For those that "buy" during stock market downturns...

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Compound
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For those that "buy" during stock market downturns...

Post by Compound » Tue Jun 28, 2016 7:28 am

Can you explain how you execute that strategy?

I'm truly curious where the money comes from.

My understanding is that many (?most) Bogleheads prefer to buy on a set schedule as money comes in, such as through regular 401k contributions or scheduled taxable investments. But there seem to be at least a few that look at these market downturns as "buying" opportunities.


Best I can tell there are several ways this activity can be funded:
1. Rebalancing bands are activated. When used in this sense, I can't say that I agree the term "buying" should be used. Rather the investor is rebalancing from bonds to stocks.
2. New money just happened to come in on or about the buying date and is held looking for opportunities. This could be in the form of a regular paycheck or otherwise.
3. Cash is kept on hand with an eye to pile into stocks with market downturns. Clearly this is a form of market timing. Also, it seems to suggest a form of floating asset allocation.
4. Others. I'm such there are other ways people do this.

This type of behavior makes a lot of intuitive sense to me because stocks are on "sale" in comparison to recent pricing. However, I just can't wrap my head around how this could be successfully executed without an opportunity cost (such as not being fully invested at all times).

From those of you who take advantage of these opportunities, I'd love to hear how you do it.

livesoft
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Re: For those that "buy" during stock market downturns...

Post by livesoft » Tue Jun 28, 2016 7:31 am

I exchanged from bond ETFs and bond funds into equity funds.

Also I had a handful of dividends that were paid in mid to late June that needed reinvesting. For instance, the payable dates for DGS & IVV were conveniently 6/24 and 6/27.
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Re: For those that "buy" during stock market downturns...

Post by Doc » Tue Jun 28, 2016 7:42 am

livesoft wrote:I exchanged from bond ETFs and bond funds into equity funds.

Also I had a handful of dividends that were paid in mid to late June that needed reinvesting. For instance, the payable dates for DGS & IVV were conveniently 6/24 and 6/27.
Ditto except for the specific securities.
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Polymath
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Re: For those that "buy" during stock market downturns...

Post by Polymath » Tue Jun 28, 2016 7:43 am

All of my tax differed accounts are on auto-pilot and maxed out. For excess funds beyond my tax differed I "pool" cash over a month and direct it towards market opportunities. This could be stock/bonds , real estate, debt reduction, a car purchase etc. It is this cash that I use in a "market timing" fashion but also part of serving my mental need to be more "active". In sum it is a small part of my portfolio activity. The good news it is all spelled out in my families investment plan.

Compound
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Re: For those that "buy" during stock market downturns...

Post by Compound » Tue Jun 28, 2016 7:46 am

livesoft wrote:I exchanged from bond ETFs and bond funds into equity funds.

Also I had a handful of dividends that were paid in mid to late June that needed reinvesting. For instance, the payable dates for DGS & IVV were conveniently 6/24 and 6/27.
Thanks for your reply livesoft.

If I may ask, was the exchange from bond etfs and bond funds into equity funds because of crossing a rebalancing band, because of a RBD trigger, or otherwise? Do you allow your asset allocation to float in order to take advantage of stock market downturns?

Thanks again!

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Kitty Telltales
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Re: For those that "buy" during stock market downturns...

Post by Kitty Telltales » Tue Jun 28, 2016 7:48 am

Your point No. 2 is true for me. I recently sold a property with the intention of investing the proceeds in the market. I'm rather new to Bogleheads and realize that sorting things out in a Bogle way will take some time, but that's the goal. However, knowing that Brexit was coming, I decided in early May to wait for the results. Of course, it could have gone the other way.
Last edited by Kitty Telltales on Tue Jun 28, 2016 7:49 am, edited 1 time in total.

Compound
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Re: For those that "buy" during stock market downturns...

Post by Compound » Tue Jun 28, 2016 7:48 am

Compound wrote:
livesoft wrote:I exchanged from bond ETFs and bond funds into equity funds.

Also I had a handful of dividends that were paid in mid to late June that needed reinvesting. For instance, the payable dates for DGS & IVV were conveniently 6/24 and 6/27.
Thanks for your reply livesoft.

If I may ask, was the exchange from bond etfs and bond funds into equity funds because of crossing a rebalancing band, because of a RBD trigger, or otherwise? Do you allow your asset allocation to float in order to take advantage of stock market downturns?

Thanks again!
Doc: just saw your response, could you answer the above questions as well?

Thank you!

furnace
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Re: For those that "buy" during stock market downturns...

Post by furnace » Tue Jun 28, 2016 7:58 am

Having a "cash" component as part of your portfolio is wise. You hardly lose any performance if you keep something like 5% in cash.

Grogs
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Re: For those that "buy" during stock market downturns...

Post by Grogs » Tue Jun 28, 2016 8:17 am

In my case, I put in some money yesterday (Monday) that I was going to invest anyway. I got paid Friday, so it was basically your #2 above. My next scheduled buy now would be after my next payday in late July. Anything before then would be #3, essentially spending down my emergency fund to be replenished later. Hopefully I can resist the temptation to do that (or the market will go back up and there will be no temptation).

50ismygoal
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Re: For those that "buy" during stock market downturns...

Post by 50ismygoal » Tue Jun 28, 2016 8:21 am

My IRA is 100% BIV (Intermediate-term bonds), so on days like Friday and Monday, I'll sell a little BIV and buy some equities, in yesterday's case Vanguard's ETF that track's European equities. I don't plan on holding these long as I want my IRA to be all bonds, so when these rise up I'll shift back to bonds. If they go lower, I'l but more equities. Hopefully, my IRA will expand over time. Of course, this is antithetical to the Boglehead philosophy as this is market-timing defined. But it is a small percentage of my overall portfolio.

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Re: For those that "buy" during stock market downturns...

Post by White Coat Investor » Tue Jun 28, 2016 8:21 am

Compound wrote:Can you explain how you execute that strategy?

I'm truly curious where the money comes from.

My understanding is that many (?most) Bogleheads prefer to buy on a set schedule as money comes in, such as through regular 401k contributions or scheduled taxable investments. But there seem to be at least a few that look at these market downturns as "buying" opportunities.


Best I can tell there are several ways this activity can be funded:
1. Rebalancing bands are activated. When used in this sense, I can't say that I agree the term "buying" should be used. Rather the investor is rebalancing from bonds to stocks.
2. New money just happened to come in on or about the buying date and is held looking for opportunities. This could be in the form of a regular paycheck or otherwise.
3. Cash is kept on hand with an eye to pile into stocks with market downturns. Clearly this is a form of market timing. Also, it seems to suggest a form of floating asset allocation.
4. Others. I'm such there are other ways people do this.

This type of behavior makes a lot of intuitive sense to me because stocks are on "sale" in comparison to recent pricing. However, I just can't wrap my head around how this could be successfully executed without an opportunity cost (such as not being fully invested at all times).

From those of you who take advantage of these opportunities, I'd love to hear how you do it.
You can't do it without opportunity cost. But there's a little room around the edges to fiddle. You can hold your 401(k) contribution a day or two. You can rebalance a little early or before your bands are hit. You can take money that was being saved for something else and buy stocks with it. It's just market timing and a way to make yourself feel better about your recent losses-"Yea, I lost $100K but I bought $10K of stocks on sale!" Kind of like TLHing that way. Beats panic-selling.
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tedclu
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Re: For those that "buy" during stock market downturns...

Post by tedclu » Tue Jun 28, 2016 8:26 am

http://longleafpartners.com/sites/defau ... pril29.pdf

II keep cash most times, but more when market is over valued(like US market now).
At certain times, Cash a is a good thing. See above white paper from Southeastern Asset Management.

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Re: For those that "buy" during stock market downturns...

Post by Rodc » Tue Jun 28, 2016 8:34 am

furnace wrote:Having a "cash" component as part of your portfolio is wise. You hardly lose any performance if you keep something like 5% in cash.
But also no real benefit as far as rebalancing or buying dips vs just having that 5% in bonds. You can put either into stocks anytime you wish.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

alex_686
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Re: For those that "buy" during stock market downturns...

Post by alex_686 » Tue Jun 28, 2016 8:56 am

I would say that "buying during stock mark downturns" is a psychological trick to combat behavioral defects.

As Bogleheads we believe in a efficient market and that we lack the knowledge to market time. Studies, logic, and experience has taught us that the best way to run a portfolio if to forge a optimal asset allocation and stick with it. Depending on cash flows and market movements we always rebalance back to our optimal AA.

However, what if we feel that the market is overvalued? How do we justify buying into that? Well, for one we know we are not smart enough to market time, so we hold to our AA. As the market falls, and we suspect that the market will keep on falling, why do we rebalance our AA by buying more stocks? Because we don't know what the future holds, so we hold to logic and not our feelings - and rebalance by buying more stocks.

How do we reconcile our feelings with logic? We come up with a little post hoc justification - when the market dips we buy cheap stock. This is tosh but it makes us feel better.

Theseus
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Re: For those that "buy" during stock market downturns...

Post by Theseus » Tue Jun 28, 2016 9:25 am

Major proportion (close to 85%) of my money is outside tax sheltered accounts (for various reasons). Most of the money is in broad index funds (S&P etc) that have appreciated quite a bit. So rebalancing is really hard for me since it triggers capital gains tax etc.

So what I have done is I retain any dividends and distributions in cash rather than reinvesting. And then every 2-3 years I have enough cash to help with some rebalance. I am 49 and I keep only about 15% in bond funds since I am ok with 20% market swings and I don't change anything when markets crash (I actually use the cash to buy more S&P 500 index funds). From what I have heard Bogle say is that if you have high tolerance for risk (I believe I do) then you are better of with all your money in S&P 500.

This probably is not the most effective strategy (if there is a better way please chime in).

archii
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Re: For those that "buy" during stock market downturns...

Post by archii » Tue Jun 28, 2016 9:28 am

Simple. I always keep a rather large cash position, currently 500K or about 8%. I keep it in a 1.05% savings account. With current inflation, it's holding it's own if not performing better YTD. This will change, and I plan on investing half of this cash position over a period of time into an established AA plan. When markets take a dive, I put it to work. In either case I move it into the market. The frequency and amount just varies according to market valuations. In addition, I have about 75% of my dividends reinvested automatically. All I know is that a particular index fund was a lot cheaper on monday than it was on thursday of last week.
Last edited by archii on Tue Jun 28, 2016 9:36 am, edited 1 time in total.

rbaldini
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Re: For those that "buy" during stock market downturns...

Post by rbaldini » Tue Jun 28, 2016 9:34 am

Compound wrote: This type of behavior makes a lot of intuitive sense to me because stocks are on "sale" in comparison to recent pricing.
It my (modest) experience, this actually doesn't work. Eschewing all financial theory (of which I know virtually nothing), one can simply look at the historical data. Take, say, last month's return and compute the correlation with next year's (or next 5 years) return. If the stock is "on sale", then your future return should be modestly negatively correlated with the recent return - i.e., price drops precede price increases.

But it's not true. Looking at S&P 500 prices since Jan 1930, the correlation between last month's return and the following year's return is 0.0089. With the next 5 years, it's 0.0127. Neither are negative; more importantly, both are effectively 0. In other words, recent performance tells you just about nothing.

This is consistent with the "stay-the-course/it's-all-noise" philosophy. It's not consistent with the "a recent drop means that stocks are on sale" philosophy.

magneto
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Re: For those that "buy" during stock market downturns...

Post by magneto » Tue Jun 28, 2016 9:40 am

"This type of behavior makes a lot of intuitive sense to me because stocks are on "sale" in comparison to recent pricing. However, I just can't wrap my head around how this could be successfully executed without an opportunity cost (such as not being fully invested at all times)". Compound (OP)

This opportunity cost assumes that Stocks continue steadily to outperform all other assets at all times, without a hitch.
A look back at history can indicate this might not be the case?
This argument taken to its' logical conclusion would mean a 100% Stock Portfolio regardless of valuations.

If we look at the main methods of allocating Assets :-

1. Tactical Asset Allocation aka Market Timing
An endeavour to seek out the most or least promising Asset going forward for short-term outperformance, using such tools as economic criteria, valuations, or plain moving averages/accel/decel chartism. Can sometimes be taken to extremes by moving totally in or out from the most unpromising Asset Classes to the most promising Asset Classes.

2. Investment Formula Plans
2.1 Constant Value Investment (esp to Stocks allocation)
2.2 Constant Value Investment, with added gentle slope over time (esp to Stocks allocation)
2.3 Constant Ratio Investment (aka Strategic Asset Allocation) the BH default!
2.4 Variable Ratio Investment (aka Dynamic Asset Allocation or Valuation Driven Investment)


If it helps we use :-

2.4 for Stock : Fixed Income Ratio.
2.3 for geographical/sector allocations
2.1 and/or 2.2 for individual holdings.

But then we are RTM/Value, not Momentum Investors.

2.1 and 2.2 flag up very quickly on a spreadsheet, any add or reduce opportunities.
We do however trade more frequently than most here would advocate.

The end result can be steadily growing positions at ever reducing book cost.
The book cost for long held positions can even turn negative
So my hero Buzz Lightyear might say the capital gain is beyond infinity!

There is a flaw in that last para which will almost certainly be picked up by other posters?
Last edited by magneto on Tue Jun 28, 2016 10:00 am, edited 3 times in total.
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MathWizard
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Re: For those that "buy" during stock market downturns...

Post by MathWizard » Tue Jun 28, 2016 9:43 am

I don't have cash lying around to buy on sale.

I do rebalance, so when there is a sharp drop in equities relative to bonds, I am "buying stocks on sale".

That at least is my argument to those who say "Get out of the market,it is falling", after a big drop.
But that is a bad time to sell. Thinking of this as buying equities on sale makes a good counter argument.

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Re: For those that "buy" during stock market downturns...

Post by golfallday » Tue Jun 28, 2016 9:44 am

I have a nice pile of cash on hand. I bought $10k of VXUS on Friday morning. I'll buy more if panic selling occurs over the next few weeks. I'll never trade it. Something for my 2 grandchildren and St Jude Children's Research Hospital 20 years down the road. VXUS is on sale. I understand it's market timing which is sacrilege on this forum. Some bargains you just can't pass up.

livesoft
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Re: For those that "buy" during stock market downturns...

Post by livesoft » Tue Jun 28, 2016 9:49 am

Compound wrote:If I may ask, was the exchange from bond etfs and bond funds into equity funds because of crossing a rebalancing band, because of a RBD trigger, or otherwise? Do you allow your asset allocation to float in order to take advantage of stock market downturns?
My IPS says I must buy on RBDs (unless they occur on Friday, but it does not say I cannot buy on Fridays). I increase my allocation to equities at such times, so I don't even have to see if I cross a rebalancing band or not. My IPS also says that if a bond fund goes up 0.5% or more in a few hours, then I must buy equities, too.

My asset allocation to equities thus floats a little bit. On Thursday evening it was about 59% and this morning before the open, it was 66%. I may start selling equities today.

As for the holding cash waiting for these opportunities, I will note that bond funds went up about 1% in the past two days. See if your cash ever does that. In other words, when one has cash, one should invest it and not wait for opportunities. The cash could be used to buy bond fund shares or equity fund shares depending on one's desired asset allocation.

That's one of the biggest misconceptions about RBDs. Many people think one is waiting for an RBD to happen in order to invest. That is wrong. One has an asset allocation and stays the course. Then when an RBD happens, one rebalances or tax-loss harvests.

If my portfolio performance did not exceed the performance of its benchmarks, then I would probably stop doing this.
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Re: For those that "buy" during stock market downturns...

Post by 2Birds1Stone » Tue Jun 28, 2016 9:58 am

livesoft wrote:
Compound wrote:If I may ask, was the exchange from bond etfs and bond funds into equity funds because of crossing a rebalancing band, because of a RBD trigger, or otherwise? Do you allow your asset allocation to float in order to take advantage of stock market downturns?
My IPS says I must buy on RBDs (unless they occur on Friday, but it does not say I cannot buy on Fridays). I increase my allocation to equities at such times, so I don't even have to see if I cross a rebalancing band or not. My IPS also says that if a bond fund goes up 0.5% or more in a few hours, then I must buy equities, too.

My asset allocation to equities thus floats a little bit. On Thursday evening it was about 59% and this morning before the open, it was 66%. I may start selling equities today.

As for the holding cash waiting for these opportunities, I will note that bond funds went up about 1% in the past two days. See if your cash ever does that. In other words, when one has cash, one should invest it and not wait for opportunities. The cash could be used to buy bond fund shares or equity fund shares depending on one's desired asset allocation.

That's one of the biggest misconceptions about RBDs. Many people think one is waiting for an RBD to happen in order to invest. That is wrong. One has an asset allocation and stays the course. Then when an RBD happens, one rebalances or tax-loss harvests.

If my portfolio performance did not exceed the performance of its benchmarks, then I would probably stop doing this.
Thank you for sharing your strategy! I too buy on RBD's and try to invest to get my AA back to IPS levels with new money.

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Re: For those that "buy" during stock market downturns...

Post by jeffyscott » Tue Jun 28, 2016 10:08 am

I don't have a set allocation and am willing to have stock allocation range from 35% to 50%, depending on valuations. That's currently at the low end just above 35%. I'm also willing to vary the foreign stock allocation as a percentage of equities in a range of 20-40%, or maybe even 50% when overall stock allocation is low and foreign valuations are much lower than US.

I make only very small, gradual moves over time. On Friday, I moved about 0.03% of assets from bonds to stocks. I estimated this move restored about 1/3 of the dollar loss in foreign stocks for that day. I could do that every week for a year and it's only gonna move about 1.5% of our portfolio and increase our foreign allocation by 10% (from 14% of portfolio to 15.5%).
press on, regardless - John C. Bogle

Rodc
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Re: For those that "buy" during stock market downturns...

Post by Rodc » Tue Jun 28, 2016 10:12 am

One of the things that is striking is that no one has ever produced a study or a plausible set of data that supports buying on the dips, much less that this is an important bit of strategy.

Would be interesting if someone did have such a study.

My guess is that if one tried hard enough they could find the right funds and the right period to show some benefit, but more valuable would be a broad study that showed (1) this provided a benefit rather more often than not and (2) the benefit was greater than the general background noise.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: For those that "buy" during stock market downturns...

Post by livesoft » Tue Jun 28, 2016 10:24 am

One can do some math using the past 3 days.

If I move 7% of my portfolio from bonds to equities, then restore my asset allocation later today after those equities have gone up by 1% (and bonds don't change value), then my portfolio will gain on my benchmark by a mere 0.07%.

If I restore my AA after those equities go up by 2%, then the gain on the benchmark is 0.14%.

If I restore my AA after those equities lose 10%, then I fall behind the benchmark by 0.7%.

If sometimes that temporary increase in equities on an RBD causes the portfolio to gain against the benchmark and sometimes it causes the portfolio to lose against the benchmark, then the results are mixed.

If my portfolio was ahead of the benchmark by 1.5% on last Thursday and on Monday I moved 7% of my portfolio into equities, then that 7% newly placed into equities would have to drop 21% before I had lost enough to get back to the benchmark performance.
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Re: For those that "buy" during stock market downturns...

Post by Rodc » Tue Jun 28, 2016 10:26 am

One can do some math using the past 3 days.
Now that is one sophisticated and meaningful bit of analysis! :)
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: For those that "buy" during stock market downturns...

Post by jjface » Tue Jun 28, 2016 10:40 am

There is also the option to increase equities up to the top of your rebalancing band. So someone with 5% and 70:30 could go 74:26 and be okay buying extra equities.

As livesoft mentioned I would not hold cash. I hold some treasury bond funds for this purpose to take advantage of flight to safety. My bond fund has risen 2% within a week.

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Re: For those that "buy" during stock market downturns...

Post by Rodc » Tue Jun 28, 2016 10:44 am

Rodc wrote:
One can do some math using the past 3 days.
Now that is one sophisticated and meaningful bit of analysis! :)
It should go without saying, but just in case...

We won't know if buying in the last couple of days will turn out better or worse than waiting for a regularly scheduled buy or waiting to hit a rebalance band until some time in the future after this has all played out.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: For those that "buy" during stock market downturns...

Post by Rodc » Tue Jun 28, 2016 10:45 am

jjface wrote:There is also the option to increase equities up to the top of your rebalancing band. So someone with 5% and 70:30 could go 74:26 and be okay buying extra equities.

As livesoft mentioned I would not hold cash. I hold some treasury bond funds for this purpose to take advantage of flight to safety. My bond fund has risen 2% within a week.
Right.

What little we do know is that in the only study of this I know of, it turned out a little better to do this "over-balancing" without RBD rather than with.

This approach does tend to produce whiplash between buying and selling. Unless of course one introduces other rules about hystorysis, adding rules on top of rules on top of rules.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: For those that "buy" during stock market downturns...

Post by jjface » Tue Jun 28, 2016 10:52 am

Rodc wrote:
jjface wrote:There is also the option to increase equities up to the top of your rebalancing band. So someone with 5% and 70:30 could go 74:26 and be okay buying extra equities.

As livesoft mentioned I would not hold cash. I hold some treasury bond funds for this purpose to take advantage of flight to safety. My bond fund has risen 2% within a week.
Right.

What little we do know is that in the only study of this I know of, it turned out a little better to do this "over-balancing" without RBD rather than with.

This approach does tend to produce whiplash between buying and selling. Unless of course one introduces other rules about hystorysis, adding rules on top of rules on top of rules.
Yes I have started to think I should just go for simplicity and leave it all alone. I haven't actually bought anything this time other than with the money I was going to invest anyway. I held off buying for a couple of days pre-Brexit and that worked out luckily. I spent too much time looking at ETF movements and thinking about buying/selling this past few days. I paused because it was getting overwhelming even paying attention to it all. Dangerous stuff. I should listen to some of my other posts and Taylor and just stay the course. Livesoft is too much of a bad influence on me :twisted:

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Re: For those that "buy" during stock market downturns...

Post by Rodc » Tue Jun 28, 2016 11:00 am

jjface wrote:
Rodc wrote:
jjface wrote:There is also the option to increase equities up to the top of your rebalancing band. So someone with 5% and 70:30 could go 74:26 and be okay buying extra equities.

As livesoft mentioned I would not hold cash. I hold some treasury bond funds for this purpose to take advantage of flight to safety. My bond fund has risen 2% within a week.
Right.

What little we do know is that in the only study of this I know of, it turned out a little better to do this "over-balancing" without RBD rather than with.

This approach does tend to produce whiplash between buying and selling. Unless of course one introduces other rules about hystorysis, adding rules on top of rules on top of rules.
Yes I have started to think I should just go for simplicity and leave it all alone. I haven't actually bought anything this time other than with the money I was going to invest anyway. I held off buying for a couple of days pre-Brexit and that worked out luckily. I spent too much time looking at ETF movements and thinking about buying/selling this past few days. I paused because it was getting overwhelming even paying attention to it all. Dangerous stuff. I should listen to some of my other posts and Taylor and just stay the course. Livesoft is too much of a bad influence on me :twisted:
And I suspect he enjoys that. :twisted:
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: For those that "buy" during stock market downturns...

Post by Vilgan » Tue Jun 28, 2016 11:07 am

I have an emergency fund at the moment since I'm self employed and income can vary wildly. Then when the stock market dives significantly, I treat it as an emergency and dump some of my fund into buying stocks. If there is no stock market dive, I content myself with the 1% interest and the knowledge that I don't have to stress if I have a few slow months.

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Re: For those that "buy" during stock market downturns...

Post by Johnnie » Tue Jun 28, 2016 11:12 am

I'm in the "others" category.

After decades of wandering in the wilderness, last fall I discovered Buy-and-Hold via a Paul Merriman article on Marketwatch ("The Ultimate Buy and Hold Portfolio"). It's bogle-icious because it's disciplined, stay-the-course investing, but St. Jack grumbles that slice-and-dice schemes like this are complicated (which would presumably make it easier for adherents to fall off the stay-the-course wagon). But I like a wee bit of complicated, and if that's the worst the great man can come up with I'm content.

Anyway, I'm in the process of a one-year transition to this 10-way slice-and-dice. Some of my slices were easy - moving 10% from S&P 500 to LCV, redirecting 403b contribs to REITS. etc.. And some were hard (scary) - emerging markets, ISCV, and internationals in general. (I had planned to be 50 percent international but feeling a little chicken now and may just go 40% - tbd.)

So because it's new and scary I've been DCAing into the internationals, and yesterday was the day I set months ago for the next tranche! OK I cheated - I did it Friday instead, out of S&P (-3%) and into several funny-furriner indexes (-4% to -8%). :-)

Feeling smart and sassy today, but always in my head I hear Frank singing, "♫ Ridin' high in April, shot down in May.. ♪ ♫" :?
Last edited by Johnnie on Tue Jun 28, 2016 11:32 am, edited 1 time in total.
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Re: For those that "buy" during stock market downturns...

Post by itstoomuch » Tue Jun 28, 2016 11:16 am

2008: sold off W funds for preference of GLWB annuities with 100% equity mutual funds (managed, high fee). Current annuities do not have this option. Recognizing and timing was extremely important for this type of product. Primary purpose was Insurance. Essentially these annuities function as a Straddle.
2008-current: Discretionary account. In the beginning, "Buy Low, Sell High". Now with a fairly large discretionary, I keep try to keep 20% in cash and still buy low and sell high but now I don't have to be so careful in finding the lows and highs. I deal with no more than 10 stocks at any time and a couple of leave-alone Indexes. Cash can vary between 0-85%. Currently about 75-80% cash.
YMMV
See disclaimer below: :mrgreen:
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

cals400ex
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Re: For those that "buy" during stock market downturns...

Post by cals400ex » Tue Jun 28, 2016 11:38 am

When you move from bonds to equities, are you only doing so in the taxable accounts?

What tax consequences come from this? How are you taxed when the bonds are sold?

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Re: For those that "buy" during stock market downturns...

Post by WasabiOsbourne » Tue Jun 28, 2016 11:45 am

OP, it's funny........... i do alot of "buy the dip" work and it looks very good. but then i wonder "why not just invest long-term in market anyway?"

so i always think "where does the cash to buy the dips come from?"

lots of ways you can put a little extra cash into the market but none of them are really easy................ to put a decent amount of $$$$ into the market to me suggests that you have sold at some point in the recent to medium=term past.

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Re: For those that "buy" during stock market downturns...

Post by expat » Tue Jun 28, 2016 12:49 pm

After investing 20 percent of gross income and after spending, there is some cash left over that accumulates. I use that to buy.

Chuck
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Re: For those that "buy" during stock market downturns...

Post by Chuck » Tue Jun 28, 2016 12:53 pm

golfallday wrote:I have a nice pile of cash on hand. I bought $10k of VXUS on Friday morning. I'll buy more if panic selling occurs over the next few weeks. I'll never trade it. Something for my 2 grandchildren and St Jude Children's Research Hospital 20 years down the road. VXUS is on sale. I understand it's market timing which is sacrilege on this forum. Some bargains you just can't pass up.
How long have you been waiting for VXUS to go below $42?

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Re: For those that "buy" during stock market downturns...

Post by rbaldini » Tue Jun 28, 2016 12:54 pm

Forgive my shameless self-promotion (or don't), but in the following active post I argue that this "holding onto some cash for buying after a market drop" strategy makes zero sense: viewtopic.php?f=10&t=194185&newpost=2957348

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Re: For those that "buy" during stock market downturns...

Post by texas lawdog » Tue Jun 28, 2016 1:19 pm

When you live below your means, you have a continuous positive cash accumulation. So, my choices are not based on a one-time static amount - but a series of decisions each month. Most of the time, it goes into savings. Sometimes, I'll notice an event like Brexit and decide to move the money from savings to equity investments thinking that my chances of it appreciating are greater than if I just funnel into savings. It's the same psychological effect that I get when I go into the store and find something on clearance that I didn't need but enjoy getting a "deal" :sharebeer

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Re: For those that "buy" during stock market downturns...

Post by BW1985 » Tue Jun 28, 2016 1:35 pm

texas lawdog wrote:When you live below your means, you have a continuous positive cash accumulation. So, my choices are not based on a one-time static amount - but a series of decisions each month. Most of the time, it goes into savings. Sometimes, I'll notice an event like Brexit and decide to move the money from savings to equity investments thinking that my chances of it appreciating are greater than if I just funnel into savings. It's the same psychological effect that I get when I go into the store and find something on clearance that I didn't need but enjoy getting a "deal" :sharebeer
Same. I also have a larger cash emergency fund than a lot of people keep. I can buy a dip and then use cash flow to build it back up.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

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Re: For those that "buy" during stock market downturns...

Post by Pacman » Tue Jun 28, 2016 1:37 pm

I'm almost 30, and choose to keep a decent chunk of net worth change in cash (a mix of future house downpayment, emergency fund, and extra cushion). If the market declined a lot, I'd be willing to invest some of that. I personally think its nuts to basically hold everything except an emergency fund in the stock market. Its basically an asset class you have no control over the outcome. There was a thread not too long ago where a newbie asked "why will the stock market continue to go up over time?" Every single poster had a different answer (i.e. "GDP rises!" "prices always go up!" "technology improves!", etc) and there didn't seem to be a consensus. The reason for that is simple: no one knows.

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Re: For those that "buy" during stock market downturns...

Post by Dulocracy » Tue Jun 28, 2016 2:05 pm

This is a GREAT buying opportunity. I like buying during buying opportunities. However, I am also prudent. I will not tap my emergency fund. I recently needed money for other things. In the recent downturn, I only had a little money in my Fidelity rewards account that I recently got in the way of cash back. I used that money to buy IEUR. 3 shares total.

If I had more money, more would have done in. Many on this site often have some money available for such things. Sometimes we do not. Right now, I am settling for the 3 shares of IEUR as a new purchase. With other things in life being up in the air, it would not be responsible to use any of the cash that I have. Sometimes, you miss the opportunity in favor of being responsible.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: For those that "buy" during stock market downturns...

Post by Toons » Tue Jun 28, 2016 2:37 pm

As it keeps dropping
Keep buying.
I use linked checking account. :happy
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Re: For those that "buy" during stock market downturns...

Post by TOJ » Tue Jun 28, 2016 2:38 pm

As an anti-market timing and pro-time in market boglehead, I do not have unallocated cash laying around to buy on dips. I'm always buying with my regular contributions.

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Re: For those that "buy" during stock market downturns...

Post by abuss368 » Tue Jun 28, 2016 2:41 pm

Our strategy is very simple and it has worked just fine. We simply contribute and buy whatever I below our asset allocation every other week. If there was a major market correction or financial crisis, we may rebalance with bonds.

This is a very good reason why a bond allocation ha mor than one purpose!
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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arthurdawg
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Re: For those that "buy" during stock market downturns...

Post by arthurdawg » Tue Jun 28, 2016 2:42 pm

I'm a bit sloppy in my investing. I let cash accumulate and try to invest every quarter. Often it is every 6 months... and once I went about a year without logging into Vanguard (albeit I was still receiving statements!).


If I hear news about a market "crash" end of the world etc... I'll often sit down and see if there has been a big drop and then go ahead and catch up on investing. As I just posted on another thread, I don't rebalance between stocks (all taxable at present) so I use new cash to balance out the funds, so I don't really consider it market timing, so much as buying stocks on sale. Kinda like buying my dress shirts when they have a good sale.


I don't really worry too much about my allocation either... I have a stated plan and it seems to oscillate around my general guidelines.
TSM / SCV / FTSE Big World / FTSE Small World / REIT / TBM / Int Term Tax Exempt

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Re: For those that "buy" during stock market downturns...

Post by JonnyDVM » Tue Jun 28, 2016 2:44 pm

My wife contributes to her solo 401k monthly. That money can pile up for a few months before we get around to using it to buy something. I also don't go fiddling around figuring out if it's time to rebalance or not (bands) very often unless I know there's been some major movement and its time to sit and look to see if we should do it. If I had some extra cash in an emergency fund I would be more tempted to shave some of it off the top and toss it in the market when there's a downturn.

Procrastinators reward lets call it. Is there any sort of increased return for doing things this way? IDK, maybe not, but at the very least it makes one feel like he's doing something positive when things are trending negative.
Sometimes the questions are complicated and the answers are simple. -Dr. Seuss

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Re: For those that "buy" during stock market downturns...

Post by CedarWaxWing » Tue Jun 28, 2016 2:48 pm

As a new retiree, with a relatively low income until age 70... I use a drop in equities to do t ira to Roth ira conversions from equities to the same equities while the prices are lower... goal being to convert as much as possible before rmds and SS at age 70 start.

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Doc
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RBD is rebalancing

Post by Doc » Tue Jun 28, 2016 2:55 pm

Regarding Livesoft's RBD approach:

Buying on major market dips is no difference than a buy & hold but rebalance strategy with very tight bands. OK depending on your RBD definition maybe those bands are a little variable but if your IPS spells out the mechanism it's just another way to trigger the rebalancing that almost all of us adhere to.

Ask yourself what the difference is if I rebalance when my AA drops by 5% below target due to a bunch of RBD's or by 1% from yesterday's AA due to a single RBD. The philosophy is the same It is only the frequency and size of the rebalance that is different.
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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