Buy on Really Bad Days, Sell on Really Good Days?

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inbox788
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by inbox788 » Tue Oct 03, 2017 11:50 am

livesoft wrote:
Tue Oct 03, 2017 11:24 am
inbox788 wrote:
Tue Oct 03, 2017 11:19 am
IMO, the biggest risk is wasting away cash waiting around for these events. You could be waiting around a while. BTW, how are you defining these anyway? When was the latest Really Bad Day and Really Good Day?
DGS had a RBD in September 2017 as announced in this post:
viewtopic.php?p=3547515#p3547515

And don't have cash sitting around waiting for these events. That is really bad.
The rest of the market barely moved on Sept. 25.

WisdomTree Emerging Markets SmallCap Dividend Fund
http://www.marketwatch.com/investing/fund/dgs

This Emerging Market ETF went down 2.7% (by my calculations; is the threshold 2.0 or 2.5 or something else like standard deviations?). The following 2 days went down some more and was negative until today. The traders antithesis is "never catch a falling knife", but this is barely a RBD or a falling knife IMO.

I'm guessing Emerging Markets are especially volatile because they carry double risk of currencies as well as commodities.


Addendum: I just realized DGS went ex-div Sept. 26, so if you add back in the dividend, it might not even be a RBD. (would not have thought about if the name of the fund didn't include dividend)

http://www.nasdaq.com/symbol/dgs/dividend-history

livesoft
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by livesoft » Tue Oct 03, 2017 12:00 pm

Let me add some math to the discussion.

Suppose one decided they were going to market time the selling of some of their bond fund on a RGD. For example, suppose they sold BIV as shown in the chart I posted and bought it back yesterday. BIV dropped about 1% in value during those 2 weeks. Be careful though since some of the drop was from going ex-dividend. That's why I charted VBIIX which takes dividends into account.

So if one did market timing, then they saved themselves a 1% loss on those shares they sold and bought back. Now suppose their asset allocation was 40% to bonds and they sold 10% of their portfolio, so they went to 60% equities, 30% bonds, and 10% cash for those 2 weeks. And then bought back BIV.

This means their portfolio performance for the year will increase over not having made the trades by 10% x 1% or 0.1%. That is, instead of maybe having their fixed income perform at 4%, they got 4.1%. Not too exciting is it?

And if they took that 10% of portfolio and used it to buy IJS instead of letting it sit in cash, we now know that IJS went up 10% in those 2 weeks. So their portfolio performance was increased by 10% x 10% = 1% plus the 0.1% from not losing 1% staying in BIV. That means their portfolio will perform about 1.1% better than if they had done nothing.

Now there was no reason to know that IJS would go up 10% in two weeks. And even so, if one bought IJS, then one would be changing their asset allocation from 60/40 to 70/30, so one would hope that the 70/30 portfolio would have a better total return than the 60/40 portfolio. There is no alpha here. There is no free lunch.
Last edited by livesoft on Tue Oct 03, 2017 12:07 pm, edited 1 time in total.
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livesoft
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by livesoft » Tue Oct 03, 2017 12:02 pm

inbox788 wrote:
Tue Oct 03, 2017 11:50 am
Addendum: I just realized DGS went ex-div Sept. 26, so if you add back in the dividend, it might not even be a RBD. (would not have thought about if the name of the fund didn't include dividend)
The RBD was the day before the dividend, so the dividend did not factor into the math of the RBD. You've got to be on your toes if you want to market time.

The question to answer is: If one bought DGS on 9/25 by exchanging from BND (a bond fund), has one outperformed the total return of the bond fund since 9/25?

Another question to answer is: When should one exchange DGS back into BND? I will give a partial answer: One should probably wait until at least next week when the Korean Stock Exchange opens again after a week-long holiday.

Of course, one did not know if DGS would go up after the RBD. Maybe something interesting would happen on the Korean Peninsula? Maybe China or Taiwan have something to add to all this? Who knows? Anyone who bought DGS on 9/25 (or any date for that matter) is taking a big risk.
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avalpert
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by avalpert » Tue Oct 03, 2017 12:24 pm

livesoft wrote:
Tue Oct 03, 2017 10:41 am
avalpert wrote:
Tue Oct 03, 2017 9:51 am
That chart and data point (and the inverse about avoiding the top worst days) is a popular one in narratives - but from an analytical standpoint it is useless. You need to look at the relationship between those best days and worst days and other best days (they often come together) - you need to evaluate a complete trading system that has both the ins and the outs to see if it can improve performance. Like I said, last month if I had 'taken the gain' the first time my portfolio popped a few weeks worth of expenses I would have missed out on a continuing run of gains - unless you have a well constructed plan focused on timing short-term movement (i.e. you are a true market timer) then you need to ignore daily movement in favor of your long-term plan.
Generally, Boglehead-derived portfolios contain both equity and bond funds. Would you agree that on every RBD in an equity fund that one's bond funds missed out on the RBD?
Depends on what the bond fund did that day, but since they are generally uncorrelated I would think most times that would be true. The bond funds also miss out on every real good day - but for most 'Bogleheads' that is why they hold them, to reduce portfolio volatility.

inbox788
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by inbox788 » Tue Oct 03, 2017 12:25 pm

livesoft wrote:
Tue Oct 03, 2017 12:02 pm
inbox788 wrote:
Tue Oct 03, 2017 11:50 am
Addendum: I just realized DGS went ex-div Sept. 26, so if you add back in the dividend, it might not even be a RBD. (would not have thought about if the name of the fund didn't include dividend)
The RBD was the day before the dividend, so the dividend did not factor into the math of the RBD. You've got to be on your toes if you want to market time.

The question to answer is: If one bought DGS on 9/25 by exchanging from BND (a bond fund), has one outperformed the total return of the bond fund since 9/25?

Another question to answer is: When should one exchange DGS back into BND? I will give a partial answer: One should probably wait until at least next week when the Korean Stock Exchange opens again after a week-long holiday.

Of course, one did not know if DGS would go up after the RBD. Maybe something interesting would happen on the Korean Peninsula? Maybe China or Taiwan have something to add to all this? Who knows? Anyone who bought DGS on 9/25 (or any date for that matter) is taking a big risk.
I always get confused by these, and I've heard it both ways. Either the 25th drop wasn't that much or the 26th with the dividend was a recovery, so the 2 day net drop was very small and probably not significant.
If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.
https://www.sec.gov/fast-answers/answer ... enhtm.html

As far as when to unwind your position, that depends on your timing strategy. So far, I've only heard of buy on Really Bad Days and HOLD. So the answer is never (or until the next rebalance threshold). For this thread, the answer is the next Really Good Day. Waiting for these two events could keep you in or out of the fund for a long time. BTW, are there Really Good Days and Really Bad Days for BND? Watching diversified bond funds on a daily basis is like watching paint dry or grass grow.

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by avalpert » Tue Oct 03, 2017 12:37 pm

TheTimeLord wrote:
Tue Oct 03, 2017 10:41 am
This is more about managing risk versus maximizing return.
Which is why you need to tie it to your rebalancing bands (whether percentage or dollar-value based) and not anchored on near-time price movements.
Remember you don't truly have a gain until you sell,
No, you truly do have a gain (or loss) before you sell. Your portfolio is now worth X, gains/losses relative to the past are irrelevant and you need to only focus on forward expectations and needs from here.
and I am sure you can find a ton of posts on this board recently telling people not to count on their balances because the market is at an all-time high and could drop 40%-50%.
Yep, and in every one of those posts you should also find the regulars reminding people to stick to their plan, that they drafted their approach to rebalancing for a reason and in the heat of the moment is not the time to declare that reason invalidated. People posting here are no less prone to emotional reactions to market movements than others (well, maybe a little less prone - but still prone).

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by avalpert » Tue Oct 03, 2017 12:43 pm

TheTimeLord wrote:
Tue Oct 03, 2017 11:37 am
staythecourse wrote:
Tue Oct 03, 2017 11:14 am
I am not sure why it seems to be SO HARD for folks to understand... YOU CAN NOT TIME THE MARKET!!

Every possible buying and selling technique has been done a ZILLION times with high end computers on Wall Street with Harvard, MIT, Princeton, Yale, etc... double masters degree geeks for at least 10 years+. So don't you think it would be arrogant to think someone on bogleheads or anywhere else could just go, "Hey I wonder if this simple plan will generate some alpha?" as if no one before them has already thought of it.

To make it simple my default thought process in investing is assuming that anything I think about as a great idea has already been thought of and has been debunked otherwise it would be standard practice already.

Good luck.

p.s. There has been numerous studies showing rebalancing too frequent produces lower returns due to transaction costs and/ or taxes.

This is not what would be classically considered market timing because it is not about jumping in and out of the market. Nor is it about maximizing gains which assuredly is what all those smart people were trying to build a better mouse trap for. This is a combination of the very foundation of passive investing, taking what the market gives you , and Bernstein's stop playing when you have won the game. There is no intent to generate alpha or maximize gains, this is risk mitigation and taking advantage of obvious statistical anomalies you are fortunate to be on the right side of a RGD because you are a buy and hold investor.
Except the days you are talking about aren't statistical anomalies, they are regular occurrences, and by reacting to them outside of the broader context of your portfolio you really don't know what impact it would have on your risk/return balance - that is why you specify one and keep to it. What you are describing isn't risk mitigation - it is reacting to daily market movements, it is exactly what would be considered classic market timing.

livesoft
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by livesoft » Tue Oct 03, 2017 12:56 pm

inbox788 wrote:
Tue Oct 03, 2017 12:25 pm
I always get confused by these, ....
Then market timing is not for you.
inbox788 wrote:
Tue Oct 03, 2017 12:25 pm
As far as when to unwind your position, that depends on your timing strategy. So far, I've only heard of buy on Really Bad Days and HOLD.
There was a thread with quite some backtesting on the hold time.

OTOH, I think it is often written that if somebody came up with a good market timing strategy, then they wouldn't tell anyone else. Of course, what this means is that good market timing strategies are not published nor publicly tested. Or they are only made known after they stop working. There are a number of books which discuss this.

So bogleheads.org will probably never have a completely laid out discussion of a working market timing strategy. Pretty much by definition. So if anybody tells you that market timing does not work, you should change that to "Market timing as we know it does not work."

And one more thing: Many people equate Market Timing with making hundreds of thousands of dollars in the stock market. But what if Market Timing was something simpler, such as Making 0.5% more annually than your benchmark funds in the stock market. If this extra 0.5% annually is one's idea of Market Timing, then one had better not have an extra 1% in fees and taxes to get that 0.5% or they will just be digging themselves hole. :)
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staythecourse
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by staythecourse » Tue Oct 03, 2017 1:28 pm

livesoft wrote:
Tue Oct 03, 2017 11:22 am
staythecourse wrote:
Tue Oct 03, 2017 11:14 am
So don't you think it would be arrogant to think someone on bogleheads or anywhere else could just go, "Hey I wonder if this simple plan will generate some alpha?" as if no one before them has already thought of it.
[...]
p.s. There has been numerous studies showing rebalancing too frequent produces lower returns due to transaction costs and/ or taxes.
I agree that there is no "generate some alpha" which suggests that one can get extra performance without increasing one's allocation to equities. One gets extra performance by increasing one's allocation to equities. I don't think you would argue that an asset allocation of 80/20 should not have higher performance than an asset allocation of 20/80.

As for transaction costs and/or taxes, I can say that there are none if one has no commissions (say at Vanguard) and uses tax-advantaged accounts (say at Vanguard). Do you have transaction costs and taxes now in your tax-advantaged accounts? If so, why?

Agree with there is no $20 bills lying on the floor to pick up. The only way to generate better EXPECTED returns is through taking on more systematic risk, i.e. equity risk, term risk, etc...

The second point I would agree should have LESS transaction costs, but doesn't mean they are not there. I have NO data to back up this claim, but have a hard time believing Person X sells mutual fund A for mutual fund B with NO costs no matter what situation. It isn't like the brokerage house or the intermediary is doing if for free. They aren't sitting there putting the order in selling mutual fund B (doing that paperwork for the SEC) then buying mutual fund B at the close (with that paperwork) for free. I am not sure, but the cynic in me will bet some leakage of money is occurring to pay for this transaction even if it does not show up. Like I said I may be COMPLETELY wrong, but don't buy (pun intended) Wall Street doing anything for free.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by SimplicityNow » Tue Oct 03, 2017 1:49 pm

My opinion is that it is market timing whatever you want to call it. Some like to market time to some degree.

Could it be more profitable then doing nothing, sure. Can you continue to replicate that indefinitely? I don't think so.

At the end of the day, week, year or decade I don't think its going to make much difference.

When I get cash I invest it immediately according to my AA.

I'll continue to be boring and do nothing.

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by The Wizard » Tue Oct 03, 2017 2:16 pm

staythecourse wrote:
Tue Oct 03, 2017 11:14 am
I am not sure why it seems to be SO HARD for folks to understand... YOU CAN NOT TIME THE MARKET!!...
Buy low, sell high.
That's all there is to it...
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by GoldenFinch » Tue Oct 03, 2017 3:01 pm

livesoft wrote:
Tue Oct 03, 2017 12:56 pm

And one more thing: Many people equate Market Timing with making hundreds of thousands of dollars in the stock market. But what if Market Timing was something simpler, such as Making 0.5% more annually than your benchmark funds in the stock market.
When we’re talking about a half of a percent it sounds like the motivation is the intellectual exercise and maybe the subsequent sense of satisfaction when one succeeds. It can’t be the money. I guess it could be, but that doesn’t make sense when you factor in risk.

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by staythecourse » Tue Oct 03, 2017 3:53 pm

The Wizard wrote:
Tue Oct 03, 2017 2:16 pm
staythecourse wrote:
Tue Oct 03, 2017 11:14 am
I am not sure why it seems to be SO HARD for folks to understand... YOU CAN NOT TIME THE MARKET!!...
Buy low, sell high.
That's all there is to it...
I hope you are kidding otherwise you have some reading to do. How do you know when it is "low"? Or how about "high"? The only way I know when it is "low" or "high" is in retrospect after it is all said and done. Your crystal ball is much better then mine. Read the BHB and BSB studies and it showed their ability (the top pension fund managers) brought in negative alpha on their ability to predict when it is "low" or "high". Guess your crystal ball is better then theirs as well.

For me since I don't know when it will be low or high or sideways I just put money in when I get it.

Good luck.
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by The Wizard » Tue Oct 03, 2017 4:47 pm

staythecourse wrote:
Tue Oct 03, 2017 3:53 pm
The Wizard wrote:
Tue Oct 03, 2017 2:16 pm
staythecourse wrote:
Tue Oct 03, 2017 11:14 am
I am not sure why it seems to be SO HARD for folks to understand... YOU CAN NOT TIME THE MARKET!!...
Buy low, sell high.
That's all there is to it...
I hope you are kidding otherwise you have some reading to do. How do you know when it is "low"? Or how about "high"? The only way I know when it is "low" or "high" is in retrospect after it is all said and done. Your crystal ball is much better then mine. Read the BHB and BSB studies and it showed their ability (the top pension fund managers) brought in negative alpha on their ability to predict when it is "low" or "high". Guess your crystal ball is better then theirs as well.

For me since I don't know when it will be low or high or sideways I just put money in when I get it.

Good luck.
Excellent points.
It's Relative highs and Relative lows.
Prune your outperformers (sell high) and move the proceeds into either underperforming stocks or stable assets, such as TIAA Traditional in my case.
Really, it's just enhanced rebalancing.
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Pajamas
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by Pajamas » Tue Oct 03, 2017 6:18 pm

TheTimeLord wrote:
Tue Oct 03, 2017 7:37 am
Pajamas wrote:
Tue Oct 03, 2017 7:31 am
You never know for sure if it is a good day or a bad day until the market closes. :beer
Unless one uses ETFs or tracks the ETFs equivalents of their funds. But it is true if you use Mutual Funds you are at the mercy of the closing prices to buy or sell, but ETFs are priced, bought and sold throughout the day.
I was referring to the markets in general, not any particular type of investment. A market can be down in the morning and up in the afternoon or similar. Sometimes the market reverses direction going into the close. Can't really say if it is a really good day or really bad day until it is over. Same for most things. You could be having a great day at work until thirty minutes before it's time to go home and then something bad happens and you have to stay a couple of more hours trying to prevent a disaster.

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by goingup » Tue Oct 03, 2017 6:59 pm

Haven't most days since March 2009 been good days? Sure, there have been some pullbacks and even a correction or 2 but basically a long march upward.

I can't imagine lopping off a few weeks expenses. That would be tinkering non-pareil. :oops:

In one of his book Dan Solin mentions that retirees withdrawing annual expenses might take an extra 10% (so 4.4% rather than 4) in really good years and take less in bad years. That makes sense to me.

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by The Wizard » Tue Oct 03, 2017 7:06 pm

goingup wrote:
Tue Oct 03, 2017 6:59 pm
Haven't most days since March 2009 been good days?
Umm no, they haven't...
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by livesoft » Tue Oct 03, 2017 7:09 pm

goingup wrote:
Tue Oct 03, 2017 6:59 pm
Haven't most days since March 2009 been good days? Sure, there have been some pullbacks and even a correction or 2 but basically a long march upward.
Please watch these videos: viewtopic.php?t=205911

The statistics are presented that during good times, the stock market (S&P500?) goes up about 53% of the trading days, but during bad times it goes down about 53% of the days. That says something about the direction, but not the magnitude.
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by goingup » Tue Oct 03, 2017 7:14 pm

The Wizard wrote:
Tue Oct 03, 2017 7:06 pm
goingup wrote:
Tue Oct 03, 2017 6:59 pm
Haven't most days since March 2009 been good days?
Umm no, they haven't...
Well perhaps I overstate the case. Would suggesting that we have been in a long bull market offend anyone's sensibilities?

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by TheTimeLord » Tue Oct 03, 2017 8:38 pm

Pajamas wrote:
Tue Oct 03, 2017 6:18 pm
TheTimeLord wrote:
Tue Oct 03, 2017 7:37 am
Pajamas wrote:
Tue Oct 03, 2017 7:31 am
You never know for sure if it is a good day or a bad day until the market closes. :beer
Unless one uses ETFs or tracks the ETFs equivalents of their funds. But it is true if you use Mutual Funds you are at the mercy of the closing prices to buy or sell, but ETFs are priced, bought and sold throughout the day.
I was referring to the markets in general, not any particular type of investment. A market can be down in the morning and up in the afternoon or similar. Sometimes the market reverses direction going into the close. Can't really say if it is a really good day or really bad day until it is over. Same for most things. You could be having a great day at work until thirty minutes before it's time to go home and then something bad happens and you have to stay a couple of more hours trying to prevent a disaster.
Again using ETFs the price you would received would be the time you sell not end of day so what the market does after that has no effect on your transaction.
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by Pajamas » Wed Oct 04, 2017 7:52 am

TheTimeLord wrote:
Tue Oct 03, 2017 8:38 pm

Again using ETFs the price you would received would be the time you sell not end of day so what the market does after that has no effect on your transaction.
The topic of the post is buying on really bad days and selling on really good days. So please explain to me how you know which it will be in advance?

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by TheTimeLord » Wed Oct 04, 2017 10:14 am

Pajamas wrote:
Wed Oct 04, 2017 7:52 am
TheTimeLord wrote:
Tue Oct 03, 2017 8:38 pm

Again using ETFs the price you would received would be the time you sell not end of day so what the market does after that has no effect on your transaction.
The topic of the post is buying on really bad days and selling on really good days. So please explain to me how you know which it will be in advance?
If I look at VTI and it is up 2% on the day, for me that would be a really good day and I would likely sell at that instant. If it rises or fades into the close would have no effect. I think you are being really literal with the word day in assuming it has to the whole day through the closing. If I told you today was a good day to sell XXX because it was up 10%, but you look and it closed down 2% after being up 10% at noon, does it make it any less true it was a good day to sell or the day any less good for those who sold at noon. I guess I am not following what the crux of your question is since prices for indexes and the corresponding ETFs to Vanguard mutual funds I don't see why it is difficult to judge if your holdings are up or down.
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by livesoft » Wed Oct 04, 2017 11:26 am

Pajamas wrote:
Wed Oct 04, 2017 7:52 am
The topic of the post is buying on really bad days and selling on really good days. So please explain to me how you know which it will be in advance?
Who cares that they know in advance? In fact, the whole point of this thread is that one doesn't need to know anything in advance. One only needs to know that it happened just a minute ago. That is, one is not predicting a Really Bad Day; one is simply reacting to a RBD that has already happened.

And the same can be said for a Really Good Day: One is simply reacting to a RGD that has already happened.
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by nedsaid » Wed Oct 04, 2017 11:57 am

The Wizard wrote:
Tue Oct 03, 2017 2:16 pm
staythecourse wrote:
Tue Oct 03, 2017 11:14 am
I am not sure why it seems to be SO HARD for folks to understand... YOU CAN NOT TIME THE MARKET!!...
Buy low, sell high.
That's all there is to it...
This made me laugh. I always thought buy low, sell high was pretty fundamental to success as an investor. It is amazing all the remarks how this is somehow market timing. I don't know, buy high and sell low? Is that supposed to work better. I like my buy low, sell high formula better.
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by The Wizard » Wed Oct 04, 2017 12:10 pm

nedsaid wrote:
Wed Oct 04, 2017 11:57 am
The Wizard wrote:
Tue Oct 03, 2017 2:16 pm
staythecourse wrote:
Tue Oct 03, 2017 11:14 am
I am not sure why it seems to be SO HARD for folks to understand... YOU CAN NOT TIME THE MARKET!!...
Buy low, sell high.
That's all there is to it...
This made me laugh. I always thought buy low, sell high was pretty fundamental to success as an investor. It is amazing all the remarks how this is somehow market timing. I don't know, buy high and sell low? Is that supposed to work better. I like my buy low, sell high formula better.
Good, I'm glad we agree on things.
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by avalpert » Wed Oct 04, 2017 12:17 pm

nedsaid wrote:
Wed Oct 04, 2017 11:57 am
The Wizard wrote:
Tue Oct 03, 2017 2:16 pm
staythecourse wrote:
Tue Oct 03, 2017 11:14 am
I am not sure why it seems to be SO HARD for folks to understand... YOU CAN NOT TIME THE MARKET!!...
Buy low, sell high.
That's all there is to it...
This made me laugh. I always thought buy low, sell high was pretty fundamental to success as an investor. It is amazing all the remarks how this is somehow market timing. I don't know, buy high and sell low? Is that supposed to work better. I like my buy low, sell high formula better.
'Buy low, sell high' is a trite throwaway line. Of course everyone wants to pay the least and sell for the most - the problem is it is only known in retrospect whether that is indeed what happens and you shouldn't conflate 'higher today than yesterday' with selling high.

Whether or not the market inherently 'cannot' be time, every attempt I have seen to specify 'buying on Really Bad Days' enough to actually test it has shown it isn't a means of more consistently buying high and selling low than vanilla rebalancing methods.

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by avalpert » Wed Oct 04, 2017 12:28 pm

TheTimeLord wrote:
Wed Oct 04, 2017 10:14 am
Pajamas wrote:
Wed Oct 04, 2017 7:52 am
TheTimeLord wrote:
Tue Oct 03, 2017 8:38 pm

Again using ETFs the price you would received would be the time you sell not end of day so what the market does after that has no effect on your transaction.
The topic of the post is buying on really bad days and selling on really good days. So please explain to me how you know which it will be in advance?
If I look at VTI and it is up 2% on the day, for me that would be a really good day and I would likely sell at that instant.
Based on a very quick look, the last time I see VTI going up 2% in a day was November 7th, 2016 (I wonder why) - it closed at 109.15 that day and hasn't been that low since - selling at that instant would have been foolish.

The time before that was March 1st, 2016 when it closed at 100.66 - it also has never been that low since. The time before that was January 29th, 2016 - it closed at 98.33 and you did have a few weeks after that where you could reenter at a lower price, but it hasn't been that low since February 25th so your window was small.

I think you get the point. Selling the instant it goes up 2% in a given day does not seem to be a reliable way to sell high.

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by livesoft » Wed Oct 04, 2017 12:42 pm

avalpert wrote:
Wed Oct 04, 2017 12:28 pm
Selling the instant it goes up 2% in a given day does not seem to be a reliable way to sell high.
This is an excellent observation. Since the stock market is expected to go up (otherwise why would we want to invest at all), this idea to sell just because something goes up 2% or 3% or 10% is probably not the way to do it.

HOWEVER, suppose that one's nominal AA to equities is 65%, but on Monday one noticed that one's asset allocation to equities is now 70%. Then on Wednesday, VTI goes up 2%, would one sell VTI or should one wait?

Or ...
suppose that one's nominal AA to equities is 65% with a 5% trigger. On Monday one noticed that one's asset allocation to equities is now 69.9%. Then on Wednesday, VTI goes up 2%, would one sell VTI or should one wait?

Or ...
suppose one wasn't paying attention to anything and then one received an alert on their smart phone that VTI was up 2% so far today. One checks their asset allocation and notice that they now have 70% in equities when they want a nominal 65% with a 5% band. Would one sell VTI or should one wait?
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by avalpert » Wed Oct 04, 2017 1:02 pm

livesoft wrote:
Wed Oct 04, 2017 12:42 pm
avalpert wrote:
Wed Oct 04, 2017 12:28 pm
Selling the instant it goes up 2% in a given day does not seem to be a reliable way to sell high.
This is an excellent observation. Since the stock market is expected to go up (otherwise why would we want to invest at all), this idea to sell just because something goes up 2% or 3% or 10% is probably not the way to do it.

HOWEVER, suppose that one's nominal AA to equities is 65%, but on Monday one noticed that one's asset allocation to equities is now 70%. Then on Wednesday, VTI goes up 2%, would one sell VTI or should one wait?

Or ...
suppose that one's nominal AA to equities is 65% with a 5% trigger. On Monday one noticed that one's asset allocation to equities is now 69.9%. Then on Wednesday, VTI goes up 2%, would one sell VTI or should one wait?
What I would say is one should devise their approach to rebalancing before it comes up and execute their approach as devised. In devising the approach you should take into account considerations such as how likely will you be to actually execute the plan and how you want to approach momentum. I have yet to find conclusive proof of what approach is optimal and I wouldn't attempt to target the 'best' method but find one I can stick to and use it. However, while I may not be able to tell you the best approach I can definitely tell you approaches that will be bad.

That said, in the first case no rebalancing plan is specified - if they had one they would know whether to rebalance because their equities are now over 70% or not. In the second case then yes they should sell (assuming bonds didn't also go up as much) as they now past their predetermined trigger.

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by TheTimeLord » Wed Oct 04, 2017 1:27 pm

avalpert wrote:
Wed Oct 04, 2017 12:28 pm
TheTimeLord wrote:
Wed Oct 04, 2017 10:14 am
Pajamas wrote:
Wed Oct 04, 2017 7:52 am
TheTimeLord wrote:
Tue Oct 03, 2017 8:38 pm

Again using ETFs the price you would received would be the time you sell not end of day so what the market does after that has no effect on your transaction.
The topic of the post is buying on really bad days and selling on really good days. So please explain to me how you know which it will be in advance?
If I look at VTI and it is up 2% on the day, for me that would be a really good day and I would likely sell at that instant.
Based on a very quick look, the last time I see VTI going up 2% in a day was November 7th, 2016 (I wonder why) - it closed at 109.15 that day and hasn't been that low since - selling at that instant would have been foolish.

The time before that was March 1st, 2016 when it closed at 100.66 - it also has never been that low since. The time before that was January 29th, 2016 - it closed at 98.33 and you did have a few weeks after that where you could reenter at a lower price, but it hasn't been that low since February 25th so your window was small.

I think you get the point. Selling the instant it goes up 2% in a given day does not seem to be a reliable way to sell high.
2% was an arbitrary example to illustrate for Pajamas the mechanics, as you can see from the first post I asked for feedback on what defined a RGD. This is not some buy low sell, high scheme where you take all you chips off the table and re-enter at some later date at a lower price. This is about taking an outsized gain and setting it aside in a liability matched manner to reduce sequence of return risk. Heaven help anybody who rebalanced on 11/7/2016, 3/1/2016 or 1/29/2016 because they were foolish in your opinion. Retirement savings is at its heart about taking risk until you have accumulated enough for your retirement, not maximizing the potential gains of your portfolio. Otherwise we would all have 100% equity portfolio.
TheTimeLord wrote:
Tue Oct 03, 2017 6:37 am
This got me wondering, I know the strategy of buying on Really Bad Days is often discussed here but I don't remember reading of a strategy of selling on Really Good Days (which I assume yesterday wasn't quite). Is there such a thing as selling on Really Good Days and if so what constitutes a Really Good Day. Yesterday's gains would have covered several days worth of my expenses so I imagine on a really good days there are folks here whose portfolios growth by a couple weeks or month's worth of expenses maybe more. So is there any Really Good Day strategy? :confused
TheTimeLord wrote:
Tue Oct 03, 2017 10:50 am
Basically saying on this day you won so big that it is just best to take your winnings for that day, but only the winnings for that day, and set them aside in a safe fixed income or inflation protected vehicle and thank Mr. Market for the statistical anomaly you have just benefited from. From my standpoint I am not suggesting trying to sell high and buy low, I am suggesting taking a advantage of the gains from a statical anomaly and banking them because the goal is to have enough to fund your retirement not to have the maximum possible.
TheTimeLord wrote:
Tue Oct 03, 2017 6:52 am
I would assume if a Really Good Day equity strategy ever merges it will be focused on those with substantial portfolios or who are retired and would be part of their overall withdrawal strategy. It doesn't make a lot of sense to me for those in early or mid stages of the accumulation phase of life.
TheTimeLord wrote:
Tue Oct 03, 2017 10:41 am
I want to say this again, if this is a viable strategy and I am not saying it is, I see it is applicable for people in the late stages of accumulation, retired or with substantial portfolios that make them FI or very near FI. I don't see it as universally applicable
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by livesoft » Wed Oct 04, 2017 1:34 pm

I will write that there is at least one Really Good Day strategy, but readers of this thread probably won't like it.

Here it is:

1. Exchange from bond funds into the equity ETF that has had a Really Bad Day. This will increase one's asset allocation to equities and reduce one's asset allocation to bonds.

2. Then if a Really Good Day for that equity ETF happens within a week of the purchase, exchange from that equity ETF back into bond funds.

3. If a RGD for that equity ETF does not happen within a week, then have a plan for that, too. :twisted:
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by TheTimeLord » Wed Oct 04, 2017 1:40 pm

avalpert wrote:
Wed Oct 04, 2017 12:28 pm
Based on a very quick look, the last time I see VTI going up 2% in a day was November 7th, 2016 (I wonder why) - it closed at 109.15 that day and hasn't been that low since - selling at that instant would have been foolish.

The time before that was March 1st, 2016 when it closed at 100.66 - it also has never been that low since. The time before that was January 29th, 2016 - it closed at 98.33 and you did have a few weeks after that where you could reenter at a lower price, but it hasn't been that low since February 25th so your window was small.

I think you get the point. Selling the instant it goes up 2% in a given day does not seem to be a reliable way to sell high.
I believe your examples would be more realistic if you had chosen time periods that had either corrections or bear markets in them. Your example are somewhat like someone saying anyone who bought stocks, as represented but the S&P 500, between January 1, 1997 and December 31, 2008 was foolish because they could have bought them cheaper on January 1, 2009. But given today's prices those people would not have been proven foolish just as if we have the average bear market or even hard correction the results of your examples will change. And we all know bear markets and corrections are normal occurrences in the stock market thus the reason we have sequence of return risk.
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by dspencer » Wed Oct 04, 2017 1:45 pm

livesoft wrote:
Wed Oct 04, 2017 12:42 pm
avalpert wrote:
Wed Oct 04, 2017 12:28 pm
Selling the instant it goes up 2% in a given day does not seem to be a reliable way to sell high.
This is an excellent observation. Since the stock market is expected to go up (otherwise why would we want to invest at all), this idea to sell just because something goes up 2% or 3% or 10% is probably not the way to do it.

HOWEVER, suppose that one's nominal AA to equities is 65%, but on Monday one noticed that one's asset allocation to equities is now 70%. Then on Wednesday, VTI goes up 2%, would one sell VTI or should one wait?
Trick question - They should have already rebalanced on Monday. :D

Tying this to rebalancing seems to muddy the waters. The core question almost always reduces to: Is it possible to reliably predict the future based on available information such as historical prices? IMO, the evidence suggests that it is very difficult but not impossible. Diligent people (especially those with powerful computers) can find strategies that worked in the past using backtesting. Whether they will work in the future is not certain. Some people have tried and succeeded. Others have failed. Whether those who succeed owe more to skill or luck is nearly impossible to say.

The easier a pattern is to discern, the quicker it will disappear. So it's hard to see how a simple and obvious strategy can be expected to work for long, if at all. And even if it "works" the payoff might be so small that one would be better off spending their time in other ways.

Personally, I'm a hypocrite. So when I buy shares with monthly contributions or dividends, I often look at recent price history. But I do so within narrow parameters so that I can't do much harm or good and in the end I don't even track to know which happened. But playing around in an insignificant way gives me an outlet for my gambling/stock picking type urges.

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by avalpert » Wed Oct 04, 2017 1:46 pm

TheTimeLord wrote:
Wed Oct 04, 2017 1:27 pm
avalpert wrote:
Wed Oct 04, 2017 12:28 pm
TheTimeLord wrote:
Wed Oct 04, 2017 10:14 am
Pajamas wrote:
Wed Oct 04, 2017 7:52 am
TheTimeLord wrote:
Tue Oct 03, 2017 8:38 pm

Again using ETFs the price you would received would be the time you sell not end of day so what the market does after that has no effect on your transaction.
The topic of the post is buying on really bad days and selling on really good days. So please explain to me how you know which it will be in advance?
If I look at VTI and it is up 2% on the day, for me that would be a really good day and I would likely sell at that instant.
Based on a very quick look, the last time I see VTI going up 2% in a day was November 7th, 2016 (I wonder why) - it closed at 109.15 that day and hasn't been that low since - selling at that instant would have been foolish.

The time before that was March 1st, 2016 when it closed at 100.66 - it also has never been that low since. The time before that was January 29th, 2016 - it closed at 98.33 and you did have a few weeks after that where you could reenter at a lower price, but it hasn't been that low since February 25th so your window was small.

I think you get the point. Selling the instant it goes up 2% in a given day does not seem to be a reliable way to sell high.
2% was an arbitrary example to illustrate for Pajamas the mechanics, as you can see from the first post I asked for feedback on what defined a RGD. This is not some buy low sell, high scheme where you take all you chips off the table and re-enter at some later date at a lower price. This is about taking an outsized gain and setting it aside in a liability matched manner to reduce sequence of return risk. Heaven help anybody who rebalanced on 11/7/2016, 3/1/2016 or 1/29/2016 because they were foolish in your opinion. Retirement savings is at its heart about taking risk until you have accumulated enough for your retirement, not maximizing the potential gains of your portfolio.
But you are focusing on daily ups and downs - you aren't referencing absolute 'outsized gains' (that November 7th close was sill lower than it was a week and a half earlier, it wasn't an outsized gain over any significant time frame), you aren't referencing how much you have accumulated and whether it is enough. In short, the words you are using and the approach you are describing is precisely the emotional reaction to anchored values that aren't relevant to rational decision making that one devises a written plan to avoid.

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by Pajamas » Wed Oct 04, 2017 2:10 pm

livesoft wrote:
Wed Oct 04, 2017 11:26 am
Pajamas wrote:
Wed Oct 04, 2017 7:52 am
The topic of the post is buying on really bad days and selling on really good days. So please explain to me how you know which it will be in advance?
Who cares that they know in advance? In fact, the whole point of this thread is that one doesn't need to know anything in advance. One only needs to know that it happened just a minute ago. That is, one is not predicting a Really Bad Day; one is simply reacting to a RBD that has already happened.

And the same can be said for a Really Good Day: One is simply reacting to a RGD that has already happened.
Okay, I see now that we simply have different definitions of what a "day" is and what buying or selling "on a day" is. Carry on! :beer

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by dspencer » Wed Oct 04, 2017 2:26 pm

TheTimeLord wrote:
Tue Oct 03, 2017 10:50 am
Basically saying on this day you won so big that it is just best to take your winnings for that day, but only the winnings for that day, and set them aside in a safe fixed income or inflation protected vehicle and thank Mr. Market for the statistical anomaly you have just benefited from. From my standpoint I am not suggesting trying to sell high and buy low, I am suggesting taking a advantage of the gains from a statical anomaly and banking them because the goal is to have enough to fund your retirement not to have the maximum possible.
I can't figure out what this accomplishes. It seems like mental gymnastics. How is this different than, for example, taking anything over a 5% return in a given year and moving it into fixed income? Or taking stock dividends and putting them into bonds instead of reinvesting?

If the goal is to rebalance from equity into fixed income, I suppose this would be a way of doing it. But what is the benefit you perceive as opposed to any other method?

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by TheTimeLord » Wed Oct 04, 2017 2:41 pm

dspencer wrote:
Wed Oct 04, 2017 2:26 pm
TheTimeLord wrote:
Tue Oct 03, 2017 10:50 am
Basically saying on this day you won so big that it is just best to take your winnings for that day, but only the winnings for that day, and set them aside in a safe fixed income or inflation protected vehicle and thank Mr. Market for the statistical anomaly you have just benefited from. From my standpoint I am not suggesting trying to sell high and buy low, I am suggesting taking a advantage of the gains from a statical anomaly and banking them because the goal is to have enough to fund your retirement not to have the maximum possible.
I can't figure out what this accomplishes. It seems like mental gymnastics. How is this different than, for example, taking anything over a 5% return in a given year and moving it into fixed income? Or taking stock dividends and putting them into bonds instead of reinvesting?

If the goal is to rebalance from equity into fixed income, I suppose this would be a way of doing it. But what is the benefit you perceive as opposed to any other method?
I would say not that difference than taking anything beyond a return of X% in a year and putting it in fixed income beyond immediacy. Very different from the dividend suggestion because that does not taking into account anything resembling reversion to the mean or sequence of returns. Why are the expectation for market returns currently muted for the next 10 years, not because of business expectation but because of the leave of returns we have received in the current bull market.
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by TheTimeLord » Wed Oct 04, 2017 2:51 pm

avalpert wrote:
Wed Oct 04, 2017 1:46 pm
TheTimeLord wrote:
Wed Oct 04, 2017 1:27 pm
avalpert wrote:
Wed Oct 04, 2017 12:28 pm
TheTimeLord wrote:
Wed Oct 04, 2017 10:14 am
Pajamas wrote:
Wed Oct 04, 2017 7:52 am


The topic of the post is buying on really bad days and selling on really good days. So please explain to me how you know which it will be in advance?
If I look at VTI and it is up 2% on the day, for me that would be a really good day and I would likely sell at that instant.
Based on a very quick look, the last time I see VTI going up 2% in a day was November 7th, 2016 (I wonder why) - it closed at 109.15 that day and hasn't been that low since - selling at that instant would have been foolish.

The time before that was March 1st, 2016 when it closed at 100.66 - it also has never been that low since. The time before that was January 29th, 2016 - it closed at 98.33 and you did have a few weeks after that where you could reenter at a lower price, but it hasn't been that low since February 25th so your window was small.

I think you get the point. Selling the instant it goes up 2% in a given day does not seem to be a reliable way to sell high.
2% was an arbitrary example to illustrate for Pajamas the mechanics, as you can see from the first post I asked for feedback on what defined a RGD. This is not some buy low sell, high scheme where you take all you chips off the table and re-enter at some later date at a lower price. This is about taking an outsized gain and setting it aside in a liability matched manner to reduce sequence of return risk. Heaven help anybody who rebalanced on 11/7/2016, 3/1/2016 or 1/29/2016 because they were foolish in your opinion. Retirement savings is at its heart about taking risk until you have accumulated enough for your retirement, not maximizing the potential gains of your portfolio.
But you are focusing on daily ups and downs - you aren't referencing absolute 'outsized gains' (that November 7th close was sill lower than it was a week and a half earlier, it wasn't an outsized gain over any significant time frame), you aren't referencing how much you have accumulated and whether it is enough. In short, the words you are using and the approach you are describing is precisely the emotional reaction to anchored values that aren't relevant to rational decision making that one devises a written plan to avoid.
If that is your conclusion then wouldn't it have just been easier to answer the question asked in the original post with something like "No I don't think you can have a valid RGD sell strategy because the timeframe is to short and to determine if the gain is outsized (truly good) you need to be looking at 6 to 12 month timeframe"?
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by nedsaid » Wed Oct 04, 2017 6:52 pm

avalpert wrote:
Wed Oct 04, 2017 12:17 pm
nedsaid wrote:
Wed Oct 04, 2017 11:57 am
The Wizard wrote:
Tue Oct 03, 2017 2:16 pm
staythecourse wrote:
Tue Oct 03, 2017 11:14 am
I am not sure why it seems to be SO HARD for folks to understand... YOU CAN NOT TIME THE MARKET!!...
Buy low, sell high.
That's all there is to it...
This made me laugh. I always thought buy low, sell high was pretty fundamental to success as an investor. It is amazing all the remarks how this is somehow market timing. I don't know, buy high and sell low? Is that supposed to work better. I like my buy low, sell high formula better.
'Buy low, sell high' is a trite throwaway line. Of course everyone wants to pay the least and sell for the most - the problem is it is only known in retrospect whether that is indeed what happens and you shouldn't conflate 'higher today than yesterday' with selling high.

Whether or not the market inherently 'cannot' be time, every attempt I have seen to specify 'buying on Really Bad Days' enough to actually test it has shown it isn't a means of more consistently buying high and selling low than vanilla rebalancing methods.
I don't know, you can say about anything is a trite throwaway line. "Stay the course." "Don't do something, just stand there." "Age in bonds." There are a lot of rules of thumb in investing that are rules of thumb because they are mostly true and/or true most of the time. These are also rhetorical shortcuts to facilitate discussion. I could use a "trite phrase" to help describe something in a few short sentences rather than many paragraphs with extensive footnotes. We aren't writing textbooks here. Buy low, sell high is a pretty fundamental concept or at least I thought so. It implies looking for value, patience, and longer holding periods.

So my advice for you is to buy high and sell low and see if that works better. No one advises that strategy though many investors do this in practice when they let emotions rather than reason drive their investments. One could say that Bogleheadism is a collection of trite phrases. You just can't make everyone happy.
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by nedsaid » Wed Oct 04, 2017 6:55 pm

The Wizard wrote:
Wed Oct 04, 2017 12:10 pm
nedsaid wrote:
Wed Oct 04, 2017 11:57 am
The Wizard wrote:
Tue Oct 03, 2017 2:16 pm
staythecourse wrote:
Tue Oct 03, 2017 11:14 am
I am not sure why it seems to be SO HARD for folks to understand... YOU CAN NOT TIME THE MARKET!!...
Buy low, sell high.
That's all there is to it...
This made me laugh. I always thought buy low, sell high was pretty fundamental to success as an investor. It is amazing all the remarks how this is somehow market timing. I don't know, buy high and sell low? Is that supposed to work better. I like my buy low, sell high formula better.
Good, I'm glad we agree on things.
I just put in orders to prune three of my stock funds, moving just under 1% of my portfolio into TIAA Traditional paying 4%...
I saw that today was going to end higher, so about 1/2 hour before the close I submitted trades to exchange small amounts of stock funds into bond funds. Another round of the mild rebalancing I have been executing since July 2013. If the markets are up tomorrow, I might do some more in another account. It seems like all I am doing is hitting the "sell" button for stocks.
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by Sandtrap » Wed Oct 04, 2017 7:00 pm

nedsaid wrote:
Wed Oct 04, 2017 6:55 pm
The Wizard wrote:
Wed Oct 04, 2017 12:10 pm
nedsaid wrote:
Wed Oct 04, 2017 11:57 am
The Wizard wrote:
Tue Oct 03, 2017 2:16 pm
staythecourse wrote:
Tue Oct 03, 2017 11:14 am
I am not sure why it seems to be SO HARD for folks to understand... YOU CAN NOT TIME THE MARKET!!...
Buy low, sell high.
That's all there is to it...
This made me laugh. I always thought buy low, sell high was pretty fundamental to success as an investor. It is amazing all the remarks how this is somehow market timing. I don't know, buy high and sell low? Is that supposed to work better. I like my buy low, sell high formula better.
Good, I'm glad we agree on things.
I just put in orders to prune three of my stock funds, moving just under 1% of my portfolio into TIAA Traditional paying 4%...
I saw that today was going to end higher, so about 1/2 hour before the close I submitted trades to exchange small amounts of stock funds into bond funds. Another round of the mild rebalancing I have been executing since July 2013. If the markets are up tomorrow, I might do some more in another account. It seems like all I am doing is hitting the "sell" button for stocks.
Thanks "Nedsaid".
I was just thinking the same thing. Pondering whether to add to my bond fund allocation.
Though I'm not sure about selling equities. Tough for me to sell things.
Bonds it is.

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by nedsaid » Wed Oct 04, 2017 7:14 pm

Sandtrap wrote:
Wed Oct 04, 2017 7:00 pm
nedsaid wrote:
Wed Oct 04, 2017 6:55 pm
I saw that today was going to end higher, so about 1/2 hour before the close I submitted trades to exchange small amounts of stock funds into bond funds. Another round of the mild rebalancing I have been executing since July 2013. If the markets are up tomorrow, I might do some more in another account. It seems like all I am doing is hitting the "sell" button for stocks.
Thanks "Nedsaid".
I was just thinking the same thing. Pondering whether to add to my bond fund allocation.
Though I'm not sure about selling equities. Tough for me to sell things.
Bonds it is.
Well, I don't like selling either. The thing is, I am 58 years old now and I can't let my stock allocations keep creeping up. When I started my mild rebalancing program in July 2013, I was probably at 69% stocks. I have whittled that down to 67%. Had I done nothing, my guess is that I would be at 75% stocks by now. I am a stock guy and I hate to sell, even to rebalance as I know this will reduce my returns. The thing is, rebalancing is also about controlling risk, something to think more and more about as one gets older and older. I have a fiduciary responsibility to myself as there is no one else to do it for me, so I have to do things that I don't particularly like.

Stocks are certainly not cheap but bonds are expensive with stubbornly low interest rates. Yet another reason I don't like to rebalance. The yields from bonds probably barely beat inflation.

The percentages are pretty low but the dollar amounts of stocks sold to buy bonds are getting to be pretty significant. I keep hitting the "sell" button and about all I am doing is running in place. It shows what a powerful bull market can do.
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by avalpert » Wed Oct 04, 2017 7:15 pm

nedsaid wrote:
Wed Oct 04, 2017 6:52 pm
avalpert wrote:
Wed Oct 04, 2017 12:17 pm
nedsaid wrote:
Wed Oct 04, 2017 11:57 am
The Wizard wrote:
Tue Oct 03, 2017 2:16 pm
staythecourse wrote:
Tue Oct 03, 2017 11:14 am
I am not sure why it seems to be SO HARD for folks to understand... YOU CAN NOT TIME THE MARKET!!...
Buy low, sell high.
That's all there is to it...
This made me laugh. I always thought buy low, sell high was pretty fundamental to success as an investor. It is amazing all the remarks how this is somehow market timing. I don't know, buy high and sell low? Is that supposed to work better. I like my buy low, sell high formula better.
'Buy low, sell high' is a trite throwaway line. Of course everyone wants to pay the least and sell for the most - the problem is it is only known in retrospect whether that is indeed what happens and you shouldn't conflate 'higher today than yesterday' with selling high.

Whether or not the market inherently 'cannot' be time, every attempt I have seen to specify 'buying on Really Bad Days' enough to actually test it has shown it isn't a means of more consistently buying high and selling low than vanilla rebalancing methods.
I don't know, you can say about anything is a trite throwaway line. "Stay the course." "Don't do something, just stand there." "Age in bonds."
Here's the difference between those (which have their own problems) and 'buy low, sell high'. Each of those is actionable, it directly implies a set of actions (or non-action I suppose) one can take whether it be telling you how much to hold in bonds or not, don't deviate from your plan or don't do anything at all.

'Buy low, sell high' provides no such actionable advice - unless you can tell me how you know when it is low or high. It is a mental shortcut to avoid having to specify and evaluate the proposed actions - and that is how it is often used. It's right up there with 'don't lose money' in terms of empty, useless 'advice' provided to investors.
Buy low, sell high is a pretty fundamental concept or at least I thought so. It implies looking for value, patience, and longer holding periods.
I think that is pretty laughable when you see it arose in the context of a 'strategy' to sell on a reactionary basis to daily movements with no reference to valuation at all.
So my advice for you is to buy high and sell low and see if that works better. No one advises that strategy though many investors do this in practice when they let emotions rather than reason drive their investments.
Yep, and trite lines like 'buy low, sell high' and 'never lose money' make it easier to tug on ones emotions and trip them up.
One could say that Bogleheadism is a collection of trite phrases. You just can't make everyone happy.
I highly disagree with this notion. The trite phrases are used to blur distinctions between 'boglehead' approach and various forms of market timing - not to clarify. When you resort to empty rhetoric you don't aid people in overcoming their emotions you provide marketers and salesmen the tools to hide the actual mechanisms underlying actions.

What makes the approach powerful is that it can be described simply and elegantly with resorting to tautologies, truisms and tag lines.

avalpert
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by avalpert » Wed Oct 04, 2017 7:25 pm

TheTimeLord wrote:
Wed Oct 04, 2017 2:51 pm
avalpert wrote:
Wed Oct 04, 2017 1:46 pm
TheTimeLord wrote:
Wed Oct 04, 2017 1:27 pm
avalpert wrote:
Wed Oct 04, 2017 12:28 pm
TheTimeLord wrote:
Wed Oct 04, 2017 10:14 am


If I look at VTI and it is up 2% on the day, for me that would be a really good day and I would likely sell at that instant.
Based on a very quick look, the last time I see VTI going up 2% in a day was November 7th, 2016 (I wonder why) - it closed at 109.15 that day and hasn't been that low since - selling at that instant would have been foolish.

The time before that was March 1st, 2016 when it closed at 100.66 - it also has never been that low since. The time before that was January 29th, 2016 - it closed at 98.33 and you did have a few weeks after that where you could reenter at a lower price, but it hasn't been that low since February 25th so your window was small.

I think you get the point. Selling the instant it goes up 2% in a given day does not seem to be a reliable way to sell high.
2% was an arbitrary example to illustrate for Pajamas the mechanics, as you can see from the first post I asked for feedback on what defined a RGD. This is not some buy low sell, high scheme where you take all you chips off the table and re-enter at some later date at a lower price. This is about taking an outsized gain and setting it aside in a liability matched manner to reduce sequence of return risk. Heaven help anybody who rebalanced on 11/7/2016, 3/1/2016 or 1/29/2016 because they were foolish in your opinion. Retirement savings is at its heart about taking risk until you have accumulated enough for your retirement, not maximizing the potential gains of your portfolio.
But you are focusing on daily ups and downs - you aren't referencing absolute 'outsized gains' (that November 7th close was sill lower than it was a week and a half earlier, it wasn't an outsized gain over any significant time frame), you aren't referencing how much you have accumulated and whether it is enough. In short, the words you are using and the approach you are describing is precisely the emotional reaction to anchored values that aren't relevant to rational decision making that one devises a written plan to avoid.
If that is your conclusion then wouldn't it have just been easier to answer the question asked in the original post with something like "No I don't think you can have a valid RGD sell strategy because the timeframe is to short and to determine if the gain is outsized (truly good) you need to be looking at 6 to 12 month timeframe"?
Well for starters because I don't think you should be looking at 6 or 12 month returns either. You should be looking at your own portfolio's current asset allocation and it suitability for your future desired risk/return profile - anchoring on past returns is a mistake.

staythecourse
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by staythecourse » Wed Oct 04, 2017 7:37 pm

nedsaid wrote:
Wed Oct 04, 2017 7:14 pm
Sandtrap wrote:
Wed Oct 04, 2017 7:00 pm
nedsaid wrote:
Wed Oct 04, 2017 6:55 pm
I saw that today was going to end higher, so about 1/2 hour before the close I submitted trades to exchange small amounts of stock funds into bond funds. Another round of the mild rebalancing I have been executing since July 2013. If the markets are up tomorrow, I might do some more in another account. It seems like all I am doing is hitting the "sell" button for stocks.
Thanks "Nedsaid".
I was just thinking the same thing. Pondering whether to add to my bond fund allocation.
Though I'm not sure about selling equities. Tough for me to sell things.
Bonds it is.
Well, I don't like selling either. The thing is, I am 58 years old now and I can't let my stock allocations keep creeping up. When I started my mild rebalancing program in July 2013, I was probably at 69% stocks. I have whittled that down to 67%. Had I done nothing, my guess is that I would be at 75% stocks by now. I am a stock guy and I hate to sell, even to rebalance as I know this will reduce my returns. The thing is, rebalancing is also about controlling risk, something to think more and more about as one gets older and older. I have a fiduciary responsibility to myself as there is no one else to do it for me, so I have to do things that I don't particularly like.

Stocks are certainly not cheap but bonds are expensive with stubbornly low interest rates. Yet another reason I don't like to rebalance. The yields from bonds probably barely beat inflation.

The percentages are pretty low but the dollar amounts of stocks sold to buy bonds are getting to be pretty significant. I keep hitting the "sell" button and about all I am doing is running in place. It shows what a powerful bull market can do.
I'm not trying to be difficult, but do you have any data to support rebalancing a whole 2% (69% down to 67%) is somehow meaningful in reducing risk AND/ OR improving risk/ return ration over the cost of doing such transactions? As far as every/ nearly every study I know suggest rebalancing more often then 5% is pretty useless and maybe harmful (due to cost).

My opinion, you are using some rationalization and/ or intellectualization to justify some fears of losing money getting so close to ?retirement on your part. I am not a psychologist, but have considered a Holiday Inn. :D

Good luck.

p.s. As I have said numerous times before intelligent, well read investors don't make behavioral mistakes due to lack of knowledge they make them based on rationalizing or intelletualizing why there situation is different.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

livesoft
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by livesoft » Wed Oct 04, 2017 8:13 pm

avalpert wrote:
Wed Oct 04, 2017 7:15 pm
I think that is pretty laughable when you see it arose in the context of a 'strategy' to sell on a reactionary basis to daily movements with no reference to valuation at all.
I am also laughing. Thanks!

Folks around here are told to make purchases when they have the money without any reference to valuation at all. So I don't think valuation has anything to do with what is discussed in this thread.

As for whether something is "low" or not, I can tell you that can be something simple: Is the price now lower than it was yesterday? That's not really hard to figure out and needs no special skills to figure out.
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avalpert
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by avalpert » Wed Oct 04, 2017 8:36 pm

livesoft wrote:
Wed Oct 04, 2017 8:13 pm
As for whether something is "low" or not, I can tell you that can be something simple: Is the price now lower than it was yesterday? That's not really hard to figure out and needs no special skills to figure out.
Your right it isn't hard to figure out if it is low relative to yesterday - but it is also uninteresting.

I don't care about buying low relative to yesterday - I care about buying low relative to tomorrow (well, maybe not the literal tomorrow but you know what I'm saying).

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by tesuzuki2002 » Wed Oct 04, 2017 9:04 pm

If the market went up 25% in 1 Day... I'd probably sell some stuff.

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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by abuss368 » Wed Oct 04, 2017 9:14 pm

We invest on a consistent basis and do not let the individual daily results impact the timing of any purchases of additional shares. Over the long term it will not make any difference.

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livesoft
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Re: Buy on Really Bad Days, Sell on Really Good Days?

Post by livesoft » Wed Oct 04, 2017 9:15 pm

avalpert wrote:
Wed Oct 04, 2017 8:36 pm
I don't care about buying low relative to yesterday - I care about buying low relative to tomorrow (well, maybe not the literal tomorrow but you know what I'm saying).
Interesting because I don't care about buying low relative to the future because I assume that will always happen. If I didn't assume that, then I wouldn't be investing in the first place. That doesn't mean that my assumption is always true, but it is true enough for my purposes.
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