Sitting on cash....Waiting for a crash

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harvestbook
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Re: Sitting on cash....Waiting for a crash

Post by harvestbook » Sun Mar 19, 2017 12:32 pm

I'm not smart enough to trust my feelings.
I engaged in market timing on my early purchases, always hoping or expecting some event would occur, and ended up just wasting time. Now I look at it as, "If the market drops fifty percent, my dividends will buy more shares and my new purchases will buy more shares." Now I DCA all the way, buy a little extra at a 5 percent drop, and a little more extra at a 10 percent drop. I barely even noticed February 2016--now I look at the chart and go "Hmm, I should've been afraid." Truth is, I don't care. I have faith in the long run. Also, the S & P is not 'the market.' Plenty of international markets are near historical P/E means or are undervalued.

Bogle says over long terms the market reverts to means. Of course, it all depends on what your horizon is. Bogle expects 5 percent nominal returns (in US stocks) over the next ten years, and that's plenty good enough for me. In fact, I project that out over 25 years as my expected returns. If it hits that, great. If surpasses 5 percent, I will have extra money. If it's below that, I suspect we'll all have much bigger problems than the stock market.

Bogle also says buyers and sellers equal out to zero, minus the cut Wall Street takes. I make money off the bottom sellers, speculators, and the people who "know what's going to happen next." I didn't invent the world, so I don't feel guilty about benefiting from the avoidable mistakes of others.
I'm not smart enough to know, and I can't afford to guess.

rgs92
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Re: Sitting on cash....Waiting for a crash

Post by rgs92 » Sun Mar 19, 2017 12:55 pm

After scanning this thread, I see lot's of contrarian comments from people who are 100% in stocks or close to it. That is just as bad as the OP's strategy in my book.

kathyauburn
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Re: Sitting on cash....Waiting for a crash

Post by kathyauburn » Sun Mar 19, 2017 1:10 pm

fundseeker wrote:You're expecting your crash to be three to five years away? If you'd had that mindset three to five years ago, you'd be hating yourself now. But, I am with you in that I expect a large dip (though in the near future, not years away). And, the only move I made was to have my TSP contributions only go into the G Fund until that time comes, so I am not buying stock in my TSP right now. If I was thinking the crash was years away, I would not have made any adjustments and would have stayed the course.


Why not at least hedge with the L income fund? The G alone makes no sense to me. In 2008 the Income fund lost only 5% and recovered that plus 2.5% the following year.

kathyauburn
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Re: Sitting on cash....Waiting for a crash

Post by kathyauburn » Sun Mar 19, 2017 1:15 pm

David Scubadiver wrote:
ofcmetz wrote:So should those who are living off of their portfolio have 10 years of expenses allocated to cash?


That's what I have. To each his own. But the cash lets me feel like I can ride out a downturn of a decade. I can raise more if I needed to without touching the investment stash.

This business of 6 months to 1 year of cash savings is bunk, in my book.

herpfinance
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Re: Sitting on cash....Waiting for a crash

Post by herpfinance » Sun Mar 19, 2017 1:19 pm

kathyauburn wrote:Why not at least hedge with the L income fund? The G alone makes no sense to me. In 2008 the Income fund lost only 5% and recovered that plus 2.5% the following year.


The G fund is particularly attractive as your principal is always guaranteed. In other words, there is no decline in principal due to rising interest rates.
"The intelligent investor is a realist who sells to optimists and buys from pessimists" - Benjamin Graham

kathyauburn
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Re: Sitting on cash....Waiting for a crash

Post by kathyauburn » Sun Mar 19, 2017 1:22 pm

juliewongferra wrote:
if you're kept up late at night worrying about your investments, the money you save will be spent on antacids and sleep aids and treating your ulcer. Get your mix of money to a place, either long term or tactically, where you can sleep easy.

cheers!
jwf


Right on. Many investors, however, do not really know their comfort level until they've been through a crash or bear. It's easy to cite statistics that argue for being heavily invested in stocks.

Ivygirl
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Re: Sitting on cash....Waiting for a crash

Post by Ivygirl » Sun Mar 19, 2017 1:39 pm

Granted if a person believed it was ever a good plan to sit on cash and wait for a crash, now would not be the right time to do it.

The best indicator to me that the market is not overvalued is the behavior of "quiet" people. There are plenty of big wheels rolling around making noise, but big wheels don't carry the load that matters right now. The people who are able to do something are on the move: people who make, mine, grow, fabricate, invent, build, and hire. Current valuations are the castles in the air; as Thoreau says, now we put the foundations under them.

Your security in investing now is the collective wisdom of many small and medium businesspeople who have left the sidelines and are determined to prosper. They've been living with tightened belts, getting leaner and fitter, while the weak or unwise players have been flushed out. And the animal spirits want to run.

If you want to market time, you should sit on cash when the true engines of wealth production become fat, careless from easy times, and bloated. Or when a speculative type of investment runs away with valuations, as dot coms did and real estate in their respective turns. That time isn't now. I believe we will have several years of uneven but increasing commercial success in America before we have to be concerned again.

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wander
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Re: Sitting on cash....Waiting for a crash

Post by wander » Sun Mar 19, 2017 1:45 pm

From the day this post was originally post until today, my portfolio gives 2% gain.

freyj6
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Re: Sitting on cash....Waiting for a crash

Post by freyj6 » Sun Mar 19, 2017 3:01 pm

I've never understood people going 100% cash and waiting.

I'm not quite on board with the people who say "it's always a good time! Go 100% in today!" but I've never been so sure of where we are in the cycle that I'd pull everything out.

IMO, if you're the kind of person who would do some active management, what makes more sense is something like this:

If you're 100% stock, go down to 80% if valuations get above 30, go down to 60% if they go above 35 and go down to 40% stocks if they go above 40. And so on.

But sitting in cash makes little sense to me.

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HomerJ
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Re: Sitting on cash....Waiting for a crash

Post by HomerJ » Sun Mar 19, 2017 7:28 pm

freyj6 wrote:I've never understood people going 100% cash and waiting.

I'm not quite on board with the people who say "it's always a good time! Go 100% in today!" but I've never been so sure of where we are in the cycle that I'd pull everything out.


Just go 50/50, and you're always right. That's what I do. :)

chuppi
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Re: Sitting on cash....Waiting for a crash

Post by chuppi » Sun Mar 19, 2017 9:50 pm

I understand OP's dilema. If you decided to wait and then the market goes up, it just feels too stupid to go back in. What if there is a market crash right after.That is even worse.

More than 7/10ths of my asset is invested and I don't worry about it because I have long ways to go.
I did get a windfall mid 2016 and then another end of 2016. I asked this forum for advice. Most suggested that I go all in and some gradually. I invested a huge chunk (thanks to the advice I received on the forum) and the remaining I am investing every month. It will take more than a year for me to be fully invested. If the market goes down, I will invest at a higher percentage (I have a formula). Otherwise I will be fully invested eventually. In hindsight I should have invested everything then. But it is okay. I made a decision and I am sticking to it rain or shine.

clown
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Re: Sitting on cash....Waiting for a crash

Post by clown » Sun Mar 19, 2017 11:08 pm

Of course, there is always another side. What if the crash doesn't come? What growth opportunities are foregone by waiting? Case in point. Last fall, before the election, there was some concern (not universal agreement) that the market was overvalued. If one sat on their cash from October until now, waiting for the crash, a large opportinity would have been missed.

Some investors might have "thought" they knew who would be elected and what would happen. But nobody knows the un-knowable for absolute certain.

Since you can't truly know in advance, the best choice (my opinion) is to move forward. If the crash comes, how big? If it is 10-20% and you have a longish horizon (given your age), you will make the money back and in the meantime buy shares periodically on the cheap.

Look to history. Immediately after 9-11, the market cratered. Now, some 16 years later, we are at all time highs. If you didn't need the money in the interim, the better choice is to hold on.

Vanguard Fan 1367
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Re: Sitting on cash....Waiting for a crash

Post by Vanguard Fan 1367 » Mon Mar 20, 2017 7:19 am

chuppi wrote:I understand OP's dilema. If you decided to wait and then the market goes up, it just feels too stupid to go back in. What if there is a market crash right after.That is even worse.

More than 7/10ths of my asset is invested and I don't worry about it because I have long ways to go.
I did get a windfall mid 2016 and then another end of 2016. I asked this forum for advice. Most suggested that I go all in and some gradually. I invested a huge chunk (thanks to the advice I received on the forum) and the remaining I am investing every month. It will take more than a year for me to be fully invested. If the market goes down, I will invest at a higher percentage (I have a formula). Otherwise I will be fully invested eventually. In hindsight I should have invested everything then. But it is okay. I made a decision and I am sticking to it rain or shine.


I am new to this forum but it seems like people who give great advice abound!! I am glad that you invested your "huge chunk". I would guess that you didn't invest in load mutual funds with high expense ratios due to the good advice of Bogleheads.

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David Jay
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Re: Sitting on cash....Waiting for a crash

Post by David Jay » Mon Mar 20, 2017 8:52 am

I was re-reading Bernstein's "Deep Risk" on the plane Friday. Ran across a great quote:

...mistiming the market is probably the most frequent and severe form of permanent capital loss.

but hey, its a free country...
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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EyeYield
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Re: Sitting on cash....Waiting for a crash

Post by EyeYield » Mon Mar 20, 2017 9:19 am

Another quote from "Deep Risk":

"Most importantly, shallow risk mandates deep liquidity. If you do not have a large amount highly liquid and safe reserves—for the average individual, Treasuries and CDs—you will not have the wherewithal to weather the employment setbacks that come with turbulent markets, to purchase stocks at low prices, and to keep your courage up when it’s needed most."
"The stock market is a giant distraction from the business of investing." - Jack Bogle

juliewongferra
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Re: Sitting on cash....Waiting for a crash

Post by juliewongferra » Mon Mar 20, 2017 10:00 am

HomerJ wrote:
freyj6 wrote:I've never understood people going 100% cash and waiting.

I'm not quite on board with the people who say "it's always a good time! Go 100% in today!" but I've never been so sure of where we are in the cycle that I'd pull everything out.


Just go 50/50, and you're always right. That's what I do. :)


HomerJ,

That's the glass half full perspective...the glass half-empty is that you're also always wrong!!! LOLOLOLOL :P

cheers,
jwf

unmesh
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Re: Sitting on cash....Waiting for a crash

Post by unmesh » Mon Mar 20, 2017 2:03 pm

EyeYield wrote:Another quote from "Deep Risk":

"Most importantly, shallow risk mandates deep liquidity. If you do not have a large amount highly liquid and safe reserves—for the average individual, Treasuries and CDs—you will not have the wherewithal to weather the employment setbacks that come with turbulent markets, to purchase stocks at low prices, and to keep your courage up when it’s needed most."


Does he say how much liquidity? I'm fortunate to be able to keep 5 year's worth of burn rate in cash equivalents and still have a fair bit to invest in equities.

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DaftInvestor
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Re: Sitting on cash....Waiting for a crash

Post by DaftInvestor » Mon Mar 20, 2017 2:12 pm

Folks came last year and asked this same question...and they did it the year before as well. Some of those people that sat out of the market are now regretting it I'm sure. Others probably eventually jumped in and lost out on a couple of years of gains. Others come here and pound their chest about the fact that they successfully sold and then bought on a dip - these people never seem to return and brag about the same move a second time (likely because when they tried it a second time they lost - or sold and are still waiting for some dip that might come or might not come - and might or might not give them the gains that they definitely missed by staying out of the market).

Time in the market is a better way to make money than market timing as many have learned the hard way....

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oldzey
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Re: Sitting on cash....Waiting for a crash

Post by oldzey » Mon Mar 20, 2017 2:12 pm

Sitting on cash....Waiting for a crash....

Need some music to set to these lyrics....

Something like:

https://www.youtube.com/watch?v=5cvEVivHVsU
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

helloeveryone
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Re: Sitting on cash....Waiting for a crash

Post by helloeveryone » Mon Mar 20, 2017 3:42 pm

Is it appropriate to rebalance your portfolio to a more conservative mix during these periods where the market is high? (i.e. - is this the equivalence of trying to time the market?)
What I am getting at is that I felt like at my age (late 30's) I felt comfortable with a 80% stock 20% bond portfolio. However I feel more comfortable re-balancing to a 60:40 or 70:30 allocation right now as I worry about the large fluctuations that will happen with an 80:20 AA. This is despite having read through this forum and many other resources that I just need to let it ride, re-adjust as I get closer to retirement age etc.... And should the market "crash" or "correct itself" then at that point I will feel more comfortable re-balancing to a 80:20 AA. Having read many of the commenters responses I think I know exactly the answer to this and should just leave things be but thank you for your comments regardless.

Doom&Gloom
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Re: Sitting on cash....Waiting for a crash

Post by Doom&Gloom » Mon Mar 20, 2017 4:13 pm

oldzey wrote:Sitting on cash....Waiting for a crash....

Need some music to set to these lyrics....

Something like:

https://www.youtube.com/watch?v=5cvEVivHVsU


I've been thinking this since I first saw the title of the thread. But I had envisioned Guy Clark (RIP):

https://www.youtube.com/watch?v=fSxs89qT-r0

furikake
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Re: Sitting on cash....Waiting for a crash

Post by furikake » Mon Mar 20, 2017 7:56 pm

I'm sitting on cash, that's because this is going to be my emergency fund for when the market is down. Usually we put money into the market, but since we have accumulated enough I think, so now when we have extra, I keep it as cash to build our emergency fund. And next saving goal is for building a shed and buying a new car which I don't want to use our portfolio money for. Dh doesn't agree, he wants to put everything in the market and then withdraw 2 years of funds from the market for emergency and pay taxes when we decide to retire. Don't know who's right, but I'm keeping extra as cash right now.

gaspr
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Re: Sitting on cash....Waiting for a crash

Post by gaspr » Mon Mar 20, 2017 8:19 pm

This blog post by Ben Carlson might be helpful. It is the story of a fictitious character named "Bob, The World's Worst Market Timer"

[urlhttp://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/][/url]

And then there is this post about Buying only at market bottoms...

[urlhttp://awealthofcommonsense.com/2014/07/bought-near-market-bottoms/][/url]

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EyeYield
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Re: Sitting on cash....Waiting for a crash

Post by EyeYield » Mon Mar 20, 2017 8:22 pm

unmesh wrote:
EyeYield wrote:Another quote from "Deep Risk":

"Most importantly, shallow risk mandates deep liquidity. If you do not have a large amount highly liquid and safe reserves—for the average individual, Treasuries and CDs—you will not have the wherewithal to weather the employment setbacks that come with turbulent markets, to purchase stocks at low prices, and to keep your courage up when it’s needed most."


Does he say how much liquidity? I'm fortunate to be able to keep 5 year's worth of burn rate in cash equivalents and still have a fair bit to invest in equities.

Well, the answer is Deep, not being sarcastic. Dr. Bernstein offers up some various formulas and I found it to be an interesting read. He has offered his Deep Risk pamphlet on this site for free and may do it again, but the Kindle version is only $4.95.
In my opinion, five years of expenses is an adequate amount to deal with "Shallow Risk", depending on your situation, of course.
"The stock market is a giant distraction from the business of investing." - Jack Bogle

S17C
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Re: Sitting on cash....Waiting for a crash

Post by S17C » Tue Mar 21, 2017 11:35 am

As of 12:35pm EDT the S&P 500 has dropped about 17-18 since market open, at its lowest point since February 2017. Discount prices on S&P500!

Doom&Gloom
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Re: Sitting on cash....Waiting for a crash

Post by Doom&Gloom » Tue Mar 21, 2017 12:55 pm

Ask and it shall be delivered.

Is it now time? Should one wait even longer? Will a bell ring?

Vanguard Fan 1367
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Re: Sitting on cash....Waiting for a crash

Post by Vanguard Fan 1367 » Tue Mar 21, 2017 1:08 pm

Doom&Gloom wrote:Ask and it shall be delivered.

Is it now time? Should one wait even longer? Will a bell ring?


The great Bogle thinks that you can and probably will damage your returns with market timing. Who are we to argue with him.

GoldenFinch
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Re: Sitting on cash....Waiting for a crash

Post by GoldenFinch » Tue Mar 21, 2017 1:12 pm

Doom&Gloom wrote:Ask and it shall be delivered.

Is it now time? Should one wait even longer? Will a bell ring?


Bells are on timers. We will have none of that here. Tsk, tsk!

ray333
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Re: Sitting on cash....Waiting for a crash

Post by ray333 » Tue Mar 21, 2017 2:20 pm

Buy buy buy?

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blueblock
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Re: Sitting on cash....Waiting for a crash

Post by blueblock » Tue Mar 21, 2017 6:06 pm

Doom&Gloom wrote:Will a bell ring?


I'm waiting for more (cow)bell.

https://www.nbc.com/saturday-night-live ... 1046?snl=1

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