Are you a closet market-timer?

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3funder
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Re: Are you a closet market-timer?

Post by 3funder » Thu Jan 16, 2020 3:28 pm

KlangFool wrote:
Thu Jan 16, 2020 9:17 am
Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Something's been eating away at me...

For all the talk about staying the course, investment policies, automated rebalancing etc.. an awful lot of folks seem to adjust their desired asset allocations at "compelling market moments."

I am hypothesizing that asset allocations are adjusted more frequently in volatile markets than in calm ones. They are tweaked at perceived highs and lows more often than when markets float inside of recently established ranges. Traders and other market-timers always do this. But I am talking to the BH faithful right now. Subscribers of the staid principles of Bogleian investing.

I raise my hand as a case in point. I've considered myself to be a stone-cold dollar cost average investor for a long time. But recently I find myself reexamining this position. Over the last couple of months I've made a significant reallocation - shifting ~5% of my net worth from stocks to bonds. The impetus (I told myself) was a general assessment of my station in life: A combination of accelerated retirement plans, diminished volatility tolerance, perceived reduction in income predictability etc.. I concluded mild de-risking was prudent.

Before you, I confront myself with a disturbing possibility. All the rationalizations were a pretext for having "sold high" at a point where fear trumped greed.

Are you right now "reassessing your risk tolerance" or "reexamining your investment policy" or undertaking some Bogleian exercise all in the name of justifying what your gut demands of you.. to SELLLLL!!!? Are you a closet market-timer?
Financologist,

If your portfolio is big enough and it is time to take money away from the stock market, what is wrong with that?

KlangFool
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Theoretical
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Re: Are you a closet market-timer?

Post by Theoretical » Thu Jan 16, 2020 3:43 pm

Whatyear? wrote:
Thu Jan 16, 2020 1:21 pm
I have a certain "average" return I am hoping to achieve over time, which happens to be 7.25%. This is based on historical returns for my AA (which I KNOW is not necessarily indicative of future return, but it's what I am targeting). If I happen to over-achieve that return mid-year, I happily take it off the table by moving $$ from stock funds to bond funds. If the market keeps going up after that I don't feel bad because I have plenty more invested in stocks. If it happens to go down, I'm happy I locked in a small gain. I don't consider it market-timing at all.
You have basically turned your equity portfolio into a non-marketable (not even interest rate boosts to a brokered CD) stock-index “-linked CD that has a capped upside with no downside protection or insurance. That’s exactly what you don’t want to do if you’re targeting a certain positive return.

bck63
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Re: Are you a closet market-timer?

Post by bck63 » Thu Jan 16, 2020 4:35 pm

02nz wrote:
Thu Jan 16, 2020 12:12 am
Bogle himself was never all that dogmatic about any of this stuff (except maybe cost). If you looked at your life situation and decided a lower allocation to stocks would be better for you, nothing wrong with that. But there are some on this board who see anything and everything as market-timing.
Mr. Bogle said in an interview that he pulled his stock allocation back to 25% prior to the dot-com crash. He also said feel free to decrease your stock allocation some if you feel stocks are overvalued. I've recently done that, but more because of my own risk tolerance (or lack thereof). I am a small investor (more of a saver, really) and could never figure out when to pull back based on market conditions.

You're right. He was definitely not dogmatic.

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Financologist
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Re: Are you a closet market-timer?

Post by Financologist » Thu Jan 16, 2020 5:28 pm

=watchnerd post_id=4958193 time=1579205747 user_id=766]
Financologist wrote:
Thu Jan 16, 2020 3:09 pm
A policy statement is based on the point in time at which it was created. I am coming to the belief that people tinker with their policy statements and their plans at an increased rate during compelling market moments. It's fascinating to see how people offer rationalizations at an increased frequency during this time also. I include myself in that group.

I offer this based on anecdotal observations and I'm trying to validate or invalidate the hypothesis based on the broader sample of investors here.

The higher rate of action during these market moments seems to suggest that regardless of the rationalizations people offer, they are reacting to the market and not individual circumstances.

In other words I am trying to follow the numbers.. not the claims. To that end, I would be interested if someone could offer evidence in support or to the contrary of the hypothesis.
You're quite probably right, but...

1. I know of no data source to validate or refute your hypothesis regarding IPS/AA changes during special market moments

2. What would you do what that info if you had it? Would it change anything for you?
[/quote]

Watchnerd,

If data were to show that people more readily reallocate during these market moments then I would probably examine my own reallocation more closely before executing. The moves I am making right now seem all too rational. The contrarian in me thinks this may signal they are emotional.

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TheTimeLord
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Re: Are you a closet market-timer?

Post by TheTimeLord » Thu Jan 16, 2020 5:29 pm

Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Are you a closet market-timer?
Definitely not, when I time the market I do it in the open and for what I believe is a rational reason.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Financologist
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Re: Are you a closet market-timer?

Post by Financologist » Thu Jan 16, 2020 5:39 pm

KlangFool,

Mine changed after each child came into the world. It also changed when my wife started a business. It changed again when our spending profile changed which drove a different expectation of what would be needed in retirement. It changed yet again when the prospects in my industry changed making future income less predictable. This was another one of my rationalizations for shifting further into bonds, by the way. I don't believe in static policies because policies should make the most of a changing fact set. If one can improve the policy based on new information then why not? I guess you can say I am not an originalist.

All of that being said, I do believe that principles can and should endure. And those tried-and-true principles should guide any policy adjustments.
KlangFool wrote:
Thu Jan 16, 2020 3:16 pm
Financologist wrote:
Thu Jan 16, 2020 3:09 pm

A policy statement is based on the point in time at which it was created. I am coming to the belief that people tinker with their policy statements and their plans at an increased rate during compelling market moments. It's fascinating to see how people offer rationalizations at an increased frequency during this time also. I include myself in that group.
Financologist,

<<A policy statement is based on the point in time at which it was created. >>

It does not have to and I don't.

<<I am coming to the belief that people tinker with their policy statements and their plans at an increased rate during compelling market moments.>>

If you believe that, then, you would have a problem with your IPS.

My annual expense is 60K.

My IPS says that my AA starts at 70/30 and glides down to 60/40 as it approaches my FI number of 1.5 million. My IPS says that my AA should be 60/40 after it crosses 1.2 million. My IPS was created long ago.

The AA is 60/40 because, at 1.5 million and 25X annual expense, it gives me 10 years of expense in fixed income.

There are no market-related items in my IPS.

It looks like you need to fix your IPS.

KlangFool

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Re: Are you a closet market-timer?

Post by Fallible » Thu Jan 16, 2020 5:53 pm

Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Something's been eating away at me...

For all the talk about staying the course, investment policies, automated rebalancing etc.. an awful lot of folks seem to adjust their desired asset allocations at "compelling market moments."

I am hypothesizing that asset allocations are adjusted more frequently in volatile markets than in calm ones. They are tweaked at perceived highs and lows more often than when markets float inside of recently established ranges. Traders and other market-timers always do this. But I am talking to the BH faithful right now. Subscribers of the staid principles of Bogleian investing.

I raise my hand as a case in point. I've considered myself to be a stone-cold dollar cost average investor for a long time. But recently I find myself reexamining this position. Over the last couple of months I've made a significant reallocation - shifting ~5% of my net worth from stocks to bonds. The impetus (I told myself) was a general assessment of my station in life: A combination of accelerated retirement plans, diminished volatility tolerance, perceived reduction in income predictability etc.. I concluded mild de-risking was prudent.

Before you, I confront myself with a disturbing possibility. All the rationalizations were a pretext for having "sold high" at a point where fear trumped greed.

Are you right now "reassessing your risk tolerance" or "reexamining your investment policy" or undertaking some Bogleian exercise all in the name of justifying what your gut demands of you.. to SELLLLL!!!? Are you a closet market-timer?
Your reallocation as you describe it appears to be based not on market timing (which is investing based on predicting what the market will do), but on a changing personal tolerance for risk, which happens to all of us of over an investing lifetime. Staying the course means the right course, which means the right course for an individual investor's ability, willingness (risk tolerance), and need to take risk, all of which can change as you've noted in your case.

You are not market timing.
Last edited by Fallible on Thu Jan 16, 2020 5:56 pm, edited 1 time in total.
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watchnerd
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Re: Are you a closet market-timer?

Post by watchnerd » Thu Jan 16, 2020 5:56 pm

Financologist wrote:
Thu Jan 16, 2020 5:28 pm


Watchnerd,

If data were to show that people more readily reallocate during these market moments then I would probably examine my own reallocation more closely before executing. The moves I am making right now seem all too rational. The contrarian in me thinks this may signal they are emotional.
How often do you make these changes?

Frequency may be a proxy for emotionally driven decisions.

Some people have a 3 month "cooling off period" for any IPS / AA change to make sure they think it's still a good idea 3 months later.

That may be a good behavioral hack for you if you're in doubt of your own rationality.
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KlangFool
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Re: Are you a closet market-timer?

Post by KlangFool » Thu Jan 16, 2020 6:02 pm

Financologist wrote:
Thu Jan 16, 2020 5:39 pm
KlangFool,

Mine changed after each child came into the world. It also changed when my wife started a business. It changed again when our spending profile changed which drove a different expectation of what would be needed in retirement. It changed yet again when the prospects in my industry changed making future income less predictable. This was another one of my rationalizations for shifting further into bonds, by the way. I don't believe in static policies because policies should make the most of a changing fact set. If one can improve the policy based on new information then why not? I guess you can say I am not an originalist.

All of that being said, I do believe that principles can and should endure. And those tried-and-true principles should guide any policy adjustments.
Financologist,

I disagreed. The IPS can remain the same if the formula is based on the retirement or current annual expense.

<< I don't believe in static policies because policies should make the most of a changing fact set.>>

I disagreed. The policy can be written in such a way that it could adapt to a new estimation of current or retirement expenses.

<< If one can improve the policy based on new information then why not? I guess you can say I am not an originalist. >>

Or, it is based on the latest emotion or rationalization about the market.

KlangFool

Whatyear?
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Re: Are you a closet market-timer?

Post by Whatyear? » Thu Jan 16, 2020 6:14 pm

1130Super wrote:
Thu Jan 16, 2020 1:58 pm
KlangFool wrote:
Thu Jan 16, 2020 1:41 pm
Whatyear? wrote:
Thu Jan 16, 2020 1:21 pm
I have a certain "average" return I am hoping to achieve over time, which happens to be 7.25%. This is based on historical returns for my AA (which I KNOW is not necessarily indicative of future return, but it's what I am targeting). If I happen to over-achieve that return mid-year, I happily take it off the table by moving $$ from stock funds to bond funds. If the market keeps going up after that I don't feel bad because I have plenty more invested in stocks. If it happens to go down, I'm happy I locked in a small gain. I don't consider it market-timing at all.
Whatyear?,

In my opinion, you are a market-timer.

KlangFool
You need those 20% & 30% years (2013,2019) to make up for the down years. Your theory is probably the worst possible way to market time. If you capped your return at 7.25% in 2012, 2013, 2017, 2019 your equities are half what they could be
I don't "cap the return" - I take a small piece (i.e., the amount I was planning on earning that year) off the table and everything else stays invested. Let's say hypothetically my portfolio is $1 million and I am targeting (at 7.25%) making $75,000 in year one. I see that the market has gone up 10% so I've in fact made $100,000 so far. In that case maybe I decide to take $75,000 and move it to a bond fund, The remaining $1,025,000 stays invested in stocks.

This is over-simplified but it illustrates what I am doing. I'm only missing out on future upswings for that small piece. And by the way, the bond funds are doing pretty well, too. It's not like they earn zero . . . My high-yield fund made ~19% in 2019. I'll take that any day.

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Portfolio7
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Re: Are you a closet market-timer?

Post by Portfolio7 » Fri Jan 17, 2020 1:31 am

Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Are you right now "reassessing your risk tolerance" or "reexamining your investment policy" or undertaking some Bogleian exercise all in the name of justifying what your gut demands of you.. to SELLLLL!!!? Are you a closet market-timer?
Well, yes, but why do you want to know? I went from 75/25 to 85/15 on Dec 1st. On Jan 10th I went back to 75/25. But I'm not in the closet. Market Timing is my admitted sin against the BH way, but I've come to terms with my errant ways and put boundaries around it. So anyway, are you trying to say we need to be more wary of our sneaky emotional impulses? How do you suggest we do this? I mean, there should be guidance in our IPS, and if we don't violate our IPS, is there really an issue?

Imho, changing your AA by 10% because you have a jolt of fear is not a terrible thing, as long as you've rationalized it and the changes stop there.

If you are panicking and sell all your equity holdings in one transaction, or changing your AA based on the latest Mad Money episode, now that's a problem.
"An investment in knowledge pays the best interest" - Benjamin Franklin

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Financologist
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Re: Are you a closet market-timer?

Post by Financologist » Fri Jan 17, 2020 1:41 am

Why do you do this? If you know you are changing your allocation because of a "jolt of fear" and I presume you know that your fear is not a predictor of market performance, then why do you allow yourself to make decisions on this basis?
Portfolio7 wrote:
Fri Jan 17, 2020 1:31 am
Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Are you right now "reassessing your risk tolerance" or "reexamining your investment policy" or undertaking some Bogleian exercise all in the name of justifying what your gut demands of you.. to SELLLLL!!!? Are you a closet market-timer?
Well, yes, but why do you want to know? I went from 75/25 to 85/15 on Dec 1st. On Jan 10th I went back to 75/25. But I'm not in the closet. Market Timing is my admitted sin against the BH way, but I've come to terms with my errant ways and put boundaries around it. So anyway, are you trying to say we need to be more wary of our sneaky emotional impulses? How do you suggest we do this? I mean, there should be guidance in our IPS, and if we don't violate our IPS, is there really an issue?

Imho, changing your AA by 10% because you have a jolt of fear is not a terrible thing, as long as you've rationalized it and the changes stop there.

If you are panicking and sell all your equity holdings in one transaction, or changing your AA based on the latest Mad Money episode, now that's a problem.

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Portfolio7
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Re: Are you a closet market-timer?

Post by Portfolio7 » Fri Jan 17, 2020 4:52 am

Well first of all - we all do this, at some level. For any BH's AA, I can ask about why it's not more or less aggressive, or 3 fund vs 2 fund, or TIPS vs standard Treasuries. The answers will be reasonable and rationalized and written in black and white in your IPS, but the buried reality of the situation is that a host of emotions underlie those rationalizations and interpretations. The question is whether those emotions control you or serve you.

Secondly, the direct answer to your question is I don't... at least not in the manner you imply. However, it was how I interpreted your personal example of perhaps rationalizing an AA change. If your gut is screaming SELLLLL, as you describe, I interpreted that as a jolt of fear. However, you had rationalized it as a change in risk tolerance. I'm saying I don't think that's so terrible as long as you adhere to limits/boundaries. Apologies if I mistook your meaning.

I personally change my AA when there is either a technical indicator, or (very rarely) when I think there is an unpriced change in the underlying market risk. By "think", I mean the synthesis of facts and interpretations, and weighing of possibilities. I forecast things with low R-squared drivers for a living. Once in a while I have an intuition that something is not what it appears. If I can find facts and corroborating opinions among other investors that support that intuition, then I may have the basis to investigate if a segment of the market is perhaps misunderstood. Even if it is misunderstood, a black swan can happen anytime. I have rigid limits in amount and timing of portfolio changes to limit volatility risk.

BTW, I don't view this as predicting market performance. What I'm trying to understand is underlying market risk. Low risk doesn't mean high returns, but if risk actually is lower, then an Aggressive AA is safer to hold.

My market timing is done within constraints, but if you ask why do I do it? I could write a book, but maybe the most truthful answer is that it's in my nature. I'm intrinsically a tinkerer. By putting constraints on myself I avoid significant damage (and to the extent I've been able to measure the results, they've been net helpful.)
Financologist wrote:
Fri Jan 17, 2020 1:41 am
Why do you do this? If you know you are changing your allocation because of a "jolt of fear" and I presume you know that your fear is not a predictor of market performance, then why do you allow yourself to make decisions on this basis?
Portfolio7 wrote:
Fri Jan 17, 2020 1:31 am
Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Are you right now "reassessing your risk tolerance" or "reexamining your investment policy" or undertaking some Bogleian exercise all in the name of justifying what your gut demands of you.. to SELLLLL!!!? Are you a closet market-timer?
Well, yes, but why do you want to know? I went from 75/25 to 85/15 on Dec 1st. On Jan 10th I went back to 75/25. But I'm not in the closet. Market Timing is my admitted sin against the BH way, but I've come to terms with my errant ways and put boundaries around it. So anyway, are you trying to say we need to be more wary of our sneaky emotional impulses? How do you suggest we do this? I mean, there should be guidance in our IPS, and if we don't violate our IPS, is there really an issue?

Imho, changing your AA by 10% because you have a jolt of fear is not a terrible thing, as long as you've rationalized it and the changes stop there.

If you are panicking and sell all your equity holdings in one transaction, or changing your AA based on the latest Mad Money episode, now that's a problem.
"An investment in knowledge pays the best interest" - Benjamin Franklin

TSWNY
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Re: Are you a closet market-timer?

Post by TSWNY » Fri Jan 17, 2020 12:41 pm

I silently hope that if the market has a down day it's on pay day. That's about it for me.

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watchnerd
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Re: Are you a closet market-timer?

Post by watchnerd » Fri Jan 17, 2020 12:43 pm

This whole thread is like a group therapy session.
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lukestuckenhymer
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Re: Are you a closet market-timer?

Post by lukestuckenhymer » Fri Jan 17, 2020 12:46 pm

If the market is tanking/has just tanked in January or February (a la 2019), I will frontload my 403(b) contributions and then back off later in the year in order to just get the maximum employer match. This year, I'm spreading them evenly, though. Either way, I'm still contributing the maximum. Worked pretty well in 2019. Am I a market timer?

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Re: Are you a closet market-timer?

Post by watchnerd » Fri Jan 17, 2020 12:50 pm

This whole thread is like a group therapy session.
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Re: Are you a closet market-timer?

Post by Lee_WSP » Fri Jan 17, 2020 1:28 pm

I am completely out in the open about messing around with a tiny amount of my portfolio. That said, so far, I'm not finding any compelling evidence that the "juice is worth the squeeze".

teelainen
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Re: Are you a closet market-timer?

Post by teelainen » Fri Jan 17, 2020 1:36 pm

Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Are you a closet market-timer?
I think many people are to some extent. If the market goes down 35%, doesn't it make sense to buy more stocks? (especially if you are in it for the long haul).

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TheTimeLord
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Re: Are you a closet market-timer?

Post by TheTimeLord » Fri Jan 17, 2020 1:43 pm

I am currently performing a market timing experiment. I am putting new money into a Target Date fund (I normally despise Target Date Funds) that is roughly 70/30 and plan to exchange the shares for S&P 500 Index shares if we get a market swoon. :beer
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: Are you a closet market-timer?

Post by cashboy » Fri Jan 17, 2020 2:54 pm

no

but if i was going to market time i would do it out in the open, not in a closet :D
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Financologist
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Re: Are you a closet market-timer?

Post by Financologist » Fri Jan 17, 2020 2:56 pm

Maybe it makes sense and maybe it doesn't. None of us know. For example, if you dumped all of your money into the stock market after a 35% decline during the Great Depression you didn't do well. Or more recently, had you waited for a 35% dip in late 2018 you never would have gotten it and would have missed out on the 30% rise in the S&P 500 after only a 20% dip.

teelainen wrote:
Fri Jan 17, 2020 1:36 pm
Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Are you a closet market-timer?
I think many people are to some extent. If the market goes down 35%, doesn't it make sense to buy more stocks? (especially if you are in it for the long haul).

LiterallyIronic
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Re: Are you a closet market-timer?

Post by LiterallyIronic » Fri Jan 17, 2020 3:02 pm

Financologist wrote:
Wed Jan 15, 2020 11:53 pm
For all the talk about staying the course, investment policies, automated rebalancing etc.. an awful lot of folks seem to adjust their desired asset allocations at "compelling market moments."

Are you right now "reassessing your risk tolerance" or "reexamining your investment policy" or undertaking some Bogleian exercise all in the name of justifying what your gut demands of you.. to SELLLLL!!!? Are you a closet market-timer?
I am not. I set my Roth IRA to target retirement fund 2045 when I set up the account in 2012 and have never changed it. I set my wife's Roth IRA to target retirement fund 2050 a couple years later (2050 wasn't an option yet when I set mine up) and have never changed it. I set my 401k to 100/0 and have never changed it.

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Financologist
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Re: Are you a closet market-timer?

Post by Financologist » Fri Jan 17, 2020 4:51 pm

Perhaps you should consider rebalancing :P
LiterallyIronic wrote:
Fri Jan 17, 2020 3:02 pm
Financologist wrote:
Wed Jan 15, 2020 11:53 pm
For all the talk about staying the course, investment policies, automated rebalancing etc.. an awful lot of folks seem to adjust their desired asset allocations at "compelling market moments."

Are you right now "reassessing your risk tolerance" or "reexamining your investment policy" or undertaking some Bogleian exercise all in the name of justifying what your gut demands of you.. to SELLLLL!!!? Are you a closet market-timer?
I am not. I set my Roth IRA to target retirement fund 2045 when I set up the account in 2012 and have never changed it. I set my wife's Roth IRA to target retirement fund 2050 a couple years later (2050 wasn't an option yet when I set mine up) and have never changed it. I set my 401k to 100/0 and have never changed it.

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Bluce
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Re: Are you a closet market-timer?

Post by Bluce » Fri Jan 17, 2020 5:02 pm

Financologist wrote:
Fri Jan 17, 2020 4:51 pm
Perhaps you should consider rebalancing :P
LiterallyIronic wrote:
Fri Jan 17, 2020 3:02 pm
Financologist wrote:
Wed Jan 15, 2020 11:53 pm
For all the talk about staying the course, investment policies, automated rebalancing etc.. an awful lot of folks seem to adjust their desired asset allocations at "compelling market moments."

Are you right now "reassessing your risk tolerance" or "reexamining your investment policy" or undertaking some Bogleian exercise all in the name of justifying what your gut demands of you.. to SELLLLL!!!? Are you a closet market-timer?
I am not. I set my Roth IRA to target retirement fund 2045 when I set up the account in 2012 and have never changed it. I set my wife's Roth IRA to target retirement fund 2050 a couple years later (2050 wasn't an option yet when I set mine up) and have never changed it. I set my 401k to 100/0 and have never changed it.
Ha, reading that was a reality check on my quickly-dwindling life. In 2050 I would be 100 years old; I'll be lucky to see 2030. :(
"There are no new ideas, only forgotten ones." -- Amity Shlaes

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Financologist
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Re: Are you a closet market-timer?

Post by Financologist » Fri Jan 17, 2020 5:08 pm

Bluce wrote:
Fri Jan 17, 2020 5:02 pm
Financologist wrote:
Fri Jan 17, 2020 4:51 pm
Perhaps you should consider rebalancing :P
LiterallyIronic wrote:
Fri Jan 17, 2020 3:02 pm
Financologist wrote:
Wed Jan 15, 2020 11:53 pm
For all the talk about staying the course, investment policies, automated rebalancing etc.. an awful lot of folks seem to adjust their desired asset allocations at "compelling market moments."

Are you right now "reassessing your risk tolerance" or "reexamining your investment policy" or undertaking some Bogleian exercise all in the name of justifying what your gut demands of you.. to SELLLLL!!!? Are you a closet market-timer?
I am not. I set my Roth IRA to target retirement fund 2045 when I set up the account in 2012 and have never changed it. I set my wife's Roth IRA to target retirement fund 2050 a couple years later (2050 wasn't an option yet when I set mine up) and have never changed it. I set my 401k to 100/0 and have never changed it.
Ha, reading that was a reality check on my quickly-dwindling life. In 2050 I would be 100 years old; I'll be lucky to see 2030. :(
On the contrary, Bluce. Biotech is advancing far more rapidly than your age. In other words, you're getting younger by the day.

Good luck..

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Bluce
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Re: Are you a closet market-timer?

Post by Bluce » Fri Jan 17, 2020 5:21 pm

Financologist wrote:
Fri Jan 17, 2020 5:08 pm
Bluce wrote:
Fri Jan 17, 2020 5:02 pm
Financologist wrote:
Fri Jan 17, 2020 4:51 pm
I am not. I set my Roth IRA to target retirement fund 2045 when I set up the account in 2012 and have never changed it. I set my wife's Roth IRA to target retirement fund 2050 a couple years later (2050 wasn't an option yet when I set mine up) and have never changed it. I set my 401k to 100/0 and have never changed it.
Ha, reading that was a reality check on my quickly-dwindling life. In 2050 I would be 100 years old; I'll be lucky to see 2030. :(
On the contrary, Bluce. Biotech is advancing far more rapidly than your age. In other words, you're getting younger by the day.

Good luck..
Ha, I'm still physically able to do a lot of things, but I have gotten mentally lazy so I end up NOT doing a lot of things I could do if I wanted to -- not sure how that can be reversed.

Oh well, I'm getting off-track here.
"There are no new ideas, only forgotten ones." -- Amity Shlaes

1130Super
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Re: Are you a closet market-timer?

Post by 1130Super » Fri Jan 17, 2020 6:16 pm

Financologist wrote:
Fri Jan 17, 2020 2:56 pm
Maybe it makes sense and maybe it doesn't. None of us know. For example, if you dumped all of your money into the stock market after a 35% decline during the Great Depression you didn't do well. Or more recently, had you waited for a 35% dip in late 2018 you never would have gotten it and would have missed out on the 30% rise in the S&P 500 after only a 20% dip.

teelainen wrote:
Fri Jan 17, 2020 1:36 pm
Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Are you a closet market-timer?
I think many people are to some extent. If the market goes down 35%, doesn't it make sense to buy more stocks? (especially if you are in it for the long haul).
And if you were waiting for a 20% decline 13 months ago we only had a 19.9% drop

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Bluce
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Re: Are you a closet market-timer?

Post by Bluce » Fri Jan 17, 2020 7:49 pm

teelainen wrote:
Fri Jan 17, 2020 1:36 pm
Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Are you a closet market-timer?
I think many people are to some extent. If the market goes down 35%, doesn't it make sense to buy more stocks? (especially if you are in it for the long haul).
If you knew that -35% was at or near the bottom -- yes. But it is never knowable.

Let's say you bought in at that level, and the market dithered around for a week or so, then plunged an additional 10% in a couple of days. Then in a week it was down by another 10%. At that point, what would you do?

This is kinda what happened in '08. I had no idea what to do, so I did nothing -- which ended up being the right thing. But never once did it go through my mind to start buying more stock. There seemed to be no bottom. My portfolio is my retirement, and I was 58 that year. At that time my AA was about 65/35.

I have no idea how old you are; maybe you went through it yourself during that time. If you did, did you buy all the way down? Do you have a guaranteed pension to fall back on?

And so, we ramble on.
"There are no new ideas, only forgotten ones." -- Amity Shlaes

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Financologist
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Re: Are you a closet market-timer?

Post by Financologist » Fri Jan 17, 2020 11:03 pm

Bluce wrote:
Fri Jan 17, 2020 7:49 pm
teelainen wrote:
Fri Jan 17, 2020 1:36 pm
Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Are you a closet market-timer?
I think many people are to some extent. If the market goes down 35%, doesn't it make sense to buy more stocks? (especially if you are in it for the long haul).
If you knew that -35% was at or near the bottom -- yes. But it is never knowable.

Let's say you bought in at that level, and the market dithered around for a week or so, then plunged an additional 10% in a couple of days. Then in a week it was down by another 10%. At that point, what would you do?

This is kinda what happened in '08. I had no idea what to do, so I did nothing -- which ended up being the right thing. But never once did it go through my mind to start buying more stock. There seemed to be no bottom. My portfolio is my retirement, and I was 58 that year. At that time my AA was about 65/35.

I have no idea how old you are; maybe you went through it yourself during that time. If you did, did you buy all the way down? Do you have a guaranteed pension to fall back on?

And so, we ramble on.
I got very lucky at that time. I received a bonus, a severance package and a tuition reimbursement all within the month of February '09. Dumped it all into the market. Not because I was smart but because I always did that with every spare dollar I got. I was particularly naive at the time and put it into Emerging Markets and QQQ mostly. It's not lost on me how fortunate I got with my incidental market timing.

milktoast
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Re: Are you a closet market-timer?

Post by milktoast » Fri Jan 17, 2020 11:08 pm

I think people get too hung up on the term “market timing.”

At its core, rebalancing or even maintaining AA with contributions/withdrawals is market timing.

Writing the rules down helps avoid emotional decisions. But even high frequency traders (who are definitely market timing) write down their rules.

I have an IPS and follow it exactly. Try very very hard not to adjust the rules based on how I feel.

But it has definite market timing in it. When to alter contributions to bring back to AA, when to execute rebalance trades (including lower threshold for a >2% down 30 minutes before market close), cape and percentage off record close thresholds which alters whether I direct taxable funds to investment or mortgage, etc.

I’m out and proud of timing the market. I just write the rules ahead of time.

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geerhardusvos
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Re: Are you a closet market-timer?

Post by geerhardusvos » Sat Jan 18, 2020 12:06 am

BalancedJCB19 wrote:
Thu Jan 16, 2020 1:04 am
Well being my entire portfolio is in the Vanguard Balanced Index Fund, I am as Stay the Course as one can get. Most of the time I don't even look at it. This portfolio is a win-win. It helps me sleep at night, it protects me against myself and I don't even have to give it TLC. It does all the heavy lifting without me.
No TLC can be good but what about TLH
VTSAX and chill

beth65
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Re: Are you a closet market-timer?

Post by beth65 » Sat Jan 18, 2020 10:00 am

I do have some cash (sold a home, now renting, not sure when I'll be ready to buy again, whether that is 1 or 2 years down the road) which includes emergency plus down payment and a little extra, but honestly, if we hit another 2009, I can't lie and say that I might not be willing to put some of that cash into more investments/equities and delay buying another home for longer. Having both owned and now back to renting, and realizing that it generally takes 5-7 years to make a profit with closing costs, realtor fees, etc., I am not necessarily rushing to buy again, as it's nice to not put $1 into the house outside of rent, but it's also nice to have equity in a home and stability, but I don't generally view housing as an investment, as the maintenance costs and taxes often offset gains.

I guess that would be considered market timing (if I invested some of that cash if the market drops significantly), but due to the overall short-term nature of the needs for the cash, and being well invested otherwise, I'm not willing to risk that cash right now while I'm safely earning 1.8%, and may need it in less than a year. All of my other investments are set-it-and-forget-it, and I recently reallocated my 401k from 5 funds to 3 based on advice given here on the BH forum. I don't trade or sell, but I do believe in reallocating as I age or if needs change, and I'm conservative and look for a 70/30 balance at my age (40).

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Financologist
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Re: Are you a closet market-timer?

Post by Financologist » Sat Jan 18, 2020 1:13 pm

Asset values often move in unison. So while you may be tempted to buy stocks on a dip, what's to say that buying a house on a related dip.. with leverage.. won't be the better move?
beth65 wrote:
Sat Jan 18, 2020 10:00 am
I do have some cash (sold a home, now renting, not sure when I'll be ready to buy again, whether that is 1 or 2 years down the road) which includes emergency plus down payment and a little extra, but honestly, if we hit another 2009, I can't lie and say that I might not be willing to put some of that cash into more investments/equities and delay buying another home for longer. Having both owned and now back to renting, and realizing that it generally takes 5-7 years to make a profit with closing costs, realtor fees, etc., I am not necessarily rushing to buy again, as it's nice to not put $1 into the house outside of rent, but it's also nice to have equity in a home and stability, but I don't generally view housing as an investment, as the maintenance costs and taxes often offset gains.

I guess that would be considered market timing (if I invested some of that cash if the market drops significantly), but due to the overall short-term nature of the needs for the cash, and being well invested otherwise, I'm not willing to risk that cash right now while I'm safely earning 1.8%, and may need it in less than a year. All of my other investments are set-it-and-forget-it, and I recently reallocated my 401k from 5 funds to 3 based on advice given here on the BH forum. I don't trade or sell, but I do believe in reallocating as I age or if needs change, and I'm conservative and look for a 70/30 balance at my age (40).

beth65
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Re: Are you a closet market-timer?

Post by beth65 » Sat Jan 18, 2020 1:27 pm

I don’t disagree at all. I would watch rather buy at a lower price, because you can always refinance the mortgage when the rates drop again in the future. Nobody ever gives you a refund when the price of your house drops. I’m not saying I would necessarily choose investing in the market over buying a house at a lower price, but hopefully both might even be an option.

teelainen
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Re: Are you a closet market-timer?

Post by teelainen » Sun Jan 19, 2020 12:09 am

Bluce wrote:
Fri Jan 17, 2020 7:49 pm
teelainen wrote:
Fri Jan 17, 2020 1:36 pm
Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Are you a closet market-timer?
I think many people are to some extent. If the market goes down 35%, doesn't it make sense to buy more stocks? (especially if you are in it for the long haul).
If you knew that -35% was at or near the bottom -- yes. But it is never knowable.

Let's say you bought in at that level, and the market dithered around for a week or so, then plunged an additional 10% in a couple of days. Then in a week it was down by another 10%. At that point, what would you do?

This is kinda what happened in '08. I had no idea what to do, so I did nothing -- which ended up being the right thing. But never once did it go through my mind to start buying more stock. There seemed to be no bottom. My portfolio is my retirement, and I was 58 that year. At that time my AA was about 65/35.

I have no idea how old you are; maybe you went through it yourself during that time. If you did, did you buy all the way down? Do you have a guaranteed pension to fall back on?

And so, we ramble on.
I didn't explain well enough. I usually tend to gravitate toward a 60/40 or 65/35 portfolio at all times. I typically only rebalance once a year. In 2008-2009, as the market kept tanking, I was forced to buy more stocks in order to keep my 60/40 AA.

I basically pushed myself to rebalance like 3-4 times (I don't remember the exact number of times) in less than half a year during that market plunge. Is that considered timing?

That's what I meant about buying more stocks when the market is down significantly.

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Financologist
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Re: Are you a closet market-timer?

Post by Financologist » Tue Jan 21, 2020 12:25 am

If you are following a policy of rebalancing whenever your target 60/40 allocation is out of balance by more than x%, then you are not timing the market.

My question is more for folks who (like me) suspect that adjustments to their policy coincide with compelling market moments. In 2009, I "realized" that, I didn't need as big an emergency fund as I previously thought. So I dumped everything into stocks. In retrospect, I suspect my "realization" was compelled by a sense of opportunity (market-timing behavior).

teelainen wrote:
Sun Jan 19, 2020 12:09 am
Bluce wrote:
Fri Jan 17, 2020 7:49 pm
teelainen wrote:
Fri Jan 17, 2020 1:36 pm
Financologist wrote:
Wed Jan 15, 2020 11:53 pm
Are you a closet market-timer?
I think many people are to some extent. If the market goes down 35%, doesn't it make sense to buy more stocks? (especially if you are in it for the long haul).
If you knew that -35% was at or near the bottom -- yes. But it is never knowable.

Let's say you bought in at that level, and the market dithered around for a week or so, then plunged an additional 10% in a couple of days. Then in a week it was down by another 10%. At that point, what would you do?

This is kinda what happened in '08. I had no idea what to do, so I did nothing -- which ended up being the right thing. But never once did it go through my mind to start buying more stock. There seemed to be no bottom. My portfolio is my retirement, and I was 58 that year. At that time my AA was about 65/35.

I have no idea how old you are; maybe you went through it yourself during that time. If you did, did you buy all the way down? Do you have a guaranteed pension to fall back on?

And so, we ramble on.
I didn't explain well enough. I usually tend to gravitate toward a 60/40 or 65/35 portfolio at all times. I typically only rebalance once a year. In 2008-2009, as the market kept tanking, I was forced to buy more stocks in order to keep my 60/40 AA.

I basically pushed myself to rebalance like 3-4 times (I don't remember the exact number of times) in less than half a year during that market plunge. Is that considered timing?

That's what I meant about buying more stocks when the market is down significantly.

m@ver1ck
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Re: Are you a closet market-timer?

Post by m@ver1ck » Tue Jan 21, 2020 12:34 am

Went from 100% stocks to 77% stocks over the course of last year. At 43, it seemed prudent to take some risk off the table. However, I discovered bogleheads October/November last year - and learnt the concept of taking the right amount of risk...

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Financologist
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Re: Are you a closet market-timer?

Post by Financologist » Fri Feb 07, 2020 12:16 am

m@ver1ck wrote:
Tue Jan 21, 2020 12:34 am
Went from 100% stocks to 77% stocks over the course of last year. At 43, it seemed prudent to take some risk off the table. However, I discovered bogleheads October/November last year - and learnt the concept of taking the right amount of risk...
Does your perception of the "right amount of risk" warp when the market is going haywire? When stocks plunged on friday, how may folks "realized" that they are equities-overweighted?

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willthrill81
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Re: Are you a closet market-timer?

Post by willthrill81 » Fri Feb 07, 2020 12:53 am

Theoretical wrote:
Thu Jan 16, 2020 3:43 pm
Whatyear? wrote:
Thu Jan 16, 2020 1:21 pm
I have a certain "average" return I am hoping to achieve over time, which happens to be 7.25%. This is based on historical returns for my AA (which I KNOW is not necessarily indicative of future return, but it's what I am targeting). If I happen to over-achieve that return mid-year, I happily take it off the table by moving $$ from stock funds to bond funds. If the market keeps going up after that I don't feel bad because I have plenty more invested in stocks. If it happens to go down, I'm happy I locked in a small gain. I don't consider it market-timing at all.
You have basically turned your equity portfolio into a non-marketable (not even interest rate boosts to a brokered CD) stock-index “-linked CD that has a capped upside with no downside protection or insurance. That’s exactly what you don’t want to do if you’re targeting a certain positive return.
Actually, that's the heart of McClung's Prime Harvesting withdrawal approach, and many intelligent people around here use 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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Re: Are you a closet market-timer?

Post by 3504PIR » Fri Feb 07, 2020 2:42 am

I’m not a strict follower of anyone’s rules but my own, but I will say that staying the course has benefited our assets. To be brutally honest, I don’t pay attention to the moves of the market with any sort of detail other than being generally aware of what I may hear on the evening news if it happens to be on. In other words, I gave up detailed market following decades ago because it isn’t my job and I lack the time to do it. However, I recall a very long post during the meltdown in 2008-2009 where my impression from the thousands of posts was that the majority (to me, meaning more than half) who were posting in real time did not “stay the course.” A detailed analysis might prove me wrong, but you’d be amazed at how many active posters at the time did in fact not stay the course.

It’s also interesting that many of those active posters no longer participate here for a variety of reasons I’m sure. Additionally, it is interesting that when the topic comes up as the years go by, people who registered around the time I did or later more often than not seem to have “stayed the course.” Who knows, outside of a 529 plan, we had little skin in the game at the time, but it definitely made me a very conservative investor with a lasting impression that still remains fresh in my mind. People react differently when watching their life savings implode. I’m no better and hope my AA is correct for my mental capacity for loss and I keep a healthy allocation in cash whenever I am able and a lower than average Bogleheads allocation to stocks.

So to me, my eyes are as open as I can make them, but don’t believe that everyone touting “stay the course” will do so. Look up some old threads from back then and you’ll be amazed. One of the better ones had the words Plan B in the title if I recall correctly.

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firebirdparts
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Re: Are you a closet market-timer?

Post by firebirdparts » Fri Feb 07, 2020 7:06 am

3504PIR wrote:
Fri Feb 07, 2020 2:42 am
However, I recall a very long post during the meltdown in 2008-2009 where my impression from the thousands of posts was that the majority (to me, meaning more than half) who were posting in real time did not “stay the course.” A detailed analysis might prove me wrong, but you’d be amazed at how many active posters at the time did in fact not stay the course.
I wasn't around here then but I see the posts dredged up, such as they are, are quite interesting and helpful. I figured it was just 2 or 3 people that left an entertaining legacy.

If the market drops 50%, I don't have much of a response to somebody who says "how do you know it won't drop 90% and stay down for 10 years". In 2008, people were explaining what was going to knock the playhouse down for a full year before it happened. A full year! So ok, some guys figured out by observation how to bankrupt Lehman brothers using portfolio insurance. Awesome. That's just more business for everybody else. It simply didn't make any sense, even in the heat of the moment. If I worked at a bank I might have had a different view of the crater. Nevertheless, everybody knew at the time where the problem was.

I have been taking a course "thegreatcourses.com" on financial crashes (mentioned here by somebody else). A lot or most crashes/panics in American history have been banking/currency crises. The course actually skips over dozens of them, because they were just so common. You'd need a reason to believe that a liquidity crisis is going to be permanent. In the great depression, a liquidity crisis really did last 10 years. Money policy was a lot different back then, and banks were pretty delicate. Maybe something truly bad will happen, but it sure looks like the next real downturn will just be the result of some more financial "innovation". Either way, you'll know.

So somebody will say "how do you know it won't drop 90% and stay down for 10 years?" but it probably won't be me. I'll be the one saying "invest in individual stocks and you might lose all your money permanently when the economy is booming".
A fool and your money are soon partners

rockstar
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Re: Are you a closet market-timer?

Post by rockstar » Fri Feb 07, 2020 9:23 am

I think, that when investors are willing to spending ridiculous sums for a stock, index, bond, etc., that it’s time to sell. That’s my ceiling. Tesla is a great recent example. The market cap is ridiculous. If I owned it, I would sell it.

Likewise, investors will also panic for no rational reason too, or they will reach a conclusion that valuations matter and sell. I set a floor at the 300 day ma.

Both my ceiling and floor is wide enough that I’m not constantly trading. I believe investors aren’t always rational as a crowd. It doesn’t happen all of the time. But it does happen.

My longest held position is AMEX. I’ve held it since 2003.

Nastywarnob
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Re: Are you a closet market-timer?

Post by Nastywarnob » Sat Feb 08, 2020 9:20 am

I guess I could be “considered” a market timer:
1. Paycheck comes in - TIME TO INVEST IN MY 401K
2. Bonus comes in - TIME TO INVEST IN OUR ROTHS
3. RSRs vest - TIME TO INVEST IN OUR BROKERAGE ACCOUNT

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Bluce
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Re: Are you a closet market-timer?

Post by Bluce » Sat Feb 08, 2020 11:20 am

I don't fit in here, but I've been buying and holding since 1990. 🤪
"There are no new ideas, only forgotten ones." -- Amity Shlaes

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willthrill81
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Re: Are you a closet market-timer?

Post by willthrill81 » Sat Feb 08, 2020 11:30 am

rockstar wrote:
Fri Feb 07, 2020 9:23 am
I believe investors aren’t always rational as a crowd. It doesn’t happen all of the time. But it does happen.
There's very good evidence to support that. Crowds can be every bit as irrational as individuals and even more so in some situations (e.g. riot).
“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

DB2
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Re: Are you a closet market-timer?

Post by DB2 » Sat Feb 08, 2020 4:10 pm

3504PIR wrote:
Fri Feb 07, 2020 2:42 am
I’m not a strict follower of anyone’s rules but my own, but I will say that staying the course has benefited our assets. To be brutally honest, I don’t pay attention to the moves of the market with any sort of detail other than being generally aware of what I may hear on the evening news if it happens to be on. In other words, I gave up detailed market following decades ago because it isn’t my job and I lack the time to do it. However, I recall a very long post during the meltdown in 2008-2009 where my impression from the thousands of posts was that the majority (to me, meaning more than half) who were posting in real time did not “stay the course.” A detailed analysis might prove me wrong, but you’d be amazed at how many active posters at the time did in fact not stay the course.

It’s also interesting that many of those active posters no longer participate here for a variety of reasons I’m sure. Additionally, it is interesting that when the topic comes up as the years go by, people who registered around the time I did or later more often than not seem to have “stayed the course.” Who knows, outside of a 529 plan, we had little skin in the game at the time, but it definitely made me a very conservative investor with a lasting impression that still remains fresh in my mind. People react differently when watching their life savings implode. I’m no better and hope my AA is correct for my mental capacity for loss and I keep a healthy allocation in cash whenever I am able and a lower than average Bogleheads allocation to stocks.

So to me, my eyes are as open as I can make them, but don’t believe that everyone touting “stay the course” will do so. Look up some old threads from back then and you’ll be amazed. One of the better ones had the words Plan B in the title if I recall correctly.
Yep. A number of 'purist' Bogleheads sold off back in 2008. The same thing will happen again in the next severe downturn. There is 'theory' and there is reality (human emotions). I believe very few people can hold all of their equities during a meltdown like that.

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firebirdparts
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Re: Are you a closet market-timer?

Post by firebirdparts » Sat Feb 08, 2020 4:28 pm

Nastywarnob wrote:
Sat Feb 08, 2020 9:20 am
I guess I could be “considered” a market timer:
1. Paycheck comes in - TIME TO INVEST IN MY 401K
2. Bonus comes in - TIME TO INVEST IN OUR ROTHS
3. RSRs vest - TIME TO INVEST IN OUR BROKERAGE ACCOUNT
I know how you feel. I just got a safe harbor contribution lump sum Friday. I am very happy to have it. It went into FXNAX, Fidelity bond index. Bonds are overpriced, but yet USA bonds look like a huge bargain compared to everybody elses. Go figure.
A fool and your money are soon partners

MathWizard
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Re: Are you a closet market-timer?

Post by MathWizard » Sat Feb 08, 2020 4:47 pm

No, not in the closet. I adjust AA based on the best available information. If you want to label me a market timer, so be it.

I shifted my AA towards stocks in 2001, 2003, and 2008/9, going form 80% to 100% stocks in 2008/2009. I was comfortable with that.

I have backed off to 50% in the last few years as equities have become more expensive compared to inflation adjusted earnings.
I will shift back to something like 70/30 or 80/20 going into retirement, once I believe that stock prices align better with earnings.

Keeping a fixed AA just means controlling against volatility risk. I take a different view of risk.

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Bluce
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Re: Are you a closet market-timer?

Post by Bluce » Sat Feb 08, 2020 4:50 pm

DB2 wrote:
Sat Feb 08, 2020 4:10 pm
Yep. A number of 'purist' Bogleheads sold off back in 2008. The same thing will happen again in the next severe downturn. There is 'theory' and there is reality (human emotions). I believe very few people can hold all of their equities during a meltdown like that.
I held onto everything in 2008, but not because I'm smart. It was too scary and I didn't know what else to do, so I did nothing.

I was the proverbial "deer in the headlights." :shock: But my PF value all came back by the end of 2010. :mrgreen:
"There are no new ideas, only forgotten ones." -- Amity Shlaes

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