Saving for the crash

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mickeyd
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Re: Saving for the crash

Post by mickeyd » Sat Dec 23, 2017 2:24 pm

a bunch of people were saying that they're setting aside a large amount of cash for the next big market crash


Who are these people?

Have them report to me immediately!
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

MotoTrojan
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Re: Saving for the crash

Post by MotoTrojan » Sat Dec 23, 2017 9:14 pm

Purely behavioral finance. I bet many of the people who think they’ve successfully done this in the past didn’t realize how much they actually lost on modest growth and dividends.

Feels better to buy in after a 1-day 25% crash rather than before a 3-year 50% increase followed by a 25% crash.

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Doom&Gloom
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Re: Saving for the crash

Post by Doom&Gloom » Sat Dec 23, 2017 9:30 pm

MotoTrojan wrote:
Sat Dec 23, 2017 9:14 pm
Purely behavioral finance. I bet many of the people who think they’ve successfully done this in the past didn’t realize how much they actually lost on modest growth and dividends.

Feels better to buy in after a 1-day 25% crash rather than before a 3-year 50% increase followed by a 25% crash.
Weird, ain't it?

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EyeYield
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Re: Saving for the crash

Post by EyeYield » Sat Dec 23, 2017 10:06 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?
It seems that you were on another forum mostly related to financial illiteracy and now you've found a bunch of people who are investing for the long term using the proven Boglehead method.

Congratulations to you, but not so much for that other bunch of people.

That's my opinion on that strategy.
"The stock market is a giant distraction from the business of investing." - Jack Bogle

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market timer
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Re: Saving for the crash

Post by market timer » Sun Dec 24, 2017 1:49 am

One of the economics metrics I like to check periodically is household net worth to disposable income. Currently, this metric sits at an all-time high of 673%. While this doesn't mean a crash is right around the corner, it suggests some frothiness in asset prices, and perhaps signals that now is a prudent time to increase cash allocations.

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Another metric worth keeping an eye on is the size of the Federal Reserve balance sheet. The Fed has just started to reduce the size of the balance sheet this quarter. This will make cash a bit more scarce than it has been in recent years.

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Lieutenant.Columbo
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Re: Saving for the crash

Post by Lieutenant.Columbo » Sun Dec 24, 2017 5:36 am

DrGoogle2017 wrote:
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...
DrGoogle2017 wrote:
Fri Dec 22, 2017 7:36 pm
...However, I tilt toward international, only lately...
DrGoogle2017 wrote:
Fri Dec 22, 2017 7:36 pm
...While since August, I titled toward US equities.
are these examples of "chasing returns" strategy?
Lt. Columbo: Well, what do you know. Here I am talking with some of the smartest people in the world, and I didn't even notice!

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DaftInvestor
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Re: Saving for the crash

Post by DaftInvestor » Sun Dec 24, 2017 7:41 am

"Saving for the crash".
Can you define "the crash"? When will it occur? How deep will it go? How long will it last? How will you know when it's over?
How can you save for something you can't define?
I have a friend who has been waiting for the crash for three years - he is finally thinking about jumping back in after losing three years of gains.

BogleBoogie
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Re: Saving for the crash

Post by BogleBoogie » Sun Dec 24, 2017 7:49 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.
Meanwhile the market has driven up over time that 20-40% while they are on the sidelines waiting!

DrGoogle2017
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Re: Saving for the crash

Post by DrGoogle2017 » Sun Dec 24, 2017 11:02 am

Lieutenant.Columbo wrote:
Sun Dec 24, 2017 5:36 am
DrGoogle2017 wrote:
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...
DrGoogle2017 wrote:
Fri Dec 22, 2017 7:36 pm
...However, I tilt toward international, only lately...
DrGoogle2017 wrote:
Fri Dec 22, 2017 7:36 pm
...While since August, I titled toward US equities.
are these examples of "chasing returns" strategy?
Most likely.

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