"Waiting for the Market to Crash is a Terrible Strategy"

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Avo
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"Waiting for the Market to Crash is a Terrible Strategy"

Post by Avo »

I recently came across this article, which seems relevant as the US market keeps hitting new highs:

"Waiting for the Market to Crash is a Terrible Strategy" by Samuel Lee:

http://svrn.co/blog/2017/5/14/waiting-f ... e-strategy
boglephreak
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by boglephreak »

what i find most amusing about people talking about holding cash on this forum is when livesoft comes in and starts listing all the big recent dips and asking them when they bought back in to the market, and seeing the blank looks (figuratively, since i cant actually see them).
palaheel
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by palaheel »

I don't remember who on this site first posted this link, but it's wonderful. Can you decide when to sell and when to buy?

https://qz.com/487013/this-game-will-sh ... right-now/

It's better if, like me, you've lost a lot of hair already. The fact that this is a game helps the ulcer situation.
Markets crash. Markets recover. Inflation takes your money FOREVER.
hoops777
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by hoops777 »

The problem with waiting is that when it does take a decent size dip,you think it will dip more and hold off buying, and then it doesn't and you swear you will get it next time :D
K.I.S.S........so easy to say so difficult to do.
GoldenFinch
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by GoldenFinch »

This thread reminds me of someone I know (mid 30s) who moved his 401k money out of mutual funds into a no interest money market back in August of 2014. Unfortunately, not only did he not get back in yet, he has made 95% of future contributions go into the money market. He's still waiting for the crash. I think the market is up close to 30% since August 2014.
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Toons
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by Toons »

Time Not Timing
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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InvestorNewb
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by InvestorNewb »

Staying invested has paid off handsomely. I have no intention of selling anytime soon.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
fundseeker
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by fundseeker »

Not sure that article is very compelling, and it's probably worth noting that a firm might prepare such an article after its clients have kept telling them that they're waiting (hence fewer fees for the firm).

But regardless, there is nothing wrong with sitting on the sideline for a while if you've come into some money, and/or maybe DCAing into this market. Maybe a thread should be started to discourage people with a lot of cash from lump summing in right now, since a lot of people's current interest in the stock market is a result of how well it has done, which we all now probably won't last. And they are the ones who will be crying over not waiting. And for some of us, there is nothing wrong with rebalancing and maybe even changing our allocation to reduce our exposure. These historical studies do not really apply to everyone's situation and cannot predict the future.
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badbreath
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by badbreath »

In 08, 09 the thought of selling never came across my mind. I remember looking at statements and saying that looks really bad but still keep putting money in the market.
Last edited by badbreath on Tue Jun 20, 2017 9:13 pm, edited 1 time in total.
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TheTimeLord
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by TheTimeLord »

Not commenting on if the strategy is good or bad but to call 10% a crash is ridiculous and probably the devil in the details of how the author made their case especially given the fact we have had a few almost 10% dips in the current bull market. I would like to see the data run with both 5%, 20% and 30% drops.
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arcticpineapplecorp.
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by arcticpineapplecorp. »

palaheel wrote:I don't remember who on this site first posted this link, but it's wonderful. Can you decide when to sell and when to buy?

https://qz.com/487013/this-game-will-sh ... right-now/

It's better if, like me, you've lost a lot of hair already. The fact that this is a game helps the ulcer situation.
That one's not bad but I like this one better:

https://www.prudential.com/personal/ins ... ends-game/
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
swguy
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by swguy »

You can go back to 2009 on the forum and read posts discouraging investing in lump sum, and promoting sitting on the sidelines because of valuations, etc. Hindsight seems to support those who weren't sitting.
fundseeker
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by fundseeker »

And re the author of the article in the OP's link, you can have him handle your finances for the following fees:

Fees
In addition to a one-time engagement fee of $5,000, we charge an annual asset-based fee:

0.65% for the first $2 million;
0.45% for the next $3 million;
0.25% for the rest.
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bottlecap
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by bottlecap »

hoops777 wrote:The problem with waiting is that when it does take a decent size dip,you think it will dip more and hold off buying, and then it doesn't and you swear you will get it next time :D
This should be response to every thread in which the poster mentions they are waiting to get back in.

This is just human nature.

JT
james22
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by james22 »

...historically, once prospective returns have dropped below about 7.5%, investors could have adopted what I've called a "Rip van Winkle" strategy: just going to sleep until stocks dropped by at least 30% or moved back to prospective returns above 10% - a strategy that would have historically outperformed the S&P 500 with about half the overall risk.

http://www.hussman.net/wmc/wmc110523.htm
lazyday
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by lazyday »

james22 wrote:...historically, once prospective returns have dropped below about 7.5%, investors could have adopted what I've called a "Rip van Winkle" strategy: just going to sleep until stocks dropped by at least 30% or moved back to prospective returns above 10% - a strategy that would have historically outperformed the S&P 500 with about half the overall risk.
http://www.hussman.net/wmc/wmc110523.htm
Sounds like data mining.

Until 1955, you could have sold your US stocks whenever the dividend yield went under, say, 4.5% and bought back when it went over 5.5%. Would have worked from the 1870s until mid 1950s.

I expect you'll be proven right, but am not willing to risk dumping stocks when both yield+growth and 1/CAPE are significantly higher than TIPS yield, when I still might live for several decades.
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goingup
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by goingup »

swguy wrote:You can go back to 2009 on the forum and read posts discouraging investing in lump sum, and promoting sitting on the sidelines because of valuations, etc. Hindsight seems to support those who weren't sitting.
It's never been BH mainline thinking to discourage lump sum investing or to promote sideline sitting. Jack Bogle says "invest we must" and that means even in the teeth of the storm like 2008-9.

There was one legendary poster, Adrian Neuvo (I think that's the right name), who famously put every bit of his portfolio into 100% equity near the absolute bottom of the Market in 2009. He was really ridiculed as a market timer, so much so that he quit posting around that time. It was noted that he had a generous pension coming upon retirement, but it was still a bold move. Made out like a bandit it seems. I have no idea what happened to him and whether his good fortune continued.
Vanguard Fan 1367
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by Vanguard Fan 1367 »

Ben Stein wrote a book on doing exactly that, waiting on a 30 or more percent drop to invest. I tried that for a little while and am prospering greatly doing the John Bogle approach instead.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."
david99
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by david99 »

goingup wrote:
swguy wrote:You can go back to 2009 on the forum and read posts discouraging investing in lump sum, and promoting sitting on the sidelines because of valuations, etc. Hindsight seems to support those who weren't sitting.
It's never been BH mainline thinking to discourage lump sum investing or to promote sideline sitting. Jack Bogle says "invest we must" and that means even in the teeth of the storm like 2008-9.

There was one legendary poster, Adrian Neuvo (I think that's the right name), who famously put every bit of his portfolio into 100% equity near the absolute bottom of the Market in 2009. He was really ridiculed as a market timer, so much so that he quit posting around that time. It was noted that he had a generous pension coming upon retirement, but it was still a bold move. Made out like a bandit it seems. I have no idea what happened to him and whether his good fortune continued.
There were a few retired Bogleheads who were thinking of selling their stocks in 2008/2009. You can look back and find some of those threads. In hindsight they had too much invested in stocks for their risk tolerance ---- this is something that we can all learn from ---- know your risk tolerance.
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by beammeupscotty »

lazyday wrote:
james22 wrote:...historically, once prospective returns have dropped below about 7.5%, investors could have adopted what I've called a "Rip van Winkle" strategy: just going to sleep until stocks dropped by at least 30% or moved back to prospective returns above 10% - a strategy that would have historically outperformed the S&P 500 with about half the overall risk.
http://www.hussman.net/wmc/wmc110523.htm
Sounds like data mining.

Until 1955, you could have sold your US stocks whenever the dividend yield went under, say, 4.5% and bought back when it went over 5.5%. Would have worked from the 1870s until mid 1950s.

I expect you'll be proven right, but am not willing to risk dumping stocks when both yield+growth and 1/CAPE are significantly higher than TIPS yield, when I still might live for several decades.
Yeah, let's follow a strategy suggested by someone whose flagship fund has underperformed the Vanguard money market fund since inception! No thanks.

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HomerJ
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by HomerJ »

Vanguard Fan 1367 wrote:Ben Stein wrote a book on doing exactly that, waiting on a 30 or more percent drop to invest. I tried that for a little while and am prospering greatly doing the John Bogle approach instead.
Ben Stein also panicked during 2008-2009 crash.
deltaneutral83
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by deltaneutral83 »

Timing the market with a large chunk of your portfolio to wait on a pullback/crash is a great idea, for about 7 out of every 1000 investors. I have come to realization that I am not one of the seven out of a thousand. Hopefully I can live with the shame of not being a statistical anomaly.
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goingup
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by goingup »

david99 wrote:
goingup wrote:
swguy wrote:You can go back to 2009 on the forum and read posts discouraging investing in lump sum, and promoting sitting on the sidelines because of valuations, etc. Hindsight seems to support those who weren't sitting.
It's never been BH mainline thinking to discourage lump sum investing or to promote sideline sitting. Jack Bogle says "invest we must" and that means even in the teeth of the storm like 2008-9.

There was one legendary poster, Adrian Neuvo (I think that's the right name), who famously put every bit of his portfolio into 100% equity near the absolute bottom of the Market in 2009. He was really ridiculed as a market timer, so much so that he quit posting around that time. It was noted that he had a generous pension coming upon retirement, but it was still a bold move. Made out like a bandit it seems. I have no idea what happened to him and whether his good fortune continued.
There were a few retired Bogleheads who were thinking of selling their stocks in 2008/2009. You can look back and find some of those threads. In hindsight they had too much invested in stocks for their risk tolerance ---- this is something that we can all learn from ---- know your risk tolerance.
I do remember that too. (Longtime lurker here.) There was much talk of Plan B (I hate to trot that phrase out again) and putting in the floor if "you can't afford to lose one more dollar". I don't remember much talk dissuading investing based on valuations, however, especially for those with still working.
Vanguard Fan 1367
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by Vanguard Fan 1367 »

HomerJ wrote:
Vanguard Fan 1367 wrote:Ben Stein wrote a book on doing exactly that, waiting on a 30 or more percent drop to invest. I tried that for a little while and am prospering greatly doing the John Bogle approach instead.
Ben Stein also panicked during 2008-2009 crash.
Interesting! I looked up the title, Yes, You Can Time The Market and the date published, 2003. Not panicking is classic Bogle advice, when there is blood in the streets it is time to stay the course, keep your index funds and ride out the bear. I don't know anything about Stein's panic in 2008-2009 except I am not surprised.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."
Swelfie
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by Swelfie »

beammeupscotty wrote:Yeah, let's follow a strategy suggested by someone whose flagship fund has underperformed the Vanguard money market fund since inception! No thanks.
I love that graph though. It's like a failed moon launch. It started so well, and that low volatility is commendable throughout, and it continues on a very predictable trajectory as it just accelerates into the ground now.
Phil DeMuth
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by Phil DeMuth »

Two corrections: Ben Stein's book did not recommend waiting for a 30% drop. Also, he did not panic during the crash.
tesuzuki2002
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by tesuzuki2002 »

I just keep buying... and when the market crashes, I'm planning to buy a bunch more!!
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Re: "Waiting for the Market to Crash is a Terrible Strategy"

Post by Vanguard Fan 1367 »

Phil DeMuth wrote:Two corrections: Ben Stein's book did not recommend waiting for a 30% drop. Also, he did not panic during the crash.
I don't know if I can find my copy of the book and I am out of town right now anyway. How about this: did he say that if you waited for some sort of correction, maybe not exactly 30 percent, and invested then, then in the past you would have done ok?

Thanks for the help.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."
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