Why not stand on the sidelines for a little while?

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watchnerd
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Re: Why not stand on the sidelines for a little while?

Post by watchnerd »

OP, if you're so sure you're right, why are you wasting time writing all this stuff instead of just selling?
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Re: Why not stand on the sidelines for a little while?

Post by pkcrafter »

fitterhappier wrote: Wed Mar 25, 2020 7:05 am
I think this is a great event in a sense because it forces one to reconsider one's rationales from the bottom up.

Correct.

Maybe Bogleism is a great idea 98% of the time, but just maybe, every once in a while, the world throws you a curve ball that makes you rethink some things.

The curve ball you mention is called market risk. It's what we all are experiencing right now. Something very similar happened in 2008. People (investors) simply did not have any experience with the problem and most found it very unnerving. As for you, fitterhappier, there is no way you should be 100% stocks. You want to try and justify getting out of the market, and I'll say stop fighting it and get out of you wish. However, The main thing you need to do is lower your stock allocation to something that gives you a bit of breathing room. The stock market is risky, and now you and many other newbies have some grasp of what is meant by market risk.

In any case, I'm with you all in the long term. I don't see this as simply betting but also a model-building and incorporating risks, and the model and the risks have been scrambled.

Yes, of course, and again it defines true market risk.

I think "the market" is doing a piss-poor job in the last month of dealing with those

The market is investors, and of course they are doing a poor job of dealing with this situation because it's unprecedented. People (investors), like to control, make plans, etc, but there are often cases involving the stock market that won't fit the plan, and investors begin to panic.

which is more evidence that what we refer to as a "wise market" probably doesn't really exist on such small timescales, and is probably only a useful notion at a granularity of a minimum of a year, maybe two or even more, with time for the humans involved to grapple with shocks to the model.

You're starting to get it.
This is where I get my ~9 month idea. I'm not looking to make money on market timing (though obviously that'd be nice), just get out and then re-bet on something I understand better.

Yes, get out and realign your ducks, but also get a grip on what risk actually means and create an asset allocation that gives you some wiggle room.


Maybe it's just me but risks only make sense to take if you have a model you're working with which says it's worth it. If you never question the model in the face of novel information - like even in the face of events that actuaries can't deal with - maybe you don't have a model at all, and it's all just dogma/faith.

You can have all the models you want, but there will be situations where your carefully made model doesn't fit the situation. That's why it's called risk. So, factor this unknown into your asset allocation with the idea that it's better to ride the downs than to get out and try to figure when to get back in. That strategy has proven it is far from optimal. When approaching retirement you can again asses your ability to take risk. You basically have to assess need, ability, and willingness to take risk. To do this, you must fully understand the meaning and scope of risk.

Paul
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: Why not stand on the sidelines for a little while?

Post by lostdog »

fitterhappier wrote: Wed Mar 25, 2020 9:33 am
ausmatt wrote: Wed Mar 25, 2020 8:05 am I notice the OP has selectively ignored responding the best posts. (1) the financial crisis of 2008-2009 comments, (2) the post asking if he was so clear on his reasoning why he didn’t pull the trigger at end of Feb, and (3) the numerous posts asking about his published model.

Look - if you want discourse then consider all the replies and viewpoints. If you are looking for affirmation of your thoughts, then just say so at the beginning.
I'm happy to respond to them, but I happen to disagree with the quality. In fact I'm about to stop replying overall because there are a very small number that are talking in terms of risk modeling vs simply winning bets on market timing. Most are just assuming that I'm freaking out and scolding me for doing so (the hilarious part is the most likely outcome is I don't do this at all because I have other things to do today / I'm too lazy. I really appreciate it when people read/listen vs replying to what they wish I'd said, because they're practiced at seeing a certain kind of freakout-post around here. I kinda just wanted to see what reasoning people would come up with regarding my comment about the fundamental shift in downside risk due to an unprecedented crisis in which the outcome will depend on - unusually - what specific decisions specific politicians take).

Regarding the 2008/09 genre of post, which is a fan favorite in this forum - the one that goes "if you had sold at X date you'd have missed out on Y gains" and so on. My story happens to be that I timed the market pretty well in '08, and it was my realization once I sold out of my positions a couple years later that I really didn't know anything, and my winnings weren't any different from a good day at the craps table (various of my investments dove considerably after I got out), that made me completely re-assess my (already pretty conservative) investing strategy. Buy the haystack - sounds great, let's do it.

But speaking from a risk modeling perspective: 2008-9 was a massive market crash, liquidity crisis, banking crisis. History is full of those - you know, the bankers wreck everything and get away with it - there's something of a playbook. If you recall in '08, the '29 crash, and the response to it, was very much in the news. The '98 Asian crisis wasn't that far back, and depending on your point of view, the dotcom crash was a kind of precedent. Politicians and govt institutions may not have been ready, but they sort of had a frame of reference. People who were in charge were alive when vaguely-similar bad things happened in finance.

This crisis is so completely different that it's mind-boggling. No one was alive for 1918. The closest thing to relevant experience is the (now famous) east asian countries that were prepared because of MERS, and who deserve nonstop praise and whose response practices we should surely all adopt:

https://www.sciencemag.org/news/2020/03 ... ts-success

In '08 the odds of congress and the president responding like Hoover were zero. I don't know about you but at the time I had no doubt that GM would get bailed out and there'd be a massive stimulus package passed with bailouts and such.

The odds of a new Hoover/Depression equivalent occurring because of
- the decisions of given politicians who are in charge
- there generally being no living memory among anyone of a situation like this
- the general hostility to good scientific thinking even when the graphs all are magnificently and perfectly predicting "Christmas Future" for, say, the state of Florida
...are nonzero to put it mildly and objectively, and this therefore creates a lot of downside risk in my humble opinion! Risks that are perhaps not currently priced in by "the market"! It's no wonder that volatility is insane...you can take that as the market telling you "well we just don't understand this".

We are probably going to have the following confluence of events:
- The fastest increase in unemployment on record
- The largest quarterly drop in GDP on record
- The fastest increase in # of bankruptcies on record
- People confined to their houses by governments, in many places creating novel tests for various western legal systems, especially as the less-at-risk just get tired of being confined. What will various politicians do when it comes to cracking down vs allowing the restart and/or juicing of an exponential growth problem?
- Overwhelmed hospitals that will certainly, in many locales and countries, start making harsh decisions about who gets to live and die. What social unrest will there be as a result? What spillover effects might such unrest have?
- What will be the overall effect once all this starts playing out in places w/o modern healthcare systems?

To me this is a world of difference from '08. It's not about the market going down, it's about the novel nature of the risks we have in front of us and the lack of preparedness of the political and economic leadership for them.
the post asking if he was so clear on his reasoning why he didn’t pull the trigger at end of Feb
I was responding to a post which made the point, that's now been exhaustively made in this thread, that I don't know more than the market so I shouldn't sell. Then I called into question the wisdom of the market in the past month. The market is presumably meant to include a bunch of far-seeing market-makers who employ PhD's and the like, and my point was that there is something broken with the idea that the market is wise given the evidence available to said geniuses from Wuhan and well-worn pandemic math available very early in the month, at the latest. I even expressed in my comment as an aside that I wished I had been paying attention instead of mostly focused on my job - maybe I *would* have thought about this. The reply you were referring to then attempted some kind of debunking of my argument with something like "if you're so smart why didn't you do X". And I would have just let that go, because it's like having a discussion with someone at a party, you're responding to a question in the best and clearest way you know how, and then them responding with some tangential thought revealing that your interlocutor was at best half-listening to you. You move on. My ability to call this crisis was not only not the point, but I even poked fun at my own failing here. Reading comprehension, yo.
the numerous posts asking about his published model
We all model risks without "published models" all the time - for example, you risk model regarding your health probably now incorporates the risks of getting this virus in large crowds, so you're avoiding those - you do this without a published model. Your risk model of driving probably similarly incorporates the value of seat belts and therefore you wear them. I figured I was being trolled and didn't respond.
I suggest you turn off the TV or stop reading the sensationalized internet articles. Your doom and gloom is waay over the top.

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watchnerd
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Re: Why not stand on the sidelines for a little while?

Post by watchnerd »

beernutz wrote: Wed Mar 25, 2020 9:17 am These threads are getting tedious. OP if are you looking for validation of your idea you are unlikely to get it here though I think you know that.

Why don't you start this thread on a doomsday forum where you are likely to get all the support you apparently crave and leave us buy and hold investors to suffer in peace?
+1

3-4 of the same in the last week, at least.
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Re: Why not stand on the sidelines for a little while?

Post by H-Town »

fitterhappier wrote: Wed Mar 25, 2020 5:07 am
Stef wrote: Wed Mar 25, 2020 4:47 am And what if the market recovers in those 9 months and you missed out on +35%?
I'm trying to imagine a 35% recovery when the economy is undergoing a major reorganization, consumer spending is affected by best-case 10% unemployment, further temporary lockdowns are necessary.

Even if you hand people checks, they're obviously going to hoard the money without job prospects. Getting people employed again is a process that plays out over years, and jobs only become available when employers have viable businesses. Airlines won't be hiring anytime soon, for one.

Restaurant bookings are YoY -100% across the western world
https://www.opentable.com/state-of-industry

These are not well-capitalized businesses, they're gonna fail.

35% up in 9 months. Having a really hard time with that.

35% down in 9 months because Florida hospitals are overwhelmed and the consequential lockdown lasts much longer than anyone expected? Yeah I can imagine that. 35% down because of unprecedented political instability in poorer countries that just don't have the ability to respond to the crisis? I can imagine that too.
The thing about capitalism is that some will fall, others will rise. This is a free market where anyone can rise to the occasion. Sure small companies will fail. Unemployment would be unprecedented. This is actually a great opportunity for others.

See the make-up of S&P 500. How many companies in the 1980s-1990s are still here in 2020?
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Re: Why not stand on the sidelines for a little while?

Post by nanameg »

I’m not looking for a doomsday forum or for sympathy...I’m trying to learn how to go forward now and I thought this forum was about learning not emoting.

As I said I didn’t have an IPS and I think that’s what did me in.

I also didn’t realize I had so little risk tolerance...which is probably also related to not having an IPS.

The template that’s available in the wiki is a bit overwhelming as are others I’ve seen which is partly why I’ve never made one.

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Re: Why not stand on the sidelines for a little while?

Post by Double Dog »

I agree with you, OP. "Stay the course" is a good mantra, but all rules need to have exceptions. If the reasoning that made "stay the course" be good advice in the past no longer applies, then act accordingly. I swear some people here could receive news of an impending planet-destroying asteroid strike and would continue to chant "stay the course".
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Re: Why not stand on the sidelines for a little while?

Post by BogleFanGal »

Kenkat wrote: Wed Mar 25, 2020 9:02 am I think the target retirement funds are pretty aggressive. If you assume retirement means age 65, then Target Retirement 2025 would be appropriate (according to Vanguard) for someone who is 60. In the old days, it used to be “age in bonds”. So someone, 60 should be 40/60. Then people started living longer and the equity market started booming and it became “age in bonds - 10” or other such variations. Target Retirement 2025 is “age in bonds - 20” which is pretty aggressive in my opinion as a set and forget fund. True, you can just adjust down to a different fund, but you’ve got to look carefully when selecting the fund.
I totally agree with this - that feels a bit rich equity wise for a retirement just 5 years away. It's not off the charts risky for most BHers...but I'd imagine many people using these target funds want a worry-free, hands off way to prepare for retirement - if anything, leaning a little more to the conservative side is better than the alternative to avoid major shocks - as those interested in taking more risk tend to manage their own investments - or could just pick a more distant target year. I'd have guessed a target fund AA for avg 60 year old not interested in actively balancing their own investments would be a tad more conservative - 50/50 or 40/60.
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Re: Why not stand on the sidelines for a little while?

Post by H-Town »

Double Dog wrote: Wed Mar 25, 2020 9:49 am I agree with you, OP. "Stay the course" is a good mantra, but all rules need to have exceptions. If the reasoning that made "stay the course" be good advice in the past no longer applies, then act accordingly. I swear some people here could receive news of an impending planet-destroying asteroid strike and would continue to chant "stay the course".
If there's an impending planet-destroying asteroid strike, the least of my concern is selling stock and staying on the sideline.

Get your priorities straight. Maybe hug your loved ones, grab a beer and kick it back on your front porch? Not much else one should do at that point.
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Re: Why not stand on the sidelines for a little while?

Post by CTcutter »

While I am new to the forum, reading it seems like many people invest emotinally. On Monday, stay onsidelines. Today, "you are missing rally". I think there are months to go before this shakes out. Buying on a stimulus bill yet we have not seen huge jump in unemployment (millions this week) nor the major retail closings. It will be mind-blowing. The govt response was too slow and impact too great.
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Re: Why not stand on the sidelines for a little while?

Post by magicrat »

watchnerd wrote: Wed Mar 25, 2020 9:40 am OP, if you're so sure you're right, why are you wasting time writing all this stuff instead of just selling?
To quote the OP: "the most likely outcome is I don't do this at all because I have other things to do today / I'm too lazy."
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Re: Why not stand on the sidelines for a little while?

Post by watchnerd »

magicrat wrote: Wed Mar 25, 2020 10:07 am
watchnerd wrote: Wed Mar 25, 2020 9:40 am OP, if you're so sure you're right, why are you wasting time writing all this stuff instead of just selling?
To quote the OP: "the most likely outcome is I don't do this at all because I have other things to do today / I'm too lazy."
I call BS on that.

Executing trades takes less time than writing the mini-essays we're seeing.
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Re: Why not stand on the sidelines for a little while?

Post by LFKB »

watchnerd wrote: Wed Mar 25, 2020 9:40 am OP, if you're so sure you're right, why are you wasting time writing all this stuff instead of just selling?
He just told you a few minutes ago that he’s too busy today and also too lazy to do this (yes you read that right) and that he also was mostly just posting this to see what the responses would be.
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Re: Why not stand on the sidelines for a little while?

Post by watchnerd »

LFKB wrote: Wed Mar 25, 2020 10:38 am
watchnerd wrote: Wed Mar 25, 2020 9:40 am OP, if you're so sure you're right, why are you wasting time writing all this stuff instead of just selling?
He just told you a few minutes ago that he’s too busy today and also too lazy to do this (yes you read that right) and that he also was mostly just posting this to see what the responses would be.
I think we're going to see a lot more of this kind of performance art.
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Re: Why not stand on the sidelines for a little while?

Post by Alex GR »

watchnerd wrote: Wed Mar 25, 2020 10:40 am
LFKB wrote: Wed Mar 25, 2020 10:38 am
watchnerd wrote: Wed Mar 25, 2020 9:40 am OP, if you're so sure you're right, why are you wasting time writing all this stuff instead of just selling?
He just told you a few minutes ago that he’s too busy today and also too lazy to do this (yes you read that right) and that he also was mostly just posting this to see what the responses would be.
I think we're going to see a lot more of this kind of performance art.
Or not... perhaps the proliferation of these threads means we were at the bottom on 3/23, S&P will reach 2500 today and go up from there. :greedy
Just some wishful thinking. Trying to stay positive.
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Re: Why not stand on the sidelines for a little while?

Post by HomerJ »

fitterhappier wrote: Wed Mar 25, 2020 4:16 amI'm just having a hard time seeing the scenario in which the market rockets in that time and I miss out on some massive gain. The downside risk, however, seems...titanic.
I see it the opposite.

The downside risk is very small... What titanic downside risk? In the long-run, the stock market will almost certainly be higher.

Sure it could drop a LOT in the next 1-2 years... but if it's higher than today in 10 years who cares?

Remember, the 9%-10% average nominal annual return of the stock market INCLUDES the 50% crashes. In the past, you still got wealthy riding the stock market all the way down and back up again.

Stock market money should be long-term money. You don't have to guess or worry about what is going to happen this year or next year.

On other hand, you say you have a hard time seeing the market rocket in the next 9 months.

Missing the next 9 months seems like a larger risk to me. Market surprises people all the time. We gained 30% in 2019 in about 9 months and no one saw that coming.

Buy and hold works. Sure, it would be great to be out of the market when it's going down, and in when it's going up, but that's HARD.
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Re: Why not stand on the sidelines for a little while?

Post by miket29 »

Seems like what the OP is saying echoes the sentiments in this quote from a different thread:
with all due respect, I must disagree with what you are saying. I understand that your advice is straight from the Diehard playbook, but this time it is different. If one were to consult with the 10 most respected authorities on the economy (you pick) all would say that this crisis is at least the second worst since ’29. All would say that the economy will not recover for a long time. Most would say that at best the market will not increase but more likely the market will decline until recovery.

So my question is what is the hurry? Of course the market might rebound tomorrow, but the broad consensus is that it will not. Why not instead go with the probabilities and wait-and-see?
Funny thing, though, is the quote above comes from the 2008 thread by Ferri with advice on what to do in the face of the steep market decline viewtopic.php?f=10&t=26284
Last edited by miket29 on Wed Mar 25, 2020 11:13 am, edited 1 time in total.
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Re: Why not stand on the sidelines for a little while?

Post by bertilak »

Double Dog wrote: Wed Mar 25, 2020 9:49 am I swear some people here could receive news of an impending planet-destroying asteroid strike and would continue to chant "stay the course".
Yes, we would do better by running around and yelling "We're doomed! We're doomed!"

OR, we could all hold hands and sing "kumbaya, kumbaya."

At least we would be actively managing our future.
Last edited by bertilak on Wed Mar 25, 2020 11:19 am, edited 1 time in total.
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Re: Why not stand on the sidelines for a little while?

Post by whodatheads »

If OP believes this crisis will result in a "L" shape recovery and we are far away from the bottom, then I don't see anything wrong with "standing on the sidelines for a while" stance. Plenty of analysts/economists think there is a likelihood of L shape recovery, not "V" nor "U" shape. It is up to you to decide who to believe.
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Re: Why not stand on the sidelines for a little while?

Post by ks289 »

whodatheads wrote: Wed Mar 25, 2020 1:40 pm If OP believes this crisis will result in a "L" shape recovery and we are far away from the bottom, then I don't see anything wrong with "standing on the sidelines for a while" stance. Plenty of analysts/economists think there is a likelihood of L shape recovery, not "V" nor "U" shape. It is up to you to decide who to believe.
The point is that future outcomes cannot be reliably known, and coming up with a rigorous yet simple to apply strategy which will outperform the market long term is really not achievable for retail investors like most of us. In other words, who the heck really knows if its going to be L, V, U, or W or something else?

The super simple strategy of buy and hold/avoiding market timing removes the necessity of being an amazing prognosticator or being ridiculously lucky. And by minimizing costs, taxes, and most importantly BAD TIMING--it will tend to outperform other strategies with comparable levels of risk.

The ad hoc strategy of reading the news, forums, and predictions of your favorite experts and then forming your own heavily researched prediction is very difficult to get right.
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Re: Why not stand on the sidelines for a little while?

Post by Double Dog »

bertilak wrote: Wed Mar 25, 2020 11:16 am
Double Dog wrote: Wed Mar 25, 2020 9:49 am I swear some people here could receive news of an impending planet-destroying asteroid strike and would continue to chant "stay the course".
Yes, we would do better by running around and yelling "We're doomed! We're doomed!"

OR, we could all hold hands and sing "kumbaya, kumbaya."

At least we would be actively managing our future.
Meanwhile I would be using my brain and the information available to form a new strategy, build an underground bunker or something, while you "stayed the course" and continued your normal daily routine. The point is that people should not only know the rules of thumb, but also what reasoning underpins those rules, and what situations might turn previously useful rules into bad ones. We're faced with an event that's unprecedented in living memory, global in scale. And unlike past calamities, we have good scientific data showing how much worse this is likely to get, but most people still don't seem to grasp it. Given the circumstances I think standing on the sidelines for a while is very reasonable.
Last edited by Double Dog on Wed Mar 25, 2020 2:13 pm, edited 1 time in total.
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Re: Why not stand on the sidelines for a little while?

Post by HomerJ »

ks289 wrote: Wed Mar 25, 2020 1:54 pm
whodatheads wrote: Wed Mar 25, 2020 1:40 pm If OP believes this crisis will result in a "L" shape recovery and we are far away from the bottom, then I don't see anything wrong with "standing on the sidelines for a while" stance. Plenty of analysts/economists think there is a likelihood of L shape recovery, not "V" nor "U" shape. It is up to you to decide who to believe.
The point is that future outcomes cannot be reliably known, and coming up with a rigorous yet simple to apply strategy which will outperform the market long term is really not achievable for retail investors like most of us. In other words, who the heck really knows if its going to be L, V, U, or W or something else?

The super simple strategy of buy and hold/avoiding market timing removes the necessity of being an amazing prognosticator or being ridiculously lucky. And by minimizing costs, taxes, and most importantly BAD TIMING--it will tend to outperform other strategies with comparable levels of risk.

The ad hoc strategy of reading the news, forums, and predictions of your favorite experts and then forming your own heavily researched prediction is very difficult to get right.
This... great post.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Re: Why not stand on the sidelines for a little while?

Post by michaeljc70 »

Double Dog wrote: Wed Mar 25, 2020 9:49 am I agree with you, OP. "Stay the course" is a good mantra, but all rules need to have exceptions. If the reasoning that made "stay the course" be good advice in the past no longer applies, then act accordingly. I swear some people here could receive news of an impending planet-destroying asteroid strike and would continue to chant "stay the course".
Anyone can claim "it is different this time" for just about any reason. It is like saying I always eat healthy when I feel like it. If the earth is going to be destroyed there is probably no point in worrying about your portfolio.
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Re: Why not stand on the sidelines for a little while?

Post by mrspock »

fitterhappier wrote: Wed Mar 25, 2020 4:16 am To recap: we are facing a world-historic crisis situation, much of which depends on how the US pandemic plays out, and various economic vicious cycles play out after an unprecedented small-business wipeout and massive unemployment...while at the same time we have (without getting too deep into politics) what everyone will agree is a highly unusual US administration in place, and are in an election year.

Multiply all those factors together and I understand the extreme market volatility. This current situation is so world-historic insane vs any crisis I remember that it's hard to hold it in my head at all.

I'm a buy-and-hold long-term indexing investor, but I also strongly believe in investing in what I understand. I do not understand the world economy right now at all.

So we have a nice bump here from the stimulus announcement. Why not take, say, a 9-month break (past the initial lockdowns, unemployment numbers, earnings announcements, US election), sit in cash, and get back in when we're back to an economic situation in some ballpark of "normal"?

I'm just having a hard time seeing the scenario in which the market rockets in that time and I miss out on some massive gain. The downside risk, however, seems...titanic.

So it's market timing, I know. But what are the arguments against the sensibility of an idea like this - given the circumstances?
I'd encourage you to calculate the sobering opportunity cost of this decision over your life if you are wrong. Say you you have a $1M portfolio, you sold down 30%, with 30 years left to invest, and get back in to the game by the fall. You are down $300k, but hey you say, that was money well spent as I could sleep at night for 9 months. The problem here isn't that you are out $300k, you are out $300k x 30 years of returns on that money you'll never see -- that's about $5.1M @ 10% per year (historical average) or more conservatively, $3M at 8% per year. So you see, you'll have to decide if you are $5.1M "sure" that it's going to go down further AND you'll have the courage to buy in at the lower valuations, or decide you are comfortable losing the $5.1M in future returns.

Another way to look at it: Calculate that in how many years sooner it means you can retire. What's 2-3 years of your prime life worth to you? $300k? If I came to you on your death bed and offered you the trade... $300k for 2-3 years extra prime life? I know my answer.
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Re: Why not stand on the sidelines for a little while?

Post by David Jay »

nanameg wrote: Wed Mar 25, 2020 9:48 amThe template that’s available in the wiki is a bit overwhelming as are others I’ve seen which is partly why I’ve never made one.

Nanameg
For something compact, here are a few threads I found with search term "IPS" and either the word "postcard" or "3x5"
viewtopic.php?t=296267
viewtopic.php?t=170937
viewtopic.php?t=170910
viewtopic.php?t=252215
viewtopic.php?t=155352
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
rgs92
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Re: Why not stand on the sidelines for a little while?

Post by rgs92 »

As long as I've been reading Bogleheads, I've seen the comment (in various ways) that "I'm going to buy in the future when the market settles down."
This easily translates into "I'm going to buy when stock prices are higher."
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watchnerd
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Re: Why not stand on the sidelines for a little while?

Post by watchnerd »

rgs92 wrote: Wed Mar 25, 2020 2:51 pm As long as I've been reading Bogleheads, I've seen the comment (in various ways) that "I'm going to buy in the future when the market settles down."
This easily translates into "I'm going to buy when stock prices are higher."
It's a strategy.

I'd be curious to see a modeling of the trade-offs for how stock returns look if you only invest when stocks catch up to the last market's previous high.
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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier »

Wow, digging my post history - resourceful.
You took the good Boglehead advice and constructed a simple portfolio. However this bear market seems to indicate that you were not cut out for a heavy position in stocks.
My takeaway from my first serious Boglehead thread is that when you pose a halfway intelligent question that perhaps calls Boglehead orthodoxy into question just a little bit, and the incoming fire is both relentless and absurd. It's like the whole conception of investing is about the emotional preparedness of the investor to deal with bear markets. You and 5 others here are imputing that I'm not up to the task. Message received loud and clear Sergeant(s)!

I've literally stated that I'm willing to walk into Dec 1 and go all in whatever the consequences, for the purposes of discussion at least. No change in the discussion. It's impossible to get to some higher level of quality, you're locked in - I can type whatever I want here and it gets translated into "he's a big chicken". Same rote responses, like talking to a wall.

My conclusion is that the consensus here is that Bogleism cannot fail, it can only be failed.
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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier »

watchnerd wrote: Wed Mar 25, 2020 10:40 am
LFKB wrote: Wed Mar 25, 2020 10:38 am
watchnerd wrote: Wed Mar 25, 2020 9:40 am OP, if you're so sure you're right, why are you wasting time writing all this stuff instead of just selling?
He just told you a few minutes ago that he’s too busy today and also too lazy to do this (yes you read that right) and that he also was mostly just posting this to see what the responses would be.
I think we're going to see a lot more of this kind of performance art.
Watchnerd, I'm just ignoring your posts mostly but will just say out of semi-fascination with your persistence that you're making late-90's usenet look good at this point. Why are you wasting your time in this thread, and on me?
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Kenkat
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Re: Why not stand on the sidelines for a little while?

Post by Kenkat »

What did you expect? You walked into the Flat Earth Society and declared the world is round. Or did you walk into the Round Earth Society and declare the world is flat?

Ay, there’s the question now - which is it?
tbone555
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Re: Why not stand on the sidelines for a little while?

Post by tbone555 »

fitterhappier wrote: Wed Mar 25, 2020 3:00 pm Wow, digging my post history - resourceful.
You took the good Boglehead advice and constructed a simple portfolio. However this bear market seems to indicate that you were not cut out for a heavy position in stocks.
My takeaway from my first serious Boglehead thread is that when you pose a halfway intelligent question that perhaps calls Boglehead orthodoxy into question just a little bit, and the incoming fire is both relentless and absurd. It's like the whole conception of investing is about the emotional preparedness of the investor to deal with bear markets. You and 5 others here are imputing that I'm not up to the task. Message received loud and clear Sergeant(s)!

I've literally stated that I'm willing to walk into Dec 1 and go all in whatever the consequences, for the purposes of discussion at least. No change in the discussion. It's impossible to get to some higher level of quality, you're locked in - I can type whatever I want here and it gets translated into "he's a big chicken". Same rote responses, like talking to a wall.

My conclusion is that the consensus here is that Bogleism cannot fail, it can only be failed.
I think everyone is actually trying to help you. They know from their own collective experiences and rigorous studies that what you are thinking of doing is likely to fail and cost you major financial losses over the course of your life and probably some mental distress if the market goes against you.

And if you end up being right it is purely based on chance.
JD101
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Re: Why not stand on the sidelines for a little while?

Post by JD101 »

How will you feel sitting on the sidelines when the rally starts and it keeps going up, next day down, next day up but the ups are a bit more up than the downs.

This will mess with your head. You'll start to have anxiety trying to figure out when to get back in. You'll start wringing your hands, sweating when you see the market slowly increase. You'll be secretly wishing it was going down because that's what you predicted.

You get frustrated 😡.

You'll say screw this market and walk away for a few years. After a few years the SP500 index is at 4000. You're older and wiser and you've come to realization that you messed up and regret your decision.

You're stuck at work for another 5 years. All of the fear mongers and market timers/ trend followers or other method of market timers that triggered you to sell low will not come to save you and pay all that money back you lost. They'll be back in their caves hiding out.

You'll regret it.

I think you made up your mind already but came here to argue why buy and hold doesn't work. So why bother if no one will be able to talk you off the cliff?
What happens if market tanks to 10K in next 9 months and OP gets back in? then you will you get frustrated? It is fair to think the probability of market going down is more than going up at least for next few months till some sense of stability is restored and market is doing the normal fluctuation
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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier »

HomerJ wrote: Wed Mar 25, 2020 11:07 am
fitterhappier wrote: Wed Mar 25, 2020 4:16 amI'm just having a hard time seeing the scenario in which the market rockets in that time and I miss out on some massive gain. The downside risk, however, seems...titanic.
I see it the opposite.

The downside risk is very small... What titanic downside risk? In the long-run, the stock market will almost certainly be higher.

Sure it could drop a LOT in the next 1-2 years... but if it's higher than today in 10 years who cares?
I don't have any worry about the market coming back eventually, for some value of eventually. I've tried to be pretty careful to not say such things. I'm sure that at retirement I will have returned some amount of money that's pretty decent, compounded over time, and all that. I get that people want me to man up and weather the hard times, and every time I read this I wonder what it is I'm writing to lead people to believe this is even an issue.

The challenge I'm posing is a little more fundamental. To put it in terms of a hypothetical, if investing experience were more often situations like this and not "what will the fed do in its next meeting" or like "are the Germans gonna bail out the Greeks", there would be no Bogleism. I've brought up actuaries because this is how I think about the current crisis: there's no model for it, no predictability about how down the downside might just be. Sure, all the major actors are heavily incentivized to bring the market back, but as we see, stupidity also matters - there are serious suggestions in certain quarters that ignoring the virus and opening businesses again is some kind of option (?). If a combination of idiocracy and an unfortunate moment in the history of pandemics causes a massive downside effect that gets you to break even in several decades, wouldn't you want to be out?
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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier »

Meanwhile I would be using my brain and the information available to form a new strategy, build an underground bunker or something, while you "stayed the course" and continued your normal daily routine. The point is that people should not only know the rules of thumb, but also what reasoning underpins those rules, and what situations might turn previously useful rules into bad ones. We're faced with an event that's unprecedented in living memory, global in scale. And unlike past calamities, we have good scientific data showing how much worse this is likely to get, but most people still don't seem to grasp it. Given the circumstances I think standing on the sidelines for a while is very reasonable.
Thank you, Double Dog, and not because you are +1'ing my conclusions, but because of contributing this:

The point is that people should not only know the rules of thumb, but also what reasoning underpins those rules, and what situations might turn previously useful rules into bad ones.
Wishing I had written these words much earlier.
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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier »

HomerJ wrote: Wed Mar 25, 2020 2:06 pm
ks289 wrote: Wed Mar 25, 2020 1:54 pm
whodatheads wrote: Wed Mar 25, 2020 1:40 pm If OP believes this crisis will result in a "L" shape recovery and we are far away from the bottom, then I don't see anything wrong with "standing on the sidelines for a while" stance. Plenty of analysts/economists think there is a likelihood of L shape recovery, not "V" nor "U" shape. It is up to you to decide who to believe.
The point is that future outcomes cannot be reliably known, and coming up with a rigorous yet simple to apply strategy which will outperform the market long term is really not achievable for retail investors like most of us. In other words, who the heck really knows if its going to be L, V, U, or W or something else?

The super simple strategy of buy and hold/avoiding market timing removes the necessity of being an amazing prognosticator or being ridiculously lucky. And by minimizing costs, taxes, and most importantly BAD TIMING--it will tend to outperform other strategies with comparable levels of risk.

The ad hoc strategy of reading the news, forums, and predictions of your favorite experts and then forming your own heavily researched prediction is very difficult to get right.
This... great post.
Yeah agree great post.

I can agree with it and say that at the moment we don't need experts to inform us at all, but just look a the facts about changes in economic activity, which are mind-blowing. And we can look objectively at the actions our political and economic leaders are taking which in many cases are ... very bad. And these decisions have direct consequences for at least medium-term economic outcomes. There's the straightforward exponential growth of the virus - no experts or interpretation necessary. I just don't see how you this isn't a fundamental test of the economic and political order. It could go ok. But it may not go well, at all!
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Re: Why not stand on the sidelines for a little while?

Post by DonIce »

fitterhappier wrote: Wed Mar 25, 2020 3:27 pm I don't have any worry about the market coming back eventually, for some value of eventually. I've tried to be pretty careful to not say such things. I'm sure that at retirement I will have returned some amount of money that's pretty decent, compounded over time, and all that. I get that people want me to man up and weather the hard times, and every time I read this I wonder what it is I'm writing to lead people to believe this is even an issue.

The challenge I'm posing is a little more fundamental. To put it in terms of a hypothetical, if investing experience were more often situations like this and not "what will the fed do in its next meeting" or like "are the Germans gonna bail out the Greeks", there would be no Bogleism. I've brought up actuaries because this is how I think about the current crisis: there's no model for it, no predictability about how down the downside might just be. Sure, all the major actors are heavily incentivized to bring the market back, but as we see, stupidity also matters - there are serious suggestions in certain quarters that ignoring the virus and opening businesses again is some kind of option (?). If a combination of idiocracy and an unfortunate moment in the history of pandemics causes a massive downside effect that gets you to break even in several decades, wouldn't you want to be out?
There's no reasonable scenario in which this particular crisis takes decades to recover from. It's a virus, it will be done with in 2 years tops, one way or another. Most likely much sooner. The economic fallout might take a year or two to deal with after things re-open, or less if governments are willing to provide massive stimulus, which so far they seem to be. Could other things happen while the virus is still ongoing that keep knocking things down and send the world economy into a tailspin for decades? Possible, but that's possible at any time.

The market may bottom at any time (or may already have), and you may miss out on resulting gains if you sell near there and don't buy back in for months.

Some investors may benefit psychologically from not being invested during times of crisis, and that may be worth some amount of money. But selling low and buying back in high is just not a strategy for making money; it's a strategy for losing money.

As for your points about this crisis being different. Nope... not really. The events of today are far more mild than many others that have happened in history, even in the recent history during which we have had stock markets. This is not WWII, where it was possible that all the democratic capitalist nations could have fallen to aggressive authoritarian regimes. This is not the Spanish flu, where 50-200 million people died from disease, on the back of the most devastating war that the world had seen up to that point. This is not the cold war, when instantaneous nuclear annihilation threatened the very survival of the human species every moment of every day for decades.

All of those times were good times to hold onto stocks, in retrospect. So too will this be.
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Re: Why not stand on the sidelines for a little while?

Post by michaeljc70 »

fitterhappier wrote: Wed Mar 25, 2020 3:33 pm
Meanwhile I would be using my brain and the information available to form a new strategy, build an underground bunker or something, while you "stayed the course" and continued your normal daily routine. The point is that people should not only know the rules of thumb, but also what reasoning underpins those rules, and what situations might turn previously useful rules into bad ones. We're faced with an event that's unprecedented in living memory, global in scale. And unlike past calamities, we have good scientific data showing how much worse this is likely to get, but most people still don't seem to grasp it. Given the circumstances I think standing on the sidelines for a while is very reasonable.
Thank you, Double Dog, and not because you are +1'ing my conclusions, but because of contributing this:

The point is that people should not only know the rules of thumb, but also what reasoning underpins those rules, and what situations might turn previously useful rules into bad ones.
Wishing I had written these words much earlier.
Stay the course (aka don't market time) is not a rule of thumb. Its purpose, backed by countless studies, is that you cannot know when to get out and back in. You cannot see the future and can only guess at market tops and bottoms. This situation or any other doesn't change that premise. The only thing different is how you react to the situation.
Last edited by michaeljc70 on Wed Mar 25, 2020 3:49 pm, edited 1 time in total.
LFKB
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Re: Why not stand on the sidelines for a little while?

Post by LFKB »

fitterhappier wrote: Wed Mar 25, 2020 3:27 pm
HomerJ wrote: Wed Mar 25, 2020 11:07 am
fitterhappier wrote: Wed Mar 25, 2020 4:16 amI'm just having a hard time seeing the scenario in which the market rockets in that time and I miss out on some massive gain. The downside risk, however, seems...titanic.
I see it the opposite.

The downside risk is very small... What titanic downside risk? In the long-run, the stock market will almost certainly be higher.

Sure it could drop a LOT in the next 1-2 years... but if it's higher than today in 10 years who cares?
I don't have any worry about the market coming back eventually, for some value of eventually. I've tried to be pretty careful to not say such things. I'm sure that at retirement I will have returned some amount of money that's pretty decent, compounded over time, and all that. I get that people want me to man up and weather the hard times, and every time I read this I wonder what it is I'm writing to lead people to believe this is even an issue.

The challenge I'm posing is a little more fundamental. To put it in terms of a hypothetical, if investing experience were more often situations like this and not "what will the fed do in its next meeting" or like "are the Germans gonna bail out the Greeks", there would be no Bogleism. I've brought up actuaries because this is how I think about the current crisis: there's no model for it, no predictability about how down the downside might just be. Sure, all the major actors are heavily incentivized to bring the market back, but as we see, stupidity also matters - there are serious suggestions in certain quarters that ignoring the virus and opening businesses again is some kind of option (?). If a combination of idiocracy and an unfortunate moment in the history of pandemics causes a massive downside effect that gets you to break even in several decades, wouldn't you want to be out?
We all understand what you’ve been saying. There’s no need to keep repeating it like we don’t.

We all know there is risk out there. You seem to understand and articulate all of the risk but none of the upside

We (pretty much all) disagree with your conclusion on how to handle that risk

But it’s your money not ours, so just do as you’d like with it and live with the consequences or rewards
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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier »

I'd encourage you to calculate the sobering opportunity cost of this decision over your life if you are wrong. Say you you have a $1M portfolio, you sold down 30%, with 30 years left to invest, and get back in to the game by the fall. You are down $300k, but hey you say, that was money well spent as I could sleep at night for 9 months. The problem here isn't that you are out $300k, you are out $300k x 30 years of returns on that money you'll never see
I keep seeing these posts about how bad selling is. This is in spite of my - I assure you - deep, double-secret conviction to get back in at some date in the near future.

If I get out at $700k and the market is at $750k in 9 months, I lose out on $50k compounding for the rest of my life.
If I get out at $700k and the market is at $650k in 9 months, I gain $50k compounding for the rest of my life.

You're making a marking-timing inference that the market heads back up to the $1M level in the interim. If I were an average boglehead (as I've learned from my thread experience here), I would now try to taunt you with pedantic suggestions such as that you buy S&P calls on maxed-out margin if you're so sure about all this.

Anti-market-timing posts have a way of becoming pro-market-timing.
LFKB
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Re: Why not stand on the sidelines for a little while?

Post by LFKB »

In June 2018 you were in a three portfolio

At some point between June 2018 and today, at the tail end of the longest bulk market in history, you switched to 100% equities

At the first sign of trouble, you are ready to move to 0% equities for 9 months

Just read that. It could work out great, but it sounds like a recipe for disaster

But again, it’s your money and your decision
JD101
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Re: Why not stand on the sidelines for a little while?

Post by JD101 »

, or less if governments are willing to provide massive stimulus,
I'm not sure what govt stimulus really does other than propping the market for temporary period. If stimulus would have been the fix for everything, govts would have kept giving the stimulus after stimulus, what do they have to loose? Somebody have to pay the price of stimulus and usually it has to be tax payers.
Johnnyone
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Re: Why not stand on the sidelines for a little while?

Post by Johnnyone »

I think you’ll lose about 20% if you sell now and wait 9 months.
DonIce
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Re: Why not stand on the sidelines for a little while?

Post by DonIce »

JD101 wrote: Wed Mar 25, 2020 3:52 pm
, or less if governments are willing to provide massive stimulus,
I'm not sure what govt stimulus really does other than propping the market for temporary period. If stimulus would have been the fix for everything, govts would have kept giving the stimulus after stimulus, what do they have to loose? Somebody have to pay the price of stimulus and usually it has to be tax payers.
Stimulus takes today's economic problems and turns them into debt, pushing them into the future. Depending how far into the future you can push them, it may not be relevant for today's investors. Current trends of increasing sovereign debt in developed nations don't seem sustainable, but they could continue for decades yet before bursting, or a period of high inflation could make current debts essentially meaningless.
MittensMoney
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Re: Why not stand on the sidelines for a little while?

Post by MittensMoney »

With this level of confidence you shouldn't be going to cash, you should be buying Puts and shorting the market. You'll earn in both directions and truly capitalize on the most obvious of situations unfolding.
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Re: Why not stand on the sidelines for a little while?

Post by 2pedals »

fitterhappier wrote: Wed Mar 25, 2020 3:27 pm If a combination of idiocracy and an unfortunate moment in the history of pandemics causes a massive downside effect that gets you to break even in several decades, wouldn't you want to be out?
You asking question based on an very bad scenario for a future that is unknown. What if you are wrong and investing in this discounted market is an opportunity for a lifetime, wouldn't you want to be in?
latesaver
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Re: Why not stand on the sidelines for a little while?

Post by latesaver »

fitterhappier wrote: Wed Mar 25, 2020 4:33 am
manatee2005 wrote: Wed Mar 25, 2020 4:23 am Do it and let us know how much money you lost by being on sidelines for 9 months :-)
To quantify: loss of dividend income (except, well, nobody's gonna pay dividends), plus 9 months of destruction of the value of the cash pile by inflation. So I'm more or less locking in a 2% loss for 9 months. Right?

Market volatility *every day* is well in excess of that. Do you think the surprises we encounter are more likely to be good or bad? (this is the question I'm asking myself)

Just to take one example: one of the most populous states, Florida, currently has no lockdown of any kind - if you plug the numbers just for that state into this

http://gabgoh.github.io/COVID/index.html

in very little time it gets very ugly. Probably a very unpleasant surprise building there. Kinda doubt this risk is being built in by the market. In general I think we've seen that the market is not doing super well dealing with exponential growth problems.

All that vs a certain 2% hit. Hmm.
I haven't read through the thread but that is patently false. Miami has a shelter in place order for one.
Elysium
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Re: Why not stand on the sidelines for a little while?

Post by Elysium »

OP,

Purchased more shares today in multiple accounts. Looking juicy at these prices. Added to those purchased on March 16.

These are the times steady hands builds up shares that creates wealth in future, while weak hands fold and sit on the sidelines.

Will be waiting for more opportunities to purchase if there is more downside.
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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier »

it will be done with in 2 years tops, one way or another. Most likely much sooner. The economic fallout might take a year or two to deal with after things re-open
No more than ten to twenty million killed, tops, right?

You might want to check up on how well capitalized the average business is. I'm pretty sure "things" are not going to "reopen"...in 2 years!!...in quite the way you imagine.
As for your points about this crisis being different. Nope... not really. The events of today are far more mild than many others that have happened in history, even in the recent history during which we have had stock markets. This is not WWII, where it was possible that all the democratic capitalist nations could have fallen to aggressive authoritarian regimes.
I hope I would have sold had I been an investor in 1939.
This is not the Spanish flu, where 50-200 million people died from disease, on the back of the most devastating war that the world had seen up to that point.
I hope I would not have been in the market at that time either.

I don't care about another numbers game, this is about understanding the investment for me, which is world growth. If I cease to understand the investment then I think about getting out. The echoes of value investing are intended.
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watchnerd
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Re: Why not stand on the sidelines for a little while?

Post by watchnerd »

2pedals wrote: Wed Mar 25, 2020 4:04 pm investing in this discounted market is an opportunity for a lifetime, wouldn't you want to be in?
I like having more shares.

Cheaper prices means I get more shares for my dollar.

It's just that simple.
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MotoTrojan
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Re: Why not stand on the sidelines for a little while?

Post by MotoTrojan »

fitterhappier wrote: Wed Mar 25, 2020 3:27 pm
HomerJ wrote: Wed Mar 25, 2020 11:07 am
fitterhappier wrote: Wed Mar 25, 2020 4:16 amI'm just having a hard time seeing the scenario in which the market rockets in that time and I miss out on some massive gain. The downside risk, however, seems...titanic.
I see it the opposite.

The downside risk is very small... What titanic downside risk? In the long-run, the stock market will almost certainly be higher.

Sure it could drop a LOT in the next 1-2 years... but if it's higher than today in 10 years who cares?
I don't have any worry about the market coming back eventually, for some value of eventually. I've tried to be pretty careful to not say such things. I'm sure that at retirement I will have returned some amount of money that's pretty decent, compounded over time, and all that. I get that people want me to man up and weather the hard times, and every time I read this I wonder what it is I'm writing to lead people to believe this is even an issue.

The challenge I'm posing is a little more fundamental. To put it in terms of a hypothetical, if investing experience were more often situations like this and not "what will the fed do in its next meeting" or like "are the Germans gonna bail out the Greeks", there would be no Bogleism. I've brought up actuaries because this is how I think about the current crisis: there's no model for it, no predictability about how down the downside might just be. Sure, all the major actors are heavily incentivized to bring the market back, but as we see, stupidity also matters - there are serious suggestions in certain quarters that ignoring the virus and opening businesses again is some kind of option (?). If a combination of idiocracy and an unfortunate moment in the history of pandemics causes a massive downside effect that gets you to break even in several decades, wouldn't you want to be out?
Maybe you should look into volatility managed portfolio strategies where you hold an equity allocation inversely proportional to recent volatility (which tends to cluster). Volatility is a good indicator that the markets model isn’t dialed in. At least this would be systemic and you could use it for life.
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