Saving for the crash

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investmentjeff
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Saving for the crash

Post by investmentjeff » Thu Dec 21, 2017 11:53 pm

I was on another forum mostly unrelated to investment, and a bunch of people were saying that they're setting aside a large amount of cash for the next big market crash (e.g., 2008). I think I know what folks will say about this plan (e.g., money not making money while you wait), but I'd love to hear your opinion on this strategy. Is anyone doing something similar or is it absolutely anti-Bogle?

PFInterest
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Re: Saving for the crash

Post by PFInterest » Thu Dec 21, 2017 11:58 pm

It's just dumb. I will buy with new money, rebalance with old, harvest the losses and not create a drag on my portfolio.

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Watty
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Re: Saving for the crash

Post by Watty » Fri Dec 22, 2017 12:27 am

Someone is always saying stuff like that. Just by random chance some of them will eventually be right. People that said that a year ago and are still waiting will have a hard time ever catching up with the gains they missed.

I figured out long ago that I was not smart enough to time the market.

I have a set asset allocation so and things go up then I will automatically rebalance and sell when investments are high. When things go down I will automatically by then things are low.

One thing that I did do was at about the time I retired I finished paying off my house so that I would have less sequence of returns risk.

surfstar
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Re: Saving for the crash

Post by surfstar » Fri Dec 22, 2017 1:03 am

People (so called "experts") were saying this back in 2013 - before a great year for the S&P 500.

Whenever people talk about stuff like this, remember and repeat:

" Nobody knows nuthin' "

Ari
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Re: Saving for the crash

Post by Ari » Fri Dec 22, 2017 3:06 am

Yup. Time in the market, not timing the market. Dry powder loses more money by not being in the market than it gains by buying low.
All in, all the time.

Archimedes
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Re: Saving for the crash

Post by Archimedes » Fri Dec 22, 2017 3:50 am

I don’t love bonds that much. I have a high stock allocation and also real estate direct investments. I have 10% of my net worth in super safe cash equivalent investments to weather any major market meltdown.

That is a comfortable asset mix for me and allows me to sleep well at night. The downside is some drag on my overall investment performance, but the idea of having years of living expenses as a cash cushion gives me comfort.

Explorer
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Re: Saving for the crash

Post by Explorer » Fri Dec 22, 2017 6:38 am

I have no idea about the timing of a market crash, but it is very highly likely that a market pullback will occur soon enough (don't know when or why).

So, let us say, your portfolio is $1M and 70% of it is invested in stocks - so $700,000 in stocks.

Let us now say the market experiences a 10% pullback - and you have a paper loss of about $70,000 in stocks. Would this worry you?

Investing is an emotional/behavioral thing. The more your money is exposed to the market (and the closer you are to retiring) the more you need to be careful.

When I was younger, I used to get on to the dare-devil roller coasters all day long - not so much now anymore. A friend of mine doesn't hesitate to bet a large amount in his poker games while I personally don't bet what I can't afford to lose.

So.. temper your behavior based on your overall situation.

All the best!

onourway
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Re: Saving for the crash

Post by onourway » Fri Dec 22, 2017 6:39 am

I suspect many of the people adopting this strategy will measure their 'success' by counting the gains they make from the time they buy to some point in the next boom cycle. They will completely forget to count the gains their cash missed out on while waiting.

livesoft
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Re: Saving for the crash

Post by livesoft » Fri Dec 22, 2017 6:53 am

There is really no reason to save cash for the next crash because one can invest in bond funds instead. I guess these folks are thinking they have to be 100% in stocks except when they are saving for the next crash. That's just not the way to make money through thick and thin.

The way to make money is to have an asset allocation comprised of both equities and fixed income all the time. When the crash comes, one takes their fixed income such as bond funds and rebalances into equities such as stock index funds. When there is no crash or while waiting for a crash, one can still do the rebalancing thing as bond funds do make more money than cash anyways and of course stock funds make money as well.

So money is always making money.
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bottlecap
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Re: Saving for the crash

Post by bottlecap » Fri Dec 22, 2017 6:55 am

I love it. It means the market still has plenty of legs.

When those people finally give up and get in, that's when it’s time to worry.

Think about it. How many people on the internet actually got rich with that strategy in the past? Very close to zero, I would say.

JT

magneto
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Re: Saving for the crash

Post by magneto » Fri Dec 22, 2017 6:56 am

Liquid portfolio approx at :-
25% Risk (=Stocks)
25% Defensives (=Bonds + Alt Fixed Income)
50% Cash (incl I-Bond type assets)
and continuing to sell on rising markets from the risk-side.

Quite content with the returns made over the last cycle.
Valuations on the risk-side IMHO pushing to within 6% to 8% of their historical ceilings.

For us three key themes to keep in mind :-
+ What is on offer today (not what might happen tomorrow!!!)
+ Small steps (I.E. gentle ongoing adjustments to portfolio, not major step changes)
+ Patience

The last is possibly the most important, and relevant today.
Have not a clue which way markets will head; just apportion guided by valuations through market cycles in a manner similar to Ben Graham's philosophy.

For those who avoid Variable Ratio, and strictly follow the Constant Ratio Formula, that is just fine too (less hard work) and always buying and selling in the appropriate direction.
Last edited by magneto on Fri Dec 22, 2017 7:04 am, edited 1 time in total.
'There is a tide in the affairs of men ...', Brutus (Market Timer)

minimalistmarc
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Re: Saving for the crash

Post by minimalistmarc » Fri Dec 22, 2017 7:02 am

Invariably, market timers waiting for a crash never get back in. The reason is that as a group they have very little tolerance of risk. If the market drops 20% they will wait for 30% then 40% and so on because they can’t psychologically bring themselves to pull the trigger and put their money in.

Valuethinker
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Re: Saving for the crash

Post by Valuethinker » Fri Dec 22, 2017 7:08 am

investmentjeff wrote:
Thu Dec 21, 2017 11:53 pm
I was on another forum mostly unrelated to investment, and a bunch of people were saying that they're setting aside a large amount of cash for the next big market crash (e.g., 2008). I think I know what folks will say about this plan (e.g., money not making money while you wait), but I'd love to hear your opinion on this strategy. Is anyone doing something similar or is it absolutely anti-Bogle?
No. But I have increased my bond weightings. I do think the market is ignoring rising geopolitical risks.

By quite a lot.

Cash is just dead money. In the long run the upward slope of the yield curve kills you. (BTW it is nearly flat now)

Say the gap between money market rates and short term bond yields is 2% on average, long run.

Say an average of 40% of your portfolio in bonds over your investing lifetime. 2% of 40% of your portfolio over 40 years is a lot of money.

Bank CDs are a reasonable alternative at some points, as they have been for Americans the last few years.

Valuethinker
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Re: Saving for the crash

Post by Valuethinker » Fri Dec 22, 2017 7:09 am

minimalistmarc wrote:
Fri Dec 22, 2017 7:02 am
Invariably, market timers waiting for a crash never get back in. The reason is that as a group they have very little tolerance of risk. If the market drops 20% they will wait for 30% then 40% and so on because they can’t psychologically bring themselves to pull the trigger and put their money in.
Having done this both on the bull market side (holding on too long, resetting my selling point) and the bear market side (waiting for things to get even worse) I can vouch for this aspect of human behaviour. We are "Predictably Irrational".

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market timer
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Re: Saving for the crash

Post by market timer » Fri Dec 22, 2017 7:25 am

I like holding cash right now. Short term rates are almost surely heading higher. Bonds and stocks are expensive. Let's check back in a year.

runner3081
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Re: Saving for the crash

Post by runner3081 » Fri Dec 22, 2017 9:44 am

investmentjeff wrote:
Thu Dec 21, 2017 11:53 pm
I was on another forum mostly unrelated to investment, and a bunch of people were saying that they're setting aside a large amount of cash for the next big market crash (e.g., 2008). I think I know what folks will say about this plan (e.g., money not making money while you wait), but I'd love to hear your opinion on this strategy. Is anyone doing something similar or is it absolutely anti-Bogle?
Since everyone is talking about bitcoin, are you buying that as well?

CoAndy
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Re: Saving for the crash

Post by CoAndy » Fri Dec 22, 2017 9:49 am

There are several people who posted about a year ago that they were "retreating to cash" due to instability. 20%+ gains later, when do they get back in? Hence the problem...when to get out and when to get in?

WhyNotUs
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Re: Saving for the crash

Post by WhyNotUs » Fri Dec 22, 2017 9:51 am

If one has plenty of retirements savings, is about to retire and concerned about a setback then they might put a couple years living expenses in a MM.
I own the next hot stock- VTSAX

Dottie57
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Re: Saving for the crash

Post by Dottie57 » Fri Dec 22, 2017 1:18 pm

PFInterest wrote:
Thu Dec 21, 2017 11:58 pm
It's just dumb. I will buy with new money, rebalance with old, harvest the losses and not create a drag on my portfolio.


Bingo

Dottie57
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Re: Saving for the crash

Post by Dottie57 » Fri Dec 22, 2017 1:22 pm

WhyNotUs wrote:
Fri Dec 22, 2017 9:51 am
If one has plenty of retirements savings, is about to retire and concerned about a setback then they might put a couple years living expenses in a MM.

This is me. 5 years expenses in cash. Retiring in March.

Engineer250
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Re: Saving for the crash

Post by Engineer250 » Fri Dec 22, 2017 2:05 pm

Next year I will probably be able to double the amount my household has been saving for retirement, and a bit more of a bump the year after. Therefore I know for a fact the crash won’t happen until after 2018. Or it will be a flash crash. Because if it happened sooner all these new contributions from me would come in at low prices and that’s not gonna happen. So don’t worry everyone, I’m thinking 2019 or probably 2020 for anything that isn’t just a flash crash.
Where the tides of fortune take us, no man can know.

Dandy
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Re: Saving for the crash

Post by Dandy » Fri Dec 22, 2017 2:38 pm

If you set your allocation at or near you risk tolerance then re balancing should adjust any "over exposure" to equities. I see no problem when equities are on a hot streak to maybe re balance a bit toward the lower end of your equity allocation range. I'm more into asset preservation than go for growth.

If you are in the accumulation stage you don't want to have too many assets "hiding out" waiting for a chance to pounce on low equity valuations. Again, re balancing when that happens will provide that opportunity.

CryingHawaiian
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Re: Saving for the crash

Post by CryingHawaiian » Fri Dec 22, 2017 2:49 pm

market timer wrote:
Fri Dec 22, 2017 7:25 am
I like holding cash right now. Short term rates are almost surely heading higher. Bonds and stocks are expensive. Let's check back in a year.
I loved reading your 'A different approach to asset allocation' post the other day and was glad to hear you're doing well after all of these years.

It's refreshing to have somebody on the forums consistently put out opposing viewpoints but I want to ask you a personal question if you don't mind answering:

Do your investment principles align at all with Bogleheads? It seems to me on the major point of picking an asset allocation and staying the course, you consistently seem to... well... time the market, market timer.

CULater
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Re: Saving for the crash

Post by CULater » Fri Dec 22, 2017 2:57 pm

I will tell you based on personal experience that even if you're right and the market crashes, you will never know when to deploy your cash hoard to get back in. When the market goes down by 10% or 15%, you'll think it is "too soon" to get back in. When it's down by 25% or 30%, you'll think it is surely going to go down even harder and you'll be scared to get in. When it's down by 50% you'll be paralyzed by panic that the world is about to end and it will seem absolutely crazy to throw safe cash and bonds into the abyss. There will never be a point at which you will "know" it's time to get back in. Way back I had a huge cash hoard and said that if the S&P hit 666 (the Devil's number) I would go "all in". Hey, guess what? It did hit 666 and I was hiding under the bed sucking my thumb. I never got in. Now the S&P is almost 2800 and I coulda been a Millionaire.

The best advice I ever heard was from Edward Thorpe. He said that you'll never know if the market is overvalued and, even if it is, when it might crash. So just sell down to your sleeping point and quit worrying about it. If I'd done that, I'd at least be a multi-thousand-aire by now because I would have left a few toes in.
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

sambb
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Re: Saving for the crash

Post by sambb » Fri Dec 22, 2017 3:22 pm

It is possible that the market could go down for decades. No one knows. Past performance doesn’t guarantee. Anything is possible. I choose to take the risk and stay in. Not everyone does.

delamer
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Re: Saving for the crash

Post by delamer » Fri Dec 22, 2017 4:56 pm

You go to cash with stocks at 100 and the market proceeds to go up to 120, a 20% increase. Then, finally, you get your long-awaited 15% correction. So post-crash, the market is at 102. That’s the math. And then stocks start to recover. So you would have been better off not going to cash in the first place.

A plausible scenario, right? But people assume when they go to cash that at some point stocks will fall below the level at which they withdrew, and it may not work out that way.

Not to mention the dividends you missed along the way.

james22
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Re: Saving for the crash

Post by james22 » Fri Dec 22, 2017 5:01 pm

market timer wrote:
Fri Dec 22, 2017 7:25 am
I like holding cash right now. Short term rates are almost surely heading higher. Bonds and stocks are expensive. Let's check back in a year.
Yep.
This whole episode is likely to end so badly that future children will learn about it in school and shake their heads in wonder at the rank stupidity of it all... Hussman

overthought
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Re: Saving for the crash

Post by overthought » Fri Dec 22, 2017 7:32 pm

I found this article quite insightful.

tl;dr: Cash is a pure drag because during good times it doesn't grow, and during bad times you can't reasonably keep enough cash around to truly "protect" yourself (in the sense of being able to live off the cash cushion... especially when things can easily go bad for a decade at a time).

DrGoogle2017
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Re: Saving for the crash

Post by DrGoogle2017 » Fri Dec 22, 2017 7:36 pm

What crash? I think bonds are more risky right now, I’m actually increasing my AA. We are a long term bull like the 80s. However, I tilt toward international, only lately. While since August, I titled toward US equities.

3funder
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Re: Saving for the crash

Post by 3funder » Fri Dec 22, 2017 7:40 pm

I'm not saving cash for the next crash; however, in my opinion, my wife and I have too much cash (at least in relation to what we need). Don't get me wrong--we max our pre-tax and post-tax retirement accounts, but I sometimes think we should invest 50% of our available cash (which is currently earning 1.3% in a Capital One 360 Money Market Account) in total market stock index funds via a taxable brokerage account at Vanguard.

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arcticpineapplecorp.
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Re: Saving for the crash

Post by arcticpineapplecorp. » Fri Dec 22, 2017 7:57 pm

I wonder if your friends on the other investing website have read the following Larry Swedroe article titled, "Better to Face Correction":

http://www.etf.com/sections/index-inves ... correction

If not, it's definitely worth a read. The most relevant part (but the whole article is great) is this:
The evidence is very clear that professional mutual fund managers cannot predict the stock market. For example, in his famous book “A Random Walk down Wall Street,” Burton Malkiel cited a Goldman Sachs study that examined mutual funds’ cash holdings for the period 1970 through 1989.

In their efforts to time the market, fund managers raise cash holdings when they believe the market will decline and lower cash holdings when they become bullish. The study found that, over the period it examined, mutual fund managers miscalled all nine major turning points.

Legendary investor Peter Lynch offered yet another example. He pointed out that an investor who followed a passive investment strategy and stayed fully invested in the S&P 500 over the 40-year period beginning in 1954 would have achieved an 11.4% rate of return.

If that investor missed just the best 10 months (2% of them), his return fell 27%, to 8.3%. If the investor missed the best 20 months (or 4% of them), his return dropped 54%, to 6.1%. Finally, if the investor missed the best 40 months (or just 8% of them), his return declined 76%, all the way to 2.7%.

In a September 1995 interview with Worth magazine, Lynch put it this way: “Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.”
source: http://www.etf.com/sections/index-inves ... correction
The takeaway is this: Even if you believe the probability of a correction is high, it’s far from certain. And when the correction doesn’t happen, the expected opportunity cost of having waited is much greater than the expected benefit.
source: http://www.etf.com/sections/index-inves ... nopaging=1
If those folks don't understand the above then they're not investing. They're speculating. Playing around with their money.

welcome to the forum by the way. I have a feeling you'll learn more at this forum then the other one. Hope to hear from you again.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

BogleMelon
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Re: Saving for the crash

Post by BogleMelon » Fri Dec 22, 2017 8:08 pm

investmentjeff wrote:
Thu Dec 21, 2017 11:53 pm
or is it absolutely anti-Bogle?
This should answer your question. Bogleheads® investment philosophy:
Never try to time the market
There is a large amount of research showing that typical mutual fund investors actually perform far worse than the mutual funds they invest in because they tend to buy after a fund has done well and tend to sell what they own when it has done poorly. This behavior of buy high, sell low is guaranteed to produce poor results. Instead, Bogleheads create a good plan and then stick with it, which consistently produces good outcomes over the long term.
https://www.bogleheads.org/wiki/Boglehe ... the_market
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

longinvest
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Re: Saving for the crash

Post by longinvest » Fri Dec 22, 2017 8:28 pm

BogleMelon wrote:
Fri Dec 22, 2017 8:08 pm
investmentjeff wrote:
Thu Dec 21, 2017 11:53 pm
or is it absolutely anti-Bogle?
This should answer your question. Bogleheads® investment philosophy:
Never try to time the market
There is a large amount of research showing that typical mutual fund investors actually perform far worse than the mutual funds they invest in because they tend to buy after a fund has done well and tend to sell what they own when it has done poorly. This behavior of buy high, sell low is guaranteed to produce poor results. Instead, Bogleheads create a good plan and then stick with it, which consistently produces good outcomes over the long term.
https://www.bogleheads.org/wiki/Boglehe ... the_market
Here's a nice video about it:
Last edited by longinvest on Fri Dec 22, 2017 9:37 pm, edited 1 time in total.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VLB/ZRR

thangngo
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Re: Saving for the crash

Post by thangngo » Fri Dec 22, 2017 8:32 pm

investmentjeff wrote:
Thu Dec 21, 2017 11:53 pm
I was on another forum mostly unrelated to investment, and a bunch of people were saying that they're setting aside a large amount of cash for the next big market crash (e.g., 2008). I think I know what folks will say about this plan (e.g., money not making money while you wait), but I'd love to hear your opinion on this strategy. Is anyone doing something similar or is it absolutely anti-Bogle?
They think that they're smart and can time the market. Many have failed. Some people attempted to set aside cash and time the market and I haven't seen anyone succeed. But hey it's better than people who spend it all.

The only sell high, buy low strategy that works: rebalancing.

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market timer
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Re: Saving for the crash

Post by market timer » Fri Dec 22, 2017 9:30 pm

CryingHawaiian wrote:
Fri Dec 22, 2017 2:49 pm
Do your investment principles align at all with Bogleheads? It seems to me on the major point of picking an asset allocation and staying the course, you consistently seem to... well... time the market, market timer.
If you take a snapshot at just about any moment of my life, I could tell a story about why my asset allocation is rational for that time. When I was younger, I was optimistic about my future and believed in spreading risk across time with leverage. As a result of the crash, I became more risk averse and learned the value of liquidity. Now that I'm nearing middle age with high and unstable income, I feel like I'm exposed enough to the economy, and would just like to make sure I don't ever have to work out of necessity again. If the economy continues roaring, I'm happy to continue building up my savings account. If we dip into recession and risk premiums rise, then I'll be in a position to buy assets cheaply, even if out of work.

Not sure if this is market timing so much as circumstances and personality evolving.

KlangFool
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Re: Saving for the crash

Post by KlangFool » Fri Dec 22, 2017 9:39 pm

investmentjeff wrote:
Thu Dec 21, 2017 11:53 pm
I was on another forum mostly unrelated to investment, and a bunch of people were saying that they're setting aside a large amount of cash for the next big market crash (e.g., 2008). I think I know what folks will say about this plan (e.g., money not making money while you wait), but I'd love to hear your opinion on this strategy. Is anyone doing something similar or is it absolutely anti-Bogle?
investmentjeff,

My investment portfolio is designed to handle a market crash plus unemployment lasting 5 years. How about you?

KlangFool

hoops777
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Re: Saving for the crash

Post by hoops777 » Fri Dec 22, 2017 9:55 pm

CULater wrote:
Fri Dec 22, 2017 2:57 pm
I will tell you based on personal experience that even if you're right and the market crashes, you will never know when to deploy your cash hoard to get back in. When the market goes down by 10% or 15%, you'll think it is "too soon" to get back in. When it's down by 25% or 30%, you'll think it is surely going to go down even harder and you'll be scared to get in. When it's down by 50% you'll be paralyzed by panic that the world is about to end and it will seem absolutely crazy to throw safe cash and bonds into the abyss. There will never be a point at which you will "know" it's time to get back in. Way back I had a huge cash hoard and said that if the S&P hit 666 (the Devil's number) I would go "all in". Hey, guess what? It did hit 666 and I was hiding under the bed sucking my thumb. I never got in. Now the S&P is almost 2800 and I coulda been a Millionaire.

The best advice I ever heard was from Edward Thorpe. He said that you'll never know if the market is overvalued and, even if it is, when it might crash. So just sell down to your sleeping point and quit worrying about it. If I'd done that, I'd at least be a multi-thousand-aire by now because I would have left a few toes in.
This is so true.
K.I.S.S........so easy to say so difficult to do.

bigwood177
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Re: Saving for the crash

Post by bigwood177 » Sat Dec 23, 2017 7:14 am

investmentjeff wrote:
Thu Dec 21, 2017 11:53 pm
I was on another forum mostly unrelated to investment, and a bunch of people were saying that they're setting aside a large amount of cash for the next big market crash (e.g., 2008). I think I know what folks will say about this plan (e.g., money not making money while you wait), but I'd love to hear your opinion on this strategy. Is anyone doing something similar or is it absolutely anti-Bogle?
Kind of depends on when you need the money and how big your balance is.
When retirement was more than 10 years out I didn't worry about market ups and downs.
With retirement a couple of years away I've done exactly what you're asking about - I converted some equities to cash when the Dow hit 22,000.
I've got enough cash to ride out 6 bad years.
But I also have an adequate amount left in the market.

Explorer
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Re: Saving for the crash

Post by Explorer » Sat Dec 23, 2017 7:40 am

bigwood177 wrote:
Sat Dec 23, 2017 7:14 am
investmentjeff wrote:
Thu Dec 21, 2017 11:53 pm
I was on another forum mostly unrelated to investment, and a bunch of people were saying that they're setting aside a large amount of cash for the next big market crash (e.g., 2008). I think I know what folks will say about this plan (e.g., money not making money while you wait), but I'd love to hear your opinion on this strategy. Is anyone doing something similar or is it absolutely anti-Bogle?
Kind of depends on when you need the money and how big your balance is.
When retirement was more than 10 years out I didn't worry about market ups and downs.
With retirement a couple of years away I've done exactly what you're asking about - I converted some equities to cash when the Dow hit 22,000.
I've got enough cash to ride out 6 bad years.
But I also have an adequate amount left in the market.
Bigwood177 - You are doing the right thing that works for you. As I said earlier, investing is an emotional thing. It is important to keep your emotional quotient healthy.

Looks like you are on target there !

digit8
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Re: Saving for the crash

Post by digit8 » Sat Dec 23, 2017 8:10 am

investmentjeff wrote:
Thu Dec 21, 2017 11:53 pm
I was on another forum mostly unrelated to investment, and a bunch of people were saying that they're setting aside a large amount of cash for the next big market crash (e.g., 2008). I think I know what folks will say about this plan (e.g., money not making money while you wait), but I'd love to hear your opinion on this strategy. Is anyone doing something similar or is it absolutely anti-Bogle?
I've got a small taxable portfolio of a money market fund and the S&P500. I put something in the money market each month, could be a little could be a lot, and on no particular schedule move it to the equity as a backup emergency fund/early retirement pipe dream. But I don't have any vision of catching the best returns. Just a gut instinct of when "the MMF is really at more than what I want earning so little" meets "equities have gone down a bit".
"You can't latte yourself to bankruptcy. The bladder won't allow it." | -Katherine Porter

Call_Me_Op
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Re: Saving for the crash

Post by Call_Me_Op » Sat Dec 23, 2017 8:14 am

investmentjeff wrote:
Thu Dec 21, 2017 11:53 pm
I was on another forum mostly unrelated to investment, and a bunch of people were saying that they're setting aside a large amount of cash for the next big market crash (e.g., 2008). I think I know what folks will say about this plan (e.g., money not making money while you wait), but I'd love to hear your opinion on this strategy. Is anyone doing something similar or is it absolutely anti-Bogle?
The stock market has a way of fooling most of the people most of the time. I would not be surprised if that big crash everyone is expecting doesn't happen. Instead, we may have a number of years of lackluster returns with the occasional negative year, but no crash.

I do not believe in trying to anticipate market moves. instead, I pick an allocation with which I am comfortable based upon market history, and stick with it.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

Money Market
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Re: Saving for the crash

Post by Money Market » Sat Dec 23, 2017 10:52 am

KlangFool wrote:
Fri Dec 22, 2017 9:39 pm
investmentjeff,

My investment portfolio is designed to handle a market crash plus unemployment lasting 5 years. How about you?

KlangFool
If you return to Malaysia during the period, it'll last 20 years!

KlangFool
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Re: Saving for the crash

Post by KlangFool » Sat Dec 23, 2017 11:23 am

Money Market wrote:
Sat Dec 23, 2017 10:52 am
KlangFool wrote:
Fri Dec 22, 2017 9:39 pm
investmentjeff,

My investment portfolio is designed to handle a market crash plus unemployment lasting 5 years. How about you?

KlangFool
If you return to Malaysia during the period, it'll last 20 years!
Money Market,

I have 2 kids in college that cost me 50K to 60K per year in total. This is independent of where I live. So, my 5 years account for that.

KlangFool

msj16
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Re: Saving for the crash

Post by msj16 » Sat Dec 23, 2017 11:26 am

The question I have though is whether anyone has a slight range for asset allocation (so increasing bond holdings slightly when the market appears to be potentially ready for a dip. I get that this is still likely a drag on investing gains. I assume based on this thread that the asset allocation should always remain steady and one just rebalances based on it when there is a dip.
Last edited by msj16 on Sat Dec 23, 2017 12:38 pm, edited 1 time in total.

bikechuck
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Re: Saving for the crash

Post by bikechuck » Sat Dec 23, 2017 12:11 pm

PFInterest wrote:
Thu Dec 21, 2017 11:58 pm
It's just dumb. I will buy with new money, rebalance with old, harvest the losses and not create a drag on my portfolio.
Your answer that "it's just dumb" seemed harsh to me.

Your strategy works for people who are still working. However, retirees in the de-accumulation phase do not have "new money". I suppose you could consider money in CDs and Bonds a source of "new money" that could be used to purchase equities at favorable prices should there be a crash. However the strategy that the original poster asked about might be necessary in order to have some funds to rebalance in that situation.

A "dumb" approach for one might be a "smart" approach for another person who is not fully comfortable with their current asset allocation.

Whakamole
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Re: Saving for the crash

Post by Whakamole » Sat Dec 23, 2017 12:15 pm

PFInterest wrote:
Thu Dec 21, 2017 11:58 pm
It's just dumb. I will buy with new money, rebalance with old, harvest the losses and not create a drag on my portfolio.
This also assumes you'll have new money. I recall unemployment rates going up a tad during the last recession.

bmelikia
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Re: Saving for the crash

Post by bmelikia » Sat Dec 23, 2017 12:31 pm

I'm inclined to think that people who talk of "saving for the crash" are people who were not steadily putting money into the market over the past 1-9 years - if a person had done so - there would have been no need to "save for the crash" because you would already have invested dollars at much lower prices than today's market.

There's no guarantee that the market will continue to march forward - but there's also no guarantee that we'll ever go lower than we are today - the future is always unknown (how insightful right?)

I'm just going to continue to contribute at a steady rate and call it good.
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

spammagnet
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Re: Saving for the crash

Post by spammagnet » Sat Dec 23, 2017 12:37 pm

Whakamole wrote:
Sat Dec 23, 2017 12:15 pm
PFInterest wrote:
Thu Dec 21, 2017 11:58 pm
It's just dumb. I will buy with new money, rebalance with old, harvest the losses and not create a drag on my portfolio.
This also assumes you'll have new money. I recall unemployment rates going up a tad during the last recession.
Isn't that where "rebalance with old" comes into play? That rebalancing may done by withdrawals if you need to live off your savings. Sell the high side to get cash. Move some to the low side if rebalancing requires more than you need for spending.
Last edited by spammagnet on Sat Dec 23, 2017 1:30 pm, edited 2 times in total.

Whakamole
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Re: Saving for the crash

Post by Whakamole » Sat Dec 23, 2017 12:49 pm

spammagnet wrote:
Sat Dec 23, 2017 12:37 pm
Whakamole wrote:
Sat Dec 23, 2017 12:15 pm
PFInterest wrote:
Thu Dec 21, 2017 11:58 pm
It's just dumb. I will buy with new money, rebalance with old, harvest the losses and not create a drag on my portfolio.
This also assumes you'll have new money. I recall unemployment rates going up a tad during the last recession.
Isn't that where "rebalance with old" comes into play? That rebalancing may done by withdrawals if you need to live off your savings. Sell the high side to get cash. Move some to the losses side of rebalancing requires more than you need for spending.
If you are unemployed you may have uses for that money besides rebalancing, like paying the mortgage. Yes everyone should have an emergency fund, but when I read negative comments about "dry powder", I hope people aren't investing their EF in the stock market or bitcoin or whatever the hot asset of the day is.

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Re: Saving for the crash

Post by arcticpineapplecorp. » Sat Dec 23, 2017 2:10 pm

i must have misread your OP. You said you were on a forum "mostly unrelated to investment"

if it was mostly unrelated to investment, then why would you (or anyone for that matter) take investment advice? That's like going to a blog about cars and getting advice on how to raise your child.

Anyway, you might not have seen this but you might want to see the problem with market timing:

https://www.prudential.com/personal/ins ... ends-game/

Play around and see what kind of results you get trying to time the market. Eventually, you'll see that it's time in the market, not timing the market that matters.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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