Selling in October

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MEA
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Selling in October

Post by MEA » Sun Sep 25, 2016 8:10 am

Everyone has heard of sell in May and go away. What would be wrong with sitting out October? Given enough time it would seem as though this strategy would pay off. Any thoughts?
Last edited by MEA on Sun Sep 25, 2016 8:22 am, edited 1 time in total.
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Re: Selling in October

Post by LAlearning » Sun Sep 25, 2016 8:18 am

Uh, why would this pay off?
I know nothing!

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MEA
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Re: Selling in October

Post by MEA » Sun Sep 25, 2016 8:28 am

LAlearning wrote:Uh, why would this pay off?

You must not have the same fear of October that I have.
It is speculators speculating on other speculators speculations. It is a tale told by an idiot, full of sound and fury signifying nothing.

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Re: Selling in October

Post by FillorKill » Sun Sep 25, 2016 8:38 am

You believe that you can outperform an investor bearing equity risk 12/12 of the time by doing so 11/12 of the time?

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Re: Selling in October

Post by k66 » Sun Sep 25, 2016 8:42 am

MEA: you can do as you please of course but you still would presumably want to buy back into the market. What is your strategy for that? At the very least, please develop a catchy rhyming second clause to get us interested.

Maybe "sell in October, until it's all over". That sounds like as good a plan as any--except of course for "buy and hold".
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Re: Selling in October

Post by MEA » Sun Sep 25, 2016 9:02 am

k66 wrote:MEA: you can do as you please of course but you still would presumably want to buy back into the market. What is your strategy for that? At the very least, please develop a catchy rhyming second clause to get us interested.

Maybe "sell in October, until it's all over". That sounds like as good a plan as any--except of course for "buy and hold".

I don't have a irrational fear of November, so the buyback would occur on November 1.
It is speculators speculating on other speculators speculations. It is a tale told by an idiot, full of sound and fury signifying nothing.

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Re: Selling in October

Post by StevieG72 » Sun Sep 25, 2016 9:05 am

Why do you fear October?

When would you return to being fully invested?

Capital gains?

I just stay fully invested and try not to get too excited about daily or monthly movements since I have at least 10 more years until retirement.
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Re: Selling in October

Post by k66 » Sun Sep 25, 2016 9:12 am

MEA wrote:
k66 wrote:MEA: you can do as you please of course but you still would presumably want to buy back into the market. What is your strategy for that? At the very least, please develop a catchy rhyming second clause to get us interested.

Maybe "sell in October, until it's all over". That sounds like as good a plan as any--except of course for "buy and hold".

I don't have a irrational fear of November, so the buyback would occur on November 1.


Have you back-tested your scheme, or just working by gut feel? Many here would be interested to see the results (also: how about "Flee with the leaves, until after All Hallows' Eve"?).
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Re: Selling in October

Post by rustymutt » Sun Sep 25, 2016 9:14 am

It's a gamble at best. Good luck with that move. I'm setting pat, thank you.
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Re: Selling in October

Post by nedsaid » Sun Sep 25, 2016 9:18 am

MEA wrote:Everyone has heard of sell in May and go away. What would be wrong with sitting out October? Given enough time it would seem as though this strategy would pay off. Any thoughts?


I would not do this. These are silly phrases that have a small grain of truth to them but not enough to benefit a small investor. If we should sell in May and go away, why is there often talk of the summer rally? Certainly there are seasonal effects in the stock market, like tax loss selling late in the year, and the January effect but it is hard to take advantage of them. There is evidence that tax loss selling is taking place earlier in the year than before as the effect is well known. There is also the mutual fund window dressing before the end of each quarter. Another little contradiction is the year end tax loss selling and the Santa Claus rally.

These seasonal variations may differ a bit in timing from year to year and sometimes the supposed effect doesn't happen at all. We have had Octobers that were good months for stocks. There could also be some large outside event at any time that could overwhelm these seasonal effects. In other words, the market is not obligated to act the way we think it should or follow our timeline.

In a taxable account, the tax burden from turning over a portfolio would likely be greater than any small gain from market timing. I have big doubts that the timing would work at all.
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Re: Selling in October

Post by letsgobobby » Sun Sep 25, 2016 9:24 am

Cue Mark Twain.

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Re: Selling in October

Post by coacher » Sun Sep 25, 2016 9:28 am

"Sell in October, buy back in when you're sober"?

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Re: Selling in October

Post by arcticpineapplecorp. » Sun Sep 25, 2016 9:31 am

letsgobobby wrote:Cue Mark Twain.

For those not familiar with the quote here it is:

“October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.”

― Mark Twain, Pudd'nhead Wilson
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Re: Selling in October

Post by arcticpineapplecorp. » Sun Sep 25, 2016 9:40 am

MEA wrote:Everyone has heard of sell in May and go away. What would be wrong with sitting out October? Given enough time it would seem as though this strategy would pay off. Any thoughts?

Correct me if I'm wrong, but isn't this an example of something you criticized in the following post:
viewtopic.php?f=10&t=186678&p=2833797#p2833797

By MEA

"What is the point of the thread? To get us to think? If so I think trying to game the market with pessimistic speculation has never been a good long-term strategy."

It is speculators speculating on other speculators speculations. It is a tale told by an idiot, full of sound and fury Signifying nothing.

I think market timing, i.e. "selling in October" is speculation and therefore not "a good long-term strategy."

With that out of the way, tell me...should I sell October 1st, October 31st or some other day in October?
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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Re: Selling in October

Post by navyasw02 » Sun Sep 25, 2016 9:50 am

MEA wrote:Everyone has heard of sell in May and go away. What would be wrong with sitting out October? Given enough time it would seem as though this strategy would pay off. Any thoughts?


Yea, it could work. I'm sure that market timing based purely on a calendar is a sound and rational investment strategy that cannot fail. Please let us know how it works out for you over the next 30 years.

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Re: Selling in October

Post by AlohaJoe » Sun Sep 25, 2016 10:00 am

nedsaid wrote:
MEA wrote:Everyone has heard of sell in May and go away. What would be wrong with sitting out October? Given enough time it would seem as though this strategy would pay off. Any thoughts?


I would not do this. These are silly phrases that have a small grain of truth to them but not enough to benefit a small investor.


I also would not do this but I'm not so sure they only have a "small grain of truth" to them. In the Journal of Finance this year "Return Seasonalities" found that

A strategy that selects stocks based on their historical same-calendar-month returns earns an average return of 13% per year. We document similar return seasonalities in anomalies, commodities, international stock market indices, and at the daily frequency...The three-factor model does not explain these seasonalities: the alpha for the seasonality strategy is 1.22% per month


They theorize that the equity risk premium has seasonal changes. They also point out that seasonality strategies are risky because you are still exposed to the systemic risk that generates the seasonality in the first place.

the variance of the true seasonality strategy exceeds that of its randomized counterpart by a factor of ve! This simple comparison suggests that return seasonalities are intertwined with systematic risk


Another paper this year, "Being Surprised by the Unsurprising: Earnings Seasonality and Stock Returns" shows that markets fail to properly price earnings that have a seasonal pattern. This may explain the persistence of the seasonality anomaly. Imagine a business that sells Christmas trees. In Q1, Q2, and Q3 of every year they have poor earnings. In Q4 they have great earnings. The authors provide evidence that markets overweight the recent quarters' poor performance and are always "surprised" when Q4 comes in.

That said, I consider this "interesting" but not really actionable; especially for a Boglehead-style investor. And it has little to do with the OP's unexplained desire to avoid October.

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Re: Selling in October

Post by cheese_breath » Sun Sep 25, 2016 10:09 am

MEA wrote:
LAlearning wrote:Uh, why would this pay off?

You must not have the same fear of October that I have.

And what's the cause of this irrational fear of October? Are you afraid the Cubs will win the World Series, and the world will end?
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Re: Selling in October

Post by MEA » Sun Sep 25, 2016 11:35 am

arcticpineapplecorp. wrote:
MEA wrote:Everyone has heard of sell in May and go away. What would be wrong with sitting out October? Given enough time it would seem as though this strategy would pay off. Any thoughts?

Correct me if I'm wrong, but isn't this an example of something you criticized in the following post:
viewtopic.php?f=10&t=186678&p=2833797#p2833797

By MEA

"What is the point of the thread? To get us to think? If so I think trying to game the market with pessimistic speculation has never been a good long-term strategy."

It is speculators speculating on other speculators speculations. It is a tale told by an idiot, full of sound and fury Signifying nothing.

I think market timing, i.e. "selling in October" is speculation and therefore not "a good long-term strategy."

With that out of the way, tell me...should I sell October 1st, October 31st or some other day in October?
k66 wrote:
MEA wrote:
k66 wrote:MEA: you can do as you please of course but you still would presumably want to buy back into the market. What is your strategy for that? At the very least, please develop a catchy rhyming second clause to get us interested.

Maybe "sell in October, until it's all over". That sounds like as good a plan as any--except of course for "buy and hold".

I don't have a irrational fear of November, so the buyback would occur on November 1.


Have you back-tested your scheme, or just working by gut feel? Many here would be interested to see the results (also: how about "Flee with the leaves, until after All Hallows' Eve"?).

No, I haven't back-tested. I don't know how to do that. My gut feeling is that it would be a wash. No increase or decrease in return. The payoff would come from not having to endure the large downturns that seem to happen in October.

Arct, is it market timing if l sell and buy on a pre-determined date every year? I would prefer to call it a disciplined strategy. Sell in October buy when you're one month older. There is no speculation one way or the other. You take what you get.
Last edited by MEA on Sun Sep 25, 2016 11:43 am, edited 1 time in total.
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Re: Selling in October

Post by pkcrafter » Sun Sep 25, 2016 11:36 am

And what's the cause of this irrational fear of October? Are you afraid the Cubs will win the World Series, and the world will end?

Well, it might. :shock:

MEA, we will let you know if it's a good idea in about a month.

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Re: Selling in October

Post by LAlearning » Sun Sep 25, 2016 11:46 am

MEA wrote:
LAlearning wrote:Uh, why would this pay off?

You must not have the same fear of October that I have.


i have no fear of the market.
I know nothing!

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Re: Selling in October

Post by arcticpineapplecorp. » Sun Sep 25, 2016 12:20 pm

MEA wrote:No, I haven't back-tested. I don't know how to do that. My gut feeling is that it would be a wash. No increase or decrease in return. The payoff would come from not having to endure the large downturns that seem to happen in October.

Arct, is it market timing if l sell and buy on a pre-determined date every year? I would prefer to call it a disciplined strategy. Sell in October buy when you're one month older. There is no speculation one way or the other. You take what you get.

Is it market timing if you are selling everything and going to cash which is what the phrase "Sell in May and go away" is all about? Yes which is what I and others believed you were originally suggesting/asking. Unless you weren't being clear in your original post and you were asking about simply rebalancing every October, which your quote directly above may be suggesting (or maybe not).

So now the question is, which is it? Are you asking if you should sell everything and go to cash each October, or are you simply asking if you should rebalance your portfolio back to your predetermined asset allocation every October?

I see no problem with the latter, but the former can only be called market timing.

Besides, what does being out of the market for one month do for you? What if you sell in October and then "buy when you're one month older" and the market goes UP between October and November? Then you would have sold in October only to buy back in at a higher price in November. How can that be a winning strategy?

I don't think you want to be out of the market for 30 days. What if those turn out to have been the best 30 days instead of the worst 30 days? See below:
http://www.businessinsider.com/cost-of- ... 500-2015-3

Image

It's time IN the market, not timing the market that counts.
Last edited by arcticpineapplecorp. on Sun Sep 25, 2016 12:34 pm, edited 1 time in total.
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Re: Selling in October

Post by oldcomputerguy » Sun Sep 25, 2016 12:31 pm

k66 wrote:MEA: you can do as you please of course but you still would presumably want to buy back into the market. What is your strategy for that? At the very least, please develop a catchy rhyming second clause to get us interested.

Maybe "sell in October, until it's all over". That sounds like as good a plan as any--except of course for "buy and hold".


How about "buy and hold 'till I grow old"?
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Re: Selling in October

Post by BolderBoy » Sun Sep 25, 2016 1:02 pm

MEA wrote:Everyone has heard of sell in May and go away. What would be wrong with sitting out October? Given enough time it would seem as though this strategy would pay off. Any thoughts?

I had a financial advisor who tried those tricks for 3 years. While he was doing that, I was doing the traditional, slow-and-steady buying when I had the money to do so.

At the end of three years, his returns were -40% and mine were +40%. I fired him and he squealed like a pig in hot oil.

What you are suggesting is market timing, plain-and-simple.
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Re: Selling in October

Post by MEA » Sun Sep 25, 2016 1:36 pm

arcticpineapplecorp. wrote:
MEA wrote:No, I haven't back-tested. I don't know how to do that. My gut feeling is that it would be a wash. No increase or decrease in return. The payoff would come from not having to endure the large downturns that seem to happen in October.

Arct, is it market timing if l sell and buy on a pre-determined date every year? I would prefer to call it a disciplined strategy. Sell in October buy when you're one month older. There is no speculation one way or the other. You take what you get.

Is it market timing if you are selling everything and going to cash which is what the phrase "Sell in May and go away" is all about? Yes which is what I and others believed you were originally suggesting/asking. Unless you weren't being clear in your original post and you were asking about simply rebalancing every October, which your quote directly above may be suggesting (or maybe not).

So now the question is, which is it? Are you asking if you should sell everything and go to cash each October, or are you simply asking if you should rebalance your portfolio back to your predetermined asset allocation every October

I see no problem with the latter, but the former can only be called market timing.

Besides, what does being out of the market for one month do for you? What if you sell in October and then "buy when you're one month older" and the market goes UP between October and November? Then you would have sold in October only to buy back in at a higher price in November. How can that be a winning strategy?

I don't think you want to be out of the market for 30 days. What if those turn out to have been the best 30 days instead of the worst 30 days? See below:
http://www.businessinsider.com/cost-of- ... 500-2015-3

Image

It's time IN the market, not timing the market that counts.


Yes, you understand the question.

I can't rebalance, I am 100% stocks. I am following John Bogle's advice. He suggests that you include any pensions as part of your bond portfolio. If I use a 4% SWR for my Roth and traditional IRA they will payout the same as my pension. Assuming I have the same amount of money in my 100% stock IRA portfolio in four years (I retire in four years) as I do today. So my asset allocation is 50/50 yet I own no bonds.I have always been 100% stocks, buying bonds right now doesn't seem like a good idea. But at the same time I am not comfortable with my asset allocation. It's quite a conundrum. It makes Octobers a little stressful so I'm thinking about eliminating them.
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Re: Selling in October

Post by k66 » Sun Sep 25, 2016 1:51 pm

http://www.moneychimp.com/features/monthly_returns.htm

Hmmm --MoneyChimp offers two very important pieces of information: (1) September (not October) is the real danger month, and (2) instead of bothering with market timing based on noisy scatter, stick through it all full time for the best results.
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Market Timing

Post by Taylor Larimore » Sun Sep 25, 2016 1:58 pm

MEA wrote:Everyone has heard of sell in May and go away. What would be wrong with sitting out October? Given enough time it would seem as though this strategy would pay off. Any thoughts?

MEA:

My thought is to forget market-timing. Stay the course.

What Experts Say About Market Timing

Best wishes.
Taylor
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Re: Market Timing

Post by MEA » Sun Sep 25, 2016 3:19 pm

Taylor Larimore wrote:
MEA wrote:Everyone has heard of sell in May and go away. What would be wrong with sitting out October? Given enough time it would seem as though this strategy would pay off. Any thoughts?

MEA:

My thought is to forget market-timing. Stay the course.

What Experts Say About Market Timing

Best wishes.
Taylor


It would be hard for me to do anything other than stay the course. I'm just thinking out loud.
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Re: Selling in October

Post by pkcrafter » Sun Sep 25, 2016 4:10 pm

MEA, would you mind sharing your portfolio with us? It might help if we can spot something.

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Re: Selling in October

Post by Grogs » Sun Sep 25, 2016 7:10 pm

Even assuming average returns were statistically worse in the month of October, are they just less than normal, or are they less than the risk-free rate of return. Historically the stock market has produced about a 10% annual return, which works out to about 0.8% per month. You can get a 1% return on an Ally savings account, or about 0.08% per month. So even if stock market returns are significantly less on average in October, like 0.4% on average, you would still be better off staying in the market. I'm highly skeptical that the difference is even that large.

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Re: Selling in October

Post by Theoretical » Sun Sep 25, 2016 7:40 pm

MEA wrote:

Yes, you understand the question.

I can't rebalance, I am 100% stocks. I am following John Bogle's advice. He suggests that you include any pensions as part of your bond portfolio. If I use a 4% SWR for my Roth and traditional IRA they will payout the same as my pension. Assuming I have the same amount of money in my 100% stock IRA portfolio in four years (I retire in four years) as I do today. So my asset allocation is 50/50 yet I own no bonds.I have always been 100% stocks, buying bonds right now doesn't seem like a good idea. But at the same time I am not comfortable with my asset allocation. It's quite a conundrum. It makes Octobers a little stressful so I'm thinking about eliminating them.


Ok, so you're describing something a bit different than run-of-the-mill market timing. What you're discovering is that your asset allocation is giving you heartburn while you're early in retirement, and the history of scary October crashes has you worried. The problem is that you should be worried about every other month too. That suggests 1 of 2 possibilities:

1 - Add some bonds (in your case, consider IRA CDs for the risk-of-loss-free, interest rate bump) or individual TIPS if you're worried about inflation - maybe to the tune of 10-20% of the IRA, leaving you at 45-55 or 40-60.
2 - Shrink the portfolio a bit and build a large cash cushion/emergency fund (1-2 years) so that you can better weather the market storms.

Depending on your age, you could also consider annuitizing some of it into a Single Premium Immediate Annuity (for income now) or a Deferred Annuity - to insure against running out of money at 85.

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Re: Selling in October

Post by arcticpineapplecorp. » Sun Sep 25, 2016 8:39 pm

MEA wrote: Yes, you understand the question.

I can't rebalance, I am 100% stocks. I am following John Bogle's advice. He suggests that you include any pensions as part of your bond portfolio. If I use a 4% SWR for my Roth and traditional IRA they will payout the same as my pension. Assuming I have the same amount of money in my 100% stock IRA portfolio in four years (I retire in four years) as I do today. So my asset allocation is 50/50 yet I own no bonds.I have always been 100% stocks, buying bonds right now doesn't seem like a good idea. But at the same time I am not comfortable with my asset allocation. It's quite a conundrum. It makes Octobers a little stressful so I'm thinking about eliminating them.

I think that part in red above says it all. If you're not comfortable with your asset allocation, then change it. Don't worry about the price of bonds. You can't always get what you want. You want less risk, therefore you need more bonds. Simple as that. Will the price of your bonds fall as interest rates rise? Yes, but losses on the bond side should be smaller and will be made up over time as you get higher interest payments.

Bonds are there to dampen those losses and reduce the volatility overall. And that is the issue at hand. So do what you need to sleep well at night.

I suspect those with 100% in stocks in retirement (think Mr. Money Mustache) either take out far less than 4% a year (maybe they rely on 2% a year which is essentially the dividend payments, never having to touch principle) or have multiple streams of income (SS, pension, consulting, taxable investment income, internet business, real estate, etc.). If that's not you, maybe you shouldn't be 100% in stocks. Especially if you're depending on 4% SWR. What if the market goes down by 50%. Are you going to be able to live on half the amount you were before? If so, perhaps you're taking too much risk. That makes the argument for holding a less risky portfolio, which means holding more bonds.

Finally, the table below is interesting. It shows the same rate of success using the 4% SWR over 30 years with either 50/50 or 100% stocks. But the ride I'm sure was far less bumpy (and anxiety provoking) with the 50/50 portfolio. Good luck.

https://www.bogleheads.org/wiki/File:TrinityTable3.jpg
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Re: Selling in October

Post by BolderBoy » Sun Sep 25, 2016 8:45 pm

MEA wrote:I am following John Bogle's advice. He suggests that you include any pensions as part of your bond portfolio.

Does Mr Bogle's recommendation apply to anticipated pensions or actual pensions one is getting?
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Re: Selling in October

Post by David Jay » Sun Sep 25, 2016 9:07 pm

MEA wrote:The payoff would come from not having to endure the large downturns that seem to happen in October.


But it was August last year...
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Re: Selling in October

Post by Toons » Sun Sep 25, 2016 9:12 pm

Sell In October?
Only if you need some monies.
Otherwise pass.
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Re: Selling in October

Post by Lieutenant.Columbo » Sun Sep 25, 2016 9:15 pm

BolderBoy wrote:his returns were -40% and mine were +40%. I fired him and he squealed like a pig in hot oil
what did he possibly squeal about?
in view of that -40%, HE should have been the one turning in the badge and pistol back to you
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Re: Selling in October

Post by Waba » Sun Sep 25, 2016 9:23 pm

I would not just sell, but short the whole thing too. It's gonna be a blood bath on tuesday morning.
Oh, wait, that's stll september.

randomguy
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Re: Selling in October

Post by randomguy » Sun Sep 25, 2016 9:34 pm

arcticpineapplecorp. wrote:
MEA wrote:

Finally, the table below is interesting. It shows the same rate of success using the 4% SWR over 30 years with either 50/50 or 100% stocks. But the ride I'm sure was far less bumpy (and anxiety provoking) with the 50/50 portfolio. Good luck.

https://www.bogleheads.org/wiki/File:TrinityTable3.jpg


MMM can be 100% stocks because he is still working and generating more money from his blog than he needs.

Or you could go 75/25 and have a higher success rate (98% versus 95%) and end up with more money on average when you die. What is interesting is how risky that chart has things like 25/75 being. All those safe bonds up your failure rate to 29% from 5%. There is a line between conservative enough to sleep at night and aggressive enough not to go broke.

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cheese_breath
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Re: Selling in October

Post by cheese_breath » Sun Sep 25, 2016 9:54 pm

arcticpineapplecorp. wrote:
MEA wrote: Yes, you understand the question.

I can't rebalance, I am 100% stocks. I am following John Bogle's advice. He suggests that you include any pensions as part of your bond portfolio. If I use a 4% SWR for my Roth and traditional IRA they will payout the same as my pension. Assuming I have the same amount of money in my 100% stock IRA portfolio in four years (I retire in four years) as I do today. So my asset allocation is 50/50 yet I own no bonds.I have always been 100% stocks, buying bonds right now doesn't seem like a good idea. But at the same time I am not comfortable with my asset allocation. It's quite a conundrum. It makes Octobers a little stressful so I'm thinking about eliminating them.

I think that part in red above says it all. If you're not comfortable with your asset allocation, then change it. Don't worry about the price of bonds. You can't always get what you want. You want less risk, therefore you need more bonds. Simple as that. Will the price of your bonds fall as interest rates rise? Yes, but losses on the bond side should be smaller and will be made up over time as you get higher interest payments....

He may need more convincing than that. In a different thread he said
MEA wrote: ...I have always been 100% stocks but now that I'm 53 I think it's time to add some bonds. My fear is that I will lose money in both stocks and bonds.

That's why I prefer to use the term 'fixed income' rather than 'bonds'. Some people take the term 'bonds' too literally. Some rebalance into FDIC insured cash to insure their fixed income balance doesn't decline. But then there's the inflation risk, and converting everything to cash in October or any other month risks losing one month's purchasing power to inflation. No matter what he does he's in a catch-22 where he can't totally eliminate risk regardless of what he does, but I'm not sure he realizes that.
The surest way to know the future is when it becomes the past.

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Re: Selling in October

Post by AlohaJoe » Sun Sep 25, 2016 10:24 pm

MEA wrote:The payoff would come from not having to endure the large downturns that seem to happen in October.


Any investing strategy that includes "seems to" is clearly not to be taken seriously. Still....

There have been 145 Octobers in the market since they started keeping track. 70 of them have been losses and 75 have been gains. Only 15 of them have been a loss more than 5%. Only one has been a loss of more than 15% (October 2008). There have only been 4 monthly losses of 15% in US history, meaning the sample size is too small to draw any conclusions.

The average gain/loss in October has been -0.3% with a standard deviation of 4%. When you factor in missed dividends, you're probably coming out behind. And since WW2 -- i.e. over the past 71 years -- Octobers actually return +0.1%.

It also isn't clear what you would put your money into. How do you know bonds -- or even plain bank accounts, given how many of them disappeared in the Great Depression, leaving account holders with nothing -- haven't lost more money, on average, in Octobers?

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Re: Selling in October

Post by RCL » Mon Sep 26, 2016 12:04 am

Hmmmm, we all know past performance doesn't mean very much, but
Last year the S&P 500 was at about -6.7% for the year; on October 30th, it was at +1% for the year.
October was indeed a horrible month for investing. (Sarcasm), only a 7.7% increase

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arcticpineapplecorp.
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Re: Selling in October

Post by arcticpineapplecorp. » Mon Sep 26, 2016 6:19 am

AlohaJoe wrote:
MEA wrote:The payoff would come from not having to endure the large downturns that seem to happen in October.


Any investing strategy that includes "seems to" is clearly not to be taken seriously. Still....

There have been 145 Octobers in the market since they started keeping track. 70 of them have been losses and 75 have been gains. Only 15 of them have been a loss more than 5%. Only one has been a loss of more than 15% (October 2008). There have only been 4 monthly losses of 15% in US history, meaning the sample size is too small to draw any conclusions.

The average gain/loss in October has been -0.3% with a standard deviation of 4%. When you factor in missed dividends, you're probably coming out behind. And since WW2 -- i.e. over the past 71 years -- Octobers actually return +0.1%.

It also isn't clear what you would put your money into. How do you know bonds -- or even plain bank accounts, given how many of them disappeared in the Great Depression, leaving account holders with nothing -- haven't lost more money, on average, in Octobers?

FDIC didn't exist during the Great Depression. It was created in response to instill confidence for depositors that they would be made whole in the event of a bank closure. So to compare losing money due to a bank closure isn't accurate because that doesn't happen anymore provided you: 1. put your money in a bank that's FDIC insured and 2. only keep deposits within the FDIC limits.

Now if you want to talk about money being lost sitting in bank accounts due to the effects of inflation, that's another story.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Harpoon1
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Re: Selling in October

Post by Harpoon1 » Mon Sep 26, 2016 6:55 am

MEA wrote:
arcticpineapplecorp. wrote:
MEA wrote:Everyone has heard of sell in May and go away. What would be wrong with sitting out October? Given enough time it would seem as though this strategy would pay off. Any thoughts?

Correct me if I'm wrong, but isn't this an example of something you criticized in the following post:
viewtopic.php?f=10&t=186678&p=2833797#p2833797

By MEA

"What is the point of the thread? To get us to think? If so I think trying to game the market with pessimistic speculation has never been a good long-term strategy."

It is speculators speculating on other speculators speculations. It is a tale told by an idiot, full of sound and fury Signifying nothing.

I think market timing, i.e. "selling in October" is speculation and therefore not "a good long-term strategy."

With that out of the way, tell me...should I sell October 1st, October 31st or some other day in October?
k66 wrote:
MEA wrote:
k66 wrote:MEA: you can do as you please of course but you still would presumably want to buy back into the market. What is your strategy for that? At the very least, please develop a catchy rhyming second clause to get us interested.

Maybe "sell in October, until it's all over". That sounds like as good a plan as any--except of course for "buy and hold".

I don't have a irrational fear of November, so the buyback would occur on November 1.


Have you back-tested your scheme, or just working by gut feel? Many here would be interested to see the results (also: how about "Flee with the leaves, until after All Hallows' Eve"?).

No, I haven't back-tested. I don't know how to do that. My gut feeling is that it would be a wash. No increase or decrease in return. The payoff would come from not having to endure the large downturns that seem to happen in October.

Arct, is it market timing if l sell and buy on a pre-determined date every year? I would prefer to call it a disciplined strategy. Sell in October buy when you're one month older. There is no speculation one way or the other. You take what you get.


Yes, of course what your proposing is "speculation". Its practically the very definition verbatim!

Clearly your AA is off and 100% equity, or whichever way you want to calculate it, is too much for you.

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Re: Selling in October

Post by jjface » Mon Sep 26, 2016 7:27 am

There is no rational reason to suppose any other month won't be as bad as October. Being 100% equities is your problem and your ability to take risk. Use bonds for safety and to help you sleep through the night (especially in October).

MEA wrote:The low rates have forced some people to take risk that they otherwise wouldn't have.

It's probably more important than ever to hold a mixed bag of nuts.

The market goes up 70 percent of the time. It goes down 30 percent of the time. If you take your money out you have a 70 percent chance it won't work out for you.

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Taylor Larimore
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Re: Selling in October?

Post by Taylor Larimore » Mon Sep 26, 2016 8:22 am

MEA wrote:Everyone has heard of sell in May and go away. What would be wrong with sitting out October? Given enough time it would seem as though this strategy would pay off. Any thoughts?

MEA:

Since January 1950 through April 2015, the S&P 500 in October was up 39 times and down 26 times. It gained +10.36% in October 1974. The average return in October was +0.8%.

Source: 2016 Stock Trader's Almanac

Stay the course.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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