Are we missing recession /bear market beginning

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Northern Flicker
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Re: Are we missing recession /bear market beginning

Post by Northern Flicker » Thu Mar 29, 2018 3:07 am

I think it gets harder to stay course as your assets accumulate and your portfolio gets larger . This causes large daily fluctuations in balances . I am trying to stay course but cannot stop watching Market movements and wondering .
This is evidence that maybe you should be reducing exposure to equities, not increasing it. Best results are when you are comfortable enough to ride the ups and downs without hand-wringing and teeth-gnashing over every twist and turn of the market.
Index fund investor since 1987.

md&pharmacist
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Re: Are we missing recession /bear market beginning

Post by md&pharmacist » Thu Mar 29, 2018 10:14 am

Here's my philosophy for what it's worth.

My wife and I are in our mid 40's managing approximately $3,000,000 in our non real-estate retirement/non-retirement investment accounts.

The market definitely just experienced a correction. Whether we are in the start of a bear market or a recession - the reality is I don't know, you don't know, and the best investors in the world don't know yet. So how to make wise decisions?

I do not do any dollar cost averaging. I see no reason to to put money into a declining market, and generally prefer to decrease exposure as lofty markets make new highs for no good reasons. Currently I do only mutual funds, as I am not smart enough to buy and sell individual stocks at the right times - I leave that to the pro's. I invest in very aggressive funds, some of which have had in excess of 80-100% annualized returns. I am also heavily diversified including, of course, US equities with high growth levels (technology, biotechnology, health care, semiconductors), international (mainly Europe), Emerging markets (China and general Asia, South America), index (Direxion 2x Nasdaq). I reassess the for best sectors at every 3-6 months. All researched online, never paid an adviser.

When the markets start to correct, I listen very carefully to what I hear on CNBC, Bloomberg, Fox Business, Yahoo Finance, etc. If it looks like a mild correction under 10%, generally the recovery takes just a few weeks-months to recover so these corrections are a good time increase equity holdings as the shares are on sale. I did this a few weeks ago.

Currently in this new cycle I am not putting new money into equities as I am already 70% invested, 30% cash. Even with my 30% cash position my accounts returned 17% over the past 12 months - well above the expected 8% annualized returns. If the market returns to new highs, I will actually be a seller unless there is some spectacular series of events/news headlines which I doubt over the next few months. I will increase my cash holdings in this situation and with the market as lofty as it is.

If the bear market continues over a prolonged period, say a year or two, I tend not to sell or buy as my long term horizon allows me to wait for the next round of market highs. Over that time frame our annual IRA and HSA contributions ($108,000 and $6750, respectfully) will go towards our cash positions and my percentage cash positions will therefore rise even if I don't pull out of any funds. During this time I am more likely to invest in new services in my medical office instead (for example I have added in house pharmacy, ultrasound, ABI, PFT's, allergy testing, NCV, ARNP's, etc.) as this is in itself a form of diversification. Also in the past year I am a new commercial landlord now with an extra $150,000-$200,000 annually coming in from this source - funds waiting patiently for the next big recession to start working for me. Right now they continue to contribute to a very healthy (>1 year) emergency fund for me.

If another major recession comes along (major domestic destabilizing events such as the 2008-2009 mortgage backed securities crisis) I will sell very aggressively because I want to have cash the next time the market has such a bottom and because the full recovery takes about 5 years. When fear is at it's peak, that's the best time to reinvest - during the last recession it was around DOW 6500. That's a good time to buy, buy, buy! In the beginning of a new bull market I prefer about 90% in equities and 10% in cash. Midstream I prefer a 65/35 split and at an expected market top I prefer to cut back to a 50/50 split, and 0% equities in market free fall. I am no longer a fan of bonds at this time in a rising interest rate environment.

Just do yourself a favor and don't buy high and sell low. Sounds counter-intuitive but that's what everyone does because they trade based on emotion, not discipline.

Hope this helps somebody...somewhere.

md&pharmacist
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Re: Are we missing recession /bear market beginning

Post by md&pharmacist » Thu Mar 29, 2018 10:26 am

randomizer wrote:
Wed Mar 28, 2018 10:39 am
“Stay the course”. Easy to say, hard to do, apparently, based on this thread.
To me stay the course does not mean do the same exact thing all the time. It means have a plan for an early bull market, a mid phase market, a mature/lofty market, a correction, a bear market, a full blown recession/depression and stick with your plan. It also means diversify - for me that's not just the markets, but commercial real estate, diversified office services (in house pharmacy, ARNP's, ultrasound, NCV, allergy testing, diversified insurance mix, non-insurance services, etc.)

That shouldn't be so hard. If you don't stay the course - you will buy high and sell low just as the herd does as they disregard their principles and act base on emotions.

Not so hard to do if you realize this straying from the plan can result in economic devastation.

We are in our mid 40's with two teenagers, with a net worth of over $10,000,000. We know what works and we've made mistakes along the way but don't want others to make them.

CantPassAgain
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Re: Are we missing recession /bear market beginning

Post by CantPassAgain » Thu Mar 29, 2018 10:30 am

Jimsad wrote:
Tue Mar 27, 2018 5:39 pm
Are Bear markets usually preceded by volatility ?
If so , what we are seeing in the last few weeks seems to be indicating the bear Market Beginning .Any thoughts ?
Why are you still asking this question deep into page two of this thread? No one knows! The way to win at this game has been stated over and over: spend some time soul searching, establish an asset allocation, and then stick with it, until such time as your life circumstances change enough that you feel you need to revisit. And no, a change in life circumstance isn't "oh no the market has volatility, I better do something."

Sit back and go wherever the ride takes you, and make sure to keep your arms, legs, and head inside the vehicle at all times.

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220volt
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Re: Are we missing recession /bear market beginning

Post by 220volt » Thu Mar 29, 2018 10:45 am

John Keynes, one of the fathers of modern economics once said "The Market can remain irrational longer than you have money if you’re betting against it."
This is why is almost impossible to predict tops or bottoms.
"If I had only followed the advice of financial analysts in 2008, I'd have a million dollars today, provided I started with a hundred million dollars" - Jon Stewart

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Ethelred
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Re: Are we missing recession /bear market beginning

Post by Ethelred » Thu Mar 29, 2018 10:53 am

md&pharmacist wrote:
Thu Mar 29, 2018 10:14 am
Just do yourself a favor and don't buy high and sell low. Sounds counter-intuitive but that's what everyone does because they trade based on emotion, not discipline.

Hope this helps somebody...somewhere.
I think your post and your background is basically a good example of how income and saving are far more important inputs than asset allocation to increasing net worth.

Your post is pretty long and detailed, but essentially explains how you are trying to time the market, except your last main paragraph, which can be summarized as "Don't try to time the market". If you really do know how to time the market correctly, you would make even more money running a hedge fund than being a doctor and business owner.

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willthrill81
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Re: Are we missing recession /bear market beginning

Post by willthrill81 » Thu Mar 29, 2018 10:57 am

Ethelred wrote:
Thu Mar 29, 2018 10:53 am
If you really do know how to time the market correctly, you would make even more money running a hedge fund than being a doctor and business owner.
Getting a 1% edge over the market's returns over the long-term, for instance, isn't going to land you a position as a hedge fund manager, nor will it make one fabulously wealthy in itself.

Timing the market perfectly is entirely impossible, and I've never heard anyone claim that they could do it.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Ethelred
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Re: Are we missing recession /bear market beginning

Post by Ethelred » Thu Mar 29, 2018 11:03 am

willthrill81 wrote:
Thu Mar 29, 2018 10:57 am
Timing the market perfectly is entirely impossible, and I've never heard anyone claim that they could do it.
Re-read md&pharmacist's post. Unless I misunderstand, it looks like he (or she) thinks he can.

Socal77
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Re: Are we missing recession /bear market beginning

Post by Socal77 » Thu Mar 29, 2018 11:05 am

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Last edited by Socal77 on Thu Mar 29, 2018 11:09 am, edited 1 time in total.

Socal77
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Re: Are we missing recession /bear market beginning

Post by Socal77 » Thu Mar 29, 2018 11:07 am

md&pharmacist wrote:
Thu Mar 29, 2018 10:14 am
Here's my philosophy for what it's worth.

My wife and I are in our mid 40's managing approximately $3,000,000 in our non real-estate retirement/non-retirement investment accounts.

The market definitely just experienced a correction. Whether we are in the start of a bear market or a recession - the reality is I don't know, you don't know, and the best investors in the world don't know yet. So how to make wise decisions?

I do not do any dollar cost averaging. I see no reason to to put money into a declining market, and generally prefer to decrease exposure as lofty markets make new highs for no good reasons. Currently I do only mutual funds, as I am not smart enough to buy and sell individual stocks at the right times - I leave that to the pro's. I invest in very aggressive funds, some of which have had in excess of 80-100% annualized returns. I am also heavily diversified including, of course, US equities with high growth levels (technology, biotechnology, health care, semiconductors), international (mainly Europe), Emerging markets (China and general Asia, South America), index (Direxion 2x Nasdaq). I reassess the for best sectors at every 3-6 months. All researched online, never paid an adviser.

When the markets start to correct, I listen very carefully to what I hear on CNBC, Bloomberg, Fox Business, Yahoo Finance, etc. If it looks like a mild correction under 10%, generally the recovery takes just a few weeks-months to recover so these corrections are a good time increase equity holdings as the shares are on sale. I did this a few weeks ago.

Currently in this new cycle I am not putting new money into equities as I am already 70% invested, 30% cash. Even with my 30% cash position my accounts returned 17% over the past 12 months - well above the expected 8% annualized returns. If the market returns to new highs, I will actually be a seller unless there is some spectacular series of events/news headlines which I doubt over the next few months. I will increase my cash holdings in this situation and with the market as lofty as it is.

If the bear market continues over a prolonged period, say a year or two, I tend not to sell or buy as my long term horizon allows me to wait for the next round of market highs. Over that time frame our annual IRA and HSA contributions ($108,000 and $6750, respectfully) will go towards our cash positions and my percentage cash positions will therefore rise even if I don't pull out of any funds. During this time I am more likely to invest in new services in my medical office instead (for example I have added in house pharmacy, ultrasound, ABI, PFT's, allergy testing, NCV, ARNP's, etc.) as this is in itself a form of diversification. Also in the past year I am a new commercial landlord now with an extra $150,000-$200,000 annually coming in from this source - funds waiting patiently for the next big recession to start working for me. Right now they continue to contribute to a very healthy (>1 year) emergency fund for me.

If another major recession comes along (major domestic destabilizing events such as the 2008-2009 mortgage backed securities crisis) I will sell very aggressively because I want to have cash the next time the market has such a bottom and because the full recovery takes about 5 years. When fear is at it's peak, that's the best time to reinvest - during the last recession it was around DOW 6500. That's a good time to buy, buy, buy! In the beginning of a new bull market I prefer about 90% in equities and 10% in cash. Midstream I prefer a 65/35 split and at an expected market top I prefer to cut back to a 50/50 split, and 0% equities in market free fall. I am no longer a fan of bonds at this time in a rising interest rate environment.

Just do yourself a favor and don't buy high and sell low. Sounds counter-intuitive but that's what everyone does because they trade based on emotion, not discipline.

Hope this helps somebody...somewhere.
Be careful not to get over-confident that you can successfully navigate all bull and bear markets over the course of your lifetime. The larger your investment assets grow, the more costly a market timing mistake becomes. In other words, a mistake with a larger amount of assets could wipe out all of your smaller excess investment market gains (if any) that you have made when you you had less assets.

This is why Bogleheads prefer to just take what the market gives them, according to the asset mix they have matched to their risk tolerance.

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willthrill81
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Re: Are we missing recession /bear market beginning

Post by willthrill81 » Thu Mar 29, 2018 11:25 am

Ethelred wrote:
Thu Mar 29, 2018 11:03 am
willthrill81 wrote:
Thu Mar 29, 2018 10:57 am
Timing the market perfectly is entirely impossible, and I've never heard anyone claim that they could do it.
Re-read md&pharmacist's post. Unless I misunderstand, it looks like he (or she) thinks he can.
Without s/he specifically claiming to do so, I doubt it. Calling the exact times of the peaks and troughs is impossible.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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munemaker
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Re: Are we missing recession /bear market beginning

Post by munemaker » Thu Mar 29, 2018 11:28 am

It doesn't really matter if we are missing the beginning of a bear market or not. Just keep investing in accordance with your investment policy statement and ignore the noise. Don't make any changes to your portfolio. You will be better off in the long run.

md&pharmacist
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Re: Are we missing recession /bear market beginning

Post by md&pharmacist » Thu Mar 29, 2018 12:01 pm

Ethelred wrote:
Thu Mar 29, 2018 10:53 am
md&pharmacist wrote:
Thu Mar 29, 2018 10:14 am
Just do yourself a favor and don't buy high and sell low. Sounds counter-intuitive but that's what everyone does because they trade based on emotion, not discipline.

Hope this helps somebody...somewhere.
I think your post and your background is basically a good example of how income and saving are far more important inputs than asset allocation to increasing net worth.

Your post is pretty long and detailed, but essentially explains how you are trying to time the market, except your last main paragraph, which can be summarized as "Don't try to time the market". If you really do know how to time the market correctly, you would make even more money running a hedge fund than being a doctor and business owner.
Yes, I know. Investments are for security. Much more passionate about being a doctor than being in the investment arena.

md&pharmacist
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Re: Are we missing recession /bear market beginning

Post by md&pharmacist » Thu Mar 29, 2018 12:40 pm

willthrill81 wrote:
Thu Mar 29, 2018 11:25 am
Ethelred wrote:
Thu Mar 29, 2018 11:03 am
willthrill81 wrote:
Thu Mar 29, 2018 10:57 am
Timing the market perfectly is entirely impossible, and I've never heard anyone claim that they could do it.
Re-read md&pharmacist's post. Unless I misunderstand, it looks like he (or she) thinks he can.
Without s/he specifically claiming to do so, I doubt it. Calling the exact times of the peaks and troughs is impossible.
I said in the beginning of the post I specifically don't know what will happen. But I don't wear blinders either. There is a difference between being in the first year of a new bull market (ie. 2009) versus the 9th year now.

I don't time the market. I don't know if this bull will go another 10 years, stay flat or nosedive tomorrow. I try to make my decisions based on getting credible news information and on reasonable probabilities related to an aging market. That's why I stressed always keeping up on financial news. Right now the news tells me that the market is lofty and in bearish trend. It is just my opinion not to buy now. If you prefer to dollar cost average because nobody knows what will happen, that's fine. But that may include buying at these lofty levels even if the DOW hits 20,000 (or lower) before it hits 30,000. I personally think this is highly likely. I may be wrong, but it is the safer bet. If I am wrong, I have plenty invested if the market continues to rise. Try to create win-win opportunities for yourself.

Be careful not to believe everything you hear from the financial experts - "you can't time the markets so dollar cost average". The more we invest, the more they make in risk-free income by turning our money. They lose nothing when you put money into lofty markets and then it turns, you lose much. By the way, the moguls on Wall Street do not dollar cost average - why?

I can argue that some timing is possible. Not the absolute bottom or top of the market, but close to it. If I exit now at DOW 24,000 and it rises to whatever - say 28,000 I did not time the top. But it would be foolish to assume it will never drop below current levels which is where I want to be as a buyer, versus cost averaging now. Like I said, I would be selling into the next record high if the market rises. I will be buying some into corrections and heavily into a deep recession/depression. That is not timing. I don't know when it will be, but I know it will be. That's what I mean by a plan you can stick with. If you do the same thing at a market top as a bottom, logic dictates that just won't work as well.

I am talking to those who want some active involvement in their investments, not those that want to forget about it for 30 years and just dollar cost average (which is fine for most). I just want to try and beat the averages - that doesn't require always acting at the absolute top and bottom only.

Sometimes bottoms are good. I just built a 15000 sq ft medical facility after taking a commercial construction loan about 2 years ago - 10 year fixed term at 3.5%. Look up construction loan rate trends and see how good this rate is. My home loan mortgage is at 2.75%.

Timing doesn't always work, but if you don't try to find the best time, doesn't that equate to laziness? I have over $1,000,000 waiting to enter the markets. Would any of you tell me this is a good time or would you more likely say that after a 50% drop in the markets entering a new bull phase?

Don't try to make rocket science out of something that isn't. I have been investing for over 20 years - now all of a sudden my patterns won't make sense?

Just as some doctors may prescribe amlodipine instead of lisinopril, I'm by no means saying my way is the only way to go. There may be even better paths for others that I don't know. This just has worked out extremely well for me.

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HomerJ
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Re: Are we missing recession /bear market beginning

Post by HomerJ » Thu Mar 29, 2018 12:45 pm

Da5id wrote:
Wed Mar 28, 2018 12:27 pm
I think we know something. The next bear market/recession is indeed coming. Because there will always be a next one of each. What we don't know is when, and we don't know a useful way to use the fact that trouble is eventually coming (maybe starting now, starting in 3 years) to invest better. What we can do is use the fact that recession/bear market is eventually coming to keep our house in order. Don't take on more equity risk than you can handle. Be resilient if the next recession may cause a job loss. etc.
Great post.

Set up an Asset Allocation you can hold if the market crashes tomorrow. Because it might.

Then you don't have to worry about it anymore. When someone says "Hey, the chance of the market crashing soon is higher today than yesterday!", you can say "Oh, well I was already prepared for a crash yesterday, so I don't have to change anything."

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HomerJ
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Re: Are we missing recession /bear market beginning

Post by HomerJ » Thu Mar 29, 2018 12:53 pm

md&pharmacist wrote:
Thu Mar 29, 2018 10:14 am
When the markets start to correct, I listen very carefully to what I hear on CNBC, Bloomberg, Fox Business, Yahoo Finance, etc. If it looks like a mild correction under 10%, generally the recovery takes just a few weeks-months to recover so these corrections are a good time increase equity holdings as the shares are on sale. I did this a few weeks ago.
Interesting. This is exact opposite of what we preach here at Bogleheads. Either you are very lucky, or you are very skilled.

How exactly does one "listen very carefully" to all those pundits (all with DIFFERENT opinions) and make an accurate forecast based on that?

Most of us here recognize that predicting the future is hard to do, and even harder if you listen to all that noise.

Unless you can quantify your exact procedure for predicting the future based on reading Yahoo Finance, this isn't very useful.
If another major recession comes along (major domestic destabilizing events such as the 2008-2009 mortgage backed securities crisis) I will sell very aggressively because I want to have cash the next time the market has such a bottom and because the full recovery takes about 5 years.
Again, opposite of what we do here. How do you know when it's a major recession and not a correction? Selling when the market drops is selling low, and is the exact opposite of "stay the course".

Riding out a crash isn't that terrible. The historical long-term return of the stock market INCLUDES all the crashes. You don't have to avoid the crashes to make a solid good return. Sure, if you can avoid the crashes and invest only when the market is going up, you'll make more.

But that's not very easy to do.

Your advice seems to be "Sell before the crash, buy at the bottom". Neither of things are easy to do in practice again and again. Signals that worked in one crash may not work in the next one, or give false positives. Many people have tried to predict the future and failed.

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HomerJ
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Re: Are we missing recession /bear market beginning

Post by HomerJ » Thu Mar 29, 2018 12:57 pm

md&pharmacist wrote:
Thu Mar 29, 2018 10:26 am
randomizer wrote:
Wed Mar 28, 2018 10:39 am
“Stay the course”. Easy to say, hard to do, apparently, based on this thread.
To me stay the course does not mean do the same exact thing all the time. It means have a plan for an early bull market, a mid phase market, a mature/lofty market, a correction, a bear market, a full blown recession/depression and stick with your plan. It also means diversify - for me that's not just the markets, but commercial real estate, diversified office services (in house pharmacy, ARNP's, ultrasound, NCV, allergy testing, diversified insurance mix, non-insurance services, etc.)
No, stay the course means stay the course. One plan. Not six different plans all based on your ability to predict what "phase" of a market we are currently in. If you predict wrong, at any of those six different inflection points, you can trail the market returns instead of beating them.


You are very well off. You have no need to try to beat the market anymore. Good luck to you.

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HomerJ
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Re: Are we missing recession /bear market beginning

Post by HomerJ » Thu Mar 29, 2018 1:18 pm

md&pharmacist wrote:
Thu Mar 29, 2018 12:40 pm
Be careful not to believe everything you hear from the financial experts - "you can't time the markets so dollar cost average". The more we invest, the more they make in risk-free income by turning our money. They lose nothing when you put money into lofty markets and then it turns, you lose much. By the way, the moguls on Wall Street do not dollar cost average - why?
Investing the same amount every two weeks for years and years works fine. I agree one should not listen to "financial experts", but dollar-cost averaging is not a evil plan from Wall Street designed to steal your money.
I can argue that some timing is possible. Not the absolute bottom or top of the market, but close to it. If I exit now at DOW 24,000 and it rises to whatever - say 28,000 I did not time the top. But it would be foolish to assume it will never drop below current levels which is where I want to be as a buyer, versus cost averaging now.
You are correct it would be foolish to assume it will never drop below current levels. But it would also be foolish to assume it absolutely will drop below current levels. No one knows.

In 1996, the stock market was at the highest valuations we had seen since 1928-1929. It had tripled over 9 years from the crash in 1987. Does this sound familiar to today?

DOW was around 6000 at the time.

It doubled again over the next 4 years, and even after the 2000-2002 crash, it never dropped back into 6000s. Even during the 2009 crash, the DOW never got as low as it was in 1996. Even after a huge 9-year run-up and the highest valuations seen in 60 years, 1996 was a great time to buy. The lowest point in the last 22 years.

It absolutely is possible that if you exit now at 24,000, it could run up to 30,000 or 35,000, crash, and still not get as low as 24,000.

Is it likely? No idea. But it's certainly possible. It JUST happened 20 years ago. (But you weren't investing then).

Heck, plenty of people were arguing (on these boards and in the media) this exact same argument back in 2015 when the DOW was at 18,000. People then were definitely stating one should sell, and buy back after the next crash. They are still waiting.

In fact, there were posts like that in 2014, 2013, 2012, 2011.

I am talking to those who want some active involvement in their investments, not those that want to forget about it for 30 years and just dollar cost average (which is fine for most). I just want to try and beat the averages - that doesn't require always acting at the absolute top and bottom only.
Yes, that's exactly right. Beating the averages is not easy as you think though. Otherwise everyone would do it. Most of us here have tried. Even some smart doctors here.

Our point is that it's hard to do, and you don't have to do it to become wealthy. Just buy and hold, ride the dips and crashes, don't base your success on your ability to predict the future. Doing nothing can actually be the smartest choice. And still make you rich.

Now, you might get MORE rich if you can time successfully, but you might get LESS too. And the odds show that getting LESS is more likely than getting MORE.
Timing doesn't always work, but if you don't try to find the best time, doesn't that equate to laziness?
Heh. No, it doesn't equate to laziness.
I have over $1,000,000 waiting to enter the markets. Would any of you tell me this is a good time or would you more likely say that after a 50% drop in the markets entering a new bull phase?
We don't know. It's certainly possible the market could go up 120% before crashing 50%, and therefore waiting for the crash would cost you money. Or it could drop 50% starting next week, and then you're a genius.

But when did you go to $1 million cash? Yesterday? Or 3 months ago? Or 6 months ago? Are you already 10%-20% behind?

What it goes up another 20%, then finally a crash happens but it only drops 30%. You were waiting for a 50% drop. What do you do? You going to get back in after 3 straight up-days gaining 5% back? You might still be buying higher than the original day you pulled the $1 million out. What if it drops again as soon as you buy? Maybe it will hit 50% drop after all and should have waited. But maybe you don't buy in, determined to wait for the 50% drop, but it goes up steadily. A new bull market may have started, and you're going to totally miss it.

It's not like the stock market goes down a straight 50% and then back up. Plenty of 10% corrections, and 20% and 30% "crashes", meanwhile always moving higher in general. It's HARD to know the right time to get out and get back in. A few wrong moves can cost a lot.

We know that we don't know how to predict market movements. You think you know. But you really don't. You're probably really really smart, but you don't know. Thousands of PhDs and Nobel Laureates have tried and failed. There are too many variables, nobody fully understands the rules of the game, and, even worse, the rules of the game can CHANGE from decade to decade.
I have been investing for over 20 years - now all of a sudden my patterns won't make sense?
That is correct. It is certainly possible they won't.

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Re: Are we missing recession /bear market beginning

Post by md&pharmacist » Thu Mar 29, 2018 5:16 pm

Homer, you should definitely use a financial adviser or stick with index/target date funds.

This is very hard to teach to someone who just can't get an active strategy. Doing the same thing passively thru all types of markets will get you the average returns if they are good enough for you.

If what was going on in 2008-2009 was not obvious to you as a crash, your adviser will understand. They will also understand the differences between investment strategies in a young bull market versus an aging bull market. They also understand the causes that generally lead to corrections versus bear markets versus recession/depression.

You want predictions that are impossible, but there can be successful intuition based on sorting thru the information out there. That is going to either come naturally to a few but it appears not to most.

Selling all my holdings now was just an example, I would only do it at the start of the next recession/depression...and yes circumstances at the time will tell the person with information and open ears that we're in one. For now I'm working on cutting back to 50% stocks and 50% cash as the markets without conviction - if they rise for good reason I don't sell into new highs...but I just haven't seen that in the last two months.

There's no way I got to this point based on luck. If you have a strategy that will beat what I've done I'm all ears. If not, pessimism about advice will keep you in the dark.

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Jimsad
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Re: Are we missing recession /bear market beginning

Post by Jimsad » Thu Mar 29, 2018 6:07 pm

Thank you everybody for your suggestions and input .
What I realize now is my risk tolerance has changed since my portfolio entered the 7 figure territory .
I have about 10 years to retirement .
I have become less risk Tolerant than when my portfolio was smaller
I will try to shoot for somewhere between 55:45 to 60:40 mix .

CantPassAgain
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Re: Are we missing recession /bear market beginning

Post by CantPassAgain » Thu Mar 29, 2018 8:15 pm

md&pharmacist wrote:
Thu Mar 29, 2018 5:16 pm
Homer, you should definitely use a financial adviser or stick with index/target date funds.

This is very hard to teach to someone who just can't get an active strategy. Doing the same thing passively thru all types of markets will get you the average returns if they are good enough for you.

If what was going on in 2008-2009 was not obvious to you as a crash, your adviser will understand. They will also understand the differences between investment strategies in a young bull market versus an aging bull market. They also understand the causes that generally lead to corrections versus bear markets versus recession/depression.

You want predictions that are impossible, but there can be successful intuition based on sorting thru the information out there. That is going to either come naturally to a few but it appears not to most.

Selling all my holdings now was just an example, I would only do it at the start of the next recession/depression...and yes circumstances at the time will tell the person with information and open ears that we're in one. For now I'm working on cutting back to 50% stocks and 50% cash as the markets without conviction - if they rise for good reason I don't sell into new highs...but I just haven't seen that in the last two months.

There's no way I got to this point based on luck. If you have a strategy that will beat what I've done I'm all ears. If not, pessimism about advice will keep you in the dark.
Welcome to Bogelheads, md&pharmacist. You might do well to do a bit of reading to get the feel of the place and the ideals espoused by the Bogleheads (i.e. "Investing advice inspired by Jack Bogle"). We are not here to try to beat the market. The goal is to get our fair share of market returns (for good or ill, hopefully good). A good place to start are the following sections of the Bogleheads Wiki:

Getting Started:
https://www.bogleheads.org/wiki/Getting_started

Bogleheads® investment philosophy
https://www.bogleheads.org/wiki/Boglehe ... philosophy

Hopefully it will give you a better idea of the tone and tenor of this forum, and where HomerJ is coming from.

Regards

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CyclingDuo
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Re: Are we missing recession /bear market beginning

Post by CyclingDuo » Thu Mar 29, 2018 9:02 pm

md&pharmacist wrote:
Thu Mar 29, 2018 10:14 am
Here's my philosophy for what it's worth.

My wife and I are in our mid 40's managing approximately $3,000,000 in our non real-estate retirement/non-retirement investment accounts.

The market definitely just experienced a correction. Whether we are in the start of a bear market or a recession - the reality is I don't know, you don't know, and the best investors in the world don't know yet. So how to make wise decisions?

I do not do any dollar cost averaging. I see no reason to to put money into a declining market, and generally prefer to decrease exposure as lofty markets make new highs for no good reasons. Currently I do only mutual funds, as I am not smart enough to buy and sell individual stocks at the right times - I leave that to the pro's. I invest in very aggressive funds, some of which have had in excess of 80-100% annualized returns. I am also heavily diversified including, of course, US equities with high growth levels (technology, biotechnology, health care, semiconductors), international (mainly Europe), Emerging markets (China and general Asia, South America), index (Direxion 2x Nasdaq). I reassess the for best sectors at every 3-6 months. All researched online, never paid an adviser.

When the markets start to correct, I listen very carefully to what I hear on CNBC, Bloomberg, Fox Business, Yahoo Finance, etc. If it looks like a mild correction under 10%, generally the recovery takes just a few weeks-months to recover so these corrections are a good time increase equity holdings as the shares are on sale. I did this a few weeks ago.

Currently in this new cycle I am not putting new money into equities as I am already 70% invested, 30% cash. Even with my 30% cash position my accounts returned 17% over the past 12 months - well above the expected 8% annualized returns. If the market returns to new highs, I will actually be a seller unless there is some spectacular series of events/news headlines which I doubt over the next few months. I will increase my cash holdings in this situation and with the market as lofty as it is.

If the bear market continues over a prolonged period, say a year or two, I tend not to sell or buy as my long term horizon allows me to wait for the next round of market highs. Over that time frame our annual IRA and HSA contributions ($108,000 and $6750, respectfully) will go towards our cash positions and my percentage cash positions will therefore rise even if I don't pull out of any funds. During this time I am more likely to invest in new services in my medical office instead (for example I have added in house pharmacy, ultrasound, ABI, PFT's, allergy testing, NCV, ARNP's, etc.) as this is in itself a form of diversification. Also in the past year I am a new commercial landlord now with an extra $150,000-$200,000 annually coming in from this source - funds waiting patiently for the next big recession to start working for me. Right now they continue to contribute to a very healthy (>1 year) emergency fund for me.

If another major recession comes along (major domestic destabilizing events such as the 2008-2009 mortgage backed securities crisis) I will sell very aggressively because I want to have cash the next time the market has such a bottom and because the full recovery takes about 5 years. When fear is at it's peak, that's the best time to reinvest - during the last recession it was around DOW 6500. That's a good time to buy, buy, buy! In the beginning of a new bull market I prefer about 90% in equities and 10% in cash. Midstream I prefer a 65/35 split and at an expected market top I prefer to cut back to a 50/50 split, and 0% equities in market free fall. I am no longer a fan of bonds at this time in a rising interest rate environment.
How was your timing in the bear market of 2011? How about the bear market from mid-2015 to mid-2016? What about the tech wreck in 2017 that took down individual tech stocks and shot them one by one from Spring to Fall? What about the 2007-2009 bear? How about the 2000-2002 bear? How about the correction in 1999? The doozy in 1998 when we fell nearly 20%? The two corrections in 1997? The 1990-91 bear market?

That's a lot of timing to get correct on both sides of the trade. :mrgreen:

https://www.yardeni.com/pub/sp500corrbear.pdf

Loss aversion, regret aversion, herding, and behavioral biases can trigger a lot of negative return. The stock market has a positive return 70% of the time.

ImageReturns

One of Jack Bogle's favorite rules: Don't Peek!

“As I have said before, the daily machinations of the stock market are like a tale told by an idiot, full of sound and fury, signifying nothing,” Bogle added. “One of my favorite rules is ‘Don’t peek.’ Don’t let all the noise drown out your common sense and your wisdom. Just try not to pay that much attention, because it will have no effect whatsoever, categorically, on your lifetime investment returns.” ...

“Divide your money into your long-term investment account and your funny money account for short-term speculation. Guess on funds, guess on markets, guess on stocks if you want to, because that gives you an opportunity to act on your speculative impulses.

But they will hurt you a lot so I recommend you have a funny money account of no more than 5% of your portfolio. I also recommend that after five years, check it out. Has it done better than the long-term investment or worse? I’d be astonished if at least 95% of those funny money accounts don’t do worse.”


https://www.forbes.com/sites/davidmarot ... 318153c51f
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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nisiprius
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Re: Are we missing recession /bear market beginning

Post by nisiprius » Thu Mar 29, 2018 9:12 pm

triceratop wrote:
Wed Mar 28, 2018 10:11 am
XIV was an ETN, not an ETF.

I mention this slight quibble only because some posters have decried the conflation of ETFs and ETNs in the popular press, and we should be careful on bogleheads.org to not confuse them further.
Ouch. :oops: Corrected.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Are we missing recession /bear market beginning

Post by MiddleOfTheRoad » Thu Mar 29, 2018 9:18 pm

*bringing out the popcorn* :sharebeer

md&pharmacist
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Re: Are we missing recession /bear market beginning

Post by md&pharmacist » Thu Mar 29, 2018 9:35 pm

CantPassAgain wrote:
Thu Mar 29, 2018 8:15 pm
md&pharmacist wrote:
Thu Mar 29, 2018 5:16 pm

Welcome to Bogelheads, md&pharmacist. You might do well to do a bit of reading to get the feel of the place and the ideals espoused by the Bogleheads (i.e. "Investing advice inspired by Jack Bogle"). We are not here to try to beat the market. The goal is to get our fair share of market returns (for good or ill, hopefully good). A good place to start are the following sections of the Bogleheads Wiki:

Getting Started:
https://www.bogleheads.org/wiki/Getting_started

Bogleheads® investment philosophy
https://www.bogleheads.org/wiki/Boglehe ... philosophy

Hopefully it will give you a better idea of the tone and tenor of this forum, and where HomerJ is coming from.

Regards
Oh! A good target date index fund can get the usual average historic 7-8% annualized returns at very low cost.

I am at closer to 20% annualized returns and aiming to improve further, so I think I'm just in a completely different mindset than those looking for advice on this forum.
I lost essentially nothing in the 2008-2009 Great Recession, and still not wanting to sustain the losses of a repeat major depression by just waiting for it to end while invested.
I'll need to look for another forum for those looking to beat the market returns or simply more closely mirror my thoughts regarding actively mitigating against large market losses to approximate those higher returns over the decades.

Thanks for clarifying!

The best of luck to everyone.

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Re: Are we missing recession /bear market beginning

Post by willthrill81 » Thu Mar 29, 2018 10:50 pm

md&pharmacist wrote:
Thu Mar 29, 2018 9:35 pm
CantPassAgain wrote:
Thu Mar 29, 2018 8:15 pm

Welcome to Bogelheads, md&pharmacist. You might do well to do a bit of reading to get the feel of the place and the ideals espoused by the Bogleheads (i.e. "Investing advice inspired by Jack Bogle"). We are not here to try to beat the market. The goal is to get our fair share of market returns (for good or ill, hopefully good). A good place to start are the following sections of the Bogleheads Wiki:

Getting Started:
https://www.bogleheads.org/wiki/Getting_started

Bogleheads® investment philosophy
https://www.bogleheads.org/wiki/Boglehe ... philosophy

Hopefully it will give you a better idea of the tone and tenor of this forum, and where HomerJ is coming from.

Regards
Oh! A good target date index fund can get the usual average historic 7-8% annualized returns at very low cost.

I am at closer to 20% annualized returns and aiming to improve further, so I think I'm just in a completely different mindset than those looking for advice on this forum.
I lost essentially nothing in the 2008-2009 Great Recession, and still not wanting to sustain the losses of a repeat major depression by just waiting for it to end while invested.
I'll need to look for another forum for those looking to beat the market returns or simply more closely mirror my thoughts regarding actively mitigating against large market losses to approximate those higher returns over the decades.

Thanks for clarifying!

The best of luck to everyone.
I'm a trend follower mainly because I want some downside protection during bear markets. If I just get the market's returns over the long-term, I'll be content, though I suspect that I'll probably outperform by around 1%. That being said, I've not seen many trend followers claim to get 20% returns on a consistent basis. There must be more than timing involved in that process to more than double the market's returns, probably some form of leverage.

There are actually a fair number of trend followers here. Buy-and-holders certainly dominate this forum, due in part to Bogle's admonition to this effect, but some Bogleheads like Larry Swedroe are warming up to the idea, even if they don't intend on implementing it themselves. Over the long-term, I think that both camps will experience similar returns.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Are we missing recession /bear market beginning

Post by MotoTrojan » Thu Mar 29, 2018 10:58 pm

nisiprius wrote:
Fri Mar 23, 2018 6:41 am
willthrill81 wrote:
Thu Mar 22, 2018 11:01 pm
...That's very true, but holding on through a recession will hurt your returns compared to avoiding it as well...
Jeremy Siegel says something close to "no, it won't." Siegel, who certainly has a favorable attitude toward stocks, discusses this at length in Chapter 15 of Stocks for the Long Run, Fifth Edition. The chapter title is "Stocks and the Business Cycle."

Siegel writes
Jeremy Siegel wrote:...if an investor switched from stocks to cash (short-term bonds) four months before the beginning of a recession and back to stocks four months before the end of a recession, he would gain almost 5 percentage points per year over the buy-and-hold investor. About two-thirds of that gain the result of predicting the end of the recession.... Investors who switch between stocks and bonds just on the months that the NBER identifies (well after the fact) as the beginning and end of the recession gain a mere 1/2 percentage point return over the buy-and-hold investor.
In short, it does you almost no good to stay out during a recession that you know is in progress. In order to gain an advantage over buy-and-hold investors, it is necessary to predict recessions and take actions before anybody knows for sure.

Of course many people do think they can do this--Adrian Nenu in this forum believed an inverted yield curve was a completely reliable indicator--but Siegel gives many dramatic examples illustrating is point that "the record of predicting business cycle turning points is extremely poor." He cites on study that shows that business cycle forecasting is not too bad in the middle of a cycle but becomes very unreliable around the time of the turning points--which is the only time they would really be valuable!
I think someone like you knows the power of 1/2% gain in the long-term. What are your thoughts with the quote you provided in that context?

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Re: Are we missing recession /bear market beginning

Post by willthrill81 » Thu Mar 29, 2018 11:10 pm

MotoTrojan wrote:
Thu Mar 29, 2018 10:58 pm
nisiprius wrote:
Fri Mar 23, 2018 6:41 am
willthrill81 wrote:
Thu Mar 22, 2018 11:01 pm
...That's very true, but holding on through a recession will hurt your returns compared to avoiding it as well...
Jeremy Siegel says something close to "no, it won't." Siegel, who certainly has a favorable attitude toward stocks, discusses this at length in Chapter 15 of Stocks for the Long Run, Fifth Edition. The chapter title is "Stocks and the Business Cycle."

Siegel writes
Jeremy Siegel wrote:...if an investor switched from stocks to cash (short-term bonds) four months before the beginning of a recession and back to stocks four months before the end of a recession, he would gain almost 5 percentage points per year over the buy-and-hold investor. About two-thirds of that gain the result of predicting the end of the recession.... Investors who switch between stocks and bonds just on the months that the NBER identifies (well after the fact) as the beginning and end of the recession gain a mere 1/2 percentage point return over the buy-and-hold investor.
In short, it does you almost no good to stay out during a recession that you know is in progress. In order to gain an advantage over buy-and-hold investors, it is necessary to predict recessions and take actions before anybody knows for sure.

Of course many people do think they can do this--Adrian Nenu in this forum believed an inverted yield curve was a completely reliable indicator--but Siegel gives many dramatic examples illustrating is point that "the record of predicting business cycle turning points is extremely poor." He cites on study that shows that business cycle forecasting is not too bad in the middle of a cycle but becomes very unreliable around the time of the turning points--which is the only time they would really be valuable!
I think someone like you knows the power of 1/2% gain in the long-term. What are your thoughts with the quote you provided in that context?
:thumbsup

At the risk of sounding self-absorbed, I'll quote myself from earlier in this thread.
willthrill81 wrote:
Fri Mar 23, 2018 9:55 am
nisiprius wrote:
Fri Mar 23, 2018 6:41 am
willthrill81 wrote:
Thu Mar 22, 2018 11:01 pm
...That's very true, but holding on through a recession will hurt your returns compared to avoiding it as well...
Jeremy Siegel says something close to "no, it won't." Siegel, who certainly has a favorable attitude toward stocks, discusses this at length in Chapter 15 of Stocks for the Long Run, Fifth Edition. The chapter title is "Stocks and the Business Cycle."

Siegel writes
Jeremy Siegel wrote:...if an investor switched from stocks to cash (short-term bonds) four months before the beginning of a recession and back to stocks four months before the end of a recession, he would gain almost 5 percentage points per year over the buy-and-hold investor. About two-thirds of that gain the result of predicting the end of the recession.... Investors who switch between stocks and bonds just on the months that the NBER identifies (well after the fact) as the beginning and end of the recession gain a mere 1/2 percentage point return over the buy-and-hold investor.
In short, it does you almost no good to stay out during a recession that you know is in progress. In order to gain an advantage over buy-and-hold investors, it is necessary to predict recessions and take actions before anybody knows for sure.

Of course many people do think they can do this--Adrian Nenu in this forum believed an inverted yield curve was a completely reliable indicator--but Siegel gives many dramatic examples illustrating is point that "the record of predicting business cycle turning points is extremely poor." He cites on study that shows that business cycle forecasting is not too bad in the middle of a cycle but becomes very unreliable around the time of the turning points--which is the only time they would really be valuable!
Using the unemployment rate as an input, the specific trading rule for GTT would be:

(1) If the unemployment rate trend is downward, i.e., not indicating an oncoming recession, then go 100% long U.S. equities.

(2) If the unemployment rate trend is upward, indicating an oncoming recession, then defer to the price trend. If the price trend is upward, then go 100% long U.S. equities. If the price trend is downward, then go to cash.

To summarize, GTT will be 100% invested in the market unless the unemployment rate trend is upward at the same time that the price trend is downward. Together, these indicators represent a double confirmation of danger that forces the strategy to take a safe position.

...

As the chart illustrates, the strategy beats buy and hold (gray) as well as a simple moving average (green) strategy by over 150 basis points per year. That’s enough to triple returns over the 87 year period, without losing any of the moving average strategy’s downside protection.
http://www.philosophicaleconomics.com/2016/02/uetrend/

So we have a metric that at least one Federal Reserve president says has been very predictive, the data support that view, it makes very good economic sense (to me at least), it is actionable, and the data indicate that trading according to this simple strategy would have significantly improved returns while offering downside protection. Yet someone testing something else found that that didn't work, which should imply that this different strategy won't work either.

Don't get me wrong, I understand the limits of backtesting very well. None of this may hold true for the future, and following such a strategy could increase risk and reduce returns compared to buy-and-hold over the long-term. I'm not recommending this to anyone, but I'm merely throwing out the logic, the data, and the analysis. Others have to decide whether they think it is worthwhile for them.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Are we missing recession /bear market beginning

Post by md&pharmacist » Thu Mar 29, 2018 11:11 pm

CyclingDuo wrote:
Thu Mar 29, 2018 9:02 pm
md&pharmacist wrote:
Thu Mar 29, 2018 10:14 am


How was your timing in the bear market of 2011? How about the bear market from mid-2015 to mid-2016? What about the tech wreck in 2017 that took down individual tech stocks and shot them one by one from Spring to Fall? What about the 2007-2009 bear? How about the 2000-2002 bear? How about the correction in 1999? The doozy in 1998 when we fell nearly 20%? The two corrections in 1997? The 1990-91 bear market?

That's a lot of timing to get correct on both sides of the trade. :mrgreen:

Hi. Thanks for your interest.

Started day trading individual stocks during my residency years 1998-2001 with about $15,000 invested capital. Did great during the "WinTel" years and used all those profits to pay off all my medical school loans within the next 3 years. Went with conservative mutual funds 2001-2006 with my first employer. My wife similarly invested her retirement accounts in conservative stock funds. Left to start my private practice 2/2007 at which time I transferred my employer account to my personal retirement accounts. At that point, got extremely lucky because what I was reading made me move out of stock funds and into bond funds so I had no losses in the 2007-2009 disaster.

Seeing that a bull market just ended and the Dow dropping to about 6500 in 2009, just watched the next bull market very closely until I decided to jump in heavily in late 2011 after watching very closely the recovery process which convinced me to be aggressive (Technology, Biotech, Semiconductors, Healthcare, 2 x Nasdaq Index, Pharmaceuticals, Defense were my general preferences). Only mutual funds at this point so the pro's can decide which companies were good investments at any given time.

I do not dollar cost average. With each subsequent correction, I would add about $100,000-$250,000 to my funds from my cash positions including those corrections you speak of. I don't sell into organized bear markets, I just hold off further investment until there is some direction that proves other than a spiraling depression on the horizon. So to answer your questions I hang in during bear markets but am willing to take the risk of selling all when something is reported like...Lehman has collapsed, banks are refusing overnight lending to each other. I could be very wrong when the time comes so I lose some market return if the market moves back up, but if I get it right,,,another opportunity for a fire sale. I have not yet been put into that extreme position.

Cut back from 90% stocks initially to about 70% currently. Based on the information available to me today, I am now cutting back stock positions with each new market high unless there is good reason for that high. A new President with reports of strong corporate earnings was good reason, tax cuts were good reason for the market to go up. Now I do not see good reason at present in a late stage bull market (that sentiment may change depending on good information). Over the next 2 years looking to cut back to 50% exposure. Not buying on the dips recently unless the 200 day market moving averages stop declining and positive news enters. Selling on the rallies unless there is positive news, one example may be a trade agreement with China that avoids tariffs.

It's not to say my accounts never dropped during the corrections, but I bought into them (buy low) and am now selling into strength (sell high) to attain my preferred asset allocation. Even with 30% cash, my annualized portfolio returns are about 17-20%.

Nothing is about prediction. It's about a strategy grounded in concrete news at the time decisions need to be made. The decisions are never at the absolute top or bottom - but my decisions after Dow 6500 required less concern than Dow 25,000 when looking for clarity on direction. I'm in a position to profit if the markets continue to rise but to buy on sale if things go in the other direction over the short term, we all know the long term trend of the market.

What is the news we have been hearing about China over the past year? An emerging superpower. My China fund did about 115% in a recent 12 month period. Do I keep it, do I sell it? I don't know and can't predict the Chinese markets, so I act based on the general news consensus. I only have my research to go on. I owned a small amount of an energy fund for about a year, it went nowhere to slightly negative and sentiment in energy remains poor, so I sold it because it wasn't worth the risk. After 20 years what may seem second nature for me to do may be scary to the more casual investor.

This is how as a family doctor (Southeast, LCOL) and a pharmD, in conjunction with a prosperous self owned medical practice and commercial real estate, we have accumulated a net worth over $10,000,000.

I think what some are getting at I could be wrong or I could be right. I'm not saying I know, but I currently have on reason to stray from the intuition I developed over the past 20 years. If good reason presents itself, I'm certainly amenable to change. Stubbornness on my part would not be good for my portfolio I don't think. If I am wrong I just change so I can be right again.

This is how I did it. I've been told that Bogleheads generally prefer to mirror market returns and stay in during recessions, dollar cost average, etc. What I do has required two decades of daily market research for hours/day so I appreciate my thought process may be difficult to mimic or even understand, but it was learned thru years of self training. It's exhaustive trying to keep annual portfolio returns in excess of 15% especially with high cash positions. For most, market returns in an indexed retirement date mutual fund is the easier way to go and should accomplish the more average returns of 7-8% over the long term. This probably better for most on this forum.

Also I personally don't feel good enough to pick individual stocks in this environment, so I don't. I do know my weaknesses!

What is your strategy/philosophy? I certainly want to learn from others. Thanks!

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Re: Are we missing recession /bear market beginning

Post by MotoTrojan » Thu Mar 29, 2018 11:18 pm

md&pharmacist wrote:
Thu Mar 29, 2018 11:11 pm
CyclingDuo wrote:
Thu Mar 29, 2018 9:02 pm
md&pharmacist wrote:
Thu Mar 29, 2018 10:14 am


How was your timing in the bear market of 2011? How about the bear market from mid-2015 to mid-2016? What about the tech wreck in 2017 that took down individual tech stocks and shot them one by one from Spring to Fall? What about the 2007-2009 bear? How about the 2000-2002 bear? How about the correction in 1999? The doozy in 1998 when we fell nearly 20%? The two corrections in 1997? The 1990-91 bear market?

That's a lot of timing to get correct on both sides of the trade. :mrgreen:

Hi. Thanks for your interest.

Started day trading individual stocks during my residency years 1998-2001 with about $15,000 invested capital. Did great during the "WinTel" years and used all those profits to pay off all my medical school loans within the next 3 years. Went with conservative mutual funds 2001-2006 with my first employer. My wife similarly invested her retirement accounts in conservative stock funds. Left to start my private practice 2/2007 at which time I transferred my employer account to my personal retirement accounts. At that point, got extremely lucky because what I was reading made me move out of stock funds and into bond funds so I had no losses in the 2007-2009 disaster.

Seeing that a bull market just ended and the Dow dropping to about 6500 in 2009, just watched the next bull market very closely until I decided to jump in heavily in late 2011 after watching very closely the recovery process which convinced me to be aggressive (Technology, Biotech, Semiconductors, Healthcare, 2 x Nasdaq Index, Pharmaceuticals, Defense were my general preferences). Only mutual funds at this point so the pro's can decide which companies were good investments at any given time.

I do not dollar cost average. With each subsequent correction, I would add about $100,000-$250,000 to my funds from my cash positions including those corrections you speak of. I don't sell into organized bear markets, I just hold off further investment until there is some direction that proves other than a spiraling depression on the horizon. So to answer your questions I hang in during bear markets but am willing to take the risk of selling all when something is reported like...Lehman has collapsed, banks are refusing overnight lending to each other. I could be very wrong when the time comes so I lose some market return if the market moves back up, but if I get it right,,,another opportunity for a fire sale. I have not yet been put into that extreme position.

Cut back from 90% stocks initially to about 70% currently. Based on the information available to me today, I am now cutting back stock positions with each new market high unless there is good reason for that high. A new President with reports of strong corporate earnings was good reason, tax cuts were good reason for the market to go up. Now I do not see good reason at present in a late stage bull market (that sentiment may change depending on good information). Over the next 2 years looking to cut back to 50% exposure. Not buying on the dips recently unless the 200 day market moving averages stop declining and positive news enters. Selling on the rallies unless there is positive news, one example may be a trade agreement with China that avoids tariffs.

It's not to say my accounts never dropped during the corrections, but I bought into them (buy low) and am now selling into strength (sell high) to attain my preferred asset allocation. Even with 30% cash, my annualized portfolio returns are about 17-20%.

Nothing is about prediction. It's about a strategy grounded in concrete news at the time decisions need to be made. The decisions are never at the absolute top or bottom - but my decisions after Dow 6500 required less concern than Dow 25,000 when looking for clarity on direction. I'm in a position to profit if the markets continue to rise but to buy on sale if things go in the other direction over the short term, we all know the long term trend of the market.

What is the news we have been hearing about China over the past year? An emerging superpower. My China fund did about 115% in a recent 12 month period. Do I keep it, do I sell it? I don't know and can't predict the Chinese markets, so I act based on the general news consensus. I only have my research to go on. I owned a small amount of an energy fund for about a year, it went nowhere to slightly negative and sentiment in energy remains poor, so I sold it because it wasn't worth the risk. After 20 years what may seem second nature for me to do may be scary to the more casual investor.

This is how as a family doctor (Southeast, LCOL) and a pharmD, in conjunction with a prosperous self owned medical practice and commercial real estate, we have accumulated a net worth over $10,000,000.

I think what some are getting at I could be wrong or I could be right. I'm not saying I know, but I currently have on reason to stray from the intuition I developed over the past 20 years. If good reason presents itself, I'm certainly amenable to change. Stubbornness on my part would not be good for my portfolio I don't think. If I am wrong I just change so I can be right again.

This is how I did it. I've been told that Bogleheads generally prefer to mirror market returns and stay in during recessions, dollar cost average, etc. What I do has required two decades of daily market research for hours/day so I appreciate my thought process may be difficult to mimic or even understand, but it was learned thru years of self training. It's exhaustive trying to keep annual portfolio returns in excess of 15% especially with high cash positions. For most, market returns in an indexed retirement date mutual fund is the easier way to go and should accomplish the more average returns of 7-8% over the long term. This probably better for most on this forum.

Also I personally don't feel good enough to pick individual stocks in this environment, so I don't. I do know my weaknesses!

What is your strategy/philosophy? I certainly want to learn from others. Thanks!
Genuinely curious if you’ve calculated a 15-20 year CAGR. 15%?

md&pharmacist
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Re: Are we missing recession /bear market beginning

Post by md&pharmacist » Thu Mar 29, 2018 11:32 pm

MotoTrojan wrote:
Thu Mar 29, 2018 11:18 pm
md&pharmacist wrote:
Thu Mar 29, 2018 11:11 pm
CyclingDuo wrote:
Thu Mar 29, 2018 9:02 pm
md&pharmacist wrote:
Thu Mar 29, 2018 10:14 am


Genuinely curious if you’ve calculated a 15-20 year CAGR. 15%?
No that is since I implemented my aggressive investing philosophy in 2011. Prior to that I was conservative with Vanguard mutual funds followed by only bond funds into the Great Recession. Something in my research told me to do that and it saved hundreds of thousands that continued to appreciate very well after aggressive reinvestment in 2011.

Last 12 months overall portfolio return 17% with about 30% in cash. Some of my funds are leveraged, like Direxion 2x Nasdaq (DXQLX) last 12 months returned approximately 80%, and it wasn't my best performer.

Hoping to get close to 25% in the best bull years.

greatwhite24
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Re: Are we missing recession /bear market beginning

Post by greatwhite24 » Fri Mar 30, 2018 12:01 am

The market only has one way to go. What way will it go?

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CyclingDuo
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Re: Are we missing recession /bear market beginning

Post by CyclingDuo » Fri Mar 30, 2018 6:47 am

md&pharmacist wrote:
Thu Mar 29, 2018 11:11 pm
What is your strategy/philosophy? I certainly want to learn from others. Thanks!
Of the 36 corrections since 1950 that have been 10% or more, all but only one - the current correction, has been completely erased by a bull market or extended rally. This one will also eventually be erased. It may take three months, it may take six months, it may take 17-18 months, or it may take longer.

I do agree that during the accumulation phase, picking up shares during a correction is a great idea (because of the above). Most of us have simply continued on automatic pilot to purchase more shares on a monthly basis, plus reinvest the dividends along the way during our working careers - which covers the corrections of 10% or more.

Sounds like you have, in Bill Bernstein's words, "won the game" and can utilize proper strategies to protect your wealth:

https://www.whitecoatinvestor.com/berns ... -the-game/

Most of us here at BH would prefer to take the sage advice from Jack Bogle:

https://www.youtube.com/watch?v=A0gQiz0pCyI
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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Re: Are we missing recession /bear market beginning

Post by MotoTrojan » Fri Mar 30, 2018 11:31 am

md&pharmacist wrote:
Thu Mar 29, 2018 11:32 pm
MotoTrojan wrote:
Thu Mar 29, 2018 11:18 pm
md&pharmacist wrote:
Thu Mar 29, 2018 11:11 pm
CyclingDuo wrote:
Thu Mar 29, 2018 9:02 pm
md&pharmacist wrote:
Thu Mar 29, 2018 10:14 am


Genuinely curious if you’ve calculated a 15-20 year CAGR. 15%?
No that is since I implemented my aggressive investing philosophy in 2011. Prior to that I was conservative with Vanguard mutual funds followed by only bond funds into the Great Recession. Something in my research told me to do that and it saved hundreds of thousands that continued to appreciate very well after aggressive reinvestment in 2011.

Last 12 months overall portfolio return 17% with about 30% in cash. Some of my funds are leveraged, like Direxion 2x Nasdaq (DXQLX) last 12 months returned approximately 80%, and it wasn't my best performer.

Hoping to get close to 25% in the best bull years.
Impressive or luck, but if it worked for you great! Hopefully once you win the game you'll save yourself some time and reduce risk with a more conventional, hands-off approach.

wrongfunds
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Re: Are we missing recession /bear market beginning

Post by wrongfunds » Fri Mar 30, 2018 8:34 pm

Popcorn Time!

HomerJ,

Did you realize you were lecturing somebody whose net worth is already over $10M? He is not here to learn but rather to teach. How did you miss that detail?

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HomerJ
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Re: Are we missing recession /bear market beginning

Post by HomerJ » Fri Mar 30, 2018 8:57 pm

wrongfunds wrote:
Fri Mar 30, 2018 8:34 pm
Popcorn Time!

HomerJ,

Did you realize you were lecturing somebody whose net worth is already over $10M? He is not here to learn but rather to teach. How did you miss that detail?
Heh :)
md&pharmacist wrote:
Thu Mar 29, 2018 10:14 am
At that point, got extremely lucky
What is he going to teach me? Be a doctor married to a pharmicist with my own business and real estate holdings making hundreds of thousands a year that I can throw into the stock market, and get lucky enough (or possibly smart enough) to completely get out of stocks before the 2008-2009 crash, and make large bets on China funds that go up 115%, but don't pick the China funds that don't go up 115%?

Assuming everything he wrote is true, I think he's a very smart investor who has also gotten very lucky (always a good combo!), who probably doesn't really know if he's actually averaged 20% a year since he's always throwing a ton of new money into different funds every year, and changing funds constantly, and going in and out of large cash positions.

But maybe he has. He may indeed a Warren Buffet type. They do exist. He sounds like he may indeed be a genius investor.

But what is he going to teach us? Can he teach us to be a Warren Buffet type? Can he teach us to be lucky?
md&pharmacist post wrote:What I do has required two decades of daily market research for hours/day
Can he teach us how to correctly predict crashes, and never be fooled by false positives, and pick winning mutual funds, all from intensive reading of Yahoo Finance, and Fox Business News, and other websites, etc.?
Last edited by HomerJ on Fri Mar 30, 2018 11:18 pm, edited 1 time in total.

MrJones
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Re: Are we missing recession /bear market beginning

Post by MrJones » Fri Mar 30, 2018 9:46 pm

md&pharmacist post wrote:What I do has required two decades of daily market research for hours/day
If you could apply your impressive abilities and do two minutes of research, one-time, into how to quote others in a post correctly, so that your responses don't look like they are a quote from someone else, it would improve the readability of your posts here significantly. Just a thought....

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HomerJ
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Re: Are we missing recession /bear market beginning

Post by HomerJ » Fri Mar 30, 2018 11:23 pm

md&pharmacist wrote:Left to start my private practice 2/2007 at which time I transferred my employer account to my personal retirement accounts. At that point, got extremely lucky because what I was reading made me move out of stock funds and into bond funds so I had no losses in the 2007-2009 disaster.

Seeing that a bull market just ended and the Dow dropping to about 6500 in 2009, just watched the next bull market very closely until I decided to jump in heavily in late 2011
Okay, guess what... The market starting in 2/2007 had fully recovered by 2011. $10,000 invested in Feb 2007 was worth around $10,000 in late 2011.

You did make money from the bonds all that time, a nice 35% over 4.5 years.

So it definitely was an okay decision, but I doubt you beat a standard 50/50 portfolio over those 4 years. Because guess what... The buy and hold investor was buying each month with his 401k paycheck deposits, buying more stock at lower prices in 2008, 2009, 2010, all of which appreciated substantially by late 2011. Some of us even rebalanced during that time, selling bonds to buy stocks to keep the portfolio at 50/50. All that money invested in stocks was up far more than your bonds by late 2011.

You were sitting on the sidelines the entire time, and COMPLETELY missed the low prices. You didn't start buying back in until the stock market was right back to the same point where you left it. That doesn't sound like someone who can easily time the market.

You certainly weren't making 20% a year during that time period. What you were doing, is growing your business, and killing it professionally, and saving tons of money (and investing in real estate? Great timing there!). All of which should be commended. But you are probably mistaken if you think you've been a stock market guru for the past 20 years. It sounds more like you've made some good (but probably risky) investments during this current bull market (the past 7 years) which have paid off well for you.

I'm not saying you're not smart and I'm not saying you're not skilled. But don't discount some luck in there. Be careful. Easy to make money in a raging bull market (Even us boring index people have made like 13% a year since late 2011 without spending hours/day on research). Good luck to you.
Last edited by HomerJ on Sat Mar 31, 2018 12:27 am, edited 3 times in total.

Ztx
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Re: Are we missing recession /bear market beginning

Post by Ztx » Fri Mar 30, 2018 11:58 pm

MD&Pharmacist -

If your approach is so easy and you can get consistent 20% returns, why can't active funds replicate it? I'd think they have plenty of smart people and yet they can't beat index funds consistently.

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Re: Are we missing recession /bear market beginning

Post by md&pharmacist » Sat Mar 31, 2018 8:44 am

HomerJ wrote:
Fri Mar 30, 2018 11:23 pm
md&pharmacist wrote:Left to start my private practice 2/2007 at which time I transferred my employer account to my personal retirement accounts. At that point, got extremely lucky because what I was reading made me move out of stock funds and into bond funds so I had no losses in the 2007-2009 disaster.

Seeing that a bull market just ended and the Dow dropping to about 6500 in 2009, just watched the next bull market very closely until I decided to jump in heavily in late 2011
Okay, guess what... The market starting in 2/2007 had fully recovered by 2011. $10,000 invested in Feb 2007 was worth around $10,000 in late 2011.

You did make money from the bonds all that time, a nice 35% over 4.5 years.

So it definitely was an okay decision, but I doubt you beat a standard 50/50 portfolio over those 4 years. Because guess what... The buy and hold investor was buying each month with his 401k paycheck deposits, buying more stock at lower prices in 2008, 2009, 2010, all of which appreciated substantially by late 2011. Some of us even rebalanced during that time, selling bonds to buy stocks to keep the portfolio at 50/50. All that money invested in stocks was up far more than your bonds by late 2011.

You were sitting on the sidelines the entire time, and COMPLETELY missed the low prices. You didn't start buying back in until the stock market was right back to the same point where you left it. That doesn't sound like someone who can easily time the market.

You certainly weren't making 20% a year during that time period. What you were doing, is growing your business, and killing it professionally, and saving tons of money (and investing in real estate? Great timing there!). All of which should be commended. But you are probably mistaken if you think you've been a stock market guru for the past 20 years. It sounds more like you've made some good (but probably risky) investments during this current bull market (the past 7 years) which have paid off well for you.

I'm not saying you're not smart and I'm not saying you're not skilled. But don't discount some luck in there. Be careful. Easy to make money in a raging bull market (Even us boring index people have made like 13% a year since late 2011 without spending hours/day on research). Good luck to you.
You're right Homer. I was very lucky for the past 20 years, and hope to be lucky for the next 40, health allowing. My exhaustive research didn't and won't make a difference. Hoping to grow a $10,000,000 current net worth portfolio to a $30,000,000+ over the next 20 years with a whole lot more "luck"!

I don't know that I would say I was sitting on the sidelines (2007-2011). Instead of investing in others' business, I invested in my own. Our annual household income grew from about $350,000 17 year ago to about $1,200,000 now plus $150,000-$180,000 in commercial real estate. I know, I know...I just got lucky there too. These are part of my diversification strategy especially when the markets are not doing well (ie. flat 2007-2011 as you noted).

Also got very "lucky" with my mutual fund portfolio and was very "lucky" to be in the strongest sectors since reinvesting. Picked them myself. I should have just picked funds randomly, instead of my exhaustive research.

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Re: Are we missing recession /bear market beginning

Post by craimund » Sat Mar 31, 2018 9:04 am

md&pharmacist wrote:
Sat Mar 31, 2018 8:44 am
HomerJ wrote:
Fri Mar 30, 2018 11:23 pm
md&pharmacist wrote:Left to start my private practice 2/2007 at which time I transferred my employer account to my personal retirement accounts. At that point, got extremely lucky because what I was reading made me move out of stock funds and into bond funds so I had no losses in the 2007-2009 disaster.

Seeing that a bull market just ended and the Dow dropping to about 6500 in 2009, just watched the next bull market very closely until I decided to jump in heavily in late 2011
Okay, guess what... The market starting in 2/2007 had fully recovered by 2011. $10,000 invested in Feb 2007 was worth around $10,000 in late 2011.

You did make money from the bonds all that time, a nice 35% over 4.5 years.

So it definitely was an okay decision, but I doubt you beat a standard 50/50 portfolio over those 4 years. Because guess what... The buy and hold investor was buying each month with his 401k paycheck deposits, buying more stock at lower prices in 2008, 2009, 2010, all of which appreciated substantially by late 2011. Some of us even rebalanced during that time, selling bonds to buy stocks to keep the portfolio at 50/50. All that money invested in stocks was up far more than your bonds by late 2011.

You were sitting on the sidelines the entire time, and COMPLETELY missed the low prices. You didn't start buying back in until the stock market was right back to the same point where you left it. That doesn't sound like someone who can easily time the market.

You certainly weren't making 20% a year during that time period. What you were doing, is growing your business, and killing it professionally, and saving tons of money (and investing in real estate? Great timing there!). All of which should be commended. But you are probably mistaken if you think you've been a stock market guru for the past 20 years. It sounds more like you've made some good (but probably risky) investments during this current bull market (the past 7 years) which have paid off well for you.

I'm not saying you're not smart and I'm not saying you're not skilled. But don't discount some luck in there. Be careful. Easy to make money in a raging bull market (Even us boring index people have made like 13% a year since late 2011 without spending hours/day on research). Good luck to you.
You're right Homer. I was very lucky for the past 20 years, and hope to be lucky for the next 40, health allowing. My exhaustive research didn't and won't make a difference. Hoping to grow a $10,000,000 current net worth portfolio to a $30,000,000+ over the next 20 years with a whole lot more "luck"!

I don't know that I would say I was sitting on the sidelines (2007-2011). Instead of investing in others' business, I invested in my own. Our annual household income grew from about $350,000 17 year ago to about $1,200,000 now plus $150,000-$180,000 in commercial real estate. I know, I know...I just got lucky there too. These are part of my diversification strategy especially when the markets are not doing well (ie. flat 2007-2011 as you noted).

Also got very "lucky" with my mutual fund portfolio and was very "lucky" to be in the strongest sectors since reinvesting. Picked them myself. I should have just picked funds randomly, instead of my exhaustive research.
For someone with $10M, you sound pretty defensive. Your "advice" isn't really advice either. Seems like you want to puff yourself up.

FWIW I bought internet & telecomm/fiber optic stocks on margin in 1999 and I turned $10K into $120K in less than 6 months. I thought I was an investing genius. . .

Most of us here have learned the hard way that you can't time the market.
"When you ain't got nothing, you got nothing to lose"-Bob Dylan 1965. "When you think that you've lost everything, you find out you can always lose a little more"-Dylan 1997

MiddleOfTheRoad
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Re: Are we missing recession /bear market beginning

Post by MiddleOfTheRoad » Sat Mar 31, 2018 9:18 am

I am surprised no one has mentioned the tax implication of being in and out of funds at his tax bracket. :|

*getting another bucket of popcorn*

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Re: Are we missing recession /bear market beginning

Post by grettman » Sat Mar 31, 2018 9:21 am

Jimsad wrote:
Thu Mar 22, 2018 5:23 am
It seems to me that on most days recently , the stock market is down on some excuse or other . It used to be the other way round till recently .
Is this because a bear market / recession has already started ?
Any changes to my portfolio I should be making?
No one knows (despite what they might say).

Should you make any changes based on this? No.

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CyclingDuo
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Re: Are we missing recession /bear market beginning

Post by CyclingDuo » Sat Mar 31, 2018 10:06 am

md&pharmacist wrote:
Sat Mar 31, 2018 8:44 am
You're right Homer. I was very lucky for the past 20 years, and hope to be lucky for the next 40, health allowing. My exhaustive research didn't and won't make a difference. Hoping to grow a $10,000,000 current net worth portfolio to a $30,000,000+ over the next 20 years with a whole lot more "luck"!

I don't know that I would say I was sitting on the sidelines (2007-2011). Instead of investing in others' business, I invested in my own. Our annual household income grew from about $350,000 17 year ago to about $1,200,000 now plus $150,000-$180,000 in commercial real estate. I know, I know...I just got lucky there too. These are part of my diversification strategy especially when the markets are not doing well (ie. flat 2007-2011 as you noted).

Also got very "lucky" with my mutual fund portfolio and was very "lucky" to be in the strongest sectors since reinvesting. Picked them myself. I should have just picked funds randomly, instead of my exhaustive research.
Your success has everything to do with your income level. According to the latest data, there are only 137,535 households in the US with incomes over $1M. Being in the top .1% - not top 1%, but top .1% - of all income earners in the United States places you in an elite category that I trust you realize doesn't resonate with the vast majority of Bogleheads. Your income level allows for an awful lot of mistakes made along the way and yet can still be successful with returns - whether they are chosen at random, or after exhaustive research and market timing. Much like a roaring bull market allows for a lot of mistakes to be erased along the way for the average investor, your income level from your human capital is akin to having a non-stop roaring bull market going on all the time as you can put that inflow of capital to work in a variety of passive, active, and alternative investments no matter where we are in the economic cycle.

So your best investment has been in your career and business as it is far surpassing all of your other investments. If you simply saved $10 a month for the next 40 years on a starting base of $10M, even at a return of 4% you end up with $48M. No worries, LeBron James makes more than that in one season with salary and endorsements, but you'd still end up with a nice pile.

If any Boglehead was working with your annual gross income of $1.2M + $150-$180K in real estate income, we would be hard pressed to muck that up and not have a wildly successful period of wealth accumulation. :beer

You are obviously impressively successful, but so are Bogleheads that have amassed an amount over their working careers that is the equivalent of one to two years of your annual income, but they have done it on household incomes that the majority can relate to based on this data showing US household income:

5%: $130,000
10%: $90,000
20%: $60,000
30%: $50,000
40%: $40,000

50%: $30,000
60%: $20,000 – $24,999
70%: $15,000
80%: $5,000 — $9,999
90%: $0.01 — $4,999

The non bolded incomes are going to be much more challenged to make ends meet, let alone save.

https://wallethacks.com/average-median- ... n-america/
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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Re: Are we missing recession /bear market beginning

Post by md&pharmacist » Sat Mar 31, 2018 10:11 am

Ztx wrote:
Fri Mar 30, 2018 11:58 pm
MD&Pharmacist -

If your approach is so easy and you can get consistent 20% returns, why can't active funds replicate it? I'd think they have plenty of smart people and yet they can't beat index funds consistently.
My investments are in actively managed funds (only 1 non-actively managed fund). I'm not smart enough to pick individual stocks so I go with mutual funds. I pick only good sectors with long term out-performance. That's how my funds beat the index. By definition index funds include both well performing and poorly performing sectors, so if your funds are only in the performing sectors they will beat index funds. For example, I own no energy funds as energy stocks have been poor performers. That may change, but the research of the day tells me that isn't going to happen any time soon...so I stay away. Logic. Research. Not luck. Not guesses. Not predictions.

Also, I never said my approach his so easy, exhaustive daily research for years but some here say that didn't matter - I just got lucky. I don't agree but maybe it's true.

My exact portfolio:

VFIAX 1 year 13.95%, 5 year annualized 13.27
VQNPX 13.84, 13.35
VWNDX 11.99, 11.89
DXQLX 60.51, 41.60
FBIOX 17.03, 19.32
FSPHX 15.47, 19.12
FSELX 34.20, 27.71
OPGIX 42.63, 20.91
UNPIX 34.81, 7.45
UGPIX 77.62, 22.03%

Please look up these funds yourself if you don't want to believe my numbers.

If you owned the 10 funds with 10% ownership of each, your 12 month return would be 32.2% even after the recent 10% correction in indices. I have recently increased to 30% cash position due to recent concerns about the markets, so that is why my return is closer to 20-25% last 12 months.

DXQLX is my only 2x Nasdaq non-active fund, all other are active funds.

A few weeks ago, the numbers were even better, UGPIX was up about 115% and DXQLX was at about 80% - my best two performers, but all funds were better.

I reassess my holdings every 3-6 months to maintain consistent out-performance, only looking at best sectors. For example, I have only owned UNPIX for about a year(not a great 5 year performer, but I see strength in China long term). I sell my worst performer first when the markets hit new highs and by more of the best performers (whether already on this list or a new fund) on the corrections (usually in the 10-20% range). Most recently picking up DXQLX.

Disclaimer:The Boglehead philosophy is not active management seeking out-performance but more passive management seeking to mimic market performance (ie. long term market returns 7-8% annualized).

Question: Why do so many think what I do with my investments is not possible? Does my exact portfolio help with that? Sure many critics will remain. Just wondering why the blinders if people actually seek advice here, feels like an oxymoron. I understand if someone wants to be more passive and avoid the risks, but to not believe it's possible? Guess I'm a dreamer.

Some think I just get lucky and my years of daily research didn't help. I think it's that very research that makes my picks feel like second nature whereas others see being able to make these out-performing picks as difficult as climbing Mount Everest. All the research available to me is available to you on the internet. It's not rocket science but I appreciate most doctors struggle with this based on what I've seen on this forum.

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munemaker
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Re: Are we missing recession /bear market beginning

Post by munemaker » Sat Mar 31, 2018 10:48 am

md&pharmacist wrote:
Sat Mar 31, 2018 10:11 am

Disclaimer:The Boglehead philosophy is not active management seeking out-performance but more passive management seeking to mimic market performance (ie. long term market returns 7-8% annualized).

Question: Why do so many think what I do with my investments is not possible? Does my exact portfolio help with that? Sure many critics will remain. Just wondering why the blinders if people actually seek advice here, feels like an oxymoron. I understand if someone wants to be more passive and avoid the risks, but to not believe it's possible? Guess I'm a dreamer.

Some think I just get lucky and my years of daily research didn't help. I think it's that very research that makes my picks feel like second nature whereas others see being able to make these out-performing picks as difficult as climbing Mount Everest. All the research available to me is available to you on the internet. It's not rocket science but I appreciate most doctors struggle with this based on what I've seen on this forum.
The investment philosophy endorsed by this forum is to buy and hold broader market index funds, so your approach is not going to find a lot of support here.

If trading in and out of actively managed funds works for you, great. Maybe you are the next Warren Buffet? Good luck!

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Re: Are we missing recession /bear market beginning

Post by Ztx » Sat Mar 31, 2018 10:58 am

MD&Pharmacist - thank you for the detailed response.
Congratulations on your success, it is very impressive!

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Re: Are we missing recession /bear market beginning

Post by md&pharmacist » Sat Mar 31, 2018 11:04 am

MiddleOfTheRoad wrote:
Sat Mar 31, 2018 9:18 am
I am surprised no one has mentioned the tax implication of being in and out of funds at his tax bracket. :|

*getting another bucket of popcorn*
Great observation! Death and taxes are certain.

The majority of my investments are in IRA, HSA. So there are no tax implications at all for me until RMD's require I sell at age 70 1/2 and those will be of course at the then income tax rate, no such thing as long term capital gains rates with traditional IRA/401(k) retirement accounts when you sell. HSA funds used in retirement for healthcare purposes are tax free.

For non-retirement accounts, it's true that I tend to hold longer (>1 yr) otherwise I just pay the taxes as I go every year on the funds I sell. Even though I reassess every 3-6 months, most funds stay in place over 1 year, and a lot of my buying is with new funds made earned as personal income so there is no prior sale to pay taxes on. The best thing though is if I ever actually need the cash in the taxable brokerage accounts, taxes are already paid so $2,000,000 million cash in a taxable account is equivalent to about $3,000,000 in a retirement account, once these retirement account taxes are paid as I will probably remain in a high tax bracket in retirement.

The percentage cash in your non-retirement portfolio can be modified in 2 ways without selling. Mutual funds/stocks can drop in value (not preferred) so percentage in cash goes up, or you can pick very well performing sectors so you don't NEED to sell while continuing to contribute new cash that will increase your cash percentages awaiting the next opportunity to invest, unless the appreciation in your assets negates that which is a good problem to have. Most often a correction is a good tome to reinvest, I did so a few weeks ago with the last correction. But large sums, near the bottom of a full blown recession or depression is best if you are lucky enough to see it. In a flat market I use the cash earned to grow my business to grow my annual income for the long term.

I pay high tax rates to uncle Sam on our non-deferred income. I don't mind. Uncle same gives you and I the opportunities we have. Uncle Sam also has a lot of expenses.

Clearly I don't need all my income and investments to live on. Always tithe (great tax savings, but would definitely do it anyway), I personally also donate 1 day a month to a free medical clinic. I gave away the last car I didn't need anymore to a college student. We send monthly support to a few kids in the third world. Do something kind for a stranger every day. Keeps the soul clean and it makes you appreciative and proud of the life you lived.

Financial prosperity is secondary to your services to others. The strength of my medical business and my good fortune with commercial real estate only came because the focus is on people, not money. I really don't need much, so aside from supporting the family, giving time and resources to others makes life great and I wish you all peace, health and prosperity!

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HomerJ
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Re: Are we missing recession /bear market beginning

Post by HomerJ » Sat Mar 31, 2018 12:00 pm

md&pharmacist wrote:
Sat Mar 31, 2018 10:11 am
Question: Why do so many think what I do with my investments is not possible?
It's certainly possible. It's not easily reproducible.
I reassess my holdings every 3-6 months to maintain consistent out-performance, only looking at best sectors.
This is basically equal to Will Roger's advice - "Only pick stocks that go up. If they don't go up, don't pick them."

How does one determine the "best sectors" for the next 3-6 months? How does one pick the best fund in that sector? Plenty of China funds that didn't do as well as the one you picked. Are you just looking at past performance of the funds? What made UGPIX stand out?
My exact portfolio:

VFIAX 1 year 13.95%, 5 year annualized 13.27
VQNPX 13.84, 13.35
VWNDX 11.99, 11.89
DXQLX 60.51, 41.60
FBIOX 17.03, 19.32
FSPHX 15.47, 19.12
FSELX 34.20, 27.71
OPGIX 42.63, 20.91
UNPIX 34.81, 7.45
UGPIX 77.62, 22.03%

Please look up these funds yourself if you don't want to believe my numbers.
So basically your secret sauce is leverage. Most of those funds are highly leveraged. You've taken on a lot of risk, and it's paid off.

But it wasn't luck, because you knew that the world-wide bull market would continue. But, of course, if you had been wrong, you would have lost a lot more than the indexes as well.

But you weren't wrong.

Good for you.
A few weeks ago, the numbers were even better, UGPIX was up about 115% and DXQLX was at about 80% - my best two performers, but all funds were better.
The fact that those funds lost 25%-30% of their gains in a couple of weeks should warn you that they are very volatile and very risky.

Why did you post their 5-year returns by the way? Have you actually held any of them 5 years?

So, anyway, what's your predictions for the next 6 months? Which will be the "best sectors" going forward? The same 10 funds you've picked above? Let us know when you make a change.

md&pharmacist
Posts: 262
Joined: Fri Mar 23, 2018 7:05 pm

Re: Are we missing recession /bear market beginning

Post by md&pharmacist » Sat Mar 31, 2018 12:06 pm

wrongfunds wrote:
Fri Mar 30, 2018 8:34 pm
Popcorn Time!

HomerJ,

Did you realize you were lecturing somebody whose net worth is already over $10M? He is not here to learn but rather to teach. How did you miss that detail?
Are you kidding! That's exactly why I'm here. If you have a good out-performing fund portfolio or sector allocation, etc. I would appreciate it.

But I'm new to this site and finding out most Bogleheads don't seek a 20+% annual return, more like 7-8% annualized market performance. I showed in another post here how my current holdings averaged better than 20% with my exact holdings listed.

Those of us who have made the most of what we learned are always going to be hungry to learn how to further improve ourselves.
Admittedly most who have given me great advice over the years are not doctors and have net worth far greater than mine - mainly business owners, brokers, real estate investors, etc.

I genuinely thought I would find other doctors blogging who also absorbed advice on active out-performance by networking with great people and implemented that advice successfully. Not only are most saying they are not there but they are skeptical to believe those someone who has implemented this.

My friend, I always have much to learn. I'm now limiting my advice to those that genuinely request it, so those that prefer market returns stick with those strategies.

I appreciate the advice of others, such as cutting back on risk and reward to preserve current wealth and at the right time I will definitely be doing that. I'm in my mid 40's. My strategy has evolved over the decades and will continue to evolve as I approach my 50's, 60's, 70's, etc.

Locked