When do you buy stocks in a correction or bear market?

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stezy
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When do you buy stocks in a correction or bear market?

Post by stezy » Fri Feb 28, 2020 8:43 am

Hey all,

So I know many will just keep everything on cruise control and continue with current investing.

There is talk about selling, as with every correction. I always have some extra money in one account or another. For the people like me, there have to be some out there, what is your threshold for layering in extra money to the market? When do people try to catch the falling knife? Yes, I know this is market timing. Some people have threshold of when they tax loss harvest, such as x amount of dollars. What is the number or percentage downturn before you decide it is worthwhile to put in any extra non invested money you have sitting around?

My speculation for the day, a sharp drop farther. It is interesting watching the panic with what so far is a healthy correction but this tends to happen after so much prosperity

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firebirdparts
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Re: When do you buy stocks in a correction or bear market?

Post by firebirdparts » Fri Feb 28, 2020 8:57 am

If you are accumulating, you'd buy stocks every payday when your asset allocation is low on the stock side.

If you have an asset allocation that you are trying to maintain, you would rebalance on some schedule that requires you to be patient. Real corrections take time. Backtest it and see.

If you have a "play money" account then you can do all the gut-instinct trading you want to with play money.
A fool and your money are soon partners

InvestingGeek
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Re: When do you buy stocks in a correction or bear market?

Post by InvestingGeek » Fri Feb 28, 2020 9:00 am

My target AA is 90/10 with a 5% band for rebalancing.

So when my portfolio gets down to 85/15, that is, when the stock portion drops by 5% is what'll trigger my rebalancing to get back up to 90/10 by selling off bonds and buying vtsax.

With the recent market moves, my portfolio allocation has barely moved though. It's gone from 90 to 89.3. A long way away from triggering rebalancing. So I'm staying put.

Edited to add: I'm also in the accumulation phase so I buy a set amount of stocks and bonds at 90/10 ratio every month regardless of status of the market.
Last edited by InvestingGeek on Fri Feb 28, 2020 9:05 am, edited 1 time in total.

Ferdinand2014
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Re: When do you buy stocks in a correction or bear market?

Post by Ferdinand2014 » Fri Feb 28, 2020 9:03 am

Every Friday. Like clockwork.
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Rowan Oak
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Re: When do you buy stocks in a correction or bear market?

Post by Rowan Oak » Fri Feb 28, 2020 9:04 am

I rebalance based on my chosen asset allocation of stocks and bonds so when either asset gets out of balance by 5-6% I begin investing new money and/or sell bonds/stocks and use that money to buy the asset class that has gone down. This week I have been buying Vanguard Total Stock Market ETF (VTI), but then tax loss harvested into Vanguard S&P 500 ETF (VOO) as I continued to buy. Next week I will probably tax loss harvest again, but this time into Vanguard Large-Cap ETF (VV). In around 31 days (if possible) I will tax-loss harvest back into Vanguard Total Stock Market ETF (VTI) all the while continuing to maintain my chosen asset allocation of stocks and bonds. This process repeats although in a bull market there is usually little opportunity to tax loss harvest. As always I look at my taxable account and retirement accounts as a whole.
Last edited by Rowan Oak on Fri Feb 28, 2020 9:09 am, edited 2 times in total.
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UpperNwGuy
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Re: When do you buy stocks in a correction or bear market?

Post by UpperNwGuy » Fri Feb 28, 2020 9:04 am

I buy on the first of each month.

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JoMoney
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Re: When do you buy stocks in a correction or bear market?

Post by JoMoney » Fri Feb 28, 2020 9:10 am

The same time I buy them in a booming bull market, every other week with my paycheck.
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Nate79
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Re: When do you buy stocks in a correction or bear market?

Post by Nate79 » Fri Feb 28, 2020 10:13 am

JoMoney wrote:
Fri Feb 28, 2020 9:10 am
The same time I buy them in a booming bull market, every other week with my paycheck.
+1 like clockwork into the 401k.

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stezy
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Re: When do you buy stocks in a correction or bear market?

Post by stezy » Fri Feb 28, 2020 10:36 am

so far, the small sample size is confirming sentence number 1

NotWhoYouThink
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Re: When do you buy stocks in a correction or bear market?

Post by NotWhoYouThink » Fri Feb 28, 2020 10:39 am

Obviously you use your dry powder to buy after the market has fallen as much as it is going to fall, but before it even starts going back up again.

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Re: When do you buy stocks in a correction or bear market?

Post by Godot » Fri Feb 28, 2020 10:55 am

NotWhoYouThink wrote:
Fri Feb 28, 2020 10:39 am
Obviously you use your dry powder to buy after the market has fallen as much as it is going to fall, but before it even starts going back up again.
Remind me again, when do we know when the market has fallen as much as it's going to fall?
Estragon: I can't go on like this. | Vladimir: That's what you think. | ― Samuel Beckett, Waiting for Godot

rockstar
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Re: When do you buy stocks in a correction or bear market?

Post by rockstar » Fri Feb 28, 2020 10:58 am

My current quantitative measure is the average PE. For the S&P I’m using 20x ttm. That’s when I’ll start buying. For now I’m buying 3 month treasuries or CDs up to the $250k.

NoviceInvestor2019
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Re: When do you buy stocks in a correction or bear market?

Post by NoviceInvestor2019 » Fri Feb 28, 2020 11:02 am

Godot wrote:
Fri Feb 28, 2020 10:55 am
NotWhoYouThink wrote:
Fri Feb 28, 2020 10:39 am
Obviously you use your dry powder to buy after the market has fallen as much as it is going to fall, but before it even starts going back up again.
Remind me again, when do we know when the market has fallen as much as it's going to fall?
I suspect that his comment was tongue-in-cheek :D

stocknoob4111
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Re: When do you buy stocks in a correction or bear market?

Post by stocknoob4111 » Fri Feb 28, 2020 11:06 am

rockstar wrote:
Fri Feb 28, 2020 10:58 am
My current quantitative measure is the average PE. For the S&P I’m using 20x ttm. That’s when I’ll start buying. For now I’m buying 3 month treasuries or CDs up to the $250k.
S&P 500 EPS for 2020 was projected at 165, so even discounting that 20% for the virus, that's 132. Adding in a multiple of 20x you get 2640 on the S&P 500. With the historical multiple of 15 you get 1980 but since interest rates are a fifth of historical I think a multiple of 20 is warranted... so 2700 or so represents fair value.

Anything i'm missing here?

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Re: When do you buy stocks in a correction or bear market?

Post by Godot » Fri Feb 28, 2020 11:17 am

stocknoob4111 wrote:
Fri Feb 28, 2020 11:06 am
rockstar wrote:
Fri Feb 28, 2020 10:58 am
My current quantitative measure is the average PE. For the S&P I’m using 20x ttm. That’s when I’ll start buying. For now I’m buying 3 month treasuries or CDs up to the $250k.
S&P 500 EPS for 2020 was projected at 165, so even discounting that 20% for the virus, that's 132. Adding in a multiple of 20x you get 2640 on the S&P 500. With the historical multiple of 15 you get 1980 but since interest rates are a fifth of historical I think a multiple of 20 is warranted... so 2700 or so represents fair value.

Anything i'm missing here?
I love the confidence, but the fact is we don't know how far the virus, and the fear, will take the market down, and/or keep it down, or for how long, and guesses of fair value will change as this thing progresses and economic conditions adjust. I was just trying to point this out in my original question.
Estragon: I can't go on like this. | Vladimir: That's what you think. | ― Samuel Beckett, Waiting for Godot

rockstar
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Re: When do you buy stocks in a correction or bear market?

Post by rockstar » Fri Feb 28, 2020 11:24 am

Godot wrote:
Fri Feb 28, 2020 11:17 am
stocknoob4111 wrote:
Fri Feb 28, 2020 11:06 am
rockstar wrote:
Fri Feb 28, 2020 10:58 am
My current quantitative measure is the average PE. For the S&P I’m using 20x ttm. That’s when I’ll start buying. For now I’m buying 3 month treasuries or CDs up to the $250k.
S&P 500 EPS for 2020 was projected at 165, so even discounting that 20% for the virus, that's 132. Adding in a multiple of 20x you get 2640 on the S&P 500. With the historical multiple of 15 you get 1980 but since interest rates are a fifth of historical I think a multiple of 20 is warranted... so 2700 or so represents fair value.

Anything i'm missing here?
I love the confidence, but the fact is we don't know how far the virus, and the fear, will take the market down, and/or keep it down, or for how long, and guesses of fair value will change as this thing progresses and economic conditions adjust. I was just trying to point this out in my original question.
I’m strictly talking about trailing, not forward. All that I’m saying is that I’ll start buying back in at 20x, not that it won’t go lower than 20x. It could go down to 10 or 12, but I’ll buy on the way down. I don’t want to buy above the average in a free fall.

JakeyLee
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Re: When do you buy stocks in a correction or bear market?

Post by JakeyLee » Fri Feb 28, 2020 11:29 am

Op,

I stick to my game plan. Hard and fast rules I've used for over 25 years. That way, emotion and irrational decisions are removed: when the market is down 15% from its high (SnP 500) I deploy 20% of my "dry powder" savings. I deploy another 20% when the market drops to 25% down. When/if it reaches down 35%, I buy another 20% (of initial dry powder number. 45% drop, rinse repeat. Then I stop. As I like to preserve my last 20% for emergencies. Of course, I'm still purchasing pretax all along the way with my paychecks.

Is this efficient ?? Meh, maybe... Maybe not. But it keeps me on a set of rules. I dont let emotions controlling my investing path. So far this methodology has served me well in the last three bear markets. And just recently (December 2018) I've benefitted from my game plan. It might not work for you ,but it serves me fine. And most Importantly, it's all autopilot for me.

* I should add that my "dry powder" typically hovers around 2 years of expenses ... Give or take a few months.

Atilla
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Re: When do you buy stocks in a correction or bear market?

Post by Atilla » Fri Feb 28, 2020 11:44 am

I really wanna dump all available cash into the market today - but I'm not. Sticking to the plan, blah blah blah.

Which means we probably hit a bottom and it's all up from here. :D Guess we'll see...
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NotWhoYouThink
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Re: When do you buy stocks in a correction or bear market?

Post by NotWhoYouThink » Fri Feb 28, 2020 11:54 am

JakeyLee wrote:
Fri Feb 28, 2020 11:29 am
Op,

I stick to my game plan. Hard and fast rules I've used for over 25 years. That way, emotion and irrational decisions are removed: when the market is down 15% from its high (SnP 500) I deploy 20% of my "dry powder" savings. I deploy another 20% when the market drops to 25% down. When/if it reaches down 35%, I buy another 20% (of initial dry powder number. 45% drop, rinse repeat. Then I stop. As I like to preserve my last 20% for emergencies. Of course, I'm still purchasing pretax all along the way with my paychecks.

Is this efficient ?? Meh, maybe... Maybe not. But it keeps me on a set of rules. I dont let emotions controlling my investing path. So far this methodology has served me well in the last three bear markets. And just recently (December 2018) I've benefitted from my game plan. It might not work for you ,but it serves me fine. And most Importantly, it's all autopilot for me.

* I should add that my "dry powder" typically hovers around 2 years of expenses ... Give or take a few months.
So then when do you replenish your dry powder? After a new market high following the 25% drop if that's as far as it falls? If it falls 45%, do you wait to replenish until it gets to the previous high water mark?

That's my confusion about any "bucket" system. How do you know when to drink from the bucket and when to refill it?

Carol88888
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Re: When do you buy stocks in a correction or bear market?

Post by Carol88888 » Fri Feb 28, 2020 12:11 pm

No rhyme or reason for my buying. Basically when I have the cash and can't stand not buying something anymore.

For me, that time was today.

MnD
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Re: When do you buy stocks in a correction or bear market?

Post by MnD » Fri Feb 28, 2020 12:15 pm

When my fixed income allocation exceeds 35% per my investment policy and retirement income statement (below in signature).

At the recent market peak my AA was 71.3%/28.7% and is currently (excluding today's drop) 68.7%/31.3%.
So the market will have to drop significantly further to trigger a rule-based rebalancing.
No emotion, no gut feelings or hunches. If things drop enough to trigger rebalancing I look forward to yet once again being on the other side of the trade to assist panic sellers with their weak hands. This has served me very well over the decades.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.

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Yesterdaysnews
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Re: When do you buy stocks in a correction or bear market?

Post by Yesterdaysnews » Fri Feb 28, 2020 1:06 pm

It's tough to not buy if you have dry powder today. Fastest correction in history just makes me want to buy. This could be the bottom or we could be on the way down further but it is tough to not buy today.

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stezy
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Re: When do you buy stocks in a correction or bear market?

Post by stezy » Fri Feb 28, 2020 2:05 pm

I could easily see the market going down a bit more but as I did have a good chunk of extra on the sidelines, I went ahead and put in today. You could call it more momentum investing strategy I guess, except otherwise, I do invest at set intervals. Just like all others, the speculation can be fun, but we never know exactly what will happen. May go up, may go down, who knows. Thank you for those who commented on their threshold of when people typically buy more. I should specify, this is for my taxable account.

I also did some tax loss harvesting today

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Re: When do you buy stocks in a correction or bear market?

Post by Dottie57 » Fri Feb 28, 2020 2:22 pm

For those who say the market may go down a bit - what will stop the market from falling further?

lessismore22
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Re: When do you buy stocks in a correction or bear market?

Post by lessismore22 » Fri Feb 28, 2020 2:36 pm

Once the drop crossed the 10% mark I started putting in dry powder. 1k for each 1% the market is down that day.

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Re: When do you buy stocks in a correction or bear market?

Post by grabiner » Sun Mar 01, 2020 9:01 pm

I buy stocks every two weeks with my employer plan contribution, and every time I have enough money in my taxable account to be worth investing.

Separately, I buy more stocks when I need to rebalance. October 2008 is the only time that a stock market decline caused me to hit a rebalancing trigger; otherwise, I buy or sell as needed every January when I give my portfolio an annual checkup (and since i change to a more conservative allocation each year, this is usually a sell).
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Re: When do you buy stocks in a correction or bear market?

Post by vencat » Sun Mar 01, 2020 9:19 pm

I'm a lazy boglehead (since 2000).
My IPS is in my head, not written down.
I reached my FIRE number long ago but will continue to work barring health issues because I love what I do.
So I do have dry powder with which I've been buying last week and anticipate more buying next week.
Buying VIOV and VSS. Largest holding is in Total stock.
I feel more comfortable buying in a down(ward) than an upward one. My wifes 401K contribution are all into DFA funds.
Some would say I've already won the game but heck, I feel like a shark smelling blood.

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Re: When do you buy stocks in a correction or bear market?

Post by JakeyLee » Thu Mar 26, 2020 1:43 pm

NotWhoYouThink wrote:
Fri Feb 28, 2020 11:54 am
JakeyLee wrote:
Fri Feb 28, 2020 11:29 am
Op,

I stick to my game plan. Hard and fast rules I've used for over 25 years. That way, emotion and irrational decisions are removed: when the market is down 15% from its high (SnP 500) I deploy 20% of my "dry powder" savings. I deploy another 20% when the market drops to 25% down. When/if it reaches down 35%, I buy another 20% (of initial dry powder number. 45% drop, rinse repeat. Then I stop. As I like to preserve my last 20% for emergencies. Of course, I'm still purchasing pretax all along the way with my paychecks.

Is this efficient ?? Meh, maybe... Maybe not. But it keeps me on a set of rules. I dont let emotions controlling my investing path. So far this methodology has served me well in the last three bear markets. And just recently (December 2018) I've benefitted from my game plan. It might not work for you ,but it serves me fine. And most Importantly, it's all autopilot for me.

* I should add that my "dry powder" typically hovers around 2 years of expenses ... Give or take a few months.
So then when do you replenish your dry powder? After a new market high following the 25% drop if that's as far as it falls? If it falls 45%, do you wait to replenish until it gets to the previous high water mark?

That's my confusion about any "bucket" system. How do you know when to drink from the bucket and when to refill it?
NotWhoYouTHink,

Great questions. I am remiss that I didn't respond. Let me answer as best I can:
My "dry powder" purchases are only done in accordance with the previous high water mark. It's too complicated to have floating benchmarks... for me, anyway. So for example, I've made two purchases during this ongoing bear market. One at -15%, and one at -25%. I will do the same when/if -35% happens, and again at -45%. Each purchase has been 20% of my original emergency/living expense allotment (two years). So $20,000. Please note that I am still making my monthly max contributions to my 403b on the first of every month (when I'm paid).

My "dry powder" gets filled through human capital. Work!! I'm very comfortable holding at least 1.5- 2 years expenses at any given time. Every December I assess how many extra months of savings I've accumulated. I then make extra purchases bringing me back in line to 1.5 years. The dry powder really builds up now that I have no house payment/debts. December is my outlook time for the coming year. This past year, for example, I replaced my 15 year old truck. So in that case, my end of the year after tax investment was much smaller. Easy peasy. I stick to my plan no matter what. It works for me. I don't have to overthink. Heck, I don't think at all. In retirement, I'm fairly certain that the plan will be reworked. The mysterious "dry powder" bucket will come to an end.

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whodidntante
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Re: When do you buy stocks in a correction or bear market?

Post by whodidntante » Thu Mar 26, 2020 1:57 pm

I buy all the way up and all the way down. Fully invested at all times. The last three days feel a bit optimistic, however. But I've noticed that a lot of people seem to think that, so maybe it's wrong.

rbaldini
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Re: When do you buy stocks in a correction or bear market?

Post by rbaldini » Thu Mar 26, 2020 2:00 pm

It's only "market timing" if you're doing it because you expect returns to be higher in the future than usual. I don't, because I don't know any evidence supporting that. I buy because a dip in the market means my stock asset allocation is probably slightly under target. But contributing to whatever fund is lowest every time I buy (every payday), I pretty much always maintain allocation within a percent or two. Easy.

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Re: When do you buy stocks in a correction or bear market?

Post by Lee_WSP » Thu Mar 26, 2020 2:02 pm

Every Monday at the end of the day. Same as the rest of the time.

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