Actionable advice in a Brexit scenario

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saltycaper
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Re: Actionable advice in a Brexit scenario

Post by saltycaper » Fri Jun 24, 2016 1:49 am

bb10 wrote:When there's high market volatility, how does one buy mutual funds while maintaining their asset allocation?

I ask because I had planned to invest a lump sum worth about 5% of my total assets tomorrow, 6/24, according to my asset allocation of 60% VTSAX, 30% VTIAX, and 10% in a bond fund. This date just happens to be the day after Brexit.

Is there a way I can make sure tomorrow's investment executes in a way that helps maintain my AA? Since mutual fund balances don't update in real-time on Vanguard's website, I'm not sure how to determine the amount of shares to buy tomorrow afternoon. I imagine my VTIAX balance will not look the same at the end of the day tomorrow as it does right now.

I realize I could hold off and buy after I learn my new end-of-day balances tomorrow, but that feels a little "market-timingy" since I'd planned to do this trading anyway. Thanks for any advice!


I check ETFs VXUS and VTI percentage changes toward market close to get an idea.
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Re: Actionable advice in a Brexit scenario

Post by jjface » Fri Jun 24, 2016 2:04 am

The reaction to the brexit vote has been ludicrous. Crazy panic movements in the markets for something that will take years to finalize with plenty of time to see the real details of the transition. I suspect things will settle back to normal pretty quickly.

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elgob.bogle
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Re: Actionable advice in a Brexit scenario

Post by elgob.bogle » Fri Jun 24, 2016 3:26 am

You could use the percentage change values for the ETFs VTI (US) & VXUS (x-US) late in the trading day to estimate the values of your corresponding mutual funds at the time and adjust accordingly. This will not be precise, but may be close enough.

elgob

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Re: Actionable advice in a Brexit scenario

Post by Valuethinker » Fri Jun 24, 2016 3:52 am

viewtopic.php?f=10&t=193853&p=2952365#p2952365

above are my thoughts from yesterday.

A surprise, although there was always that risk (cue endless arguments whether this is a "Black Swan" ;-) ).

For political reasons sterling and Euro likely to be weak for some time.

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Re: Actionable advice in a Brexit scenario

Post by Investment101 » Fri Jun 24, 2016 4:53 am

Fudgie wrote:
triceratop wrote:
packet wrote:The day has arrived ... and I have done and will continue to do nothing different than the day before.

Actually, things look pretty good thus far... :)

:beerCheers,
packet


+1.

Though I am salivating at a buying opportunity for international stocks, if Brexit does occur. The volatility and (hopefully) panic will be useful for long-term investors, i.e. Bogleheads.


Already placed an order for tomorrow! :mrgreen:


nice what did you guys buy? I got vanguard total international, gonna jump in also!

how long do you think the UK/international stocks will keep dropping until it stabilizes from Brexit? maybe a week or something? maybe best to buy a little over a week to 10 days period. I think it usually drops for several days until some good economy news right?

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Re: Actionable advice in a Brexit scenario

Post by Daryl » Fri Jun 24, 2016 5:16 am

S&P 500 Futures are indicating a low open. I'll probably wait until markets open in the US before buying another contract.

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Re: Actionable advice in a Brexit scenario

Post by triceratop » Fri Jun 24, 2016 8:35 am

Investment101 wrote:
Fudgie wrote:
triceratop wrote:
packet wrote:The day has arrived ... and I have done and will continue to do nothing different than the day before.

Actually, things look pretty good thus far... :)

:beerCheers,
packet


+1.

Though I am salivating at a buying opportunity for international stocks, if Brexit does occur. The volatility and (hopefully) panic will be useful for long-term investors, i.e. Bogleheads.


Already placed an order for tomorrow! :mrgreen:


nice what did you guys buy? I got vanguard total international, gonna jump in also!

how long do you think the UK/international stocks will keep dropping until it stabilizes from Brexit? maybe a week or something? maybe best to buy a little over a week to 10 days period. I think it usually drops for several days until some good economy news right?


If Fudgie already placed an order in the off-hours it would almost certainly be for something like VTIAX which would be priced at the close today.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Actionable advice in a Brexit scenario

Post by siamond » Fri Jun 24, 2016 9:12 am

bb10 wrote:I'm trying to figure out if there's a way to know each fund's value in the middle of the day tomorrow so I know how much of each to buy at the end of the day to maintain my AA. This may not be possible, but it'd come in handy on a day like tomorrow.

As other posters indicated, you could use the variation of value of the corresponding ETF, and apply it to the Mutual Fund. I have a small Google Sheet which does exactly that for my own portfolio, it was a small 'fun' project, and it does help a bit for such rebalancing situations. Now this will NOT help for the fact that markets may very well display quite some variability in the coming few days, possibly throwing your AA a tad out of balance right away.

Personally, if I were you, I would do the following:
1. wait a couple of days for the dust to settle a bit
2. maybe do some dollar-cost-averaging (DCA), i.e. invest half of it now, 25% in a week, 25% in another week

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Re: Actionable advice in a Brexit scenario

Post by Tamalak » Fri Jun 24, 2016 9:26 am

My plan after Brexit:

1. Rage
2. Do nothing

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Re: Actionable advice in a Brexit scenario

Post by JCE66 » Fri Jun 24, 2016 9:39 am

OP here....I am taking Mr. Larimore's sage advice: STAY THE COURSE. I am not changing a thing. There is no need to change the IPS at this point. This is an exogenous event that does not materially affect my strategy.

I am a buyer today....FSGUX and FSIVX. Monday may (or may not) present a unique rebalancing opportunity. Who knows? Since I have a long horizon, it probably does not matter all that much. This has been a very interesting discussion, and I really appreciate the Bogleheads for chiming in. And a special thank you to Mr. Larimore who has a way of going to the heart of the issue, and telling us very simple and practical things to consider/do.

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Re: Actionable advice in a Brexit scenario

Post by kingsnake » Fri Jun 24, 2016 9:45 am

I had 50k in money market ready to deploy and I decided to wait for the brexit vote....Deployed into VTIAX and VTSAX today. Maybe I got a deal, maybe not, but it :o feels good though.

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Re: Actionable advice in a Brexit scenario

Post by siamond » Fri Jun 24, 2016 10:33 am

It is interesting to see how Gold acts in such a turbulent day. As of writing, the GLD and IAU ETFs (which track the price of gold itself) are up 4.9% while XME (a decent ETF proxy for VGPMX, the previous metal miners fund) is down 3.9%.

Personally, I don't use gold in my Asset Allocation, although I can understand why some people are attracted to its negative correlation with the rest of the market. But this shows clearly that if you want to play that game, then go with gold itself, not the miners.

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Re: Actionable advice in a Brexit scenario

Post by inbox788 » Fri Jun 24, 2016 10:40 am

JCE66 wrote:OP here....I am taking Mr. Larimore's sage advice: STAY THE COURSE. I am not changing a thing. There is no need to change the IPS at this point. This is an exogenous event that does not materially affect my strategy.

I am a buyer today....FSGUX and FSIVX. Monday may (or may not) present a unique rebalancing opportunity. Who knows? Since I have a long horizon, it probably does not matter all that much. This has been a very interesting discussion, and I really appreciate the Bogleheads for chiming in. And a special thank you to Mr. Larimore who has a way of going to the heart of the issue, and telling us very simple and practical things to consider/do.


What clause in your IPS tells you to buy international funds during an exogenous event? Is this a really bad day strategy? VXUS down almost 7% VTI down nearly 3% (changing minute by minute). I see the dilemma folks who want to maintain AA face. If you wanted to rebalance or at least buy the fund that helps you approach your desired AA. Since proportionally international went down, most people should simply be adding international to bring their AA back into balance, but given the volatility, you may need to rebalance again soon.

kingsnake wrote:I had 50k in money market ready to deploy and I decided to wait for the brexit vote....Deployed into VTIAX and VTSAX today. Maybe I got a deal, maybe not, but it :o feels good though.


I do a little of that myself (market timing). I bought some VXUS around June 15 for guess what? Right around the price today (can't even TLH). Yesterday I was convinced that the cash I had remaining missed the 5% rise up and Brexit was destined to fail, and the I might miss another 5% rise. I almost deployed the rest, but held off to split the risk. Now that things have gone the other way, I'm trying to figure out what to do with these funds, and I'm leaning towards doing nothing. This is just marginal cash that I allow myself to market time. Retirement funds and long term investments are on autopilot and pretty much forgotten when these events take place.

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Re: Actionable advice in a Brexit scenario

Post by Nicolas » Fri Jun 24, 2016 9:41 pm

JonnyDVM wrote:
baw703916 wrote:My advice to any interested Bogleheads would be to not look at your account balance tomorrow, It won't be pretty, unless you have mostly Treasuries.

I guess that would qualify as "inactionable" advice. :)


Limey jerks. First Bunker Hill and now this. Thanks for nothing.


Don't forget they burned down the White House in 1812.

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Re: Actionable advice in a Brexit scenario

Post by rgs92 » Fri Jun 24, 2016 9:58 pm

All these questions about how to keep an Asset Allocation on course.
I thought the best thing to do was to rebalance once a year back to your intended asset allocation and not worry about what happens in the meantime.
Why do people think this Brexit thing is a problem that causes you to deviate from the once-a-year reset?

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Re: Actionable advice in a Brexit scenario

Post by JonnyDVM » Fri Jun 24, 2016 10:02 pm

Nicolas wrote:
JonnyDVM wrote:
Limey jerks. First Bunker Hill and now this. Thanks for nothing.


Don't forget they burned down the White House in 1812.


Yah, but in their defense they were very polite about it.
Sometimes the questions are complicated and the answers are simple. -Dr. Seuss

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Re: Actionable advice in a Brexit scenario

Post by JCE66 » Sat Jun 25, 2016 5:35 am

inbox788....Every Friday, I make weekly contributions to my 401K and Roth IRA. No need to change that [one side note, I did change the Roth IRA contribution to be all intl]. As it happens, my AA has not meaningfully changed (meaning, to rebalance). We'll see what the next week brings. :happy

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Re: Actionable advice in a Brexit scenario

Post by inbox788 » Sat Jun 25, 2016 1:22 pm

JCE66 wrote:inbox788....Every Friday, I make weekly contributions to my 401K and Roth IRA. No need to change that [one side note, I did change the Roth IRA contribution to be all intl]. As it happens, my AA has not meaningfully changed (meaning, to rebalance). We'll see what the next week brings. :happy

Friday seems to bring a lot of volatility. Many a big fall has come on Friday leaving investor nervous over the weekend. Come Monday another volatile day that continues Fridays drop or recovery from over-reaction, and we await what comes Monday.

Do you buy at the opening, close or intraday? My perception, which is probably wrong, is that end of day Friday is generally lower, so a good time to buy. Research may point to another time like Tuesday close or Wednesday open since Wednesday is the best day of the week by 0.032 percent. All this can be confusing, since you want to buy low and sell high and a day when stocks goes up more than another on average isn't helpful to you at the end of the day if you're buying but is if you're selling.

http://finance.zacks.com/day-week-buy-stocks-8954.html

My rebalance bands are wide, so I seldom do it. And like you, I rebalance automatically with more additions to the lesser performing asset. It's simpler and good enough for most intents and purposes. IMO, higher rebalancing rates only lead to more low selling during rising bull markets.

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Re: Actionable advice in a Brexit scenario

Post by JCE66 » Sun Jun 26, 2016 6:49 pm

inbox788....I have mutual funds, not ETFs, so the timing within the day is immaterial. Mutual funds do everything after the close.

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Re: Actionable advice in a Brexit scenario

Post by inbox788 » Mon Jun 27, 2016 3:45 pm

JCE66 wrote:inbox788....I have mutual funds, not ETFs, so the timing within the day is immaterial. Mutual funds do everything after the close.

There is some difference which day of the week, but on average is very small. Still, seems like Fridays and Mondays to me are more down days or more volatile days and those are the ones I would choose to put into some programmed buying. I think Tuesday or Thursday would be my selling days. Don't know if it makes any sense, but I like to buy on down days and sell on up days. There's probably some self selective memory occurring, but it just feels a little better.

Anyway, bought some VXUS today with remaining cash that was allocated, so I'm done for now. Hopefully it's bottom...

Did look at Permanent Portfolio to see how well it stood up to Brexit shock and it looks like the TLT cancelled out VTI and gold was up, so net up. Not sold on the concept, but it does appear defensive for this type of event, which help it catch up when it underperforms during bull markets.

https://ca.finance.yahoo.com/q/bc?s=VTI ... bil%2Csgol

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Re: Actionable advice in a Brexit scenario

Post by Fudgie » Tue Jun 28, 2016 5:55 pm

:oops:
Last edited by Fudgie on Fri Dec 08, 2017 7:43 am, edited 1 time in total.
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Re: Actionable advice in a Brexit scenario

Post by Fudgie » Tue Jun 28, 2016 5:59 pm

:oops:
Last edited by Fudgie on Fri Dec 08, 2017 7:43 am, edited 1 time in total.
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Re: Actionable advice in a Brexit scenario

Post by jwillis77373 » Tue Jun 28, 2016 9:06 pm

You could look upon Brexit.. in the same way as the Japanese look upon a natural distaster. Like a tusnami, something that is predictable and inevitable, almost looked upon as a future opportunity. First comes the destruction and devastation, followed by the reconstruction and resurgence.

Now would be the devastation (natural or man-made) its still far from over... and its spreading like a tsunami over the EU.. I don't pretend to know anything about all their problems.. but its obvious many look upon this event as an opportunity to vent.. and "get it all out".

In the short term its a rebalancing exercise (between the rich and the poor) those with lots will have to sell at lower prices.. those saving (and investing) will pickup really good deals.. traders will collect lots of fees. Financials that don't leverage will make a lot of money.

I don't see a rebound in a couple days.. a couple weeks.. or even a few years. Heck our booms and busts seem to last around 5 years apart.

With that in mind why would you "think" you know better than all the professionals that are actually on the scene and local to the event?

Jack Bogle is right.. you don't need all that crazy uncertainty and confusion (self confusion) don't outsmart "yourself" buy the market.. the US market.. and if you feel like playing the EU slot machines.. make sure its a lot less than 15% even less than 10%.. the average amount you'd loose in a correction event in the US markets.. that can be made up in a single cycle of foolishness.. learned, and forgotten.. but you don't have 10 or 20 or 30 years.. or longer, as it seems in the Asian markets.

Diversification isn't meant to be a shopping list to "buy this, buy that" its an example that if you hold the "market" you hold [everything] there is no extra 'smart' coy or sly plan.. you are maximally diversified.. your in every sector. Bonds are stocks, just with lower returns.. and a boat load of fees and extra game rules.. Bonds [can] outsmart you. Cash outsmarts you.. because its like carrying a leaky bucket.. inflation and taxes (income or sales) are constantly draining the bottom of the bucket.. but you don't even notice it. -- I guess the unkind, unwritten rule is.. if you don't know how to handle an emergency, and [have] an emergency fund.. if you don't know how to save.. [you should not be investing!] you have lessons far more important to learn first.. don't put an emergency fund in the market (and you won't have to sell it when the market is down).
Last edited by jwillis77373 on Tue Jun 28, 2016 9:38 pm, edited 1 time in total.

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Re: Actionable advice in a Brexit scenario

Post by madbrain » Tue Jun 28, 2016 9:36 pm

Here is some actionable if you have a mortgage : bond prices are getting higher, which means interest rates are going down.

I have a mortgage at 3.375% fixed rate, 30 year. The loan officer who did my last no-cost refi at that rate 4 years ago contacted me today to let me know that it's possible that rates will get even lower and he might be able to do a no-cost 30year refi at 3.25% soon - not quite just yet. So yes, something good can come out of this. It may be a lot of paperwork for a small interest rate reduction, but when all closing costs are paid by the lender, there is very little reason not to do it. 0.125% reduciton would save me over $400/year in interest currently, so that's something.

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Re: Actionable advice in a Brexit scenario

Post by Investment101 » Wed Jun 29, 2016 9:49 am

madbrain wrote:Here is some actionable if you have a mortgage : bond prices are getting higher, which means interest rates are going down.

I have a mortgage at 3.375% fixed rate, 30 year. The loan officer who did my last no-cost refi at that rate 4 years ago contacted me today to let me know that it's possible that rates will get even lower and he might be able to do a no-cost 30year refi at 3.25% soon - not quite just yet. So yes, something good can come out of this. It may be a lot of paperwork for a small interest rate reduction, but when all closing costs are paid by the lender, there is very little reason not to do it. 0.125% reduciton would save me over $400/year in interest currently, so that's something.


nice of officer to contact you. any idea how long the low rate will last (or keep going down)? probably awhile until they figure out Brexit?

world stocks went up the 2nd day....tho it will keep going on so not gonna buy vanguard total international

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Re: Actionable advice in a Brexit scenario

Post by Gort » Wed Jun 29, 2016 10:04 am

Alchemist wrote:
jmagi76461 wrote:I never felt particularly comfortable with international equities, but had about 25% because prevailing theory called for it. I did what I thought was my due diligence...tried to learn everything I could about Brexit...long story short I'm more confused than ever! So, I went with my what was right for ME...I exchanged all international for total stock late last week. If the Brexit hits the fan and it goes down, I'll be buying with the church lady..if nothing happens, I feel much more comfortable with my 2-Fund portfolio. :beer


That's the problem with theory giving portfolio recommendations. It is always backward looking and only able to tell you what portfolio you should have had in the past. A portfolio should be designed to be comfortable to be held under worse-case scenarios. Anything else will cause you to feel forced into action as opposed to staying the course when faced with uncertain events like Brexit.


Well said.

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Re: Actionable advice in a Brexit scenario

Post by Doc » Wed Jun 29, 2016 10:11 am

rgs92 wrote:All these questions about how to keep an Asset Allocation on course.
I thought the best thing to do was to rebalance once a year back to your intended asset allocation and not worry about what happens in the meantime.
Why do people think this Brexit thing is a problem that causes you to deviate from the once-a-year reset?


People rebalanced based on:

    Time frame
    Bands
    New contributions
    Withdrawals
    RBD's
    Valuations

Where did you get the idea that any one of these is "best" for everyone.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: Actionable advice in a Brexit scenario

Post by Doc » Wed Jun 29, 2016 10:16 am

Gort wrote:
Alchemist wrote:
jmagi76461 wrote:I never felt particularly comfortable with international equities, but had about 25% because prevailing theory called for it. I did what I thought was my due diligence...tried to learn everything I could about Brexit...long story short I'm more confused than ever! So, I went with my what was right for ME...I exchanged all international for total stock late last week. If the Brexit hits the fan and it goes down, I'll be buying with the church lady..if nothing happens, I feel much more comfortable with my 2-Fund portfolio. :beer


That's the problem with theory giving portfolio recommendations. It is always backward looking and only able to tell you what portfolio you should have had in the past. A portfolio should be designed to be comfortable to be held under worse-case scenarios. Anything else will cause you to feel forced into action as opposed to staying the course when faced with uncertain events like Brexit.


Well said.


Badly said.

So you are comfortable when a Lehman goes down and you just sit there and do nothing? Most bogleheads will rebalance, maybe not at the moment but whenever their IPS tells them it's appropriate. Buying into a bear market is seldom "comfortable" for any of us.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: Actionable advice in a Brexit scenario

Post by JCE66 » Wed Jun 29, 2016 10:42 am

Had to update the 'actionable possibilities'

So.....summing up the various possibilities.

Don't just do something, stand there.
Short the pound. [edit: people who did this made a TON of money, and probably literally a ton if you weighed it]
Sell EU index holdings, hold cash and wait for the crash to buy back EU index funds at a huge discount [edit: Brexit happened!]
Buy more EU index funds, regardless of Brexit. [edit - I did this]
Refinance your mortgage (assuming bond prices go up and mortgage rates fall)
Rebalance if your IPS calls for it, and you hit your rebalance bands

Speaking only for myself, I took the hybrid path of 'just stand there' + directing my weekly contributions (401K, Roth) into my int'l index funds for the week. It has now been changed back to what I was doing before. Probably doesn't mean all that much, but psychologically satisfying to feel like I bought on the cheap. :mrgreen:

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Re: Actionable advice in a Brexit scenario

Post by btenny » Wed Jun 29, 2016 11:27 am

Traveling to England and visiting from the US is now much cheaper. So very actionable. :happy :happy

Have Fun...

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Re: Actionable advice in a Brexit scenario

Post by jjface » Wed Jun 29, 2016 11:28 am

btenny wrote:Traveling to England and visiting from the US is now much cheaper. So very actionable. :happy :happy

Have Fun...


Even the exchange rate is starting to recover a bit.

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Re: Actionable advice in a Brexit scenario

Post by Valuethinker » Wed Jun 29, 2016 11:37 am

Main thing I learned was DO NOTHING

Also that depending on one's view of the political event, it will shape one's investment perspective. You have to watch that.

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Re: Actionable advice in a Brexit scenario

Post by Fallible » Wed Jun 29, 2016 12:08 pm

Valuethinker wrote:Main thing I learned was DO NOTHING
Also that depending on one's view of the political event, it will shape one's investment perspective. You have to watch that.

I'm not certain why, but I think this was especially true in the case of the Brexit vote and its widespread implications. I thought this "Oblivious Investor" blog by Mike Piper nicely clarified the situation for investors:
http://www.obliviousinvestor.com/brexit ... ic-events/
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Re: Actionable advice in a Brexit scenario

Post by jwillis77373 » Wed Jun 29, 2016 12:20 pm

Buying into a down or falling market is always more comfortable.. for me.. I can't stand it when the market goes up and uP and UP.. more and more expensive every paycheck.

The one thing you know about a falling market.. is it will [Always] have to retrace its steps.. even if its highly over valued in the short term.. simply because of inflation. So its always a win-win.

The only way to guarantee a "loss" when buying into a "falling market" is to rebalance (lock-in) your losses and shift funds around.. the traders are your tax collectors then.. and your Torpedoing your own self-confidence that you made a good judgement call.. in fact you just admitted defeat and burned a pile of cash in the process.

.. <shakes head in disbelief>..

this should all be so very obvious

Indexes that are not Total Market.. can hit zero. The Total Market has never hit totally zero.

There is a diffrence between Total Market Index and Hedge Fund/(Sector Fund)Indexes..

The reasons to [not] legitimize US vs International as "diversification" remain. They are different markets, [Not] different investment categories or out of phase asset classes.. they are different "Markets". Different political systems, different currencies, different agendas and goals, different retirement polices, different tax systems, different health care systems -- these little inconvenient facts really "do" matter. -- waving your hand and saying "don't sweat the details is insanity".

Now consider the EU that's 27 "times" the risk you missed something by watching 27 times the complexity of the US market. And your not even local to the situation... crazy.

Actionable:

1. If your already in a European or International fund.. now is not the time to exit.. wait 25 or 30 years, at least make up the cost of your fees before exiting.

2. If your not in any International.. don't start, take a look at what your going to be "wild guessing about".. then take the money and go to Las Vegas. The odds are much better. Or save the air fare and buy a Lottery ticket.

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Re: Actionable advice in a Brexit scenario

Post by Valuethinker » Wed Jun 29, 2016 12:40 pm

jwillis77373 wrote:Actionable:

1. If your already in a European or International fund.. now is not the time to exit.. wait 25 or 30 years, at least make up the cost of your fees before exiting.

2. If your not in any International.. don't start, take a look at what your going to be "wild guessing about".. then take the money and go to Las Vegas. The odds are much better. Or save the air fare and buy a Lottery ticket.


OK things that are wrong about this post

- markets do not always recover. After all, what if there is no inflation (Japan last 25 years)? And if an investment is wrong for a portfolio "make up the cost of your fees" is not good advice-- it's a sunk cost that has to be ignored in making decisions about the future. The only things that matter are future expected returns and volatility (and correlation with other assets)

- international equities are not the equivalent of investing in Las Vegas-- in Las Vegas the house always wins, long run. The US stock market "won" the 20th century (behind Australia) but it's unlikely it can do that in the 21st-- the PE expansion cannot continue infinitely and big US companies are so big they are dependent on global economic growth, not just US

It's a big world out there and it has some companies you may have heard of? Samsung. HSBC. Nestle. TSMC. Total? BP? Shell? Cemex? Vodafone? Glaxo Smithkline, Astra Zeneca, Roche, Sanofi, Nordisk ? Carrefour? Inditex (Zara)? We could also mention unquoted ones-- you have heard of IKEA?

We could also name US political risks. Recall what just happened in the UK-- the impossible can become very possible.
Last edited by Valuethinker on Wed Jun 29, 2016 12:42 pm, edited 1 time in total.

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Re: Actionable advice in a Brexit scenario

Post by Valuethinker » Wed Jun 29, 2016 12:41 pm

Fallible wrote:
Valuethinker wrote:Main thing I learned was DO NOTHING
Also that depending on one's view of the political event, it will shape one's investment perspective. You have to watch that.

I'm not certain why, but I think this was especially true in the case of the Brexit vote and its widespread implications. I thought this "Oblivious Investor" blog by Mike Piper nicely clarified the situation for investors:
http://www.obliviousinvestor.com/brexit ... ic-events/


A bit like US presidential elections, in fact, in that way.

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Re: Actionable advice in a Brexit scenario

Post by 2beachcombers » Wed Jun 29, 2016 1:31 pm

Was on vacation the last two weeks--Did something happen? My accounts haven't moved :P

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Re: Actionable advice in a Brexit scenario

Post by Gort » Wed Jun 29, 2016 2:17 pm

Doc wrote:
Gort wrote:
Alchemist wrote:
jmagi76461 wrote:I never felt particularly comfortable with international equities, but had about 25% because prevailing theory called for it. I did what I thought was my due diligence...tried to learn everything I could about Brexit...long story short I'm more confused than ever! So, I went with my what was right for ME...I exchanged all international for total stock late last week. If the Brexit hits the fan and it goes down, I'll be buying with the church lady..if nothing happens, I feel much more comfortable with my 2-Fund portfolio. :beer


That's the problem with theory giving portfolio recommendations. It is always backward looking and only able to tell you what portfolio you should have had in the past. A portfolio should be designed to be comfortable to be held under worse-case scenarios. Anything else will cause you to feel forced into action as opposed to staying the course when faced with uncertain events like Brexit.


Well said.


Badly said.

So you are comfortable when a Lehman goes down and you just sit there and do nothing? Most bogleheads will rebalance, maybe not at the moment but whenever their IPS tells them it's appropriate. Buying into a bear market is seldom "comfortable" for any of us.


So who said anything about doing nothing? My interpretation of Alchemist's post was to have an appropriate portfolio given your acceptable level of risk. For example, a person with a 60/40 portfolio who gets rattled by the day-to-day activities in the market may "feel forced into action" such as drastically changing the asset allocation to a 40/60 portfolio "as opposed to staying the course." As you said, "Most bogleheads will rebalance, maybe not at the moment but whenever their IPS tells them it's appropriate." I agree with that but that wasn't was Alchemist was referring to in his post.

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Re: Actionable advice in a Brexit scenario

Post by nedsaid » Wed Jun 29, 2016 2:37 pm

What is actionable advice? In the case of Brexit, we saw maybe a 5% correction in the stock market and now the US Stock Market is in its second day of roaring back. Two big down days followed by two up days. Still, the market is net down. A bell isn't rung just before markets sell off or just before they rebound. To market time this would be difficult.

Let's say that you sold on the day before the results of the referendum were known. When would you get back in? The markets have been very strong the last two trading days but perhaps a timer would be skeptical of the rally. One might wait until the markets were back at all time highs before thinking it safe to go back in. Your sell and then rebuy might actually leave you with a bit less money than if you had just let things ride. It is the market whiplash effect that trips up timing.

Really, the most actionable advice would be to be widely diversified. Don't put all your eggs in one country or one region. Be diversified all over the world. Own enough bonds so that stock market volatility is bearable. The key is to not sell at the bottom. The old buy low, sell high advice.
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Re: Actionable advice in a Brexit scenario

Post by nedsaid » Wed Jun 29, 2016 2:44 pm

Another thing to consider when thinking about actionable advice is that markets and economies adjust.
We live in a dynamic environment and not a static one. It also is not a good idea to attempt to make investment decisions around particular events. First of all, the event may not actually happen. Second, if the event occurs, the effects may not be as expected. Third, there is the unknown. You can't anticipate everything.
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Re: Actionable advice in a Brexit scenario

Post by madbrain » Wed Jun 29, 2016 9:39 pm

The only action I took so far was to reinvest $2500 recently deposited dividends in my taxable account into the Total international mutual on friday.
I believe that lot is already up nicely . That was a very small action that I might have taken anyway even without the Brexit vote.

It seems the US stock markets have already pretty much shrugged it off, which is a bit too fast. I doubt this is the end of it.

The Euro is still down 4% so I told my mother to hold off wiring me funds that she owed me - she was supposed to send them thursday, but turns out her bank requires the wire order to be placed by snail mail (!) and the euro had dropped 5% by the time the mail arrived, so she cancelled it.

As I mentioned above, I may refinance my mortgage if the rates drop further. Can't really think of much else in terms of what to do as a result. This friday/monday change was fairly small change compared to previous ones, like the US debt crisis in August 2011, and of course late 2008/early 2009.

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Re: Actionable advice in a Brexit scenario

Post by Doc » Thu Jun 30, 2016 8:58 am

nedsaid wrote:Another thing to consider when thinking about actionable advice is that markets and economies adjust.
We live in a dynamic environment and not a static one. It also is not a good idea to attempt to make investment decisions around particular events. First of all, the event may not actually happen. Second, if the event occurs, the effects may not be as expected. Third, there is the unknown. You can't anticipate everything.

A distinction should be made as to taking action on future events versus taking action on events that already happened.
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Re: Actionable advice in a Brexit scenario

Post by nedsaid » Thu Jun 30, 2016 9:34 am

Doc wrote:
nedsaid wrote:Another thing to consider when thinking about actionable advice is that markets and economies adjust.
We live in a dynamic environment and not a static one. It also is not a good idea to attempt to make investment decisions around particular events. First of all, the event may not actually happen. Second, if the event occurs, the effects may not be as expected. Third, there is the unknown. You can't anticipate everything.

A distinction should be made as to taking action on future events versus taking action on events that already happened.


I suppose once an event has happened and the uncertainty gone, that everything is priced in. Buy on the rumor, sell on the news. Or at least that is what they say.
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Re: Actionable advice in a Brexit scenario

Post by just frank » Thu Jun 30, 2016 9:40 am

I'm surprised no-one had mentioned US REITs....which have popped nicely since Brexit, given that they have been held down lately by impending Fed rate increases....now off the table. 8-)

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Re: Actionable advice in a Brexit scenario

Post by Doc » Thu Jun 30, 2016 10:06 am

nedsaid wrote:I suppose once an event has happened and the uncertainty gone, that everything is priced in. Buy on the rumor, sell on the news. Or at least that is what they say.

Depends on whether the news is good or bad. "They" are usually buying on good news and selling on bad news but Bogleheads are doing the opposite and calling it "stay the course and rebalance". :beer
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Re: Actionable advice in a Brexit scenario

Post by protagonist » Thu Jun 30, 2016 12:24 pm

Doc wrote: "They" are usually buying on good news and selling on bad news but Bogleheads are doing the opposite and calling it "stay the course and rebalance". :beer


Great point.

"Rebalancing" is just another way of saying "market timing". When the market declines you buy. When it goes up you sell. I never thought of it that way before. What politician thought up the term? Doublespeak for sure.

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Re: Actionable advice in a Brexit scenario

Post by Doc » Thu Jun 30, 2016 12:41 pm

protagonist wrote:
Doc wrote: "They" are usually buying on good news and selling on bad news but Bogleheads are doing the opposite and calling it "stay the course and rebalance". :beer


Great point.

"Rebalancing" is just another way of saying "market timing". When the market declines you buy. When it goes up you sell. I never thought of it that way before. What politician thought up the term? Doublespeak for sure.


Market timing is a strategy to increase return by making a prediction of future events.
Market timing is the strategy of making buy or sell decisions of financial assets (often stocks) by attempting to predict future market price movements.

https://en.wikipedia.org/wiki/Market_timing


Rebalancing is a strategy that is meant to keep your risk constant without any prediction of future market moves.
The Bogleheads Wiki wrote:Rebalancing is the action of bringing a portfolio that has deviated away from one's target asset allocation back into line. The objective is to maintain a consistent mix of asset classes (most commonly equities vs. fixed income) in order to control risk at the level desired by the investor.

https://www.bogleheads.org/wiki/Rebalancing

They are not the same thing.
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Re: Actionable advice in a Brexit scenario

Post by jwillis77373 » Thu Jun 30, 2016 12:44 pm

protagonist wrote:
Doc wrote: "They" are usually buying on good news and selling on bad news but Bogleheads are doing the opposite and calling it "stay the course and rebalance". :beer


Great point.

"Rebalancing" is just another way of saying "market timing". When the market declines you buy. When it goes up you sell. I never thought of it that way before. What politician thought up the term? Doublespeak for sure.


Yes

very nice point.. rebalancing alwayed looked like volunteering to pay transaction fees

But I think all the "waffling" about asset allocation and Bonds boils down to "whatever makes you feel good".. which is another way of saying.. I don't expect you to [hold the market] but the closer you get to that.. the better off you will be.. just don't go nuts with like 25% sector tilting or way off the rail road tracks and run to cash waiting for a rebound.. or the sky to fall. -- effective financial therapy is a difficult thing to execute

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Re: Actionable advice in a Brexit scenario

Post by protagonist » Thu Jun 30, 2016 1:33 pm

Doc wrote:
protagonist wrote:
Doc wrote: "They" are usually buying on good news and selling on bad news but Bogleheads are doing the opposite and calling it "stay the course and rebalance". :beer


Great point.

"Rebalancing" is just another way of saying "market timing". When the market declines you buy. When it goes up you sell. I never thought of it that way before. What politician thought up the term? Doublespeak for sure.


Market timing is a strategy to increase return by making a prediction of future events.
Market timing is the strategy of making buy or sell decisions of financial assets (often stocks) by attempting to predict future market price movements.

https://en.wikipedia.org/wiki/Market_timing


Rebalancing is a strategy that is meant to keep your risk constant without any prediction of future market moves.
The Bogleheads Wiki wrote:Rebalancing is the action of bringing a portfolio that has deviated away from one's target asset allocation back into line. The objective is to maintain a consistent mix of asset classes (most commonly equities vs. fixed income) in order to control risk at the level desired by the investor.

https://www.bogleheads.org/wiki/Rebalancing

They are not the same thing.


Philosophically, no, they are not the same. But practically speaking, rebalancing is clearly a form of market timing, if it results in buying when the market is low (and your portfolio becomes stock-heavy) and, vice versa, selling when the market is high (thus altering your AA). The difference is you are doing it to "maintain risk level and stay the course" rather than "predict the future". But so what?

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Re: Actionable advice in a Brexit scenario

Post by Doc » Thu Jun 30, 2016 2:23 pm

protagonist wrote:Philosophically, no, they are not the same. But practically speaking, rebalancing is clearly a form of market timing, if it results in buying when the market is low (and your portfolio becomes stock-heavy) and, vice versa, selling when the market is high (thus altering your AA). The difference is you are doing it to "maintain risk level and stay the course" rather than "predict the future". But so what?

I don't agree. As the Wiki quotes note: The "aim" of market timing is to influence return while the "aim" of rebalancing is to keep risk constant without regard to what the return is.

If you decide that they are just opposite sides of the same coin how can Bogleheads say rebalancing is good but market timing is bad.

That is not logical. :D
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