The Dark Side of "Stay the Course"

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Enganerd
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Re: The Dark Side of "Stay the Course"

Post by Enganerd » Sun Mar 01, 2020 11:32 am

White Coat Investor wrote:
Sun Mar 01, 2020 11:01 am
Enganerd wrote:
Sun Mar 01, 2020 8:50 am
I started investing in 2010. I never have been tested in a significant, concerning market cycle like the tech bubble or the Great Recession.
What about 2011 and 2018?

I had no trouble stating I know nothing. Stay the course. Do not let emotions swing.
Enganerd wrote:
Sun Mar 01, 2020 8:50 am
Right now I am disappointed in myself. Not because the market dropped and I lost $. But because it was obvious to me that it was more likely to drop in large %s than increase in large %s in the near future. I feel like I gave up my agency to an mantra/ideology. There were multiple visible risks. In general ppl were downplaying these risks or ignorant of them, but they were empirically there. By 2/08 it was apparent Chinese manufacturing had been significantly reduced and this would lead to global gdp hit. It was apparent COVID19 would turn up in the US if it was not already. We already have low interest rates and QE. It was bothering me that weekend so the following Monday I made move from 100/0 to 95/5. I have read here that small inconsequential moves can ease the psychological need to do something without veering too far off course. So I did, but I still feel regret about not sticking to my intuition. Again, right now this does not feel like it is about the $ as much as it is just regret over not acting in line with my beliefs.

I feel like many are still underestimating long term potential market effects. But I am a bit too stubborn to sell after last weeks sell off. I will simply tighten the belt more, work hard, and start buying back in. I still believe that in 20+ years public equities will yield returns based off today's prices. But these next 8-12 months will be very interesting with a wide range of potential outcomes. Stay safe and wash your hands.
Now you know why all the books talk about how hard it is to stay the course. The risks are always there, but they only show up some of the time. If you bailed out every time there were risks, you'd never earn the equity risk premium.

Besides, if you bailed out, you'd now have to decide when to get back in. Will it drop 10%, 20%, 30%, or 40%? If you're like me and you're honest with yourself, you'll admit you have no idea. So you might as well stick with your long-term written plan which is highly likely to work because this too shall pass. The annualized stock market return for 1918-1919 was 19%. The 1920s were a great decade for stock returns too. Yes, this will have economic effects, but not enough that you should change a good long term plan.

And yes, probably something like 10-40% of us are going to get Covid-19 and it's probably going to kill something like 0.9% of those who get it.
I guess to allude to another boglehead slogan "this time is different." I mean knowing that the virus will *likely*effect us, the quarantine will effect gdp, and that large portions of the market participants are stating they don't think is different that nobody nos nothin...

EnjoyIt
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Re: The Dark Side of "Stay the Course"

Post by EnjoyIt » Sun Mar 01, 2020 11:38 am

Hindsight is always obvious.
A time to EVALUATE your jitters. | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418

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Watty
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Re: The Dark Side of "Stay the Course"

Post by Watty » Sun Mar 01, 2020 11:45 am

Enganerd wrote:
Sun Mar 01, 2020 10:29 am
Also I should add I have a secure job and plan on working another 20 years. I honestly feel like I could handle losing my investments and move on with my life and still live happily and provide for my family. ...
I would be cautious about thinking that. I just retired a few years ago but especially in my 50's I saw a lot more people than I would have expected run into things like layoff, health problems, divorces, the death of a spouse, burnout, etc that caused their retirement plans to be upended and things like life and disability insurance were not always adequate even when they applied.

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JoeRetire
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Re: The Dark Side of "Stay the Course"

Post by JoeRetire » Sun Mar 01, 2020 11:45 am

Enganerd wrote:
Sun Mar 01, 2020 8:50 am
So I did, but I still feel regret about not sticking to my intuition. Again, right now this does not feel like it is about the $ as much as it is just regret over not acting in line with my beliefs.
Regrets are not helpful. You can't undo the past.

Look forward and decide what you want to do or not do, without regard to what you have already done.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.

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Re: The Dark Side of "Stay the Course"

Post by flaccidsteele » Sun Mar 01, 2020 11:51 am

As someone who invested into the tech crash and credit crisis, OP sounds exactly like the bandwagon jumpers of the past who said they would stay the course and then started crying and running for the exits when the market tanked over a series of months

The only difference is that OP is crying after only a couple of weeks
Last edited by flaccidsteele on Sun Mar 01, 2020 11:52 am, edited 1 time in total.
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

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tadamsmar
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Re: The Dark Side of "Stay the Course"

Post by tadamsmar » Sun Mar 01, 2020 11:52 am

Enganerd wrote:
Sun Mar 01, 2020 11:28 am
Well tighten the belt meaning, for go some luxuries I would normally indulge in to buy more equities now that their valuation has increased. Mental coping mainly, I know I purchased plenty in early 2020 so now they are an even better deal.
If you are DCAing then you will be buying more equities without forgoing luxuries.

The idea is that you have a retirement plan. The plan determines your saving rate, not what happened last week in the stock market.
Last edited by tadamsmar on Sun Mar 01, 2020 11:57 am, edited 1 time in total.

LawProf
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Re: The Dark Side of "Stay the Course"

Post by LawProf » Sun Mar 01, 2020 11:52 am

heyyou wrote:
Sun Mar 01, 2020 10:01 am
"It will fluctuate" was said about a century ago. For perspective, to what previous date's level, did the drop, return the market to? My point is-- all fluctuations are part of normal stock market behavior. Since we do not like the market drops, in the long run, we are paid more to tolerate stock market fluctuations, than we are paid for owning more stable investments. Risk and reward are immutable, but the dang risks are not pleasant to endure on our high return investments.
Volatility tolerance (being able to tolerate the ups and downs) is not the same risk tolerance (being able to tolerate losing all your money). Way too many on this board think they have a high risk tolerance when, in fact, they have a high volatility tolerance. They think that if they stay in the market long enough, they cannot lose, i.e. that there is no long-term risk. But it is not some economic law that markets will always bounce back over time (see Japan), and the belief that you cannot lose -- which is never explicitly stated, but is an undercurrent all the same -- is not reflective of reality. The future is not guaranteed to us.

Everyone here should really do a deep dive on their risk tolerance, with a proper understanding of what that term really means.

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tadamsmar
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Re: The Dark Side of "Stay the Course"

Post by tadamsmar » Sun Mar 01, 2020 11:55 am

There is a cure for it.

Start exercising your so-called "agency". Buy and sell to the fullest when you have a hunch.

You will soon learn that your agency is a illusion.

Agency means "action or intervention, especially such as to produce a particular effect"

You will find that you are not getting the effect, therefore it ain't agency.

But this is an expensive way to learn,

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Re: The Dark Side of "Stay the Course"

Post by acegolfer » Sun Mar 01, 2020 12:01 pm

Enganerd wrote:
Sun Mar 01, 2020 8:50 am

it was obvious to me that it was more likely to drop in large %s than increase in large %s in the near future. I feel like I gave up my agency to an mantra/ideology.
When it becomes obvious to you that it is more likely to increase than decrease in the near future, can you tell us? If you get that right, then I'll believe you next time.

indexlover
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Re: The Dark Side of "Stay the Course"

Post by indexlover » Sun Mar 01, 2020 12:06 pm

The famous philosopher Mike Tyson once said "Everyone has a plan 'till they get punched in the mouth." :D
Now go have a re-look at your IPS and change your AA to fit your risk profile. cus' right now it doesn't .
“If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle.” - Mr. Buffett - Berkshire Hathaway ’s 2016 annual report.

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firebirdparts
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Re: The Dark Side of "Stay the Course"

Post by firebirdparts » Sun Mar 01, 2020 12:10 pm

Enganerd wrote:
Sun Mar 01, 2020 8:50 am

I feel like many are still underestimating long term potential market effects.
We’ll see. In 15 years we’ll be thinking about expectations of a person living 15 years from now. In the short term, the market is a voting machine. Tomorrow we’ll get to vote some more.

Are you better than everybody else? Maybe. You might be.
A fool and your money are soon partners

HowlerNine
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Re: The Dark Side of "Stay the Course"

Post by HowlerNine » Sun Mar 01, 2020 12:10 pm

This thread has been a good read. I met my risk tolerance last week and returned to cash. This was a very un-Boglehead action. I too felt as though the Coronavirus would continue to impact markets negatively a few weeks ago, but stayed in as that was what I planned to do from the start. I've only been invested for 1 year, so pulling my money out was less complicated. If I was in the market longer I would not have thought pulling out would be an option and in the future I plan on staying the course.

Everything people keep saying about not knowing when to get back in makes compete sense and to be honest this will be a bridge I'll have to cross soon. I certainly don't know when this all will end. I have no idea when the market will stabilize, improve, etc. I also don't feel like I'm a superhero and can guess the ups and downs of the market with any consistency. I may very well be wrong about my entire choice to pull to cash and people have already been vocal (helpful and with intent to educate) about it being a poor choice.

As cliche as it is to say, I feel like this situation is unique and I feel things will continue to get worse over the coming weeks.

I'm not greedy in the sense that I'm trying to market time and strike it rich. I'm afraid of losing a big portion my initial investment and would rather be safe than sorry. This is why I'm waiting with my cash right now. I'm not trying to wait for clear skies and zero risk, but I'm personally just too uncomfortable to have a lot invested at this current moment.

Just wanted to share my choice, especially with the OP.

vasu100
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Re: The Dark Side of "Stay the Course"

Post by vasu100 » Sun Mar 01, 2020 12:14 pm

LawProf wrote:
Sun Mar 01, 2020 11:52 am
heyyou wrote:
Sun Mar 01, 2020 10:01 am
"It will fluctuate" was said about a century ago. For perspective, to what previous date's level, did the drop, return the market to? My point is-- all fluctuations are part of normal stock market behavior. Since we do not like the market drops, in the long run, we are paid more to tolerate stock market fluctuations, than we are paid for owning more stable investments. Risk and reward are immutable, but the dang risks are not pleasant to endure on our high return investments.
Volatility tolerance (being able to tolerate the ups and downs) is not the same risk tolerance (being able to tolerate losing all your money). Way too many on this board think they have a high risk tolerance when, in fact, they have a high volatility tolerance. They think that if they stay in the market long enough, they cannot lose, i.e. that there is no long-term risk. But it is not some economic law that markets will always bounce back over time (see Japan), and the belief that you cannot lose -- which is never explicitly stated, but is an undercurrent all the same -- is not reflective of reality. The future is not guaranteed to us.

Everyone here should really do a deep dive on their risk tolerance, with a proper understanding of what that term really means.
+1. Good way to articulate difference between “volatility tolerance” and “risk tolerance”.

So you CAN lose (and maybe lose big time) if you “buy and hold”. Just have to prepared to take that risk long term.

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DrPayItBack
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Re: The Dark Side of "Stay the Course"

Post by DrPayItBack » Sun Mar 01, 2020 12:18 pm

HowlerNine wrote:
Sun Mar 01, 2020 12:10 pm
This thread has been a good read. I met my risk tolerance last week and returned to cash. This was a very un-Boglehead action. I too felt as though the Coronavirus would continue to impact markets negatively a few weeks ago, but stayed in as that was what I planned to do from the start. I've only been invested for 1 year, so pulling my money out was less complicated. If I was in the market longer I would not have thought pulling out would be an option and in the future I plan on staying the course.

Everything people keep saying about not knowing when to get back in makes compete sense and to be honest this will be a bridge I'll have to cross soon. I certainly don't know when this all will end. I have no idea when the market will stabilize, improve, etc. I also don't feel like I'm a superhero and can guess the ups and downs of the market with any consistency. I may very well be wrong about my entire choice to pull to cash and people have already been vocal (helpful and with intent to educate) about it being a poor choice.

As cliche as it is to say, I feel like this situation is unique and I feel things will continue to get worse over the coming weeks.

I'm not greedy in the sense that I'm trying to market time and strike it rich. I'm afraid of losing a big portion my initial investment and would rather be safe than sorry. This is why I'm waiting with my cash right now. I'm not trying to wait for clear skies and zero risk, but I'm personally just too uncomfortable to have a lot invested at this current moment.

Just wanted to share my choice, especially with the OP.
Unfortunately there is nothing unique about this situation nor your reaction to it. Will just become another part of the statistics of panic selling.

“ I'm not trying to wait for clear skies and zero risk, but I'm personally just too uncomfortable to have a lot invested at this current moment.”

This is what literally everyone who panic sells says, and it’s never right.
Last edited by DrPayItBack on Sun Mar 01, 2020 12:19 pm, edited 1 time in total.

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iceport
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Re: The Dark Side of "Stay the Course"

Post by iceport » Sun Mar 01, 2020 12:18 pm

Enganerd wrote:
Sun Mar 01, 2020 8:50 am
I will simply tighten the belt more, work hard, and start buying back in.
Enganerd,

I didn't read through all the responses, which I'm sure provide potent counterpoints to your perspective right now. I'd just like to point out that you might be taking away the wrong lesson here.

Instead of looking back in hindsight, realizing your gut instincts about predicting the future were correct on some level, and then thinking using your predictive ability could be a reliable way to time the market and outperform it in the future, you should focus on the more mundane and, more importantly, more controllable aspects of your portfolio management that might deserve a second thought in light of this market shock.

IMHO, one of your take-away lessons from all this could be that 0% or 5% in fixed income leaves little room for re-balancing into equities after a huge drop in value/valuations.

It's not likely that this crash and subsequent recovery will look like the last one (in 2008/2009), but during the last one I was able to re-balance near the bottom back into equities, and I believe it helped portfolio performance immensely. After spending much of my investing life up to that point with almost as little fixed income as you, I had moved to 30% fixed income by June of 2008 — just by luck. Not only did the 30% fixed income position provide significant portfolio ballast against steeper losses, it provided a nice pool of funds to use to buy more equities at a deep discount after the huge equity losses.

That experience galvanized my faith in and commitment to a passive approach to portfolio management.

You're asking great questions; hopefully, you'll learn appropriate lessons.

Good luck to you!
"Discipline matters more than allocation.” ─William Bernstein

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climber2020
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Re: The Dark Side of "Stay the Course"

Post by climber2020 » Sun Mar 01, 2020 12:20 pm

HowlerNine wrote:
Sun Mar 01, 2020 12:10 pm
This thread has been a good read. I met my risk tolerance last week and returned to cash. This was a very un-Boglehead action. I too felt as though the Coronavirus would continue to impact markets negatively a few weeks ago, but stayed in as that was what I planned to do from the start. I've only been invested for 1 year, so pulling my money out was less complicated. If I was in the market longer I would not have thought pulling out would be an option and in the future I plan on staying the course.
1) What was your asset allocation?

and 2) How will your asset allocation change going forward now that you know how you react in times of uncertainty?

ukbogler
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Re: The Dark Side of "Stay the Course"

Post by ukbogler » Sun Mar 01, 2020 12:29 pm

climber2020 wrote:
Sun Mar 01, 2020 8:58 am
Easy to say all this after the fact.
Been saying this for months, on this very forum. The uS market was madly overvalued (and still is). Expect a bounce, then a second leg down. It's not rocket science guys.

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Re: The Dark Side of "Stay the Course"

Post by Lee_WSP » Sun Mar 01, 2020 12:45 pm

LawProf wrote:
Sun Mar 01, 2020 11:52 am
heyyou wrote:
Sun Mar 01, 2020 10:01 am
"It will fluctuate" was said about a century ago. For perspective, to what previous date's level, did the drop, return the market to? My point is-- all fluctuations are part of normal stock market behavior. Since we do not like the market drops, in the long run, we are paid more to tolerate stock market fluctuations, than we are paid for owning more stable investments. Risk and reward are immutable, but the dang risks are not pleasant to endure on our high return investments.
Volatility tolerance (being able to tolerate the ups and downs) is not the same risk tolerance (being able to tolerate losing all your money). Way too many on this board think they have a high risk tolerance when, in fact, they have a high volatility tolerance. They think that if they stay in the market long enough, they cannot lose, i.e. that there is no long-term risk. But it is not some economic law that markets will always bounce back over time (see Japan), and the belief that you cannot lose -- which is never explicitly stated, but is an undercurrent all the same -- is not reflective of reality. The future is not guaranteed to us.

Everyone here should really do a deep dive on their risk tolerance, with a proper understanding of what that term really means.
I agree with this. Volatility is not the same as risk and it really annoys me that finance defines risk as volatility.

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Re: The Dark Side of "Stay the Course"

Post by retiredjg » Sun Mar 01, 2020 12:47 pm

HowlerNine wrote:
Sun Mar 01, 2020 12:10 pm
I have no idea when the market will stabilize, improve, etc. I also don't feel like I'm a superhero and can guess the ups and downs of the market with any consistency.
None of us know that either. That is why it is important to pick an asset allocation that you are willing to stick with in the bad times as well as the good times. Do not pick a fair weather AA. Pick a bad weather AA...something that will be tolerable to live with during the bad times.

As cliche as it is to say, I feel like this situation is unique and I feel things will continue to get worse over the coming weeks.
These situations are always unique. The same market downturns don't keep happening over and over again. For the most part, there is some new set of facts and causes each time. And sometimes they do continue to get worse. That is part of investing. That' why you must invest in a way that is tolerable in the bad times.

I'm afraid of losing a big portion my initial investment and would rather be safe than sorry.
If you invest your money, you will lose a big portion of it from time to time. That is part of investing. It's like having a car - at some point, it is going to get scratched or dinged or need repair or whatever, but none of those things are enough to make you not have a car. That's just part of having a car.

This is why I'm waiting with my cash right now. I'm not trying to wait for clear skies and zero risk, but I'm personally just too uncomfortable to have a lot invested at this current moment.
When you do get back in, I suggest that you invest in a conservative manner for at least a few years. Nothing riskier than 50% stocks and 50% fixed income and bonds. Give yourself some time to get used to how investing really works before taking on anything more aggressive.

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Forester
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Re: The Dark Side of "Stay the Course"

Post by Forester » Sun Mar 01, 2020 12:48 pm

ukbogler wrote:
Sun Mar 01, 2020 12:29 pm
climber2020 wrote:
Sun Mar 01, 2020 8:58 am
Easy to say all this after the fact.
Been saying this for months, on this very forum. The uS market was madly overvalued (and still is). Expect a bounce, then a second leg down. It's not rocket science guys.
If profits tank for 2020 then I guess the CAPE would stay expensive even with a 12% bloody nose. Then again I listen to Jeremy Siegel and US stocks sound cheap :D

Another factor bubbling under surface, US rates forced to align closer with rest of the world, diminishing appetite for US assets from foreigners.

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Re: The Dark Side of "Stay the Course"

Post by Fallible » Sun Mar 01, 2020 12:51 pm

LawProf wrote:
Sun Mar 01, 2020 11:52 am
...
Volatility tolerance (being able to tolerate the ups and downs) is not the same risk tolerance (being able to tolerate losing all your money). ...
Here are correct definitions of risk tolerance from our wiki, based on a Bogleheads book and on pro Bogleheads Rick Ferri, and Larry Swedroe:

_Wiki

_The Bogleheads' Guide to Investing
Risk tolerance is an investor’s emotional and psychological ability to endure investment losses during large market declines without selling or undue worry, such as losing sleep. To know whether a portfolio is right for your risk tolerance, you need to be brutally honest with yourself as you try to answer the question, "Will I sell during the next bear market?"[1]
_Rick Ferri
Risk tolerance is a measure of the amount of price volatility and investment loss you can withstand before changing your behavior. ... An emotional decision to change or abandon an investment plan as a result of market risk ultimately increases portfolio risk and reduces return. If an investor has been in a bad market long enough to lose money, that investor doesn’t want to be out of the market when it turns around. That becomes a strategy of all risk and no return.[2]
_Larry Swedroe (who refers to risk tolerance as willingness to take risk)
The first step in finding your willingness to take risk is to take what I refer to as the “stomach acid” test. Ask yourself this question: Do you have the fortitude and discipline to stick with your predetermined investment strategy when the going gets rough?
The first principle is that you must not fool yourself – and you are the easiest person to fool. ~Richard Feynman

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climber2020
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Re: The Dark Side of "Stay the Course"

Post by climber2020 » Sun Mar 01, 2020 12:56 pm

ukbogler wrote:
Sun Mar 01, 2020 12:29 pm
climber2020 wrote:
Sun Mar 01, 2020 8:58 am
Easy to say all this after the fact.
Been saying this for months, on this very forum. The uS market was madly overvalued (and still is). Expect a bounce, then a second leg down. It's not rocket science guys.
Your returns must vastly & consistently exceed the index then.

And if your returns do not vastly exceed the index, why don’t they?

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HomerJ
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Re: The Dark Side of "Stay the Course"

Post by HomerJ » Sun Mar 01, 2020 12:57 pm

thx1138 wrote:
Sun Mar 01, 2020 9:54 am
The other suggestion I would make is to go back and look at all the other "catastrophes" that never actually happened. Go back and read about Brexit just as it was happening. Read about the Chinese trade war that never actually happened. Read articles from the time and put yourself back in that moment and understand how convincing the arguments were to leave the market. Then feel good about yourself that you made the correct call to stay the course back then.
This. The Greek debt crisis, the U.S. government shutdown, Brexit, etc.... All these things were known before they happened.

Here it comes... On this date... Pretty obvious we're going to have problems. What? No problems? The market went up instead?

Everyone forgets about the obvious crashes that didn't happen.

This virus could have blown over just like SARS and MERS and swine flu, and Ebola, etc. It didn't.

So the market is going to go down a while before it goes back up. But no one knows how far down, or when it will head back up.

EXPECT crashes... They will happen like 5-10 times in your lifetime. Be prepared for them, and then you don't have to worry about them anymore. You won't have to pay attention to the news or predictions or forecasts anymore.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”

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Re: The Dark Side of "Stay the Course"

Post by IslandTime » Sun Mar 01, 2020 12:57 pm

cableguy wrote:
Sun Mar 01, 2020 8:59 am
29 people died from drink driving yesterday. 1 person from coronavirus. In the USA. Wars, 9/11, Natural Disasters, etc.......this too shall pass.....
It's not really as much about how many people die from the virus or if it hype or not hype....its the economic effects of the "psychology" of this. Airlines, hotels, casino's, resort areas, etc. all start taking a really big hit....and the domino effects of that...layoffs ---> lead to less consumer spending ---> leads to more layoffs, etc....

Also, there are some that believe that this recovery since 2009 is built on a house of cards of trillions of "printed money" from central banks around the world that injected after the 2009 crises, zero and negative interest rates around the world (nowhere to go further down), zombie companies borrowing to buy back stocks, underfunded pensions around the world, USA $23 trillion in debt (and high debt to gdp ratios all around the world), employment numbers based on low participation rates and low quality service jobs, poor demographics (low population growth) in the developed world, etc.....

So this virus shock hits at a time when some may say financial markets and the world economy are very fragile.

And yes, we have all heard this doom and gloom perma bear stuff before. Bears have been saying the same thing for the last 5,7, 8 years. But there are some unique circumstances to present times I cannot deny.... the world has never had this combination of interest rates this low, govt's with this high debt to gdp ratios, bad demographics (low population growth + lots of elderly), so much central bank intervention in the markets, etc...

I'm a big fan of Bogle, Vanguard, buy and hold index's, stay the course. But I don't stick my head in the sand either. Just wanted to throw in some "devils advocate" into the discussion.

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HomerJ
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Re: The Dark Side of "Stay the Course"

Post by HomerJ » Sun Mar 01, 2020 12:58 pm

ukbogler wrote:
Sun Mar 01, 2020 12:29 pm
climber2020 wrote:
Sun Mar 01, 2020 8:58 am
Easy to say all this after the fact.
Been saying this for months, on this very forum. The uS market was madly overvalued (and still is). Expect a bounce, then a second leg down. It's not rocket science guys.
People have been saying the market is madly overvalued for years. Someone will get lucky someday and get it right. Maybe even you.

But it's not because you're smarter than the average bear.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”

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Re: The Dark Side of "Stay the Course"

Post by Sheepdog » Sun Mar 01, 2020 1:03 pm

razorbacker wrote:
Sun Mar 01, 2020 9:29 am
Hmm, sounds like you needed a lower "sleep better" stock AA before the drop. Remember you haven't "lost" anything until you sell. Not sure of your age but think a little more about 10 years from now instead of the next few months.
Yes to this. Have the right asset allocation which allows growth, but allows peaceful sleep. (
“One moment of patience may ward off great disaster. One moment of impatience may ruin a whole life.” — Chinese Proverb

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Re: The Dark Side of "Stay the Course"

Post by easyodie » Sun Mar 01, 2020 1:10 pm

dbr wrote:
Sun Mar 01, 2020 10:27 am
I will pile in to reinforce the observation that staying the course assumes one has the right course in the first place. In this case the issue is having the right asset allocation. There is good reason people keep harping about need, ability, and willingness to take risk, sleep at night, etc., etc.

Sorry for beating a drum, but there is more to investing than stay the course.

I also congratulate the OP for posting this discussion.
Oh my god, thank you for " more to investing than stay the course " .

Fallible
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Re: The Dark Side of "Stay the Course"

Post by Fallible » Sun Mar 01, 2020 1:11 pm

Enganerd wrote:
Sun Mar 01, 2020 10:48 am
...
I understand I am using "adjust AA" as a means to market time. I should not do that because it does confuse the issue. I would think we all agree the "you have not lost anything until you sell logic is flawed." Therefore, even if you are an investor and not a trader there can come a time when you feel like the investment is not worth the risk and change your portfolio. That would in effect change my AA but I agree it is not how AA is talked about on this forum or with writing an IPS.
As far as I can tell, you are not adjusting your AA to time the market but to bring it more in line with the amount of risk you can and want to take. True market timing is predicting when the market will go down, up, and even by how much. You are not doing this, right?

When you say that changing your AA "is not how AA is talked about on this forum," I think you again mean market timing, which again is not what you are doing.
The first principle is that you must not fool yourself – and you are the easiest person to fool. ~Richard Feynman

Pu239
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Re: The Dark Side of "Stay the Course"

Post by Pu239 » Sun Mar 01, 2020 1:11 pm

OP - The benefits of "Stay the Course" for you are far off in the future, not now or the near term. I've suffered through the 1987, Dotcom and Great Recession crashes while staying the course and now am entering a comfortable retirement. I haven't bothered looking at my account balances since year end. What would be the point?
Between the idea And the reality...Between the motion And the act...Falls the Shadow - T. S. Eliot

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DrPayItBack
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Re: The Dark Side of "Stay the Course"

Post by DrPayItBack » Sun Mar 01, 2020 1:16 pm

Fallible wrote:
Sun Mar 01, 2020 1:11 pm
Enganerd wrote:
Sun Mar 01, 2020 10:48 am
...
I understand I am using "adjust AA" as a means to market time. I should not do that because it does confuse the issue. I would think we all agree the "you have not lost anything until you sell logic is flawed." Therefore, even if you are an investor and not a trader there can come a time when you feel like the investment is not worth the risk and change your portfolio. That would in effect change my AA but I agree it is not how AA is talked about on this forum or with writing an IPS.
As far as I can tell, you are not adjusting your AA to time the market but to bring it more in line with the amount of risk you can and want to take. True market timing is predicting when the market will go down, up, and even by how much. You are not doing this, right?

When you say that changing your AA "is not how AA is talked about on this forum," I think you again mean market timing, which again is not what you are doing.
If the change in AA is entirely due to short-term market fluctuations (as it is here), then yes, it is indeed market timing. Certainly moving from 100/0 to 95/5 is not as egregious as going entirely to cash (as some people on this board seem to be doing), but it is still timing.

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Re: The Dark Side of "Stay the Course"

Post by Nowizard » Sun Mar 01, 2020 1:25 pm

There are those who are retiring, have figured their budget and retirement assets/income and who are strongly into the preservation stage. A major downturn is potentially tragic for such people. Staying the course is a broader term than just at moments like these and encompasses staying A course that sustains one through retirement. That may result in a more conservative profile or essentially cashing out with more concern about the present than the timing issue of when to get back in the market. Personal circumstances result in different decisions, though staying the course is the best course for many/most. Dogma should not always override flexibility.

Tim

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Re: The Dark Side of "Stay the Course"

Post by bb » Sun Mar 01, 2020 1:26 pm

If you think you can time the market knock yourself out.

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Re: The Dark Side of "Stay the Course"

Post by coachd50 » Sun Mar 01, 2020 1:30 pm

Nowizard wrote:
Sun Mar 01, 2020 1:25 pm
There are those who are retiring, have figured their budget and retirement assets/income and who are strongly into the preservation stage. A major downturn is potentially tragic for such people. Staying the course is a broader term than just at moments like these and encompasses staying A course that sustains one through retirement. That may result in a more conservative profile or essentially cashing out with more concern about the present than the timing issue of when to get back in the market. Personal circumstances result in different decisions, though staying the course is the best course for many/most. Dogma should not always override flexibility.

Tim
When one says “stay the course“ it is inherently assumed that the proper course has been set. Specifically to addressed your post-this would mean that the person nearing retirement has already adjusted their allocation to reflect that closeness to retirement and short timeframe

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Rick Ferri
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Re: The Dark Side of "Stay the Course"

Post by Rick Ferri » Sun Mar 01, 2020 1:37 pm

I cure myself each year of knowing the future by participating in the two Bogleheads challenges:

The Bogheheads Contest where I grossly miscalculate the ending value of the S&P 500

And

The Hedgefund Contest where I embarrass myself each year by picking some of the worst-performing long and short investments. (I'm down 18.75% so far this year.)

My performance is so consistently bad that I'm cured of any thoughts that I can predict markets or pick outperforming stocks.

Rick
Last edited by Rick Ferri on Sun Mar 01, 2020 2:27 pm, edited 2 times in total.
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

SEAworld9
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Re: The Dark Side of "Stay the Course"

Post by SEAworld9 » Sun Mar 01, 2020 1:37 pm

Some thoughts:
- yes, the spread of the disease is going to get worse (my SO is a health provider and used to work at the hospital in Seattle where the first US patient died). Diseases spread; it’s what they do.
- how much is it going to impact the economy? No one knows yet, and anyone who claims to is just guessing.
- remember that through ups and downs, you’re still buying (in your 401, taxable, etc). that means that when the market returns to previous levels any time after a dip or crash, you have more shares at that level and are therefore wealthier.
- If you start using words like “feel,” this has become an emotional exercise (even though you may use data points as confirmation bias). That is very risky for many of the reasons already stated in the thread.
- IMO it’s very, very dangerous to consider any job as “stable.” Especially if you think the disease is going to have a large enough impact on the economy to the point where you’re abandoning your AA and pulling your money out. Just like when driving your car, a large part of the risk is not you, but everyone else on the roads. Though you may think your company and position are “stable,” a stable job can go quickly out the window once your company’s AR starts piling up because your customers can’t afford to pay you or your suppliers can supply parts or inventory. If your 30-60 receivables start becoming 90-120 or 180+ or longer, or get to the point where you have to write them off, it poses a big risk to the business. Likewise with your company’s own AP and how they’re managing cash.
- as many have stated, the hard part is knowing when to get back in. Because of financial reporting cycles, this will be lagging information, and you are likely to miss out on a bunch of the gains.
- if you need to at times like these, just zoom out on the market growth chart, recognize which direction the line goes in the long term, and then put your phone back in your pocket and go about your day. All that happens otherwise is worrying and contemplating that could be used for better purposes.
- lastly, instead of worrying about losing money, use that time to figure out how to create new income streams for yourself or develop your skillset to increase your value on the job market. There is opportunity cost to using your headspace for worrying or timing the market, and the NPV of creating new income streams or advancing your job skills is likely to be more valuable that anything you may “gain” from market timing.

No crisis or disease or force majuere or other has destroyed humanity. Humans are naturally driven and incentivized to create growth, and over the long term it will happen.

- 36 y/o who started investing at 16 and had the pleasure of experiencing the tech crash and “great” recession

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Re: The Dark Side of "Stay the Course"

Post by Fallible » Sun Mar 01, 2020 1:46 pm

DrPayItBack wrote:
Sun Mar 01, 2020 1:16 pm
Fallible wrote:
Sun Mar 01, 2020 1:11 pm
Enganerd wrote:
Sun Mar 01, 2020 10:48 am
...
I understand I am using "adjust AA" as a means to market time. I should not do that because it does confuse the issue. I would think we all agree the "you have not lost anything until you sell logic is flawed." Therefore, even if you are an investor and not a trader there can come a time when you feel like the investment is not worth the risk and change your portfolio. That would in effect change my AA but I agree it is not how AA is talked about on this forum or with writing an IPS.
As far as I can tell, you are not adjusting your AA to time the market but to bring it more in line with the amount of risk you can and want to take. True market timing is predicting when the market will go down, up, and even by how much. You are not doing this, right?

When you say that changing your AA "is not how AA is talked about on this forum," I think you again mean market timing, which again is not what you are doing.
If the change in AA is entirely due to short-term market fluctuations (as it is here), then yes, it is indeed market timing. Certainly moving from 100/0 to 95/5 is not as egregious as going entirely to cash (as some people on this board seem to be doing), but it is still timing.
Again, market timing is essentially predicting what the market will do, when it will go down, up, and even by how much, then placing your bet. The OP is not doing this; his concern is risk, personal risk, and he is discovering in his first large market downturn that he has probably misjudged his tolerance for risk when he set an AA. He's not placing bets on the market, but trying to decide how much risk he can and wants to handle, a very personal and difficult decision.

And the OP is far from alone: I'm sure quite a few of us even experienced investors can remember our first big market drop and wondering whether we took on too much risk and should change an AA. I certainly have done this and the last thing I was thinking about was trying to time the market by betting on a prediction.
The first principle is that you must not fool yourself – and you are the easiest person to fool. ~Richard Feynman

IslandTime
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Re: The Dark Side of "Stay the Course"

Post by IslandTime » Sun Mar 01, 2020 1:52 pm

[/quote]

People have been saying the market is madly overvalued for years. Someone will get lucky someday and get it right. Maybe even you.

But it's not because you're smarter than the average bear.
[/quote]


I personally do a lot of investing in private more inefficient markets where I still look at valuations, fundamentals, cash on cash returns, a creditors ability to pay a loan I make. Just because I'm a paranoid scaredy cat bastard when it comes to my money!

And I think it is interesting on how the world has evolved with passive indexing (both with massive pensions and individuals). I'm not saying its wrong, I'm just saying its interesting. To passive index investors fundamentals don't matter, valuations don't matter, cash flow doesn't matter, profit margins don't matter, macro economics don't matter.

What matters is a "faith" that "stocks will go up in the long term because they always have before". That "the government can just print money to pay the interest on its debt if it has to"....so deficits and national debt don't matter anymore. And faith that, "profits of companies around the world will keep growing in the long term because human innovation and human needs".

Investing historically a long, long time ago used to be you looked at a company or piece of real estates purchase price as it relates to operating expenses, net cash flow, location, future profitability, etc.... "Is this a good deal I'm buying?" "What is my cash on cash return?" "Am I paying too much?" But now investing is just buy automatically regardless of valuation's, profitability.

Buffett always says if you buy a stock, you should look as if you are buying the "entire company". Just like you would if you were buying an entire farm down the street or country store or apartment building. You wouldn't pay 30X earnings blindly for the farm down the street or that little country store. But passive investors don't do that when they buy equity indexes. They don't look at how much they are paying for that group of companies and what their net cash flow is. They just buy because "it goes up in the long term and always has".

And similarly, no one looks at the credit quality of who they are lending to in bond funds, and is the yield I am getting enough for the risk I am taking? And is there "price discovery". It's just a faith.

And I am not saying anything is wrong with any of this. Not like I know anything, as I don't :happy lol I'm just waxing philosophically about the evolution of investing with passive indexing. And it will probably all work out well for everyone.
Last edited by IslandTime on Sun Mar 01, 2020 2:08 pm, edited 1 time in total.

CFK
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Re: The Dark Side of "Stay the Course"

Post by CFK » Sun Mar 01, 2020 2:07 pm

+1 to people saying you should keep a journal, and then look back on your emotions, your predictions, and how often the things you believed actually came to pass.

I've been doing this since late 2015 and have a mixed track record - I haven't taken drastic action based on these predictions.

The three big things I got right were: January 2018 that the market was overvalued, based on CAPE 10 ratio, and quick surge in asset prices; in December 2018 that the market sell off wasn't justified; January 2020 the market was overvalued for the same reasons as in January 2018.

Things I got wrong: Early 2016 we were going into a recession, as indicated by widening bond spreads, collapse in junk bonds, collapse in commodity prices; 2016 the market was too expensive, based on historically elevated PE ratios, pending recession; 2017-current should rotate into value ETFs, due to large gap in PE ratios between value and growth stocks; 2019 likely recession due to inverted yield curve, surveys of CFOs predicting economic downturn, high corporate indebtedness; 2018 - treasury yields would spike to 4-5% due to fed tightening, record deficits, end of QE; 2016-current that foreign stocks would perform better than domestic stocks due to valuation differences, higher yields.

I would say that I felt equally confident about all of the above predictions. Some were right, most turned out incorrect, or partially correct.

If you do feel the need to take action based on your beliefs, you should pre-plan what those actions will be. For example, give yourself leeway to change your asset allocation by 5-10% based on your "instinct," or some pre-determined metric like valuation. As long as the upper and lower bound are reasonable, and you aren't incurring capital gains or trading costs, this is a relatively harmless way to not "lose your agency" while not screwing yourself over either.

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Re: The Dark Side of "Stay the Course"

Post by beyou » Sun Mar 01, 2020 2:10 pm

For the last year + I have slowly been selling equities to my AA target, staying the course. I could have second guessed selling in a rising market and could now second guess why I didn’t sell more. During the financial crisis, people spoke of financial armageddon, but I bought up to my AA target. End result of the roller coaster ride, is a general feeling of long term progress.

I actually suggested just before the recent downturn, to my young adult son, that his roth IRA profits may evaporate in the next downturn. I said “if that really bothers you, you could sell equities now”. Of course greed of early success, and indecision won out and he rode out the losses. So of course I got “I should have listened”. My response was that I was not urging him to sell, just informing him of what may come and be prepared. I told him, you are young, this is a buying opportunity, but stick to plan (safe emergency fund first). This downturn was a lesson for my son, a lesson in stay the course.

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Re: The Dark Side of "Stay the Course"

Post by sambb » Sun Mar 01, 2020 2:15 pm

stay the course didnt really work out for japanese investors in the late 80s/early 90s. It didnt work for coronavirus a month ago compared to now. The real question for those that didnt stay the course - is that now you can buy more at a lower price, so it only works if you get back in at a lower price point i think. Assuming it will eventually go back up. Whether that is soon, or in 20 years (like japan)

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Re: The Dark Side of "Stay the Course"

Post by finite_difference » Sun Mar 01, 2020 2:28 pm

You call it the dark side but it’s actually the bright side. It allows you to not worry about any of these issues. Don’t second guess yourself. The Boglehead strategy is the optimal one psychologically and financially for long term investors. Stay the course.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

fatgeorge
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Re: The Dark Side of "Stay the Course"

Post by fatgeorge » Sun Mar 01, 2020 2:40 pm

Enganerd wrote:
Sun Mar 01, 2020 8:50 am
It was apparent COVID19 would turn up in the US if it was not already.
It was similarly apparent a war with Iran was about to happen after Gen Soleimany had been killed, and Iran retaliation strikes.
It was similarly apparent Brexit would happen/would be canceled and markets drop.
It was similarly apparent the trade war with China would drop markets in 2017.

Looking at all those above, coronavirus seem a very minor issue, no?

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Rowan Oak
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Re: The Dark Side of "Stay the Course"

Post by Rowan Oak » Sun Mar 01, 2020 3:10 pm

climber2020 wrote:
Sun Mar 01, 2020 8:58 am
Easy to say all this after the fact.

Get yourself a notebook. Every time you have a prediction about what the market will do in the short term, write it down. Be specific, and do this consistently.

Then go back and see how often you were actually correct.
This is great advice and worked well for me over the years.

A very important part of this is that it be on paper in your handwriting. No computers,typewriters,note app,etc..

Our brains are masterful at changing the way we remember our past thoughts/ideas/actions/predictions etc..

When you review your old predictions years later you will swear you never thought such a thing until you see it in your own handwriting. Even then you will question it at first. It can be a humbling experience.
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

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Re: The Dark Side of "Stay the Course"

Post by HomerJ » Sun Mar 01, 2020 3:26 pm

IslandTime wrote:
Sun Mar 01, 2020 1:52 pm
I personally do a lot of investing in private more inefficient markets where I still look at valuations, fundamentals, cash on cash returns, a creditors ability to pay a loan I make. Just because I'm a paranoid scaredy cat bastard when it comes to my money!

And I think it is interesting on how the world has evolved with passive indexing (both with massive pensions and individuals). I'm not saying its wrong, I'm just saying its interesting. To passive index investors fundamentals don't matter, valuations don't matter, cash flow doesn't matter, profit margins don't matter, macro economics don't matter.

What matters is a "faith" that "stocks will go up in the long term because they always have before". That "the government can just print money to pay the interest on its debt if it has to"....so deficits and national debt don't matter anymore. And faith that, "profits of companies around the world will keep growing in the long term because human innovation and human needs".

Investing historically a long, long time ago used to be you looked at a company or piece of real estates purchase price as it relates to operating expenses, net cash flow, location, future profitability, etc.... "Is this a good deal I'm buying?" "What is my cash on cash return?" "Am I paying too much?" But now investing is just buy automatically regardless of valuation's, profitability.

Buffett always says if you buy a stock, you should look as if you are buying the "entire company". Just like you would if you were buying an entire farm down the street or country store or apartment building. You wouldn't pay 30X earnings blindly for the farm down the street or that little country store. But passive investors don't do that when they buy equity indexes. They don't look at how much they are paying for that group of companies and what their net cash flow is. They just buy because "it goes up in the long term and always has".

And similarly, no one looks at the credit quality of who they are lending to in bond funds, and is the yield I am getting enough for the risk I am taking? And is there "price discovery". It's just a faith.

And I am not saying anything is wrong with any of this. Not like I know anything, as I don't :happy lol I'm just waxing philosophically about the evolution of investing with passive indexing. And it will probably all work out well for everyone.
You make some good points...

I would just say that the economy is not a closed system. There's a constant input of human labor and human capital, and raw resources.

So, it seems logical to think that growth is natural, not just "faith". All those billions of humans working each day are adding to the system.

We have pretty low expectations here... Positive real return over the long-run... That's about the only prediction we make.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”

Lee_WSP
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Re: The Dark Side of "Stay the Course"

Post by Lee_WSP » Sun Mar 01, 2020 3:39 pm

IslandTime wrote:
Sun Mar 01, 2020 1:52 pm
People have been saying the market is madly overvalued for years. Someone will get lucky someday and get it right. Maybe even you.

But it's not because you're smarter than the average bear.
[/quote]


I personally do a lot of investing in private more inefficient markets where I still look at valuations, fundamentals, cash on cash returns, a creditors ability to pay a loan I make. Just because I'm a paranoid scaredy cat bastard when it comes to my money!

And I think it is interesting on how the world has evolved with passive indexing (both with massive pensions and individuals). I'm not saying its wrong, I'm just saying its interesting. To passive index investors fundamentals don't matter, valuations don't matter, cash flow doesn't matter, profit margins don't matter, macro economics don't matter.

What matters is a "faith" that "stocks will go up in the long term because they always have before". That "the government can just print money to pay the interest on its debt if it has to"....so deficits and national debt don't matter anymore. And faith that, "profits of companies around the world will keep growing in the long term because human innovation and human needs".

Investing historically a long, long time ago used to be you looked at a company or piece of real estates purchase price as it relates to operating expenses, net cash flow, location, future profitability, etc.... "Is this a good deal I'm buying?" "What is my cash on cash return?" "Am I paying too much?" But now investing is just buy automatically regardless of valuation's, profitability.

Buffett always says if you buy a stock, you should look as if you are buying the "entire company". Just like you would if you were buying an entire farm down the street or country store or apartment building. You wouldn't pay 30X earnings blindly for the farm down the street or that little country store. But passive investors don't do that when they buy equity indexes. They don't look at how much they are paying for that group of companies and what their net cash flow is. They just buy because "it goes up in the long term and always has".

And similarly, no one looks at the credit quality of who they are lending to in bond funds, and is the yield I am getting enough for the risk I am taking? And is there "price discovery". It's just a faith.

And I am not saying anything is wrong with any of this. Not like I know anything, as I don't :happy lol I'm just waxing philosophically about the evolution of investing with passive indexing. And it will probably all work out well for everyone.
[/quote]

Kind of like social security,no?

Ornery Old Guy
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Re: The Dark Side of "Stay the Course"

Post by Ornery Old Guy » Sun Mar 01, 2020 3:58 pm

Enganerd wrote:
Sun Mar 01, 2020 8:50 am
I started investing in 2010. I never have been tested in a significant, concerning market cycle like the tech bubble or the Great Recession. However, I did my homework and internalized the buy and hold long term investor should expect harrowing times. Odds are if you tune in to the news and try to time the market, you will lose out to the long term DCA investor, therefore do not expect it to be easy and "Stay the Course." I am an aggressive saver, some years I have put over 50% gross income into equities.

Right now I am disappointed in myself. Not because the market dropped and I lost $. But because it was obvious to me that it was more likely to drop in large %s than increase in large %s in the near future. I feel like I gave up my agency to an mantra/ideology. There were multiple visible risks. In general ppl were downplaying these risks or ignorant of them, but they were empirically there. By 2/08 it was apparent Chinese manufacturing had been significantly reduced and this would lead to global gdp hit. It was apparent COVID19 would turn up in the US if it was not already. We already have low interest rates and QE. It was bothering me that weekend so the following Monday I made move from 100/0 to 95/5. I have read here that small inconsequential moves can ease the psychological need to do something without veering too far off course. So I did, but I still feel regret about not sticking to my intuition. Again, right now this does not feel like it is about the $ as much as it is just regret over not acting in line with my beliefs.

I feel like many are still underestimating long term potential market effects. But I am a bit too stubborn to sell after last weeks sell off. I will simply tighten the belt more, work hard, and start buying back in. I still believe that in 20+ years public equities will yield returns based off today's prices. But these next 8-12 months will be very interesting with a wide range of potential outcomes. Stay safe and wash your hands.
Read this:

https://awealthofcommonsense.com/2014/0 ... ket-timer/

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Rowan Oak
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Re: The Dark Side of "Stay the Course"

Post by Rowan Oak » Sun Mar 01, 2020 4:08 pm

HomerJ wrote:
Sun Mar 01, 2020 12:57 pm
thx1138 wrote:
Sun Mar 01, 2020 9:54 am
The other suggestion I would make is to go back and look at all the other "catastrophes" that never actually happened. Go back and read about Brexit just as it was happening. Read about the Chinese trade war that never actually happened. Read articles from the time and put yourself back in that moment and understand how convincing the arguments were to leave the market. Then feel good about yourself that you made the correct call to stay the course back then.
This. The Greek debt crisis, the U.S. government shutdown, Brexit, etc.... All these things were known before they happened.

Here it comes... On this date... Pretty obvious we're going to have problems. What? No problems? The market went up instead?

Everyone forgets about the obvious crashes that didn't happen.

This virus could have blown over just like SARS and MERS and swine flu, and Ebola, etc. It didn't.

So the market is going to go down a while before it goes back up. But no one knows how far down, or when it will head back up.

EXPECT crashes... They will happen like 5-10 times in your lifetime. Be prepared for them, and then you don't have to worry about them anymore. You won't have to pay attention to the news or predictions or forecasts anymore.
Here's a chart for this:
Image

credit:
Michael Batnick
The Irrelevant Investor
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

goblue100
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Re: The Dark Side of "Stay the Course"

Post by goblue100 » Sun Mar 01, 2020 4:31 pm

Everything is obvious in hindsight. To get market returns, you must be in the market and take the bad with the good. It's really that simple. We have all at one time or another, thought, "Well, if I could have just avoided that decline, think how good my return would be!" But there are all sorts of ways to go wrong once you go down that path.
Last edited by goblue100 on Mon Mar 02, 2020 8:27 am, edited 1 time in total.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

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Enganerd
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Re: The Dark Side of "Stay the Course"

Post by Enganerd » Sun Mar 01, 2020 5:24 pm

fatgeorge wrote:
Sun Mar 01, 2020 2:40 pm
Enganerd wrote:
Sun Mar 01, 2020 8:50 am
It was apparent COVID19 would turn up in the US if it was not already.
It was similarly apparent a war with Iran was about to happen after Gen Soleimany had been killed, and Iran retaliation strikes.
It was similarly apparent Brexit would happen/would be canceled and markets drop.
It was similarly apparent the trade war with China would drop markets in 2017.

Looking at all those above, coronavirus seem a very minor issue, no?
For whatever reason I had no opinion on those. I understood that no one knew anything.

This situation it was obvious the scale of quarantine China took was/is unprecedented. The fact that the virus was almost certainly not going to be contained. The fact that most people on this board, in person, and on mainstream media were denying or ignoring these facts was apparent. This is not the first blip I have seen as investor. This is the first time I thought it made since to make a change based off external news.

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Enganerd
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Re: The Dark Side of "Stay the Course"

Post by Enganerd » Sun Mar 01, 2020 5:30 pm

SEAworld9 wrote:
Sun Mar 01, 2020 1:37 pm
Some thoughts:
- yes, the spread of the disease is going to get worse (my SO is a health provider and used to work at the hospital in Seattle where the first US patient died). Diseases spread; it’s what they do.
- how much is it going to impact the economy? No one knows yet, and anyone who claims to is just guessing.
- remember that through ups and downs, you’re still buying (in your 401, taxable, etc). that means that when the market returns to previous levels any time after a dip or crash, you have more shares at that level and are therefore wealthier.
- If you start using words like “feel,” this has become an emotional exercise (even though you may use data points as confirmation bias). That is very risky for many of the reasons already stated in the thread.
- IMO it’s very, very dangerous to consider any job as “stable.” Especially if you think the disease is going to have a large enough impact on the economy to the point where you’re abandoning your AA and pulling your money out. Just like when driving your car, a large part of the risk is not you, but everyone else on the roads. Though you may think your company and position are “stable,” a stable job can go quickly out the window once your company’s AR starts piling up because your customers can’t afford to pay you or your suppliers can supply parts or inventory. If your 30-60 receivables start becoming 90-120 or 180+ or longer, or get to the point where you have to write them off, it poses a big risk to the business. Likewise with your company’s own AP and how they’re managing cash.
- as many have stated, the hard part is knowing when to get back in. Because of financial reporting cycles, this will be lagging information, and you are likely to miss out on a bunch of the gains.
- if you need to at times like these, just zoom out on the market growth chart, recognize which direction the line goes in the long term, and then put your phone back in your pocket and go about your day. All that happens otherwise is worrying and contemplating that could be used for better purposes.
- lastly, instead of worrying about losing money, use that time to figure out how to create new income streams for yourself or develop your skillset to increase your value on the job market. There is opportunity cost to using your headspace for worrying or timing the market, and the NPV of creating new income streams or advancing your job skills is likely to be more valuable that anything you may “gain” from market timing.

No crisis or disease or force majuere or other has destroyed humanity. Humans are naturally driven and incentivized to create growth, and over the long term it will happen.

- 36 y/o who started investing at 16 and had the pleasure of experiencing the tech crash and “great” recession
I have to agree with you that I would have higher return spending time focusing on increasing income than paying attention to markets and macro events. I find markets and macros interesting so I follow them and discuss them with other people out of a social hobby. It seems responsible to try to be somewhat informed.

Knowing when to get back in does not seem that difficult to me. Say I had the nerve to stray from my IPS and boglehead loyalty and sold a high portion of equities on 2/10. I could have bought back at anytime this past week and locked in gains. Now of course it is impossible to perfectly time the market but OTOH feeling that odds are not favorable and taking some winnings off the table is practical unless strong EMH is correct. And looking at the returns of people suspected of insider trading seems to disprove strong EMH.

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