Hitting The Sell Button

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
bgf
Posts: 1555
Joined: Fri Nov 10, 2017 9:35 am

Re: Hitting The Sell Button

Post by bgf »

Da5id wrote: Thu Jan 04, 2018 11:06 am
UpperNwGuy wrote: Thu Jan 04, 2018 10:45 am
bgf wrote: Thu Jan 04, 2018 9:32 am length of the equity bull market and CAPE ratio should be forbidden terms on this board.
+1
Why? Very little is "forbidden" here in discussing investing. CAPE is somewhat useful for discussing future dispersion of returns, but the huge error bars obviously make it poor for market timing or many other purposes to which it may be applied. And length of the bull market, while not very useful, may be helpful in the context of reminding people that stocks don't always go up and that they should be prepared for the inevitable correction. Of course, you can have corrections 2 years into a bull market or 8 years.
lol, apart from that fact that it is diametrically opposed to the fundamental boglehead investing strategy, i think you just answered your own question!

not trying to be flippant, there are certainly assumptions embedded in the boglehead strategy, and so the strategy can be critiqued by attacking those assumptions. its just that CAPE and length of bull/bear market aren't valid critiques. if anything, id contend that their discussion causes more harm than good by confusing people as to their applicability within our investment strategy.

the former is some pseudo-valuation gauge and the latter is no better than the gamblers fallacy.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
headedwest
Posts: 37
Joined: Wed Dec 28, 2016 1:05 pm

Re: Hitting The Sell Button

Post by headedwest »

I'm 55 and planning to retire when I'm 62-65. As the bull market raged on, I found myself reluctant to add new money to my taxable account, so my solution was to change my overall allocation to reduce stock exposure. Last year I shifted my allocation to reduce stock exposure from 70% to 55%, while maintaining US vs. international allocation of 60/40 of equities. I don't own bonds, but have 35% in TIAA Traditional and 10% in TREA, which has recently been more bond-like (open to discussion, I know). Now I keep very little cash on hand (as a tenured professor, I feel fairly secure in my job), and I'm very comfortable investing new funds because I've left plenty of room to rebalance.
GoldenFinch
Posts: 2353
Joined: Mon Nov 10, 2014 11:34 pm

Re: Hitting The Sell Button

Post by GoldenFinch »

magneto wrote: Thu Jan 04, 2018 10:33 am What a relief that no 100%Stockers have chipped in. :o

But hang on a minute :!:
If the 100%Stockers are unusually absent, and posters mostly seem to be tending defensive; what might that portend :?:

But at least most here seem to have the grounding of an Investment Plan. :)
They’re not chipping in because they never hit the sell button.
monsterid
Posts: 132
Joined: Sat Dec 31, 2016 7:10 pm

Re: Hitting The Sell Button

Post by monsterid »

nedsaid wrote: Wed Jan 03, 2018 11:47 pm
monsterid wrote: Wed Jan 03, 2018 11:40 pm Quality problems to have =) Think of these good times during the next recession.
A big reason I am doing this is the regret I experienced during the 2008-2009 bear market. I let my winners run and run and run without taking anything off the table. Rebalancing was hardly in my vocabulary. I told myself that I would rebalance during the next bull market.

The thing is, I should be really happy and I am. It is just that I am a stock guy and mostly optimistic, it pains me a bit to keep selling stock to buy bonds that yield 2-3%. Pretty much, as the portfolio grows so do the actual dollar gains and losses as the market fluctuates. I want to control risk and volatility. I also realize that retirement is coming closer and closer.
Yeah but you'll be rebalancing back when stocks are "on sale" right? =) Sounds to be like you are selling high buying low...

Having said that I haven't rebalanced lol.
Silk McCue
Posts: 4989
Joined: Thu Feb 25, 2016 7:11 pm

Re: Hitting The Sell Button

Post by Silk McCue »

deltaneutral83 wrote: Thu Jan 04, 2018 10:33 am I've come to realize the only time people don't have regret over their AA is when the market consolidates. The 60/40's and below are regretful of missing this run up while the 75/25's and above are just saying whew... and vice versa in 2008.
No committed boglehead that has chosen 60/40 as their appropriate allocation is disappointed that they didn't get a higher return by investing contrary to their plan. BTW please look at this analysis below of actual performance this past year.

Vanguard LifeStrategy Moderate Growth Fund (VSMGX) 60/40 - 2017 Annual Performance %15.04
Vanguard LifeStrategy Growth Fund (VASGX) 80/20 - 2017 Annual Performance %19.21
Extrapolated 75/25 - 2017 Annual Performance - %18.26

Cheers
Da5id
Posts: 2387
Joined: Fri Feb 26, 2016 8:20 am

Re: Hitting The Sell Button

Post by Da5id »

bgf wrote: Thu Jan 04, 2018 11:41 am
da5id wrote: Why? Very little is "forbidden" here in discussing investing. CAPE is somewhat useful for discussing future dispersion of returns, but the huge error bars obviously make it poor for market timing or many other purposes to which it may be applied. And length of the bull market, while not very useful, may be helpful in the context of reminding people that stocks don't always go up and that they should be prepared for the inevitable correction. Of course, you can have corrections 2 years into a bull market or 8 years.
lol, apart from that fact that it is diametrically opposed to the fundamental boglehead investing strategy, i think you just answered your own question!

not trying to be flippant, there are certainly assumptions embedded in the boglehead strategy, and so the strategy can be critiqued by attacking those assumptions. its just that CAPE and length of bull/bear market aren't valid critiques. if anything, id contend that their discussion causes more harm than good by confusing people as to their applicability within our investment strategy.

the former is some pseudo-valuation gauge and the latter is no better than the gamblers fallacy.
What you said mostly agrees with what I said. I just wouldn't want to see the mods ban discussions of CAPE and of how long the bull market has been running, which is what I was responding to.

My only personal use of CAPE is that I've targeted a lower initial SWR in part because current CAPE suggests lower returns over the next 10 years. Vanguards take on usefulness of CAPE (from 2012) is here: https://personal.vanguard.com/pdf/s338.pdf. I agree CAPE isn't awesome, but really, banning mention of it?!?
michaeljc70
Posts: 7470
Joined: Thu Oct 15, 2015 3:53 pm

Re: Hitting The Sell Button

Post by michaeljc70 »

A lot of these posts sound like market timing disguised as rebalancing. Is this rebalancing to your pre-determined AA or a new AA because the market is "frothy" in your view?

Also, you can rebalance once a year or quarterly so you won't be having to sell all the time. Or increase the threshold of bands if you use that method.

Though the market has run up, I am sticking to my plan. Bonds don't strike me as the greatest investment currently either.
Last edited by michaeljc70 on Thu Jan 04, 2018 1:35 pm, edited 1 time in total.
asif408
Posts: 2269
Joined: Sun Mar 02, 2014 8:34 am
Location: Florida

Re: Hitting The Sell Button

Post by asif408 »

Da5id wrote: Thu Jan 04, 2018 12:08 pmI agree CAPE isn't awesome, but really, banning mention of it?!?
Zealotry and fervor are not limited to sports and religion, it includes Bogleheads as well.
NibbanaBanana
Posts: 247
Joined: Sun Jan 22, 2017 10:34 pm

Re: Hitting The Sell Button

Post by NibbanaBanana »

"And this too shall come to pass."
mortfree
Posts: 2516
Joined: Mon Sep 12, 2016 7:06 pm

Re: Hitting The Sell Button

Post by mortfree »

I bought more VTI today and have my Roth purchase scheduled for next Tuesday.

That is why things are running up more.

Wait till Wednesday when it drops.

You’re welcome. :oops:
Da5id
Posts: 2387
Joined: Fri Feb 26, 2016 8:20 am

Re: Hitting The Sell Button

Post by Da5id »

mortfree wrote: Thu Jan 04, 2018 1:48 pm I bought more VTI today and have my Roth purchase scheduled for next Tuesday.

That is why things are running up more.

Wait till Wednesday when it drops.
My 401k purchases (which are front loaded to finish maxing out by April) start next week. But it is 100% bonds, as I'm using that to push me back towards target AA as I'm a currently 1.5% over in the stock direction. Not enough to make me sell to rebalance, but new contributions are going to push me in the right direction, as is my Roth purchase this week.
ge1
Posts: 576
Joined: Sat Apr 28, 2012 8:15 pm

Re: Hitting The Sell Button

Post by ge1 »

I have a very simplistic view of this raging bull market. My ultimate goal is to hit a $ number, not to win the "who-had-the-highest-YTD-return" competition. This 8 year bull market has basically front loaded a lot of returns, which in a normal environment would have taken a lot longer to achieve. So for me it's only prudent to take (a lot of) money off the table, put them in cash or bonds and be grateful for the money earned.

The dangerous thing would be to count on these outsized returns going forward and maybe even changing spending habits etc because (on paper) we are all so much richer now.
User avatar
TomatoTomahto
Posts: 11907
Joined: Mon Apr 11, 2011 1:48 pm

Re: Hitting The Sell Button

Post by TomatoTomahto »

I’m so happy that I switched to a LMP type of plan. I don’t buy bonds any more (I have tax-deferred accounts full of them). I don’t sell anything. I invest new money in PRIMECAP, TSM, and TISM. Wow, that’s easy; thinking isn’t my long suit 😉. I will come back and ask a lot of questions after we no longer have cash coming in, but that’s in the future.

Rebalancing bands? I don’t need no stinking rebalancing bands.

🍅🍅
I get the FI part but not the RE part of FIRE.
Da5id
Posts: 2387
Joined: Fri Feb 26, 2016 8:20 am

Re: Hitting The Sell Button

Post by Da5id »

ge1 wrote: Thu Jan 04, 2018 2:05 pm I have a very simplistic view of this raging bull market. My ultimate goal is to hit a $ number, not to win the "who-had-the-highest-YTD-return" competition. This 8 year bull market has basically front loaded a lot of returns, which in a normal environment would have taken a lot longer to achieve. So for me it's only prudent to take (a lot of) money off the table, put them in cash or bonds and be grateful for the money earned.

The dangerous thing would be to count on these outsized returns going forward and maybe even changing spending habits etc because (on paper) we are all so much richer now.
I think it is even more dangerous to "take money off the table" if it is not a permanent move. Ability to market time is non-existent, IMHO of course. If you have enough that you want to change your your asset allocation for the long haul, great. I did that last year myself. If you are switching stocks to bonds to balance to your target AA, also good. But if you are "keeping your powder dry" waiting for "a buying opportunity", good luck with that.
User avatar
triceratop
Posts: 5838
Joined: Tue Aug 04, 2015 8:20 pm
Location: la la land

Re: Hitting The Sell Button

Post by triceratop »

minesweep wrote: Thu Jan 04, 2018 9:47 am
nedsaid wrote: Wed Jan 03, 2018 11:24 pm Despite crying in my root beer all weekend over a portfolio return of "only" 15.01%, I can't help but notice the tremendous power of this bull market. Since July 2013, I have been mildly rebalancing from stocks to bonds. It seems like all I have been doing has been hitting the "sell" button, selling stocks in wave after wave as the market advances. Sort of like the hedge growing faster than you would have ever dreamed possible and it seems like you have to trim it back almost monthly. A nice problem to have but if I was 35 years old, I would simply be enjoying the ride. At 58, it seems to be like that laurel hedge growing out of control, a big chore to maintain. This is because I am concerned about controlling my risk as I get older. Ah to be young again!

How are other older investors like me reacting to this? Am I alone in how I feel about this?
I'm not tired of winning.
Including the "winning" last year when international stocks beat U.S. stocks? :D
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
Da5id
Posts: 2387
Joined: Fri Feb 26, 2016 8:20 am

Re: Hitting The Sell Button

Post by Da5id »

triceratop wrote: Thu Jan 04, 2018 2:36 pm Including the "winning" last year when international stocks beat U.S. stocks? :D
Allow me be the first to say it:

Bogle was Wrong! :)
ge1
Posts: 576
Joined: Sat Apr 28, 2012 8:15 pm

Re: Hitting The Sell Button

Post by ge1 »

Da5id wrote: Thu Jan 04, 2018 2:29 pm
ge1 wrote: Thu Jan 04, 2018 2:05 pm I have a very simplistic view of this raging bull market. My ultimate goal is to hit a $ number, not to win the "who-had-the-highest-YTD-return" competition. This 8 year bull market has basically front loaded a lot of returns, which in a normal environment would have taken a lot longer to achieve. So for me it's only prudent to take (a lot of) money off the table, put them in cash or bonds and be grateful for the money earned.

The dangerous thing would be to count on these outsized returns going forward and maybe even changing spending habits etc because (on paper) we are all so much richer now.
I think it is even more dangerous to "take money off the table" if it is not a permanent move. Ability to market time is non-existent, IMHO of course. If you have enough that you want to change your your asset allocation for the long haul, great. I did that last year myself. If you are switching stocks to bonds to balance to your target AA, also good. But if you are "keeping your powder dry" waiting for "a buying opportunity", good luck with that.
Agree, I was referring to a permanent move.
Buddtholomew
Posts: 1012
Joined: Thu Mar 01, 2007 3:29 pm

Re: Hitting The Sell Button

Post by Buddtholomew »

Da5id wrote: Thu Jan 04, 2018 2:39 pm
triceratop wrote: Thu Jan 04, 2018 2:36 pm Including the "winning" last year when international stocks beat U.S. stocks? :D
Allow me be the first to say it:

Bogle was Wrong! :)
Let me preface by saying I have 40% in International equities with 75% in VWILX (VG Growth) which was up 42% last year.
Bogle was not wrong as the US S&P increased 22% over that time frame with the USD falling > 15%.
Over a longer time frame, US has outpaced INT and also vice-versa.
I don't agree with the logic to only invest in your home country, but one year of returns does not prove anything about Mr. Bogle's stance.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
Da5id
Posts: 2387
Joined: Fri Feb 26, 2016 8:20 am

Re: Hitting The Sell Button

Post by Da5id »

Buddtholomew wrote: Thu Jan 04, 2018 3:11 pm
Da5id wrote: Thu Jan 04, 2018 2:39 pm
triceratop wrote: Thu Jan 04, 2018 2:36 pm Including the "winning" last year when international stocks beat U.S. stocks? :D
Allow me be the first to say it:

Bogle was Wrong! :)
Let me preface by saying I have 40% in International equities with 75% in VWILX (VG Growth) which was up 42% last year.
Bogle was not wrong as the US S&P increased 22% over that time frame with the USD falling > 15%.
Over a longer time frame, US has outpaced INT and also vice-versa.
I don't agree with the logic to only invest in your home country, but one year of returns does not prove anything about Mr. Bogle's stance.
I have 33% int'l myself. Note the smiley face. Just my response to last years "Bogle was right" thread. There is a fair bit of recency bias in the forum. When US was outpacing Int'l there were many "Bogle/Buffett say no int'l needed/wanted (or max of 20% if you must in Bogle's case)". If Int'l wins for the next few years (who knows it might or might now), that will probably fade away some.
Nowizard
Posts: 3211
Joined: Tue Oct 23, 2007 5:33 pm

Re: Hitting The Sell Button

Post by Nowizard »

I suspect that the degree to which reselling/rebalancing is occurring is also related to the portfolio size of the individual and whether it is sustaining at a principal + inflation level or reflecting a reduced principal balance over time after withdrawals. Those who are in the latter group may be more prone to let it ride unless they are believers in not playing any longer once the game has been won.

Tim
marklar13
Posts: 123
Joined: Wed Jul 08, 2015 11:47 am

Re: Hitting The Sell Button

Post by marklar13 »

nedsaid wrote: Wed Jan 03, 2018 11:24 pm It seems like all I have been doing has been hitting the "sell" button, selling stocks in wave after wave as the market advances.
Are you using really tight re-balancing bands, or maybe this is just a little hyperbole? My math could be wrong, but it takes a really sizable run-up to trigger a 5% re-balancing band. If stocks return 20% and bonds return 0%, then this would cause your 60/40 allocation to shift about 4.3% or 80/20 allocation to shift about 2.3%.

It has been a long run-up, so I can see how this could cause some bands to be hit over time... but for most people using a ~5% band, wouldn't this really only trigger a re-balance once every few years (depending on how you actually rebalance)? This also doesn't take into account new contributions. I'm somewhere between 80/20 and 75/25, using a 5% band, and within the last few years all of my re-balancing has been taken care of by new contributions (no sell button unless I need to shift things between accounts).
snarlyjack
Posts: 780
Joined: Fri Aug 28, 2015 12:44 pm
Location: Montana

Re: Hitting The Sell Button

Post by snarlyjack »

I' am one of those 100% stock investors. Over 25,000 on the Dow today.

However, I' am so young (23 years old) that I just can't see going
into bonds at all at my age. I DCA (dollar cost average) every
payday. Just letting the whole portfolio "float" in the market.
I have years to go before retirement so I' am not worried. Whatever
happens, happens...
Mr.BB
Posts: 1529
Joined: Sun May 08, 2016 10:10 am

Re: Hitting The Sell Button

Post by Mr.BB »

I've been running around a 70/30 portfolio the last couple years enjoying very nice returns. I do think this bull market has a little more to run( just personal feeling) with that in mind we decided to move to a 78/22 for the year. We'll look at where we're at the end of the year, and adjust accordingly. It's not a big difference but every little bit helps if it goes in the right direction; a little bit like expense ratios.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."
User avatar
triceratop
Posts: 5838
Joined: Tue Aug 04, 2015 8:20 pm
Location: la la land

Re: Hitting The Sell Button

Post by triceratop »

Buddtholomew wrote: Thu Jan 04, 2018 3:11 pm
Da5id wrote: Thu Jan 04, 2018 2:39 pm
triceratop wrote: Thu Jan 04, 2018 2:36 pm Including the "winning" last year when international stocks beat U.S. stocks? :D
Allow me be the first to say it:

Bogle was Wrong! :)
Let me preface by saying I have 40% in International equities with 75% in VWILX (VG Growth) which was up 42% last year.
Bogle was not wrong as the US S&P increased 22% over that time frame with the USD falling > 15%.
Over a longer time frame, US has outpaced INT and also vice-versa.
I don't agree with the logic to only invest in your home country, but one year of returns does not prove anything about Mr. Bogle's stance.
There's a famous thread which uses international returns since a Bogle prediction to argue against diversification and for home bias.

Anyway, I don't see why currency is correctly categorized as a risk for international equities yet when the exchange rate boosts USD investor returns we have to currency-adjust. Fact is, international stocks had depressed returns in recent years also due to currency fluctuations.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
honduranhurricane
Posts: 167
Joined: Tue Oct 18, 2016 10:18 pm
Location: boston, ma

Re: Hitting The Sell Button

Post by honduranhurricane »

I have a 70/30 (stock / bond) AA. Not quite to upper re-allocation band yet, new contributions helping there. But if I do cross the upper band I have been considering revising my 70/30 to 65/35 or 60/40. Crossed 50 last summer, getting a bit more conservative as I age.
linenfort
Posts: 2241
Joined: Sat Sep 22, 2007 9:22 am
Location: #96151D

Re: Hitting The Sell Button

Post by linenfort »

I’d prefer cheap stocks, but I’m enjoying rebalancing.
I also have new laurel in the backyard. I’ll let you know how the trimming goes.
User avatar
Leif
Posts: 3148
Joined: Wed Sep 19, 2007 4:15 pm

Re: Hitting The Sell Button

Post by Leif »

jebmke wrote: Thu Jan 04, 2018 9:20 am I am out of carryover losses and have now reached the end of my 10-year "window of risk" following ER at 55. My plan is to not re-balance any more on the upside and allow my equity allocation to drift upward if the market continues to go up.
Interesting. I'm doing the exact opposite. I'll take profits if my equity goes above my inflation adjusted target. I will allow my equity allocation to drift downward if (when) the market drops. I still have some carryover losses from 2009. I was a very aggressive harvester at that time.
BigJohn
Posts: 1951
Joined: Wed Apr 02, 2014 11:27 pm

Re: Hitting The Sell Button

Post by BigJohn »

I’m 61 and have been retired for about 3 years. I did my annual rebalancing earlier this week and based on the kind of year it’s been that required selling a fairly large chunk of TSM and TISM to IT bond fund. Given the size, my initial reaction was to potentially moderate the amount. However, after considering the importance of managing my portfolio risk early in retirement, I went ahead and rebalanced back to my target AA. The market has been up since then but I can honestly say I have no regrets since at this point the SWAN factor of my portfolio is more important than some potential lost incremental return.
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
User avatar
CollegePrudens
Posts: 206
Joined: Mon Oct 16, 2017 10:43 pm
Location: SF Bay Area

Re: Hitting The Sell Button

Post by CollegePrudens »

I am wrestling with a version of this problem.

I have enough funds to pay for college for my two kids at in-state schools (at today's prices) thank to the bull market. The problem is that college is 11/13 years away and that the kids are invested 90%/10% and 100%/0% for stocks/bonds by way of age based portfolios. The stock portion is 60% US, 40% international at the bond portion is 70% US, 30% international.

I haven't paid too much attention to the college fund beyond putting in money whenever I can. However, now that I think about it, their portfolios are way too aggressive - given that I have no other funds saved for college and likely no ability to save further.

I am contemplating "holding my emotions" and rebalancing to 50%/50% and 60%/40% for the kiddos.
We need to learn to want what we have, not to have what we want, in order to get stable and steady happiness - The 14th Dalai Lama
DrGoogle2017
Posts: 2528
Joined: Mon Aug 14, 2017 12:31 pm

Re: Hitting The Sell Button

Post by DrGoogle2017 »

snarlyjack wrote: Thu Jan 04, 2018 3:20 pm I' am one of those 100% stock investors. Over 25,000 on the Dow today.

However, I' am so young (23 years old) that I just can't see going
into bonds at all at my age. I DCA (dollar cost average) every
payday. Just letting the whole portfolio "float" in the market.
I have years to go before retirement so I' am not worried. Whatever
happens, happens...
All stocks for my daughters too. 22 and 27.
kappy
Posts: 163
Joined: Tue Jun 21, 2016 7:13 pm

Re: Hitting The Sell Button

Post by kappy »

Early 30's here and I took the opportunity to rebalance my 6% bonds up to 10%. It'll be back down to single digits soon as I'm DCA-ing the proceeds of the sale of my first house into VTI in taxable.
User avatar
cfs
Posts: 4154
Joined: Fri Feb 23, 2007 1:22 am
Location: ~ Mi Propio Camino ~

Re: Hitting The Sell Button

Post by cfs »

Age 22, 23, 27? Stay 100% invested in equities and don't be out of the market for one day! Good luck, and thanks for reading ~cfs~
~ Member of the Active Retired Force since 2014 ~
JBTX
Posts: 7563
Joined: Wed Jul 26, 2017 12:46 pm

Re: Hitting The Sell Button

Post by JBTX »

I was 70+% stock around 2007 before the crash at approx 44 years of age. On the way back up I keep tweaking and selling here and there in my needlessly and ridiculously complicated portfolio, but the result is about 10 years later I am still 60%, which is about the amount of change you would expect going from 44 to 54 years old.

While I feel good about my AA I have to say it is tough seeing some fully invested younger folks getting these massive portfolio bumps while my 60/40 ish portfolio got something around 16-18%.
TravelforFun
Posts: 2299
Joined: Tue Dec 04, 2012 11:05 pm

Re: Hitting The Sell Button

Post by TravelforFun »

I keep 10 years worth of expenses in bonds and never have to worry about rebalancing.

TravelforFun
TonyDAntonio
Posts: 604
Joined: Thu Mar 03, 2016 8:32 pm

Re: Hitting The Sell Button

Post by TonyDAntonio »

nedsaid wrote: Wed Jan 03, 2018 11:24 pm Despite crying in my root beer all weekend over a portfolio return of "only" 15.01%, I can't help but notice the tremendous power of this bull market. Since July 2013, I have been mildly rebalancing from stocks to bonds. It seems like all I have been doing has been hitting the "sell" button, selling stocks in wave after wave as the market advances. Sort of like the hedge growing faster than you would have ever dreamed possible and it seems like you have to trim it back almost monthly. A nice problem to have but if I was 35 years old, I would simply be enjoying the ride. At 58, it seems to be like that laurel hedge growing out of control, a big chore to maintain. This is because I am concerned about controlling my risk as I get older. Ah to be young again!

How are other older investors like me reacting to this? Am I alone in how I feel about this?
I'm 58 too and doing the same thing only I'm piling the proceeds into the prime mmf. I'm actually getting a good feeling building up so much 'cash' to spend during the next bear market.
4a757374696e
Posts: 72
Joined: Thu Sep 29, 2016 11:38 pm
Location: Austin, TX

Re: Hitting The Sell Button

Post by 4a757374696e »

DrGoogle2017 wrote: Thu Jan 04, 2018 7:28 pm
snarlyjack wrote: Thu Jan 04, 2018 3:20 pm I' am one of those 100% stock investors. Over 25,000 on the Dow today.

However, I' am so young (23 years old) that I just can't see going
into bonds at all at my age. I DCA (dollar cost average) every
payday. Just letting the whole portfolio "float" in the market.
I have years to go before retirement so I' am not worried. Whatever
happens, happens...
All stocks for my daughters too. 22 and 27.
Yup me too. I'm 23 with 100% stocks (50/50 Domestic/International).
Don't do anything tomorrow that can be done today
Lynette
Posts: 2096
Joined: Sun Jul 27, 2014 9:47 am

Re: Hitting The Sell Button

Post by Lynette »

.....
Last edited by Lynette on Wed Jan 09, 2019 10:11 pm, edited 1 time in total.
TravelforFun
Posts: 2299
Joined: Tue Dec 04, 2012 11:05 pm

Re: Hitting The Sell Button

Post by TravelforFun »

nedsaid wrote: Wed Jan 03, 2018 11:24 pm Despite crying in my root beer all weekend over a portfolio return of "only" 15.01%, I can't help but notice the tremendous power of this bull market. Since July 2013, I have been mildly rebalancing from stocks to bonds. It seems like all I have been doing has been hitting the "sell" button, selling stocks in wave after wave as the market advances. Sort of like the hedge growing faster than you would have ever dreamed possible and it seems like you have to trim it back almost monthly. A nice problem to have but if I was 35 years old, I would simply be enjoying the ride. At 58, it seems to be like that laurel hedge growing out of control, a big chore to maintain. This is because I am concerned about controlling my risk as I get older. Ah to be young again!

How are other older investors like me reacting to this? Am I alone in how I feel about this?
nedsaid, save this post and repost it when we hit a long recession.

TravelforFun
User avatar
Topic Author
nedsaid
Posts: 14381
Joined: Fri Nov 23, 2012 12:33 pm

Re: Hitting The Sell Button

Post by nedsaid »

monsterid wrote: Thu Jan 04, 2018 11:57 am
nedsaid wrote: Wed Jan 03, 2018 11:47 pm
monsterid wrote: Wed Jan 03, 2018 11:40 pm Quality problems to have =) Think of these good times during the next recession.
A big reason I am doing this is the regret I experienced during the 2008-2009 bear market. I let my winners run and run and run without taking anything off the table. Rebalancing was hardly in my vocabulary. I told myself that I would rebalance during the next bull market.

The thing is, I should be really happy and I am. It is just that I am a stock guy and mostly optimistic, it pains me a bit to keep selling stock to buy bonds that yield 2-3%. Pretty much, as the portfolio grows so do the actual dollar gains and losses as the market fluctuates. I want to control risk and volatility. I also realize that retirement is coming closer and closer.
Yeah but you'll be rebalancing back when stocks are "on sale" right? =) Sounds to be like you are selling high buying low...

Having said that I haven't rebalanced lol.
No, I think my rebalancing will be one way from now on from stocks to bonds. When the market dived in 2008-2009, I was too scared to rebalance from bonds to stocks. I just kept what I had and put 100% of my new monies for investment into the stock market for about a year. Bear markets just seem to be bottomless.

During my program of mild rebalancing, I brought my stock allocation down from 69% to 66% but otherwise really have not de-risked. It is kind of like that diet that I keep saying that I will go on but keep putting it off. I notice that Vanguard, Fidelity, T Rowe Price are about 64% for their 2025 Target Date Retirement Funds. Because I really should be de-risking, not sure I will rebalance from bonds to stocks again.
A fool and his money are good for business.
User avatar
Topic Author
nedsaid
Posts: 14381
Joined: Fri Nov 23, 2012 12:33 pm

Re: Hitting The Sell Button

Post by nedsaid »

marklar13 wrote: Thu Jan 04, 2018 3:18 pm
nedsaid wrote: Wed Jan 03, 2018 11:24 pm It seems like all I have been doing has been hitting the "sell" button, selling stocks in wave after wave as the market advances.
Are you using really tight re-balancing bands, or maybe this is just a little hyperbole? My math could be wrong, but it takes a really sizable run-up to trigger a 5% re-balancing band. If stocks return 20% and bonds return 0%, then this would cause your 60/40 allocation to shift about 4.3% or 80/20 allocation to shift about 2.3%.

It has been a long run-up, so I can see how this could cause some bands to be hit over time... but for most people using a ~5% band, wouldn't this really only trigger a re-balance once every few years (depending on how you actually rebalance)? This also doesn't take into account new contributions. I'm somewhere between 80/20 and 75/25, using a 5% band, and within the last few years all of my re-balancing has been taken care of by new contributions (no sell button unless I need to shift things between accounts).
What I am doing is rebalancing bit by bit, this is why I have called this a program of mild rebalancing. Pretty much, I didn't want my stock allocation to get over 67%. So yes, I suppose you could call these really tight rebalancing bands.
A fool and his money are good for business.
User avatar
Topic Author
nedsaid
Posts: 14381
Joined: Fri Nov 23, 2012 12:33 pm

Re: Hitting The Sell Button

Post by nedsaid »

michaeljc70 wrote: Thu Jan 04, 2018 1:19 pm A lot of these posts sound like market timing disguised as rebalancing. Is this rebalancing to your pre-determined AA or a new AA because the market is "frothy" in your view?

Also, you can rebalance once a year or quarterly so you won't be having to sell all the time. Or increase the threshold of bands if you use that method.

Though the market has run up, I am sticking to my plan. Bonds don't strike me as the greatest investment currently either.
I am not excited about bonds either. One reason that I have been rebalancing bit by bit and keeping a bit higher stock allocation. Bonds have low yields and are not exactly cheap. If I was 35 years old, I wouldn't care. I would just let this run. I am now 58 years old now and things look different to me now.
A fool and his money are good for business.
User avatar
Toons
Posts: 13933
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: Hitting The Sell Button

Post by Toons »

Age 67
I don't sell anything.
I take some capital gains and dividends and purchase shares of Intermeditate Tax Exempt Bond Fund Fund.
Allocation is still around 70/30 Stock Bond.
Was 90/10 for many many years
I let the market do what it does.
For decades.......
:mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
User avatar
Topic Author
nedsaid
Posts: 14381
Joined: Fri Nov 23, 2012 12:33 pm

Re: Hitting The Sell Button

Post by nedsaid »

Lynette wrote: Thu Jan 04, 2018 10:19 am Nedsaid,

Thanks for posting. An IPS sounds like a lot of hard work to me so I don't have one. Recently I rolled over my 401K to Vanguard and Fidelity IRA's. I landed up having more stock funds outside of my normal 60/40 AA. I have to take RMDs this year so I just sold some stock funds in both Fidelity and Vanguard. I will do some more QCDs. The advantage of waiting till the end of the year to do RMDs and QCDs is that one's portfolio may go up but it may also go down and one still has to take out the RMDs ...so what is Mr Market going to do ????
Lynette, you are an experienced investor and writing an IPS should not be difficult. For one thing, as a Boglehead, you already have a coherent investment philosophy. The Investment Policy Statement should be strategic and not tactical. It should be a document written with a long term view in mind. So if you are 70 years old, it might be appropriate to say that you plan to reduce your allocation to stocks from 50% to 40% by the time you hit 80.

I have seen people say that their IPS tells them to do X when the market does Y. They try to figure out tactical moves ahead of time and that is not the purpose of an IPS. An example would be, if the market goes up 50%, I will change my stock allocation from 70% to 50%, and back again if the market goes down 50%. Markets and life just don't work that way.

An IPS is really a statement of your investment philosophy and your long term strategy. It can be as simple as you want.
A fool and his money are good for business.
User avatar
Topic Author
nedsaid
Posts: 14381
Joined: Fri Nov 23, 2012 12:33 pm

Re: Hitting The Sell Button

Post by nedsaid »

triceratop wrote: Thu Jan 04, 2018 1:31 am nedsaid,
The converse is that it feels painful to buy intermediate-term bonds as a young accumulator, despite my aggressively-tilted 90/10 portfolio. These days it seems like all of my dividends go towards bonds. However, most of my contributions still do go towards stocks. However, I'm sure I'll appreciate those bonds when the next bear market happens. I was able to buy into the 2016 bear market solely with cash flow.
As I remember, you are about 25 years old. An aggressive pedal to the metal strategy for you is entirely rational. Your portfolio balance is probably also relatively small compared to those of us that have been doing this for a while. Someone like you should be hoping for, believing for, and praying for a nasty bear market to pick up stocks at fire sale prices. It never feels like it of course but really bear markets are where you make your money. For someone like me, a bear market would be particularly painful as the dollars involved would be much larger. Paradoxically, your emotional pain might be worse than mine.

The thing is, market psychology, at least for me is a very odd thing. I was devasted at age 28 when I lost hundreds of dollars in the stock market with the October 1987 crash. I was scared and it seemed like my economic life just flashed in front of my eyes. My feelings at the time were silly, my feelings were utterly irrational, but my feelings were very, very real. I may as well have lost billions. Fast forward to 2008-2009, I was scared and my losses were the equivalent of two years of take home pay. It was weird but the emotional intensity was higher in 1987 than it was in 2008-2009.

What I am trying but probably failing to get across is that we all have our rational self and our emotional self. It pays to have respect for the power of human emotion. As much as I think of myself as a cool and rational investor, I am subject to bouts of irrationality and craziness too. I just have to suppress those irrational and crazy impulses during bear markets. So far, so good. Who really knows how I will behave next time? I think I know but I am not 100% sure. So maybe what I am doing is guarding myself against my worst impulses. Better to "panic" at new highs than after the market has fallen 50%.
A fool and his money are good for business.
harvestbook
Posts: 795
Joined: Sat Mar 18, 2017 7:12 pm

Re: Hitting The Sell Button

Post by harvestbook »

At 55, my only nod to the bull and my age is I set my 401k to a LifeStrategy Growth Fund (80/20). My other stuff's about 93/7 and I'm riding the bull until I fall off. I expect I am still a decade away from moving to conservative mode since I can work until I am dead or dissipated in my creative field.
I'm not smart enough to know, and I can't afford to guess.
User avatar
Topic Author
nedsaid
Posts: 14381
Joined: Fri Nov 23, 2012 12:33 pm

Re: Hitting The Sell Button

Post by nedsaid »

zaboomafoozarg wrote: Thu Jan 04, 2018 8:05 am
nedsaid wrote: Wed Jan 03, 2018 11:24 pmA nice problem to have but if I was 35 years old, I would simply be enjoying the ride.
I'm 35 but certainly do not enjoy investing new money into stocks at a Shiller PE of 33.

I already changed my AA from 80/20 to 75/25 but still feel uneasy about that.
You are acting in a rational manner because you are taking valuations into account. Even Nedsaid, the great optimist that I am, have started to get nervous about valuations. At the peak of the dot com and the high tech bubble, Shiller PE got to about 45.

I applaud you because you get the concept of future expected returns. P/E ratios don't go to infinity. Eventually the law of gravity or reversion to the mean takes over. You understand that as valuations get higher and higher that future expected returns get lower and lower. The US Stock Market was essentially flat from early 2000 until about 2012 because valuations got so overheated. Too much expectation built into stocks. Earnings more than doubled during the 2000-2012 period but the market hardly budged, of course there were two very painful bear markets in between.

What happens is that as valuations get higher and higher that your are taking more and more risk for less and less future expected returns. The difference between now and early 2000 is that interest rates are 2% to 3% and not 6%. Bonds are expensive too though still less volatile than stocks.

So I will be accused of being a market timer. People will tell me to stay the course. At some point, if you see that the bridge in front of you is out, it seems prudent to put on the brakes. I don't want to just sail into the abyss just for the sake of staying the course. Sort of like famous last words.

The reason I am not making a big move here is that higher valuations might be justified. The economy is growing now at 3% and speeding up. That should greatly help earnings and the markets are anticipating that. Much different than the "new normal" of 1% GDP growth. Economic surprises now are on the upside and not the downside. Earnings really can catch up to high valuations.

So for now, mild trimming. But I am watching.
A fool and his money are good for business.
User avatar
WpgGuy
Posts: 22
Joined: Sat Feb 04, 2017 4:01 pm

Re: Hitting The Sell Button

Post by WpgGuy »

michaeljc70 wrote: Thu Jan 04, 2018 1:19 pm A lot of these posts sound like market timing disguised as rebalancing. Is this rebalancing to your pre-determined AA or a new AA because the market is "frothy" in your view?
I'm staying the course at 80/20 (stocks/bonds; late 30s in age), but the way I read these posts is it's more about folks feeling their risk tolerance is being pushed to the limits as the PE rise; i.e. if folk are losing sleep at night over higher PEs, then reduce your AA in a methodical & tax efficient fashion. I don't think there's anything wrong with that. The difference here is one of motivation: if you do it because of risk tolerance (knowing rationally the bull could rage for 2, 3, 5 or 10 years more...but who wants to go 10 years without sleep & stress?), I think it's OK; on the other hand, if you do it because you've read the tea leaves on when the next correction will happen that's probably not the right motivation.

I don't think I'll touch my AA unless I start losing sleep as well, or I see some obvious contagion type risk developing. On the latter I worry about the crypto-currency boom, right now it's ~$500B market, and who cares; but now that Wall Street is getting involved w/ derivatives (remember MBSs & CDOs in 2007?), say we add a 0 on that and suddenly we've got some serious problems IMHO. For now though, we corporations just got a fat tax cut, unemployment is low, restaurants are packed, malls full of shoppers, cars flying off dealer lots, 401k's rising, folks are taking family vacations again...the good times are rolling. Soak it up and savour it, as harder times are no doubt ahead.

My 2 cents.
bhsince87
Posts: 2700
Joined: Thu Oct 03, 2013 1:08 pm

Re: Hitting The Sell Button

Post by bhsince87 »

I'm 52 and planning to retire somewhere in the next 2 months to two years. I've been "glide pathinging" from 90/10 to 60/40 over the past couple years. That's more like "dive pathing", I guess!

It was disturbing at first, but I'm OK with it now.

I worry a bit that my T401k is about 70% bonds now, which seems strange for long-term money. But I expect to start Roth conversions soon after retiring, so I guess I can get back into equities then.

I also fear that I am being set up for the dreaded crash after retiring that gets all the focus in sequence of return risk horror stories. But switching to more bonds is helping me alleviate that fear, at least.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams
michaeljc70
Posts: 7470
Joined: Thu Oct 15, 2015 3:53 pm

Re: Hitting The Sell Button

Post by michaeljc70 »

WpgGuy wrote: Thu Jan 04, 2018 9:40 pm
michaeljc70 wrote: Thu Jan 04, 2018 1:19 pm A lot of these posts sound like market timing disguised as rebalancing. Is this rebalancing to your pre-determined AA or a new AA because the market is "frothy" in your view?
I'm staying the course at 80/20 (stocks/bonds; late 30s in age), but the way I read these posts is it's more about folks feeling their risk tolerance is being pushed to the limits as the PE rise; i.e. if folk are losing sleep at night over higher PEs, then reduce your AA in a methodical & tax efficient fashion. I don't think there's anything wrong with that. The difference here is one of motivation: if you do it because of risk tolerance (knowing rationally the bull could rage for 2, 3, 5 or 10 years more...but who wants to go 10 years without sleep & stress?), I think it's OK; on the other hand, if you do it because you've read the tea leaves on when the next correction will happen that's probably not the right motivation.

I don't think I'll touch my AA unless I start losing sleep as well, or I see some obvious contagion type risk developing. On the latter I worry about the crypto-currency boom, right now it's ~$500B market, and who cares; but now that Wall Street is getting involved w/ derivatives (remember MBSs & CDOs in 2007?), say we add a 0 on that and suddenly we've got some serious problems IMHO. For now though, we corporations just got a fat tax cut, unemployment is low, restaurants are packed, malls full of shoppers, cars flying off dealer lots, 401k's rising, folks are taking family vacations again...the good times are rolling. Soak it up and savour it, as harder times are no doubt ahead.

My 2 cents.
When you decide on an AA, you should know the risks vs. potential return. That doesn't change over the long term based on what the PE is at the moment. If they are losing sleep over the current PE, they probably didn't have the right AA to begin with. Are these same people going to change their AA (back into stocks) if the market drops 30% because they cannot sleep at night knowing it will probably recover and there is money to be made? Changing your AA based on market conditions is market timing. Of course, anyone can do what they want but let's not pretend it is something else.
DrGoogle2017
Posts: 2528
Joined: Mon Aug 14, 2017 12:31 pm

Re: Hitting The Sell Button

Post by DrGoogle2017 »

nedsaid wrote: Thu Jan 04, 2018 9:21 pm
triceratop wrote: Thu Jan 04, 2018 1:31 am nedsaid,
The converse is that it feels painful to buy intermediate-term bonds as a young accumulator, despite my aggressively-tilted 90/10 portfolio. These days it seems like all of my dividends go towards bonds. However, most of my contributions still do go towards stocks. However, I'm sure I'll appreciate those bonds when the next bear market happens. I was able to buy into the 2016 bear market solely with cash flow.
As I remember, you are about 25 years old. An aggressive pedal to the metal strategy for you is entirely rational. Your portfolio balance is probably also relatively small compared to those of us that have been doing this for a while. Someone like you should be hoping for, believing for, and praying for a nasty bear market to pick up stocks at fire sale prices. It never feels like it of course but really bear markets are where you make your money. For someone like me, a bear market would be particularly painful as the dollars involved would be much larger. Paradoxically, your emotional pain might be worse than mine.

The thing is, market psychology, at least for me is a very odd thing. I was devasted at age 28 when I lost hundreds of dollars in the stock market with the October 1987 crash. I was scared and it seemed like my economic life just flashed in front of my eyes. My feelings at the time were silly, my feelings were utterly irrational, but my feelings were very, very real. I may as well have lost billions. Fast forward to 2008-2009, I was scared and my losses were the equivalent of two years of take home pay. It was weird but the emotional intensity was higher in 1987 than it was in 2008-2009.

What I am trying but probably failing to get across is that we all have our rational self and our emotional self. It pays to have respect for the power of human emotion. As much as I think of myself as a cool and rational investor, I am subject to bouts of irrationality and craziness too. I just have to suppress those irrational and crazy impulses during bear markets. So far, so good. Who really knows how I will behave next time? I think I know but I am not 100% sure. So maybe what I am doing is guarding myself against my worst impulses. Better to "panic" at new highs than after the market has fallen 50%.
Interesting, 2000-2003 scared me for life. I don’t remember 1987 nor 2009. We now have a conservative portfolio because of that. I’m 58 too, but can’t bring myself to be 50/50 even though I set my AA to be 60/40. I also can’t bring myself to invest in bonds except through the Lifestyle strategy. It’s all in MMF. I don’t want to be in CDs either.
Post Reply