100% in bond to wait for market crash?

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HenrysPlan2
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100% in bond to wait for market crash?

Post by HenrysPlan2 » Mon Oct 09, 2017 6:09 pm

Since the stock market value most expensive except year 2000 ( p/e https://www.quandl.com/data/MULTPL/SHIL ... o-by-Month ). Also since the bond having roughly 2.3% return, please convince me not to collect 2.3% in bond and wait for stock correction. I dont to want to see my hard earned money to sink. We just started putting roughly $500k to taxable account last month that I am thinking to move it to intermediate tax exempt bond. If the money was appreciated from the stock, I would feel more comfortable leaving it there in stock. Thanks in advance.

However it's confused me that if the expected tax cut will have any affect on the market.
Last edited by HenrysPlan2 on Mon Oct 09, 2017 6:45 pm, edited 2 times in total.

bayview
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Re: 100% in bond to wait for market crash?

Post by bayview » Mon Oct 09, 2017 6:12 pm

HenrysPlan2 wrote:
Mon Oct 09, 2017 6:09 pm
Since the stock market value most Expendive except year 2000 ( p/e https://www.quandl.com/data/MULTPL/SHIL ... o-by-Month ). Also sincevthe bond having roughly 2.3% return, please convince me not to collect 2.3% in bond and wait for stock correction. I do to want to see my hard earned money to sink. We just started putting roughly $500k to taxable account last month that I am thinking to move it to intermediate tax excempt bond. If the money was appreciated from the stock, I would feel more comfortable leaving it there. Thanks in advance
This gets posted a lot.

What will you need to pull from your portfolio? What would be the equivalent of 30 years or so of needed expenses? Consider having that figure in fixed income and the rest in equities.

Right now, you're focusing on the perceived risk of stocks crashing (yes, it will happen at some point, but when?) and ignoring the risk of inflation.

Also, most people would advise against having fixed income in taxable, if it can be put somewhere else (trad IRA or Roth).
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

alex_686
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Re: 100% in bond to wait for market crash?

Post by alex_686 » Mon Oct 09, 2017 6:14 pm

1. Historically speaking, PE don't have any predicative power if the market is about to crash.

2. 2.3% is about the expected inflation over the next 10 years.

So you want to get a expected real return of 0% for ??? I understand the emotion behind your statement. Just understand that the is no logic or historical fact behind it. Investing is about balancing fear and greed. Don't be consumed by the fear - figure out a balance.

HenrysPlan2
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Re: 100% in bond to wait for market crash?

Post by HenrysPlan2 » Mon Oct 09, 2017 6:38 pm

thanks Bayview, it's just very nervous to put that much money at this high P/E. I can put it on Vanguard VWIUX which is tax exempt in taxable.
hi Alex-686, the idea is to avoid the big lost for now and eventually will move most of the fund back to the total stock market index in taxable. I have invested in my 401k as well which having 90% stock currently with $250k.

alex_686
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Re: 100% in bond to wait for market crash?

Post by alex_686 » Mon Oct 09, 2017 6:56 pm

HenrysPlan2 wrote:
Mon Oct 09, 2017 6:38 pm
hi Alex-686, the idea is to avoid the big lost for now and eventually will move most of the fund back to the total stock market index in taxable. I have invested in my 401k as well which having 90% stock currently with $250k.
No, I understand what you are saying. Let me counter with a different idea. Why don't you wait until the Superbowl? If a AFC team wins then sell. If a NFC team wins, buy more stock. If you think this is an odd request I will point out that the AFC/NFC stock predictor has a power of 80% which is a far higher predictive rate than a high P/E ratio. The P/E ratio is statically identical to zero.

Emotionally I understand why this makes sense. However expensive does not mean that there will be a crash in the next few years. It means that we can expect low returns for the next 10 years - maybe with a crash - maybe without. That is what history and theory tells us.

I think your nervousness tell me more about your risk tolerance than anything else. 90% in equities in your AA is high. Cut back on that for emotional reasons, not because you plan on market timing a fall.

inbox788
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Re: 100% in bond to wait for market crash?

Post by inbox788 » Mon Oct 09, 2017 6:59 pm

HenrysPlan2 wrote:
Mon Oct 09, 2017 6:09 pm
We just started putting roughly $500k to taxable account last month that I am thinking to move it to intermediate tax exempt bond. If the money was appreciated from the stock, I would feel more comfortable leaving it there in stock.
How did you attain this $500k last month? That is where was it a month ago and what is it in now? If you had $500k cash in the account and simply bought VOO (SP500 fund), you'd be up 3% now (13-14% YTD or 18-19% Y/Y). If you asked this same question a year ago or in January this year, you'd be waiting around for a drop that never came. Also, what specific trigger are you waiting for? If the market goes down 5% or 10%, you might buy in right as it's diving 30 or 50%. Damned if you do and damned if you don't.
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bayview
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Re: 100% in bond to wait for market crash?

Post by bayview » Mon Oct 09, 2017 7:02 pm

alex_686 wrote:
Mon Oct 09, 2017 6:56 pm
HenrysPlan2 wrote:
Mon Oct 09, 2017 6:38 pm
hi Alex-686, the idea is to avoid the big lost for now and eventually will move most of the fund back to the total stock market index in taxable. I have invested in my 401k as well which having 90% stock currently with $250k.
No, I understand what you are saying. Let me counter with a different idea. Why don't you wait until the Superbowl? If a AFC team wins then sell. If a NFC team wins, buy more stock. If you think this is an odd request I will point out that the AFC/NFC stock predictor has a power of 80% which is a far higher predictive rate than a high P/E ratio. The P/E ratio is statically identical to zero.

Emotionally I understand why this makes sense. However expensive does not mean that there will be a crash in the next few years. It means that we can expect low returns for the next 10 years - maybe with a crash - maybe without. That is what history and theory tells us.

I think your nervousness tell me more about your risk tolerance than anything else. 90% in equities in your AA is high. Cut back on that for emotional reasons, not because you plan on market timing a fall.
Agree with the bolded above. Dial back your AA in your 401k.

And don't forget that it's a lot easier to see a loss in connection with a stock market crash than it is to see a loss to inflation. Inflation losses are subtle, but they really do hurt, even in an environment of low inflation. And the posted inflation rate is lower than the real inflation rate for many retirees, who face healthcare costs rising far above the inflation rate.

It sounds like you're worrying over two extremes: 90/10 AA in your 401k, which seems to make you uncomfortable, vs. 0/100 in your proposed plan, which will have a tough time holding its value after inflation and taxes. Instead of these two extremes, take a look at a more moderate AA.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

inbox788
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Re: 100% in bond to wait for market crash?

Post by inbox788 » Mon Oct 09, 2017 7:03 pm

Thaler has found that the number of options on a 401(k) menu can affect the employees' selections. Those with a choice of a stock fund and bond fund tend to invest half in each. Those with a choice of three stock funds and one bond fund are likely to sprinkle an equal amount of their savings in each, and thus put 75 percent of the total in stocks.
http://www.nytimes.com/library/magazine ... -econ.html

Might help explain why some advisors (i.e. EJ Edwards) use dozens of funds.
Last edited by inbox788 on Mon Oct 09, 2017 7:05 pm, edited 1 time in total.

HenrysPlan2
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Re: 100% in bond to wait for market crash?

Post by HenrysPlan2 » Mon Oct 09, 2017 7:04 pm

[/quote]

No, I understand what you are saying. Let me counter with a different idea. Why don't you wait until the Superbowl? If a AFC team wins then sell. If a NFC team wins, buy more stock. If you think this is an odd request I will point out that the AFC/NFC stock predictor has a power of 80% which is a far higher predictive rate than a high P/E ratio. The P/E ratio is statically identical to zero.

Emotionally I understand why this makes sense. However expensive does not mean that there will be a crash in the next few years. It means that we can expect low returns for the next 10 years - maybe with a crash - maybe without. That is what history and theory tells us.

I think your nervousness tell me more about your risk tolerance than anything else. 90% in equities in your AA is high. Cut back on that for emotional reasons, not because you plan on market timing a fall.
[/quote]

Alex, Somewhat in year 2000 , the P/E is 45 right before the market went down, and 1929 when P/E reach almost 35 and it crash due to it's too expensive make a lot of people nervous and sell in panic. I do think it has something to do with high P/E with a market correction. I wish I know how to post the graph.

livesoft
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Re: 100% in bond to wait for market crash?

Post by livesoft » Mon Oct 09, 2017 7:07 pm

i don't see any reason to convince you of anything. You have to convince yourself.

Oh, you mentioned an expected tax cut. Did you know that you can deduct losses in your stock investments on your tax return? That alone will save you lots of money.
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Stormbringer
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Re: 100% in bond to wait for market crash?

Post by Stormbringer » Mon Oct 09, 2017 7:11 pm

HenrysPlan2 wrote:
Mon Oct 09, 2017 6:09 pm
100% in bond to wait for market crash?
A buddy of mine did that two years ago. He's still waiting.

avalpert
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Re: 100% in bond to wait for market crash?

Post by avalpert » Mon Oct 09, 2017 7:22 pm

alex_686 wrote:
Mon Oct 09, 2017 6:56 pm
HenrysPlan2 wrote:
Mon Oct 09, 2017 6:38 pm
hi Alex-686, the idea is to avoid the big lost for now and eventually will move most of the fund back to the total stock market index in taxable. I have invested in my 401k as well which having 90% stock currently with $250k.
No, I understand what you are saying. Let me counter with a different idea. Why don't you wait until the Superbowl? If a AFC team wins then sell. If a NFC team wins, buy more stock. If you think this is an odd request I will point out that the AFC/NFC stock predictor has a power of 80% which is a far higher predictive rate than a high P/E ratio.
It is a coincidence but not entirely coincidental - just like we expect stocks to go up over time we expect the NFC (particularly when adding back in original NFL teams like the Steelers as the indicator does) to dominate the AFC over time.

HenrysPlan2
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Re: 100% in bond to wait for market crash?

Post by HenrysPlan2 » Mon Oct 09, 2017 7:25 pm

I was thinking a crash like 30% or 40% , but looks like it's not likely as the tax cut on its way. The fund was in the bank for a while before I put them in market. What do you guys think if AA 50/50 and transfer all 50% bond to stock if there's a crash? I am 40

alex_686
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Re: 100% in bond to wait for market crash?

Post by alex_686 » Mon Oct 09, 2017 7:27 pm

HenrysPlan2 wrote:
Mon Oct 09, 2017 7:04 pm
Alex, Somewhat in year 2000 , the P/E is 45 right before the market went down, and 1929 when P/E reach almost 35 and it crash due to it's too expensive make a lot of people nervous and sell in panic. I do think it has something to do with high P/E with a market correction. I wish I know how to post the graph.
I don't trust graphs. They are failable to too any cognitive failures - the mind plays tricks on ourselves. I trust more robust stastical tools. I wish I could point you to a few good academic articles on the subject but they are behind paywalls. Sigh. Markets have crashed when the PE was low, the market has not crashed when the PE was high. Not predictive.

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Re: 100% in bond to wait for market crash?

Post by Tyler Aspect » Mon Oct 09, 2017 7:29 pm

You are the guy with 5 investment properties. I think that changes a lot where the proper balance is located. Also it is unclear if you intend to sell off all investments and move into bond, or merely allocate extra cash into bond type investments.
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HenrysPlan2
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Re: 100% in bond to wait for market crash?

Post by HenrysPlan2 » Mon Oct 09, 2017 7:30 pm

Stormbringer wrote:
Mon Oct 09, 2017 7:11 pm
HenrysPlan2 wrote:
Mon Oct 09, 2017 6:09 pm
100% in bond to wait for market crash?
A buddy of mine did that two years ago. He's still waiting.

Two years ago is a lot lower than now

DanMahowny
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Re: 100% in bond to wait for market crash?

Post by DanMahowny » Mon Oct 09, 2017 7:31 pm

I'm OUT, mostly.

Today I sold all equities, US, international, emerging market, and a few individual stocks.

Still hold some oil/oil services index funds. Otherwise all cash, bonds, TIPs, and gold. I figure the TIPs, gold and my house provide some protection against inflation.

Already retired, and mostly just a matter of "won the game, stop playing" deal.

I invested regularly through some monster bear markets and didn't flinch. Don't want to do it anymore.

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whodidntante
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Re: 100% in bond to wait for market crash?

Post by whodidntante » Mon Oct 09, 2017 7:36 pm

I have a hard enough time justifying 10% in bonds. Don't think I can add a zero.

HenrysPlan2
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Re: 100% in bond to wait for market crash?

Post by HenrysPlan2 » Mon Oct 09, 2017 7:45 pm

whodidntante wrote:
Mon Oct 09, 2017 7:36 pm
I have a hard enough time justifying 10% in bonds. Don't think I can add a zero.
Maybe I am not a stock guy, fund invested in 401k feel safer due to I am not going to touch it for potentially 30 years if I live to 70. The fund in the bank now was earned with blood and hard work. I do understand the inflation of 2% means the money depreciate 2% a year. I probably will leave the $500k in stock for now and if the PE increase to 45, I will surely move all to bond. PE is 30 now roughly which the only happened two times in the history and both not ended well with a big crash

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arcticpineapplecorp.
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Re: 100% in bond to wait for market crash?

Post by arcticpineapplecorp. » Mon Oct 09, 2017 7:52 pm

HenrysPlan2 wrote:
Mon Oct 09, 2017 7:30 pm
Stormbringer wrote:
Mon Oct 09, 2017 7:11 pm
HenrysPlan2 wrote:
Mon Oct 09, 2017 6:09 pm
100% in bond to wait for market crash?
A buddy of mine did that two years ago. He's still waiting.

Two years ago is a lot lower than now
That's the point. Someone who got out of the market two years ago waiting for the "imminent crash" has really missed out on some opportunities to grow their portoflio, haven't they?

Here's another question...let's say you take out your money from stocks and put it in bonds and then a crash does come (let's say 40%). What makes you so sure that you'll be willing to invest that lump sum back into stocks after the market drops? Have you done that before? Many people can't invest when the market drops because they're so fearful that it's going to keep dropping (hint: sometimes it does). Remember 2008? 50% decline in stocks right? Nope. 38% for the year. The market fell further the 1st quarter of 2009 (but then recovered for a gain in 2009). Many people didn't invest in 2008...they sold. And they didn't get in in 2009 at the bottom...they waited...until the market "seemed safe again". When was that? Who knows? Several years later...AFTER markets had gone back up (and these folks were buying at new highs after having sold at low points in 2008 or 2009).

What if you sold your stocks in 2007 and went to cash or bonds and then 2008 happened and you invested in 2008...and then the market fell further in the 1st quarter of 2009. Would you feel like a chump for buying in 2008 instead of 2009? Would you regret your decsion to go all in? This is purely market timing and it's the reason it doesn't work. No one knows what the future holds.

Investing is for the long term, not the short term. If you're 40 and you're concerned with the next market crash, you're speculating pure and simple.

There will be many crashes/recessions between now and your full retirement age (as per SSA). So why are you worried where the market will be next year when all that really matters is where your investments are at 20+ years from now?

You won't go all to cash at retirement will you? Bill Bengen's work and the Trinity Study recommend a percentage of your assets in stocks to be able to maintain your portfolio of a 30 year retirement. That means you'll like have at least 25% of your portfolio in stocks for the next 50-60 years (may you live that long). That's thinking long term. You don't get the return of the market if you don't stay in the market. People who got out of the market two years ago won't get the return of the market because they got out. What if the market never gets back to where they got out? They will have to buy back in at higher prices than they sold out at.
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HenrysPlan2
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Re: 100% in bond to wait for market crash?

Post by HenrysPlan2 » Mon Oct 09, 2017 7:58 pm

arcticpineapplecorp. wrote:
Mon Oct 09, 2017 7:52 pm
HenrysPlan2 wrote:
Mon Oct 09, 2017 7:30 pm
Stormbringer wrote:
Mon Oct 09, 2017 7:11 pm
HenrysPlan2 wrote:
Mon Oct 09, 2017 6:09 pm
100% in bond to wait for market crash?
A buddy of mine did that two years ago. He's still waiting.

Two years ago is a lot lower than now
That's the point. Someone who got out of the market two years ago waiting for the "imminent crash" has really missed out on some opportunities to grow their portoflio, haven't they?

Here's another question...let's say you take out your money from stocks and put it in bonds and then a crash does come (let's say 40%). What makes you so sure that you'll be willing to invest that lump sum back into stocks after the market drops? Have you done that before? Many people can't invest when the market drops because they're so fearful that it's going to keep dropping (hint: sometimes it does). Remember 2008? 50% decline in stocks right? Nope. 38% for the year. The market fell further the 1st quarter of 2009 (but then recovered for a gain in 2009). Many people didn't invest in 2008...they sold. And they didn't get in in 2009 at the bottom...they waited...until the market "seemed safe again". When was that? Who knows? Several years later...AFTER markets had gone back up (and these folks were buying at new highs after having sold at low points in 2008 or 2009).

What if you sold your stocks in 2007 and went to cash or bonds and then 2008 happened and you invested in 2008...and then the market fell further in the 1st quarter of 2009. Would you feel like a chump for buying in 2008 instead of 2009? Would you regret your decsion to go all in? This is purely market timing and it's the reason it doesn't work. No one knows what the future holds.

Investing is for the long term, not the short term. If you're 40 and you're concerned with the next market crash, you're speculating pure and simple.

There will be many crashes/recessions between now and your full retirement age (as per SSA). So why are you worried where the market will be next year when all that really matters is where your investments are at 20+ years from now?
I worried about it now due to the PE is almost app time high. Previous two big crash happened with high PE on Yesr 2000 and 1929. That's my main worry about the overvalued stock now

livesoft
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Re: 100% in bond to wait for market crash?

Post by livesoft » Mon Oct 09, 2017 8:00 pm

Remember the Fiscal Cliff? There's a lesson there.
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Dead Man Walking
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Re: 100% in bond to wait for market crash?

Post by Dead Man Walking » Mon Oct 09, 2017 8:11 pm

The aphorism "Time in the market beats market timing." is true if you have enough time. You can find several posts that illustrate that investing at market peaks is profitable over the long run even if you only invest at market peaks. However, I don't recall any posts that illustrate how well you would have done if you had only invested at market bottoms.

A dollar cost averaging plan might be less stressful in your case.

DMW

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arcticpineapplecorp.
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Re: 100% in bond to wait for market crash?

Post by arcticpineapplecorp. » Mon Oct 09, 2017 8:58 pm

Dead Man Walking wrote:
Mon Oct 09, 2017 8:11 pm
The aphorism "Time in the market beats market timing." is true if you have enough time. You can find several posts that illustrate that investing at market peaks is profitable over the long run even if you only invest at market peaks. However, I don't recall any posts that illustrate how well you would have done if you had only invested at market bottoms.

A dollar cost averaging plan might be less stressful in your case.

DMW
in case the OP hasn't seen that link (what if you only invested at market peaks)...here it is:

http://awealthofcommonsense.com/2014/02 ... ket-timer/

Of course if you only invested at market bottoms you'd have done even better. But the problem is no one knows when the market's going to hit bottom. That was my point. Plenty of people thought 2008 was the bottom but it wasn't. No one ever rings a bell and states the exact day the market will hit bottom...so how would you know to get in at the bottom if no one knows it's occurred...until it's already happened (and then it's too late at that point).

DCA is a psychological/emotional insurance policy. If you DCA and the market goes higher in the meantime, you'll have regret. If you wait and then lump sum when you think the market's at a low point, and then it goes lower (momentum) you'll have regret. Which will you regret less?
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nedsaid
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Re: 100% in bond to wait for market crash?

Post by nedsaid » Mon Oct 09, 2017 9:41 pm

Quite frankly, I have been waiting for bonds to crash. :wink:
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ImUrHuckleberry
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Re: 100% in bond to wait for market crash?

Post by ImUrHuckleberry » Mon Oct 09, 2017 9:57 pm

I was convinced the market was overpriced in 2011 based on stuff I was reading.

Dead Man Walking
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Re: 100% in bond to wait for market crash?

Post by Dead Man Walking » Mon Oct 09, 2017 10:03 pm

arcticpineapplecorp. wrote:
Mon Oct 09, 2017 8:58 pm
Dead Man Walking wrote:
Mon Oct 09, 2017 8:11 pm
The aphorism "Time in the market beats market timing." is true if you have enough time. You can find several posts that illustrate that investing at market peaks is profitable over the long run even if you only invest at market peaks. However, I don't recall any posts that illustrate how well you would have done if you had only invested at market bottoms.

A dollar cost averaging plan might be less stressful in your case.

DMW
in case the OP hasn't seen that link (what if you only invested at market peaks)...here it is:

http://awealthofcommonsense.com/2014/02 ... ket-timer/

Of course if you only invested at market bottoms you'd have done even better. But the problem is no one knows when the market's going to hit bottom. That whas my point. Plenty of people thought 2008 was the bottom but it wasn't. No one ever rings a bell and states the exact day the market will hit bottom...so how would you know to get in at the bottom if no one knows it's occurred...until it's already happened (and then it's too late at that point).

DCA is a psychological/emotional insurance policy. If you DCA and the market goes higher in the meantime, you'll have regret. If you wait and then lump sum when you think the market's at a low point, and then it goes lower (momentum) you'll have regret. Which will you regret less?
Thanks for the link. You reinforced the points that I made with considerably more detail. I've always employed DCA because I've never had a lump sum to invest. If I were to have 500K to invest, I would be anxious and would DCA just so I could so I could sleep at night.

DMW

CULater
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Re: 100% in bond to wait for market crash?

Post by CULater » Mon Oct 09, 2017 10:08 pm

They say you should only have the amount of money in stocks that you could stomach losing 50% on paper and not sell any of the remaining 50% while stocks are still looking pretty shaky, or even be prepared to sell some bond holdings (which probably will increase in value if stocks crash and be looking pretty good) to buy back the 50% of stocks that was flushed down the drain. If that amount for the OP is 0% stocks, then by all means all stocks should be liquidated. But, if that's your risk tolerance level, then you should always own 0% stocks because you never know when that 50% haircut is going to happen.

"You shouldn't own common stocks if a 50% decrease in their value in a short period of time would cause you acute distress." ~ Warren Buffett
Last edited by CULater on Mon Oct 09, 2017 10:33 pm, edited 1 time in total.
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fipt2030
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Re: 100% in bond to wait for market crash?

Post by fipt2030 » Mon Oct 09, 2017 10:14 pm

I am in a similar boat, with sweat money in cash ( 13 yr expenses) in taxable account
Can't seem to pull the trigger

About 4 yr expenses worth, in tax deferred accounts, in bond funds

I am in early 40's

aqan
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Re: 100% in bond to wait for market crash?

Post by aqan » Mon Oct 09, 2017 10:20 pm

DanMahowny wrote:
Mon Oct 09, 2017 7:31 pm
I'm OUT, mostly.

Today I sold all equities, US, international, emerging market, and a few individual stocks.

Still hold some oil/oil services index funds. Otherwise all cash, bonds, TIPs, and gold. I figure the TIPs, gold and my house provide some protection against inflation.

Already retired, and mostly just a matter of "won the game, stop playing" deal.
I invested regularly through some monster bear markets and didn't flinch. Don't want to do it anymore.
I don't think i can argue with that. you may want to set your entry point for getting back into equities now and stick to that as it is hard to guess the bottom (or top).

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Re: 100% in bond to wait for market crash?

Post by aqan » Mon Oct 09, 2017 10:25 pm

fipt2030 wrote:
Mon Oct 09, 2017 10:14 pm
I am in a similar boat, with sweat money in cash ( 13 yr expenses) in taxable account
Can't seem to pull the trigger

About 4 yr expenses worth, in tax deferred accounts, in bond funds

I am in early 40's
how about buying a hedge (long term UVXY call options??) instead of pulling out completely? You can buy the hedge for cheap when the market is high, if it doesn't pay off you would have made some money by staying in the market.
I've been thinking about it but haven't got the time to research.

HenrysPlan2
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Re: 100% in bond to wait for market crash?

Post by HenrysPlan2 » Mon Oct 09, 2017 10:56 pm

fipt2030 wrote:
Mon Oct 09, 2017 10:14 pm
I am in a similar boat, with sweat money in cash ( 13 yr expenses) in taxable account
Can't seem to pull the trigger

About 4 yr expenses worth, in tax deferred accounts, in bond funds

I am in early 40's

I know your feeling. The DOW was 6600 and now 22000. I had some cash somewhere $400k to $600k since 2013. Now even more due to sold of investment home. I finally pulled the trigger for part of the fund we have, but thinking to move them to bond if the stock PE reaches 40
To 45. Basically all aset inflated with ultra low interest rate for extended period of time. What happen if the rate increaseses?

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PuddlesTheDuck
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Re: 100% in bond to wait for market crash?

Post by PuddlesTheDuck » Mon Oct 09, 2017 11:32 pm

Quoting your three responses that include reasoning for exiting equities (if I missed one, I apologize). Your entire reasoning that I've seen is that the current market PE ratio is high. That's not really a reasonable position. Hopefully some people here have calmed you down, but I'll try my hand, as well.
HenrysPlan2 wrote:
Mon Oct 09, 2017 7:04 pm
Alex, Somewhat in year 2000 , the P/E is 45 right before the market went down, and 1929 when P/E reach almost 35 and it crash due to it's too expensive make a lot of people nervous and sell in panic. I do think it has something to do with high P/E with a market correction. I wish I know how to post the graph.
You know what the P/E ratio was before it was 45? 40. And 35. It hit 30 sometime in 1997, a good couple years before it hit 45. With a risk-tolerance-appropriate asset allocation and some sort of rebalancing strategy, you would have captured many years of productive market gains before the "imminent" crash occurred. What made the P/E of 45 specifically so special?
HenrysPlan2 wrote:
Mon Oct 09, 2017 7:45 pm
Maybe I am not a stock guy, fund invested in 401k feel safer due to I am not going to touch it for potentially 30 years if I live to 70. The fund in the bank now was earned with blood and hard work. I do understand the inflation of 2% means the money depreciate 2% a year. I probably will leave the $500k in stock for now and if the PE increase to 45, I will surely move all to bond. PE is 30 now roughly which the only happened two times in the history and both not ended well with a big crash
I think this here is the reasonable stance. Make sure your allocation helps you sleep at night, but don't give everything up on a hunch. If you're that scared of losing principal, put it in a CD. Maybe you're better off at 25/75 stocks/bonds. Maybe you're better off with only international stocks outside of your 401k so you're not as worried. But there's no reason to go 100% bonds.

But again, there's nothing magical about any given P/E ratio. Why sell of at 45 and not 35? The US just kept interest rates artificially low to encourage as much growth as possible. Why wouldn't that have an affect on what people are willing to pay for stocks? You just need to get to an asset allocation you can live with and not play games with "if that market does this I'll shuffle my money this way."
HenrysPlan2 wrote:
Mon Oct 09, 2017 7:58 pm
I worried about it now due to the PE is almost app time high. Previous two big crash happened with high PE on Yesr 2000 and 1929. That's my main worry about the overvalued stock now
Right before a big crash, the P/E ratio will be at some local maximum. This is simply by definition. This pattern will always be obvious in the mirror, but you'll never predict it coming.
Valuations can always go higher and you should really avoid chart reading.
When would you have sold in the 90s and why specifically then?
Some people say a trailing P/E is a better indicator. What if we use that?
And why have emerging markets not boomed and busted with some pretty wild P/E swings?

HenrysPlan2
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Re: 100% in bond to wait for market crash?

Post by HenrysPlan2 » Mon Oct 09, 2017 11:36 pm

arcticpineapplecorp. wrote:
Mon Oct 09, 2017 8:58 pm
Dead Man Walking wrote:
Mon Oct 09, 2017 8:11 pm
The aphorism "Time in the market beats market timing." is true if you have enough time. You can find several posts that illustrate that investing at market peaks is profitable over the long run even if you only invest at market peaks. However, I don't recall any posts that illustrate how well you would have done if you had only invested at market bottoms.

A dollar cost averaging plan might be less stressful in your case.

DMW
in case the OP hasn't seen that link (what if you only invested at market peaks)...here it is:

http://awealthofcommonsense.com/2014/02 ... ket-timer/

Of course if you only invested at market bottoms you'd have done even better. But the problem is no one knows when the market's going to hit bottom. That was my point. Plenty of people thought 2008 was the bottom but it wasn't. No one ever rings a bell and states the exact day the market will hit bottom...so how would you know to get in at the bottom if no one knows it's occurred...until it's already happened (and then it's too late at that point).

DCA is a psychological/emotional insurance policy. If you DCA and the market goes higher in the meantime, you'll have regret. If you wait and then lump sum when you think the market's at a low point, and then it goes lower (momentum) you'll have regret. Which will you regret less?
I have read this article on the link 4 times already , the person there having 50 years in the market, It's different. Also imaging how much would it saved if can only avoid one big crash?

MnD
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Re: 100% in bond to wait for market crash?

Post by MnD » Mon Oct 09, 2017 11:55 pm

I'm liking all these fear threads.

lotusflower
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Re: 100% in bond to wait for market crash?

Post by lotusflower » Tue Oct 10, 2017 12:28 am

HenrysPlan2 wrote:
Mon Oct 09, 2017 11:36 pm
I have read this article on the link 4 times already , the person there having 50 years in the market, It's different. Also imaging how much would it saved if can only avoid one big crash?
Paraphrasing this thread, posted on a site whose manifesto states that you can't time the market.
HenrysPlan2: I think now is a good time to time the market
Boglehead: You can't time the market.
HP2: Okay, but it could crash any day now.
BH: Or it might not happen for several years, that's why you can't time the market.
HP2: Sure, but if I could just time the market, I could have much better returns.
BH: well that's just silly, since you can't time the market. Here, read this article about why you can't time the market.
HP2: Great, that article implied that if you could just time the market, you could make a ton of money. Is now the right time?
BH: Well some other guy tried this a couple years ago, and he's still waiting.
HP2: What a fool, the market's been way up since then. So anyway, is now the right time?
BH: ummm...

So how long is this thread going to take to play all the way out?

venkman
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Re: 100% in bond to wait for market crash?

Post by venkman » Tue Oct 10, 2017 1:33 am

I recommend you spend some time listening to Dave Ramsey's investment advice.

Note that I don't recommend you FOLLOW Dave Ramsey's investment advice. Just listen to it, and you'll feel much better about being in the stock market. :mrgreen:

aqan
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Re: 100% in bond to wait for market crash?

Post by aqan » Tue Oct 10, 2017 1:47 am

MnD wrote:
Mon Oct 09, 2017 11:55 pm
I'm liking all these fear threads.
lol.. according to my calculations it means that you have 6-18 months before the crash.

HenrysPlan2
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Re: 100% in bond to wait for market crash?

Post by HenrysPlan2 » Tue Oct 10, 2017 3:16 am

All I was saying it is much more risky to put in stock now. You can treat it like a joke, but PE at 30 is real, how many times you see the market with P/E ratio 30? It's not about timing the market, it's about assess the risk. For example, you could kind of see the housing market about to crash with too many people getting Subprime mortgage they can't pay back.

GoldenFinch
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Re: 100% in bond to wait for market crash?

Post by GoldenFinch » Tue Oct 10, 2017 4:35 am

HenrysPlan2 wrote:
Tue Oct 10, 2017 3:16 am
All I was saying it is much more risky to put in stock now. You can treat it like a joke, but PE at 30 is real, how many times you see the market with P/E ratio 30? It's not about timing the market, it's about assess the risk. For example, you could kind of see the housing market about to crash with too many people getting Subprime mortgage they can't pay back.
No one is treating this as a joke. You are clearly very anxious about investing and unsure of how to proceed. Maybe you should just do nothing with your money for a while and just continue to read and educate yourself more about investing until you feel comfortable enough to do something. I am older than you and I don’t pay attention to P/E ratios, but I do pay attention to my asset allocation which I like to be around 75/25. If I was a nervous wreck about the stock market I would use a balanced fund that was 60/40 or, if my anxiety was overwhelming, 50/50. If you want your money to grow, you have to invest it and that does involve some level of risk.

fipt2030
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Re: 100% in bond to wait for market crash?

Post by fipt2030 » Tue Oct 10, 2017 5:10 am

My AA calls for 70/30, Bonds/stocks

Interest rates are gonna go up, I am not ready to lose my principal when it happens and Just can't seem to jump in now

harvestbook
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Re: 100% in bond to wait for market crash?

Post by harvestbook » Tue Oct 10, 2017 7:36 am

You've got a lot of money but it seems to be causing you misery instead of joy. You really would be okay just holding it in cash and forgetting about it and going on with your life. You'd also be okay dumping some or all in the market and going on with your life.

Bogle's projecting 3 percent real returns over the next decade--so even if there is a crash or a series of corrections or (more likely) the usual ups and downs and highs and lows, you are still coming out ahead over time. Who knows if there will be tax changes, or whether they don't actually make the market go down instead of up? Who knows what will happen if or when interest rates rise? It's possible we never have another "crash" in our lifetimes. So far there have been no 15-year losing periods for stocks--doesn't mean it can't happen.

I look at it like the money I have now is not all the money I will ever have. Some gets lost or spent and new money comes in. Money isn't even a tangible thing; it's just an idea, even if you have it in dollar bills. Clearly it doesn't buy happiness. Money and investments can rise and fall. Time wasted on worrying about money is time I will never get back. Good luck!

ETA: "All in Or All Out" - Cullen Roche
"A lot of people will tend to look at valuation metrics or other indicators and feel the need to be “all in” or “all out” of the market. This is the gambler’s approach to investing. We’re not gambling though.¹ After all, the baseline probability with gambling is a negative total return. The smart gambler knows that the baseline assumption is a negative total return. So they have to stay out more than they stay in so that they are only in when the odds are asymmetrically in their favor.

Investing, however, is the precise opposite. The baseline probability is a positive total return."
http://www.pragcap.com/all-in-or-all-out/
Last edited by harvestbook on Tue Oct 10, 2017 8:02 am, edited 1 time in total.
I'm not smart enough to know, and I can't afford to guess.

Jack FFR1846
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Re: 100% in bond to wait for market crash?

Post by Jack FFR1846 » Tue Oct 10, 2017 7:50 am

New market highs have occurred every 18 days for 100 years.

P/Es are rising. Why? My amateur answer is that pensions are a thing of the past so workers are adding to 401k's and other investments that go into the market. More money in does what to the price? It pushes it up. When will that stop? When pensions come back or when money gets pulled en masse out of the market.

You might want to adopt the philosophy that I had before looking at my investments, which has only been in the last 5 years. I never looked. I had no idea what the market was doing, how my investments were doing or how much money I had saved. This worked pretty well for 30 years and by the time I actually looked I had a million and a half dollars invested. If looking makes you panic, don't look. Maybe go in and change your password to something random. Write down the password to confirm it, then burn the paper.
Bogle: Smart Beta is stupid

goingup
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Re: 100% in bond to wait for market crash?

Post by goingup » Tue Oct 10, 2017 8:07 am

HenrysPlan2 wrote:
Mon Oct 09, 2017 7:25 pm
I was thinking a crash like 30% or 40% ..What do you guys think if AA 50/50 and transfer all 50% bond to stock if there's a crash? I am 40
Nice in theory. When the market crashes 40% you may overcome by paralyzing fear. There were times in 2008 that felt like the entire financial & economic system of the US was imploding. It's hard to brave when you may be laid off and lose your home. :| Pare back equities by 10-20% and see how you feel. Repeat if necessary in a couple months. Be clear-eyed and methodical, not knee-jerk emotional.

livesoft
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Re: 100% in bond to wait for market crash?

Post by livesoft » Tue Oct 10, 2017 8:14 am

This is a great thread to help show why Behavioral Finance / Behavorial Economics deserves the attention that it is getting. There are a lot of rational irrational thoughts being expressed in this thread.

One can make some money off of other people by knowing some of these behaviors.
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dwickenh
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Re: 100% in bond to wait for market crash?

Post by dwickenh » Tue Oct 10, 2017 8:24 am

Jack FFR1846 wrote:
Tue Oct 10, 2017 7:50 am
New market highs have occurred every 18 days for 100 years.

P/Es are rising. Why? My amateur answer is that pensions are a thing of the past so workers are adding to 401k's and other investments that go into the market. More money in does what to the price? It pushes it up. When will that stop? When pensions come back or when money gets pulled en masse out of the market.

You might want to adopt the philosophy that I had before looking at my investments, which has only been in the last 5 years. I never looked. I had no idea what the market was doing, how my investments were doing or how much money I had saved. This worked pretty well for 30 years and by the time I actually looked I had a million and a half dollars invested. If looking makes you panic, don't look. Maybe go in and change your password to something random. Write down the password to confirm it, then burn the paper.
That last line still has me laughing :D BTW I did the same thing through 2008, didn't look and kept adding money to stocks. Maybe we were both just lucky, but I would do the same again.

Best to you,

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

goingup
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Re: 100% in bond to wait for market crash?

Post by goingup » Tue Oct 10, 2017 8:25 am

^Would you agree it's better for the OP to consider his options and act in moderate ways to pare back equities than do it in fog of war (metaphor, I hope)?

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DaftInvestor
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Re: 100% in bond to wait for market crash?

Post by DaftInvestor » Tue Oct 10, 2017 8:37 am

I just moved a sum from stocks into bonds but only to rebalance back to my AA. If there is a sudden drop in the stock market I will gladly rebalance back. I learned early on that trying to time the market by looking at PEs as compared to history is a fools game for the majority (some will get lucky).
OP: It sounds like your AA needs to be adjusted for your risk tolerance. Perhaps if you have enough to live on in retirement with zero-gain that number is 0/100.

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Re: 100% in bond to wait for market crash?

Post by yukonjack » Tue Oct 10, 2017 8:42 am

HenrysPlan2 wrote:
Tue Oct 10, 2017 3:16 am
All I was saying it is much more risky to put in stock now. You can treat it like a joke, but PE at 30 is real, how many times you see the market with P/E ratio 30? It's not about timing the market, it's about assess the risk. For example, you could kind of see the housing market about to crash with too many people getting Subprime mortgage they can't pay back.
My recollection was that very few people predicted the housing market crash. Read the Big Short. And if only a few saw such a big event like that coming how could you expect to see a general market correction coming.

avalpert
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Re: 100% in bond to wait for market crash?

Post by avalpert » Tue Oct 10, 2017 8:45 am

yukonjack wrote:
Tue Oct 10, 2017 8:42 am
HenrysPlan2 wrote:
Tue Oct 10, 2017 3:16 am
All I was saying it is much more risky to put in stock now. You can treat it like a joke, but PE at 30 is real, how many times you see the market with P/E ratio 30? It's not about timing the market, it's about assess the risk. For example, you could kind of see the housing market about to crash with too many people getting Subprime mortgage they can't pay back.
My recollection was that very few people predicted the housing market crash. Read the Big Short. And if only a few saw such a big event like that coming how could you expect to see a general market correction coming.
Sure only a few predicted it ahead of time - but the number of people who correctly predicted it in retrospect is huge.

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