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

Posted: Tue Oct 03, 2017 6:37 am
by TheTimeLord
Yesterday was a good day in the Market for U.S. Investors, not so much for International investors, really good imho for Small Cap U.S. Investors. Since I had just done my monthly Net Worth calculation I was curious how much it improved yesterday, so I did a quick look at my accounts and was quite surprised and pleased by the amount. 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

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

Posted: Tue Oct 03, 2017 6:43 am
by livesoft
I think there is a really good day strategy, but only for bond ETFs and not for equity funds.
https://bogleheads.org/forum/viewtopic. ... 6#p2793106
viewtopic.php?p=3266700#p3266700
viewtopic.php?p=2860320#p2860320

For equities, just check if you have triggered a rebalancing band on a really good day and decide what to do.

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

Posted: Tue Oct 03, 2017 6:52 am
by TheTimeLord
livesoft wrote:
Tue Oct 03, 2017 6:43 am
I think there is a really good day strategy, but only for bond ETFs and not for equity funds.
https://bogleheads.org/forum/viewtopic. ... 6#p2793106
viewtopic.php?p=3266700#p3266700
viewtopic.php?p=2860320#p2860320

For equities, just check if you have triggered a rebalancing band on a really good day and decide what to do.
I have harvested Really Good Days in bonds for a while, thanks for the links. 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.

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

Posted: Tue Oct 03, 2017 7:07 am
by jebmke
I have pretty wide equity bands to avoid, especially triggering taxable events on the upside. Within 40% +/-5%pts I generally do nothing. Now that my pension is starting and SS is only 5 years away, I am thinking about an asymmetrical interval whereby I let my equity drift up (maybe to 60%) on the upside but rebalance back to 40 on the downside after a 5 pt shift. I have used up my losses from '08 and '09 so I'm not that interested in taking gains except maybe by donating them to a DAF and converting the funds to bonds there.

I really don't want to watch things on a daily basis and make decisions that often.

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

Posted: Tue Oct 03, 2017 7:10 am
by GoldenFinch
Actually the stock market only went up about a half of a percent yesterday. :happy I agree that the best idea is to keep an eye on rebalancing bands and otherwise not get too involved with “doing stuff” with the money.

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

Posted: Tue Oct 03, 2017 7:21 am
by TheTimeLord
GoldenFinch wrote:
Tue Oct 03, 2017 7:10 am
Actually the stock market only went up about a half of a percent yesterday. :happy I agree that the best idea is to keep an eye on rebalancing bands and otherwise not get too involved with “doing stuff” with the money.
Right, which is why I said I assume yesterday wasn't quite a really good day, on the other hand if you made half a percent a everyday your annual rate of return would be in the triple digits. But also we need to remember there isn't one market and depending on which funds/ETFs you held yesterday's results could vary widely. Also, full disclosure, not a fan of rebalancing using percentages for people who are past or near the end of the accumulation phase. I think using absolute dollar amounts for precise risk management makes more sense when you reach that point.

VOO - S&P 500 was up 0.42%
VTI - Total Market was up 0.53%
VO - MidCap was up 0.44%
VB - SmallCap was up 0.97%
VXUS - Total International was flat at 0.00%

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

Posted: Tue Oct 03, 2017 7:29 am
by livesoft
jebmke wrote:
Tue Oct 03, 2017 7:07 am
I really don't want to watch things on a daily basis and make decisions that often.
One doesn't have to watch anything because your brokerage firm (including Vanguard) will do it for you. Just set an alert to send a message/e-mail to your phone when something is triggered. It really is that easy as long as you look at your phone occasionally.

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

Posted: Tue Oct 03, 2017 7:31 am
by Pajamas
You never know for sure if it is a good day or a bad day until the market closes. :beer

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

Posted: Tue Oct 03, 2017 7:36 am
by livesoft
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
It is worse than that. A day could start as a good or bad day and end up differently. But one doesn't have to do anything on any such day if they don't want to. I think that's probably what most readers of bogleheads.org do.

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

Posted: Tue Oct 03, 2017 7:37 am
by TheTimeLord
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.

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

Posted: Tue Oct 03, 2017 7:50 am
by TheTimeLord
livesoft wrote:
Tue Oct 03, 2017 6:43 am
I think there is a really good day strategy, but only for bond ETFs and not for equity funds.
https://bogleheads.org/forum/viewtopic. ... 6#p2793106
viewtopic.php?p=3266700#p3266700
viewtopic.php?p=2860320#p2860320

For equities, just check if you have triggered a rebalancing band on a really good day and decide what to do.
I have been working with basically a absolute dollar cap on my bonds funds, when they exceed that level I scrap off the excess and and use short term CDs or equities depending on if I need more equity exposure. When they drop below a certain dollar level I move back from the short term CDs to bonds.

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

Posted: Tue Oct 03, 2017 7:53 am
by Kenkat
The problem with this strategy is if you sell on a really good day, you are now out of the market and miss any subsequent good days. When the next really bad day hits, you may end up buying back in higher than your last exit point.

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

Posted: Tue Oct 03, 2017 8:04 am
by TheTimeLord
Kenkat wrote:
Tue Oct 03, 2017 7:53 am
The problem with this strategy is if you sell on a really good day, you are now out of the market and miss any subsequent good days. When the next really bad day hits, you may end up buying back in higher than your last exit point.
How does this differ from rebalancing?

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

Posted: Tue Oct 03, 2017 8:14 am
by jebmke
livesoft wrote:
Tue Oct 03, 2017 7:29 am
jebmke wrote:
Tue Oct 03, 2017 7:07 am
I really don't want to watch things on a daily basis and make decisions that often.
One doesn't have to watch anything because your brokerage firm (including Vanguard) will do it for you. Just set an alert to send a message/e-mail to your phone when something is triggered. It really is that easy as long as you look at your phone occasionally.
I know, but I am just not interested in making decisions daily.

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

Posted: Tue Oct 03, 2017 8:16 am
by oldcomputerguy
livesoft wrote:
Tue Oct 03, 2017 7:29 am
jebmke wrote:
Tue Oct 03, 2017 7:07 am
I really don't want to watch things on a daily basis and make decisions that often.
One doesn't have to watch anything because your brokerage firm (including Vanguard) will do it for you. Just set an alert to send a message/e-mail to your phone when something is triggered. It really is that easy as long as you look at your phone occasionally.
Can one set up an alert on Vanguard when one's asset allocation drifts too far out? I've been looking for that but never could find it.

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

Posted: Tue Oct 03, 2017 8:26 am
by jebmke
oldcomputerguy wrote:
Tue Oct 03, 2017 8:16 am
Can one set up an alert on Vanguard when one's asset allocation drifts too far out? I've been looking for that but never could find it.
I have found that I can guess pretty closely after the close of business. Unless I am very close to a band it doesn't make a difference. A lot depends on where you start. I am at 40% equity so it takes a pretty good run to get to 45%. Based on what happened yesterday I would guess I am somewhere between 40.5% and 41%.

If I change my upside band to 60% (and leave the downside at 45%) I can pretty much stop paying attention until the market really tanks.

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

Posted: Tue Oct 03, 2017 8:29 am
by TheTimeLord
jebmke wrote:
Tue Oct 03, 2017 8:14 am
livesoft wrote:
Tue Oct 03, 2017 7:29 am
jebmke wrote:
Tue Oct 03, 2017 7:07 am
I really don't want to watch things on a daily basis and make decisions that often.
One doesn't have to watch anything because your brokerage firm (including Vanguard) will do it for you. Just set an alert to send a message/e-mail to your phone when something is triggered. It really is that easy as long as you look at your phone occasionally.
I know, but I am just not interested in making decisions daily.
Well the consensus seems to be don't try this strategy. But I have to admit if the market pops one day and my portfolio goes up by 2, 3 or 4 weeks of expenses I would be hard press not to take that gain, say thank you to Mr. Market and put it in a very fixed income or inflation protected vehicle.

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

Posted: Tue Oct 03, 2017 8:31 am
by jebmke
I don't know whether it is a good strategy or bad - I was merely commenting on my disinterest in constant monitoring. I assume you would do this in a sheltered account. Otherwise you have tax drag.

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

Posted: Tue Oct 03, 2017 8:34 am
by flyingaway
Can we start a new sub-forum entitled Good Market Timing Strategies for Bogleheads?

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

Posted: Tue Oct 03, 2017 8:52 am
by livesoft
oldcomputerguy wrote:
Tue Oct 03, 2017 8:16 am
Can one set up an alert on Vanguard when one's asset allocation drifts too far out? I've been looking for that but never could find it.
No, but one can do a couple of things that would work:

1. See the thread on Vanguard Portfolio Watch and this post:
viewtopic.php?p=3146881#p3146881

2. There is probably some price point for VTI that one can easily calculate where one would need to look to see if one's portfolio might need rebalancing. One can have an alert set for that price point.

3. Let's face it, one needs to login to their account at least monthly to see if there has been any theft of contents or unusual activity, so doing #1 above is trivial.

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

Posted: Tue Oct 03, 2017 8:55 am
by Toons
Anytime is a good time to buy ,,
irregardless of daily movements,
In my humble opinion,
That is unless you are seeking a fortune in your daytrading career :happy

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

Posted: Tue Oct 03, 2017 9:05 am
by Kenkat
TheTimeLord wrote:
Tue Oct 03, 2017 8:04 am
Kenkat wrote:
Tue Oct 03, 2017 7:53 am
The problem with this strategy is if you sell on a really good day, you are now out of the market and miss any subsequent good days. When the next really bad day hits, you may end up buying back in higher than your last exit point.
How does this differ from rebalancing?
It doesn’t, really. Rebalancing may sometimes negatively impact returns if one asset class is always outperforming another.

Rebalancing is more about controlling risk than enhancing returns. The “rebalancing bonus” only exists under certain circumstances where asset classes consistently move opposite one another.

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

Posted: Tue Oct 03, 2017 9:09 am
by avalpert
TheTimeLord wrote:
Tue Oct 03, 2017 8:29 am
jebmke wrote:
Tue Oct 03, 2017 8:14 am
livesoft wrote:
Tue Oct 03, 2017 7:29 am
jebmke wrote:
Tue Oct 03, 2017 7:07 am
I really don't want to watch things on a daily basis and make decisions that often.
One doesn't have to watch anything because your brokerage firm (including Vanguard) will do it for you. Just set an alert to send a message/e-mail to your phone when something is triggered. It really is that easy as long as you look at your phone occasionally.
I know, but I am just not interested in making decisions daily.
Well the consensus seems to be don't try this strategy. But I have to admit if the market pops one day and my portfolio goes up by 2, 3 or 4 weeks of expenses I would be hard press not to take that gain, say thank you to Mr. Market and put it in a very fixed income or inflation protected vehicle.
My portfolio has gone up 2 weeks of expenses+ at least 3 times in the last 4 weeks - if I sold after the first one I would have missed the others. Re-balancing bands can serve the goal of balancing reducing risk exposure as your need truly changes to maintain your downside protection without focusing on daily ups and downs. Even using absolute values to drive re-balancing (like a value averaging approach) can help manage risk while progressing towards your long-term goals. Reacting to a single days movement outside of that broader context is a bad idea.

Really, if you are that tempted by daily movement you shouldn't be looking at all.

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

Posted: Tue Oct 03, 2017 9:40 am
by TheTimeLord
avalpert wrote:
Tue Oct 03, 2017 9:09 am
TheTimeLord wrote:
Tue Oct 03, 2017 8:29 am
jebmke wrote:
Tue Oct 03, 2017 8:14 am
livesoft wrote:
Tue Oct 03, 2017 7:29 am
jebmke wrote:
Tue Oct 03, 2017 7:07 am
I really don't want to watch things on a daily basis and make decisions that often.
One doesn't have to watch anything because your brokerage firm (including Vanguard) will do it for you. Just set an alert to send a message/e-mail to your phone when something is triggered. It really is that easy as long as you look at your phone occasionally.
I know, but I am just not interested in making decisions daily.
Well the consensus seems to be don't try this strategy. But I have to admit if the market pops one day and my portfolio goes up by 2, 3 or 4 weeks of expenses I would be hard press not to take that gain, say thank you to Mr. Market and put it in a very fixed income or inflation protected vehicle.
My portfolio has gone up 2 weeks of expenses+ at least 3 times in the last 4 weeks - if I sold after the first one I would have missed the others. Re-balancing bands can serve the goal of balancing reducing risk exposure as your need truly changes to maintain your downside protection without focusing on daily ups and downs. Even using absolute values to drive re-balancing (like a value averaging approach) can help manage risk while progressing towards your long-term goals. Reacting to a single days movement outside of that broader context is a bad idea.

Really, if you are that tempted by daily movement you shouldn't be looking at all.

I would like to add this data to the conversation. This suggest Really Good Day make up a large portion of your gains. So does that suggest banking the gains from them bears little risk since the average day contributes such a small amount to your overall return? I am sure many people will see different things when looking at this data depending on their situation, preferences and risk tolerance.

http://www.marketwatch.com/story/how-mi ... 2016-01-25
NEW YORK (Irrelevant Investor) — “Time in the market, not timing the market” is the rallying cry for buy-and-hold investors.

Charts like the one below show the damage an investor would have done if they missed out on only the 25 best days (of 11,620) since 1970. If you somehow managed to do this, your returns would have gone from 1,910% to 371%, or 6.7% a year to 3.4%. To give you an idea of how lousy that is, 1-month U.S. T-bills returned 4.9% over the same period.
Image

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

Posted: Tue Oct 03, 2017 9:51 am
by avalpert
TheTimeLord wrote:
Tue Oct 03, 2017 9:40 am
avalpert wrote:
Tue Oct 03, 2017 9:09 am
TheTimeLord wrote:
Tue Oct 03, 2017 8:29 am
jebmke wrote:
Tue Oct 03, 2017 8:14 am
livesoft wrote:
Tue Oct 03, 2017 7:29 am

One doesn't have to watch anything because your brokerage firm (including Vanguard) will do it for you. Just set an alert to send a message/e-mail to your phone when something is triggered. It really is that easy as long as you look at your phone occasionally.
I know, but I am just not interested in making decisions daily.
Well the consensus seems to be don't try this strategy. But I have to admit if the market pops one day and my portfolio goes up by 2, 3 or 4 weeks of expenses I would be hard press not to take that gain, say thank you to Mr. Market and put it in a very fixed income or inflation protected vehicle.
My portfolio has gone up 2 weeks of expenses+ at least 3 times in the last 4 weeks - if I sold after the first one I would have missed the others. Re-balancing bands can serve the goal of balancing reducing risk exposure as your need truly changes to maintain your downside protection without focusing on daily ups and downs. Even using absolute values to drive re-balancing (like a value averaging approach) can help manage risk while progressing towards your long-term goals. Reacting to a single days movement outside of that broader context is a bad idea.

Really, if you are that tempted by daily movement you shouldn't be looking at all.

I would like to add this data to the conversation. This suggest Really Good Day make up a large portion of your gains. So does that suggest banking the gains from them bears little risk since the average day contributes such a small amount to your overall return? I am sure many people will see different things when looking at this data depending on their situation, preferences and risk tolerance.

http://www.marketwatch.com/story/how-mi ... 2016-01-25
NEW YORK (Irrelevant Investor) — “Time in the market, not timing the market” is the rallying cry for buy-and-hold investors.

Charts like the one below show the damage an investor would have done if they missed out on only the 25 best days (of 11,620) since 1970. If you somehow managed to do this, your returns would have gone from 1,910% to 371%, or 6.7% a year to 3.4%. To give you an idea of how lousy that is, 1-month U.S. T-bills returned 4.9% over the same period.
Image
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.

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

Posted: Tue Oct 03, 2017 9:53 am
by dspencer
TheTimeLord wrote:
Tue Oct 03, 2017 9:40 am
avalpert wrote:
Tue Oct 03, 2017 9:09 am
TheTimeLord wrote:
Tue Oct 03, 2017 8:29 am
jebmke wrote:
Tue Oct 03, 2017 8:14 am
livesoft wrote:
Tue Oct 03, 2017 7:29 am

One doesn't have to watch anything because your brokerage firm (including Vanguard) will do it for you. Just set an alert to send a message/e-mail to your phone when something is triggered. It really is that easy as long as you look at your phone occasionally.
I know, but I am just not interested in making decisions daily.
Well the consensus seems to be don't try this strategy. But I have to admit if the market pops one day and my portfolio goes up by 2, 3 or 4 weeks of expenses I would be hard press not to take that gain, say thank you to Mr. Market and put it in a very fixed income or inflation protected vehicle.
My portfolio has gone up 2 weeks of expenses+ at least 3 times in the last 4 weeks - if I sold after the first one I would have missed the others. Re-balancing bands can serve the goal of balancing reducing risk exposure as your need truly changes to maintain your downside protection without focusing on daily ups and downs. Even using absolute values to drive re-balancing (like a value averaging approach) can help manage risk while progressing towards your long-term goals. Reacting to a single days movement outside of that broader context is a bad idea.

Really, if you are that tempted by daily movement you shouldn't be looking at all.

I would like to add this data to the conversation. This suggest Really Good Day make up a large portion of your gains. So does that suggest banking the gains from them bears little risk since the average day contributes such a small amount to your overall return? I am sure many people will see different things when looking at this data depending on their situation, preferences and risk tolerance.

http://www.marketwatch.com/story/how-mi ... 2016-01-25
NEW YORK (Irrelevant Investor) — “Time in the market, not timing the market” is the rallying cry for buy-and-hold investors.

Charts like the one below show the damage an investor would have done if they missed out on only the 25 best days (of 11,620) since 1970. If you somehow managed to do this, your returns would have gone from 1,910% to 371%, or 6.7% a year to 3.4%. To give you an idea of how lousy that is, 1-month U.S. T-bills returned 4.9% over the same period.
Image
I think the alternative view is that chart proves the opposite view - that if you aren't in the market you risk missing out on those good days. You seem to be unconsciously relying on the assumption that RGD and RBD will alternate. As mentioned earlier, what if the pattern is RGD, RGD, RGD, RGD, RBD, RBD, RBD with a bunch of average days thrown in randomly since they don't matter much. Now you've sold right at the start of the string of good days and don't re-enter the market until the start of several bad days.

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

Posted: Tue Oct 03, 2017 10:00 am
by rkhusky
If I see the market up a couple percent, I'll check my AA to see if I need to rebalance. I tend to buy on bad days and sell on good days, or shortly thereafter. I'm not so tied to my computer that I can actually get the transaction in on the right day, plus I don't buy/sell at work.

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

Posted: Tue Oct 03, 2017 10:08 am
by an_asker
flyingaway wrote:
Tue Oct 03, 2017 8:34 am
Can we start a new sub-forum entitled Good Permissible Market Timing Strategies for Bogleheads?
Modified it slightly ;-)

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

Posted: Tue Oct 03, 2017 10:11 am
by an_asker
TheTimeLord wrote:
Tue Oct 03, 2017 6:37 am
Yesterday was a good day in the Market for U.S. Investors, not so much for International investors, really good imho for Small Cap U.S. Investors. Since I had just done my monthly Net Worth calculation I was curious how much it improved yesterday, so I did a quick look at my accounts and was quite surprised and pleased by the amount. 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
I am curious - in case someone has done the research - how often is an RBD followed by a slightly worse day (or an RGD followed by a slightly better day)?

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

Posted: Tue Oct 03, 2017 10:25 am
by livesoft
an_asker wrote:
Tue Oct 03, 2017 10:11 am
I am curious - in case someone has done the research - how often is an RBD followed by a slightly worse day (or an RGD followed by a slightly better day)?
I don't know, but such days are clustered as one can see here:
http://www.marketwatch.com/story/how-mi ... 2016-01-25

But going back to my first post in this thread:
I think there is a really good day strategy, but only for bond ETFs and not for equity funds.

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

Posted: Tue Oct 03, 2017 10:34 am
by Kenkat
dspencer wrote:
Tue Oct 03, 2017 9:53 am
TheTimeLord wrote:
Tue Oct 03, 2017 9:40 am
avalpert wrote:
Tue Oct 03, 2017 9:09 am
TheTimeLord wrote:
Tue Oct 03, 2017 8:29 am
jebmke wrote:
Tue Oct 03, 2017 8:14 am


I know, but I am just not interested in making decisions daily.
Well the consensus seems to be don't try this strategy. But I have to admit if the market pops one day and my portfolio goes up by 2, 3 or 4 weeks of expenses I would be hard press not to take that gain, say thank you to Mr. Market and put it in a very fixed income or inflation protected vehicle.
My portfolio has gone up 2 weeks of expenses+ at least 3 times in the last 4 weeks - if I sold after the first one I would have missed the others. Re-balancing bands can serve the goal of balancing reducing risk exposure as your need truly changes to maintain your downside protection without focusing on daily ups and downs. Even using absolute values to drive re-balancing (like a value averaging approach) can help manage risk while progressing towards your long-term goals. Reacting to a single days movement outside of that broader context is a bad idea.

Really, if you are that tempted by daily movement you shouldn't be looking at all.

I would like to add this data to the conversation. This suggest Really Good Day make up a large portion of your gains. So does that suggest banking the gains from them bears little risk since the average day contributes such a small amount to your overall return? I am sure many people will see different things when looking at this data depending on their situation, preferences and risk tolerance.

http://www.marketwatch.com/story/how-mi ... 2016-01-25
NEW YORK (Irrelevant Investor) — “Time in the market, not timing the market” is the rallying cry for buy-and-hold investors.

Charts like the one below show the damage an investor would have done if they missed out on only the 25 best days (of 11,620) since 1970. If you somehow managed to do this, your returns would have gone from 1,910% to 371%, or 6.7% a year to 3.4%. To give you an idea of how lousy that is, 1-month U.S. T-bills returned 4.9% over the same period.
Image
I think the alternative view is that chart proves the opposite view - that if you aren't in the market you risk missing out on those good days. You seem to be unconsciously relying on the assumption that RGD and RBD will alternate. As mentioned earlier, what if the pattern is RGD, RGD, RGD, RGD, RBD, RBD, RBD with a bunch of average days thrown in randomly since they don't matter much. Now you've sold right at the start of the string of good days and don't re-enter the market until the start of several bad days.
All of these issues with short term “runs” where the market goes up for several days or weeks or months in a row leads to trading strategies mentioned above by (avalapert) where you may use a moving average - say if the market falls below its 50 or 200 day moving average, I sell. These approaches then have their own problems and so different strategies arise to address those issues. Before you know it, you are into full blown technical analysis and market timing, which is way too much for me, not to mention I am not sure they actually work. Here’s an article on moving averages that explains why they exist and why one day timing swings don’t work:

http://www.investopedia.com/university/ ... lysis9.asp

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

Posted: Tue Oct 03, 2017 10:39 am
by BW1985
I thought BH's don't market time? :confused

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

Posted: Tue Oct 03, 2017 10:41 am
by livesoft
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?

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

Posted: Tue Oct 03, 2017 10:41 am
by TheTimeLord
an_asker wrote:
Tue Oct 03, 2017 10:11 am
TheTimeLord wrote:
Tue Oct 03, 2017 6:37 am
Yesterday was a good day in the Market for U.S. Investors, not so much for International investors, really good imho for Small Cap U.S. Investors. Since I had just done my monthly Net Worth calculation I was curious how much it improved yesterday, so I did a quick look at my accounts and was quite surprised and pleased by the amount. 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
I am curious - in case someone has done the research - how often is an RBD followed by a slightly worse day (or an RGD followed by a slightly better day)?
To be honest I am not sure it would matter for someone who is truly buy and hold because even if a RGD was followed by a few more good days they would keep holding so you eventually end up with a long running mix of good and bad. This is more about managing risk versus maximizing return. Remember you don't truly have a gain until you sell, 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%.

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

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

Posted: Tue Oct 03, 2017 10:41 am
by livesoft
BW1985 wrote:
Tue Oct 03, 2017 10:39 am
I thought BH's don't market time? :confused
Diehards don't market time. But Livesofts do.

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

Posted: Tue Oct 03, 2017 10:43 am
by Sandtrap
According to Boglehead theory, a properly allocated portfolio will do well when one "buys" as one is able to. Whether DCA "dollar cost averaging" or regular contributions. Except for balancing every 1-2 years at best, there are less reasons to sell on any day. To do so would be speculating vs investing.
This is a generalization.
Is it mostly correct?

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

Posted: Tue Oct 03, 2017 10:46 am
by ThrustVectoring
It's not worth it, IMO. It means consistently having money you can invest sit on the sidelines. The stock market is volatile, sure, but it's not volatile enough compared to the edge of having your money invested.

The math is pretty straightforward with the Kelley criteria. Having a better edge on your investment means you want more money in the market to collect more gains. Having a higher volatility means you want more money on the sidelines so that you can collect using "buy low, sell high". The balance point that maximizes long-term results is when you divide the edge by the volatility. I put the edge at 3%, and the volatility at 0.15 (it's been closer to 0.10 recently), so the best fraction to have invested is edge / vol^2 = 0.03 / 0.15^2 = 133% of your portfolio "should" be in equities.

Under "don't be a dumbass with margin" constraints, and being young in general, that puts me at 100% invested in equities instead. But yeah, the math says "buy low sell high" is the wrong way to react to the market as it stands. Just put it in the market and park it there for two decades.
Sandtrap wrote:
Tue Oct 03, 2017 10:43 am
According to Boglehead theory, a properly allocated portfolio will do well when one "buys" as one is able to. Whether DCA "dollar cost averaging" or regular contributions. Except for balancing every 1-2 years at best, there are less reasons to sell on any day. To do so would be speculating vs investing.
This is a generalization.
Is it mostly correct?
Pretty much exactly. The best strategy is to figure out your risk tolerance, translate that into a desired asset allocation, and immediately dump all your investable cash towards that asset allocation.

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

Posted: Tue Oct 03, 2017 10:50 am
by TheTimeLord
BW1985 wrote:
Tue Oct 03, 2017 10:39 am
I thought BH's don't market time? :confused
I would classify this as more being opportunistic and applying a variant of Bernstein's when you have won the game stop playing approach. 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.

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

Posted: Tue Oct 03, 2017 10:56 am
by livesoft
ThrustVectoring wrote:
Tue Oct 03, 2017 10:46 am
It means consistently having money you can invest sit on the sidelines.
This is a false statement. It means no such thing as discussed many times before.
ThrustVectoring wrote:
Tue Oct 03, 2017 10:46 am
The best strategy is to figure out your risk tolerance, translate that into a desired asset allocation, and immediately dump all your investable cash towards that asset allocation.
Yes, that is an excellent strategy. That's one reason I don't have any cash in my portfolio. I invest it all into my asset allocation.

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

Posted: Tue Oct 03, 2017 11:00 am
by ThrustVectoring
livesoft wrote:
Tue Oct 03, 2017 10:56 am
ThrustVectoring wrote:
Tue Oct 03, 2017 10:46 am
It means consistently having money you can invest sit on the sidelines.
This is a false statement. It means no such thing as discussed many times before.
I'm not sure what you mean. If you buy stocks today because the market went down, what money are you using to buy said stocks? And couldn't you have used that money to buy stocks yesterday because it means having more time in the market?

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

Posted: Tue Oct 03, 2017 11:04 am
by livesoft
I would exchange from my bond funds into stock funds. I always have some money in my bond funds and not in cash because my asset allocation has equity funds and bond funds.

And this goes back to the start of this thread. If a bond fund goes up by 0.5% in a single day, then I am very likely selling shares of it. I can usually buy those shares back later after it goes down.

Recent example:
Image
That was a great day to exchange from BIV to IJS.

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

Posted: Tue Oct 03, 2017 11:09 am
by nedsaid
I have done my mild rebalancing from stocks to bonds on days like yesterday. I didn't pull the trigger as I elected to wait a bit longer. But yes, I look to sell on really good days.

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

Posted: Tue Oct 03, 2017 11:14 am
by staythecourse
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.

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

Posted: Tue Oct 03, 2017 11:19 am
by inbox788
I buy on any day, including Really Bad Days and Really Good Days. My perception with Really Bad Days is that sometimes they recover, and sometimes they follow through even worse. Also, there are triggers for Really Bad Days that can come on suddenly, unpredictably, and severely. Aside from bouncing back from a Really Bad Day, you don't see many extreme Really Good Days. And most Really Good Days are in rising markets, so I would bet on the momentum and buy on Really Good Days.

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?

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

Posted: Tue Oct 03, 2017 11:22 am
by livesoft
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?

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

Posted: Tue Oct 03, 2017 11:24 am
by livesoft
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.

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

Posted: Tue Oct 03, 2017 11:27 am
by nedsaid
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.
I probably should have amended my statement. When the market is at or near all time highs, I will look to rebalance from stocks to bonds on really good days. Don't know why you would regard this as market timing. I have been on this program of mild rebalancing since July of 2013.

It is amazing that I got shamed when I admitted that my attitude towards rebalancing was rather relaxed. It was like saying I had a relaxed attitude towards personal hygiene or saying that I didn't call my Mom on Mothers' Day. Rebalancing, like cleanliness is next to Godliness on this forum. I was amazed to get balled out for rebalancing too much.

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

Posted: Tue Oct 03, 2017 11:34 am
by GoldenFinch
TheTimeLord wrote:
Tue Oct 03, 2017 8:29 am
jebmke wrote:
Tue Oct 03, 2017 8:14 am
livesoft wrote:
Tue Oct 03, 2017 7:29 am
jebmke wrote:
Tue Oct 03, 2017 7:07 am
I really don't want to watch things on a daily basis and make decisions that often.
One doesn't have to watch anything because your brokerage firm (including Vanguard) will do it for you. Just set an alert to send a message/e-mail to your phone when something is triggered. It really is that easy as long as you look at your phone occasionally.
I know, but I am just not interested in making decisions daily.
Well the consensus seems to be don't try this strategy. But I have to admit if the market pops one day and my portfolio goes up by 2, 3 or 4 weeks of expenses I would be hard press not to take that gain, say thank you to Mr. Market and put it in a very fixed income or inflation protected vehicle.
TimeLord, I completely understand what you are wanting to do because I have similar thoughts, especially after months and months of gains. Last night I looked at our account and calculated the difference between that number and what we had on February 11th 2016 because that was a market low etched in my mind. I felt a tinge of desire to change my asset allocation, but did nothing because I always feel that way when there are big market driven increases in our account. We won’t need this money for 15 years at the soonest, so I do nothing. Also, in the past every time I made a change it usually turned out to be a mistake in the long run. It really is market timing if it’s not in you plan.

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

Posted: Tue Oct 03, 2017 11:37 am
by TheTimeLord
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.

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

Posted: Tue Oct 03, 2017 11:44 am
by TheTimeLord
GoldenFinch wrote:
Tue Oct 03, 2017 11:34 am
TheTimeLord wrote:
Tue Oct 03, 2017 8:29 am
jebmke wrote:
Tue Oct 03, 2017 8:14 am
livesoft wrote:
Tue Oct 03, 2017 7:29 am
jebmke wrote:
Tue Oct 03, 2017 7:07 am
I really don't want to watch things on a daily basis and make decisions that often.
One doesn't have to watch anything because your brokerage firm (including Vanguard) will do it for you. Just set an alert to send a message/e-mail to your phone when something is triggered. It really is that easy as long as you look at your phone occasionally.
I know, but I am just not interested in making decisions daily.
Well the consensus seems to be don't try this strategy. But I have to admit if the market pops one day and my portfolio goes up by 2, 3 or 4 weeks of expenses I would be hard press not to take that gain, say thank you to Mr. Market and put it in a very fixed income or inflation protected vehicle.
TimeLord, I completely understand what you are wanting to do because I have similar thoughts, especially after months and months of gains. Last night I looked at our account and calculated the difference between that number and what we had on February 11th 2016 because that was a market low etched in my mind. I felt a tinge of desire to change my asset allocation, but did nothing because I always feel that way when there are big market driven increases in our account. We won’t need this money for 15 years at the soonest, so I do nothing. Also, in the past every time I made a change it usually turned out to be a mistake in the long run. It really is market timing if it’s not in you plan.
I think the fact that you won't need this money for a long time is key. I don't see this as applying for someone who is 15 years away from needing the money unless they were already FI and looking to reduce risk. I think if I was in your situation as I understand it, I would like have done noting too. you are correct, in the vast majority of cases our human instincts tend to betray us when it comes to money.