feb 04, 2018 2:20 pm
This is the justification for my auto-buy that I have used for years. I dump money in to my taxable accts with regularity and have an auto-buy that fires weekly. When the market does well, it's an error. When the market does poorly, I feel brilliant. And if my (usually wrong) human emotion thinks the market is at a relative low, I just buy more than I would have otherwise by doing additional buys beyond the auto-buy. But no matter how I feel, I don't cancel the auto-buy.
And of course 401K money has this property somewhat naturally (thanks to gradual investment across the year).
This is similar to what I do. Just automatically contribute according to my AA all the way up and down.

But, I am confused about the additional buys beyond the auto-buy. Where is the additional money coming from? Do you take it from future auto-buy amounts, so the next week you are buying less?

There has been so much talk of buying the dips, but unless you hit your re-balancing bands, am I correct in assuming that this is money sitting on the sidelines waiting for a dip? I don't think I completely understand how one is supposed to buy the dips (beyond new contributions and re-balancing).

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Re: Buy Low, Don't Sell

Post by wolf359 » Tue Feb 06, 2018 11:56 am

SocalLiving wrote:
Tue Feb 06, 2018 11:31 am
evestor wrote:
Sun Feb 04, 2018 2:20 pm
This is the justification for my auto-buy that I have used for years. I dump money in to my taxable accts with regularity and have an auto-buy that fires weekly. When the market does well, it's an error. When the market does poorly, I feel brilliant. And if my (usually wrong) human emotion thinks the market is at a relative low, I just buy more than I would have otherwise by doing additional buys beyond the auto-buy. But no matter how I feel, I don't cancel the auto-buy.
And of course 401K money has this property somewhat naturally (thanks to gradual investment across the year).
This is similar to what I do. Just automatically contribute according to my AA all the way up and down.

But, I am confused about the additional buys beyond the auto-buy. Where is the additional money coming from? Do you take it from future auto-buy amounts, so the next week you are buying less?

There has been so much talk of buying the dips, but unless you hit your re-balancing bands, am I correct in assuming that this is money sitting on the sidelines waiting for a dip? I don't think I completely understand how one is supposed to buy the dips (beyond new contributions and re-balancing).
I don't throw every free dime into the stock market. I am married, and I have kids. We allow some slack in the budget, so we can enjoy life. It also helps me convince my wife to stick with the plan over the long term, since she does not feel like we're deprived.

When the market drops, we cut back and tighten our belts. I cut the fat from the budget. At that point, we start putting every spare dime into the market.

We did some home improvement projects last year, while the market was up. The bull market effectively paid for our basement. We've now resumed aggressive saving, and just as the market has started to tank.

SocalLiving
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Re: Buy Low, Don't Sell

Post by SocalLiving » Tue Feb 06, 2018 12:02 pm

evestor wrote:
Sun Feb 04, 2018 2:20 pm
I don't throw every free dime into the stock market. I am married, and I have kids. We allow some slack in the budget, so we can enjoy life. It also helps me convince my wife to stick with the plan over the long term, since she does not feel like we're deprived.

When the market drops, we cut back and tighten our belts. I cut the fat from the budget. At that point, we start putting every spare dime into the market.

We did some home improvement projects last year, while the market was up. The bull market effectively paid for our basement. We've now resumed aggressive saving, and just as the market has started to tank.
Appreciate the explanation. Thank you

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Re: Buy Low, Don't Sell

Post by StormShadow » Tue Feb 06, 2018 12:12 pm

Like most folks here, I already dollar-cost-average through my employer retirement plan (401k/403b).

But for those that haven't yet bought their IRA, now strikes me as a very good time to buy up for 2018. I'm maxing out the $11,000 for 2018 IRA contributions this week for me and DW. Some mix between Vanguard total stock market index and Vanguard total international stock index funds.

Be greedy when others are fearful. Buy Low, Sell High. Stay thirsty my friends. :beer

lostdog
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Re: Buy Low, Don't Sell

Post by lostdog » Tue Feb 06, 2018 12:40 pm

We have automatic setup at Vanguard to contribute to our Roth IRA's every paycheck/every two week paycheck. The 401k gets invested bi weekly. So basically every Friday we invest.
VTWAX and chill.

deikel
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Re: Buy Low, Don't Sell

Post by deikel » Tue Feb 06, 2018 12:42 pm

eye.surgeon wrote:
Tue Feb 06, 2018 12:00 am
Ron Scott wrote:
Sun Feb 04, 2018 2:54 pm
deikel wrote:
Sun Feb 04, 2018 2:46 pm
I look at it a bit simplistic, but whenever the market corrects itself I look at a chart covering 10 years or more and go back to when the current price had the same price of the stock in the past - and when I buy in, its basically like I invested much earlier in life, so I can correct past mistakes of not investing enough for retirement when I was younger ......that worked wonderful in the 2009-11 range

The current correction is just a blib in the larger scale of things and last Friday would only bring me back to December....peanuts so far.
I love the mindset! Last week was nothing...and I'd want a REAL drop to consider buying.
Your wish has been granted.
But therein lies the beauty of the 'going back in time analogy', when you do that today, you still only end up in December 2017...so it really drives home that what happened in January was probably the oddity on the block and not what happened the last couple of days (based on S+P500) - what do I care if the stock is back to its December value...? Bring me back a year or two, than I will buy on sale...
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

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Ron Scott
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Re: Buy Low, Don't Sell

Post by Ron Scott » Tue Feb 06, 2018 2:11 pm

deikel wrote:
Tue Feb 06, 2018 12:42 pm

But therein lies the beauty of the 'going back in time analogy', when you do that today, you still only end up in December 2017...so it really drives home that what happened in January was probably the oddity on the block and not what happened the last couple of days (based on S+P500) - what do I care if the stock is back to its December value...? Bring me back a year or two, than I will buy on sale...
I would like to see the S&P 500 in the 2,000 range but will be in a buying mood around 2,300. We shall see.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

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