The Dark Side of "Stay the Course"

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coachd50
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Re: The Dark Side of "Stay the Course"

Post by coachd50 »

Fallible wrote: Mon Mar 02, 2020 12:26 am
coachd50 wrote: Sun Mar 01, 2020 10:01 pm
Fallible wrote: Sun Mar 01, 2020 9:55 pm
sambb wrote: Sun Mar 01, 2020 7:01 pm Agree, risk tolerance is the key. And it can change depending on all sorts of things. For instance, lets say you work in the typewriter industry. Your risk tolerance might change as your job contracts. Or you get a large bonus - this gives you more cushion and may alter your risk tolerance. Bear markets, bull markets, life events, children, marriage, divorces, health, geographical trends of your house, your company's competitiveness, and a variety of other events. As your personal risk tolerance changes, one should try to never take on too much or too little risk. Asset allocation adjustments can be needed. Terminal diseases, job changes, disruptions in life or finance, there are just innumerable things that change one's risk tolerance. Its not a list that can be made except individually.
You have described risk tolerance well, and from books and blogs I have read, are in general accordance with pro Bogleheads Rick Ferri, Larry Swedroe, Jason Zweig, Jonathan Clements, etc. Zweig, in particular, described how astonishingly often and quickly our tolerance can change in his book, Your Money & Your Brain, the chapter on "Risk."

Probably most of the threads on Covid-19 and the market drop are about risk in general and personal risk tolerance, though it's often confused with market timing. The better we understand risk and ourselves, the better chance we have of coming up with an AA to stay the course.
I disagree, because in each instance sambb has included market risk factors in his assessment of personal risk tolerance. Which is inherently wrong, since the tolerance by definition is to market risk (or more accurately, a market decline).

The other factors should indeed be factored in, because they affect ones ability to tolerate a market decline. An increased likely hood of a market decline SHOULD NOT affect ones ability to tolerate a market decline
If I understand you correctly, I agree that a possible market decline by itself should not affect one's ability (key word here) to tolerate it and I don't know how it could. According to growing research, personal risk tolerance is probably a matter of nature and nurture.
That is correct. My point was that the poster you said “did a good job describing risk tolerance” has stated numerous times that those who sold during the last week were simply rebalancing due to their new risk tolerance based on media reports of the Covid 19 outbreak.

Obviously people can do what they want to do. There is no “boglehead police” that snatch an investor up for speculation. But I believe it is important to call selling due to Corona fears what it is- speculation or a response to a poorly drafted investment plan or poorly assessed tolerance to a decreasing investment balance.

If the latter, then don’t confuse the situation by mentioning rebalancing or saying things like “black swan changed risk tolerance” as sambbb has done repeatedly. Instead, chalk up the losses as a lesson, and proceed forward with the new asset allocation until new PERSONAL CIRCUMSTANCES arise that might change it. Not new market circumstances.
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Rowan Oak
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Re: The Dark Side of "Stay the Course"

Post by Rowan Oak »

lkar wrote: Sun Mar 01, 2020 6:13 pm Here’s something for you. I know that stocks are going to get pummeled this week. Absolutely know it. There is so much delusion right now about market impacts and it has been building pressure all weekend. I think the Dow will be down over a thousand points again on Monday again. I don’t just think it, I know it in my bones. I even know when I would buy back in. Thursday at noon. I just know that if I dumped all my VTI on Monday and bought it back on Thursday at noon I would go forward with significantly more stock. I have trouble remembering a time when I was this certain of anything in the market.

Know what I am going to do? Absolutely nothing. Nada. Not a single blessed thing.

Know how many regrets I am going to have when it turns out that I was 100 percent right because of course I will be because any idiot can see it?

Zero.

Nobody knows nothin. Nobody. Knows. Nothin.
With you on this. Good post.
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Re: The Dark Side of "Stay the Course"

Post by goblue100 »

nps wrote: Mon Mar 02, 2020 6:58 am
lkar wrote: Sun Mar 01, 2020 10:46 pm I really really do genuinely believe it. But the point is that no market ever went up or down because I thought it would. And, most fundamentally, I know enough to know with a good degree of confidence that I don’t know what I don’t know.
That is internally inconsistent. If you "believe" but allow that you could be wrong, you do not have belief.
He wants to earn the return of the funds he is invested in. Most investors don't.
For the twenty years ending 12/31/2015, the S&P 500 Index averaged 9.85% a year. A pretty attractive historical return. The average equity fund investor earned a market return of only 5.19%.
Why is this?
Investor behavior is illogical and often based on emotion. This does not lead to wise long-term investing decisions.
https://www.thebalance.com/why-average- ... ns-2388519
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Rowan Oak
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Re: The Dark Side of "Stay the Course"

Post by Rowan Oak »

countmein wrote: Sun Mar 01, 2020 9:47 pm
lkar wrote: Sun Mar 01, 2020 6:13 pm
Here’s something for you. I know that stocks are going to get pummeled this week. Absolutely know it. There is so much delusion right now about market impacts and it has been building pressure all weekend. I think the Dow will be down over a thousand points again on Monday again. I don’t just think it, I know it in my bones. I even know when I would buy back in. Thursday at noon. I just know that if I dumped all my VTI on Monday and bought it back on Thursday at noon I would go forward with significantly more stock. I have trouble remembering a time when I was this certain of anything in the market.

Know what I am going to do? Absolutely nothing. Nada. Not a single blessed thing.
Makes no sense. I assume you're being hyperbolic about your certainty. Otherwise, you see a $20 bill on the ground, you pick it up.

Can you explain why you wont take the free money?
He has learned that it can't be known. No one knows.
Not even in the same universe as free money if such a thing exists.
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger
lkar
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Re: The Dark Side of "Stay the Course"

Post by lkar »

nps wrote: Mon Mar 02, 2020 6:58 am
lkar wrote: Sun Mar 01, 2020 10:46 pm I really really do genuinely believe it. But the point is that no market ever went up or down because I thought it would. And, most fundamentally, I know enough to know with a good degree of confidence that I don’t know what I don’t know.
That is internally inconsistent. If you "believe" but allow that you could be wrong, you do not have belief.
Look, obviously I am being provocative.

But a “belief” about the future when talking about markets and not about matters of religion generally should be called by its better name: A prediction.

You can make predictions with a high degree of confidence when you have most or all of the information and a strong understanding of how things work. I predict there will be gravity tomorrow. For a caveman this was an equally likely prediction but based on a much softer footing.

I made a decision when I set my plan. It was based on my understanding that my intuitions and beliefs from day to day though perhaps extremely strongly held in the moment are like the caveman’s. And that there would be times when I made two steps back for one step forward.

I really really felt confident in what I said. Truly. But with the understanding that I don’t know what I don’t know. If you want to express that as “ok, then you weren’t really confident at all,” that’s ok. That’s not wrong. But ok. Gets us to the same place.
Last edited by lkar on Mon Mar 02, 2020 9:32 am, edited 1 time in total.
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Re: The Dark Side of "Stay the Course"

Post by tibbitts »

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.
There are really only two possibilities here: almost everybody else is wrong regarding exiting and re-entering markets based on events, or you are.
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Re: The Dark Side of "Stay the Course"

Post by thelateinvestor43 »

So what's the difference if I have $50k in my 50/50 AA on the equity side or I ONLY had $50k in a 100% equity AA portfolio?

I'm still "risking" $50k either way. Yes, in the first situation I have MORE than $50k, BUT I'm still putting $50k at risk in either situation.
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Re: The Dark Side of "Stay the Course"

Post by coachd50 »

thelateinvestor43 wrote: Mon Mar 02, 2020 9:34 am So what's the difference if I have $50k in my 50/50 AA on the equity side or I ONLY had $50k in a 100% equity AA portfolio?

I'm still "risking" $50k either way. Yes, in the first situation I have MORE than $50k, BUT I'm still putting $50k at risk in either situation.
What is the difference between risking everything you own, or owning twice as much stuff and risking half of it?
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Re: The Dark Side of "Stay the Course"

Post by anon3838 »

Charlie Munger once said:

If you're not willing to react with equanimity to a marketplace decline, of 50%, 2-3 times a century, you're not fit to be a common shareholder, and you deserve the mediocre result you're going to get. -Charlie Munger, https://www.youtube.com/watch?v=3WkpQ4PpId4
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Re: The Dark Side of "Stay the Course"

Post by thelateinvestor43 »

coachd50 wrote: Mon Mar 02, 2020 9:36 am
thelateinvestor43 wrote: Mon Mar 02, 2020 9:34 am So what's the difference if I have $50k in my 50/50 AA on the equity side or I ONLY had $50k in a 100% equity AA portfolio?

I'm still "risking" $50k either way. Yes, in the first situation I have MORE than $50k, BUT I'm still putting $50k at risk in either situation.
What is the difference between risking everything you own, or owning twice as much stuff and risking half of it?
I understand, but you're still risking $50k either way. Isn't $50k $50k either way? That's why I don't really get AA too much. I mean I'm "protecting" most of my PF with AA of 35/65 right now, but someday when 35 side equals my entire PF I'll still be risking what used to be my entire PF I guess.
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Re: The Dark Side of "Stay the Course"

Post by Kenkat »

coachd50 wrote: Sun Mar 01, 2020 10:01 pm
Fallible wrote: Sun Mar 01, 2020 9:55 pm
sambb wrote: Sun Mar 01, 2020 7:01 pm Agree, risk tolerance is the key. And it can change depending on all sorts of things. For instance, lets say you work in the typewriter industry. Your risk tolerance might change as your job contracts. Or you get a large bonus - this gives you more cushion and may alter your risk tolerance. Bear markets, bull markets, life events, children, marriage, divorces, health, geographical trends of your house, your company's competitiveness, and a variety of other events. As your personal risk tolerance changes, one should try to never take on too much or too little risk. Asset allocation adjustments can be needed. Terminal diseases, job changes, disruptions in life or finance, there are just innumerable things that change one's risk tolerance. Its not a list that can be made except individually.
You have described risk tolerance well, and from books and blogs I have read, are in general accordance with pro Bogleheads Rick Ferri, Larry Swedroe, Jason Zweig, Jonathan Clements, etc. Zweig, in particular, described how astonishingly often and quickly our tolerance can change in his book, Your Money & Your Brain, the chapter on "Risk."

Probably most of the threads on Covid-19 and the market drop are about risk in general and personal risk tolerance, though it's often confused with market timing. The better we understand risk and ourselves, the better chance we have of coming up with an AA to stay the course.
I disagree, because in each instance sambb has included market risk factors in his assessment of personal risk tolerance. Which is inherently wrong, since the tolerance by definition is to market risk (or more accurately, a market decline).

The other factors should indeed be factored in, because they affect ones ability to tolerate a market decline. An increased likely hood of a market decline SHOULD NOT affect ones ability to tolerate a market decline
Yes, agree with you on this coachd50.

You retire and your income situation changes. It’s reasonable to reassess your risk tolerance and potentially make changes.

Turkey shoots down a Russian fighter jet operating over Syria; the market drops and you are afraid this will turn into something more. This is not a situation where it is reasonable to reassess your risk tolerance. Nothing about your own personal situation has changed; you are just reacting to a market event. Your risk tolerance should have already taken this into account.

If you’ve never experienced a market crisis, then (maybe) you get a one time use free pass - i.e., I thought I was good but now that I am going through it, I realized I over-estimated my risk tolerance. But you should NOT go back and forth based on current market conditions.
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Re: The Dark Side of "Stay the Course"

Post by bearcub »

Balanced fund + TIPS I can ruin a free lunch.
ukbogler
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Re: The Dark Side of "Stay the Course"

Post by ukbogler »

HomerJ wrote: 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.
I also said today would be a rally. 1.28% up last time I looked. I also said there's another leg down coming. In 10 days, you can come back to this post and eats some crow.
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Re: The Dark Side of "Stay the Course"

Post by sschullo »

Retrospection is 100% accurate going all the way back to 1803 referred to Stocks for the Run book by Jeremy Siegal, according to the best data available for the last 200 years.

Future predictions .999999999% are not only inaccurate but wrong long term.

The only "dark side" is in our heads! The psychology that messes everything when people abandon their plan because they thought that a diversified portfolio protected them from losses.

However, we need our heads--to construct a diversified portfolio that reflections our need and ability to take risks by also constructing a stock/bond split that meets that need, and stick with it.

But OP Ill give you this--economic armageddon worldwide can be the "Dark Side" you are alluding, but then we are all doomed! That ain't going to happen in our lifetimes. Civilization is here to stay.
Last edited by sschullo on Mon Mar 02, 2020 11:41 am, edited 1 time in total.
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Re: The Dark Side of "Stay the Course"

Post by HomerJ »

VBTLX (Vanguard Total Bond) - YTD return - 3.87%
VTSAX (Vanguard Total Stock) - YTD return - -8.23%

A 50/50 portfolio is down 2.2% YTD so far. Not a disaster. Makes it pretty easy to "stay the course".

Not even counting today's uptick.
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Re: The Dark Side of "Stay the Course"

Post by Unladen_Swallow »

ukbogler wrote: Mon Mar 02, 2020 10:58 am
HomerJ wrote: 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.
I also said today would be a rally. 1.28% up last time I looked. I also said there's another leg down coming. In 10 days, you can come back to this post and eats some crow.
If you could share this weeks winning lottery numbers - please and thank you.
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Re: The Dark Side of "Stay the Course"

Post by Carol88888 »

Go out & buy a notebook and write down that you sold when you thought you should have. Now be honest and write down when you buy back. Look at it later ....like maybe a decade or two later and see how your hypothetical sell would have helped/hurt you decades down the road.

My guess: Wouldn't have made much difference.
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Re: The Dark Side of "Stay the Course"

Post by Portfolio7 »

I 100% get where you are right now. It's much like how I felt in 2003-4. I held my investments and rode through the dot.com crash and came out the other side whole.... but there was a whole lot of pain associated with learning to accept those losses, and holding on to turn them into gains. This is especially true because I felt the dot.com crash was something that was predictable. Company valuations were untied to fundamentals, and we were well into 'greater fool' territory with tech stock prices. In Feb 2000 I had a strong desire to sell, but I didn't because I was following this simplistic advice. When you say you felt you had given up your agency, yes, that's exactly how I felt. Part of the reason I felt that way, though, was because I really didn't understand my portfolio...

I had the same feeling in late 2007, and was 100% equities. I didn't want to flail about in the market, so I limited my movements. I started selling 10% per month, every month or two. So, here my intuition actually "worked". I was 100% bonds by the end of 2008. I started moving back into equities sometime about a third to half of the way into 2009, 10% per month. My portfolio had 100% recovered by the end of 2009, but.... I realized how lucky I'd been. I was flying by the seat of my pants, and as often as not when you don't have a plan you end up in trouble. So I had to think about this a lot. I went to a 60/40 portfolio for several years and did a lot of reading.

In both cases I had wanted to sell, there were severe fundamental risks in the US economy, risks of the kind we haven't had in a decade (imho.) I don't think that's the case now, but then I could be wrong. However, this lead me to a couple realizations. First, that nobody can predict a black swan, and buy and hold is the only logical response to that. Second, that even when there are huge risks, if they are fundamental risks, they tend to hit slowly. Even then it's really hard/impossible to find any advance signal that isn't almost certainly a statistical fluke &/or loses it's predictive power unpredictably. But, there is time to react (and reconsider.)

In the end, I decided there was a lot of wisdom in buy and hold. I also decided that I would direct a portion of my investments on a slightly different strategy, but one that was mostly consistent with buy and hold. I decided on a "range" of AA instead of a specific AA. I decided when I could be at the top of that range, and when I could be at the bottom. I used specific triggers and measured my results for a year. Slightly lower volatility, slightly higher returns vs my base AA, which I held in a different account so I could track them both concurrently. It was just one year, but the basic approach had some literature behind it, and I stuck with it. I happened to be at my most aggressive AA when the coronavirus scare hit a week ago friday, full 80/20. Tough beans. If I can't handle a 40% loss I shouldn't be at 80% equities. I'm going to ride this thing through, straight buy and hold, stay the course, whatever you want to call it.

I'm not suggesting you do anything like this. What I hoped to do was give you an example of how one person responded, even succeeded on a one-off basis, but also could have gone very wrong. I recognize the wisdom in the common guidance. I also found a place to exert my 'agency', which was something I felt I had to do, but is not a recommended practice. For several reasons, I maintain strict limits on what I am allowed to do and when. For example, I still have two weeks before I am allowed to make any AA adjustment. By then this coronavirus issue will have shaken out a bit. I won't be reacting to the news, I'll be considering the factual implications of it.

The main thing is that I had to do a lot of work to get to this point, and at a certain point felt I had earned the knowledge that allowed me that agency you talked about. I know why my portfolio is structured the way it is, the strengths and weaknesses (and there's more for me to learn, as this site teaches me every day), and I know why my process is structured the way it is. This is a great strength, such that even when my emotions are strong, and I've even posted about those feelings - I'm have a stronger compulsion to stick with my IPS.
"An investment in knowledge pays the best interest" - Benjamin Franklin
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Re: The Dark Side of "Stay the Course"

Post by mrspock »

Enganerd wrote: Sun Mar 01, 2020 8:50 am ...
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.
Feel being the operative word. When it comes to investing they tend to do more harm than good. You are making a bunch of really bold statement in here, such as claiming to know or have accurate intuitions as to the impact of the corona virus on the economy (near and long). The reality is, you nor anyone else really knows. For all anyone knows, it could be anything from a recession to a rounding error — or simply something in between.

What we do know, is that history tells us, that in the past, things are likely to recover (an average of just 4 months for the current pullback %), and the market will hit new highs, if we wait patiently.

I suggest once the smoke clears, you reassess your AA, feelings like those you mention in your post are a good sign you need more bonds.
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Re: The Dark Side of "Stay the Course"

Post by Fallible »

coachd50 wrote: Mon Mar 02, 2020 7:03 am
Fallible wrote: Mon Mar 02, 2020 12:26 am
coachd50 wrote: Sun Mar 01, 2020 10:01 pm
Fallible wrote: Sun Mar 01, 2020 9:55 pm
sambb wrote: Sun Mar 01, 2020 7:01 pm Agree, risk tolerance is the key. And it can change depending on all sorts of things. For instance, lets say you work in the typewriter industry. Your risk tolerance might change as your job contracts. Or you get a large bonus - this gives you more cushion and may alter your risk tolerance. Bear markets, bull markets, life events, children, marriage, divorces, health, geographical trends of your house, your company's competitiveness, and a variety of other events. As your personal risk tolerance changes, one should try to never take on too much or too little risk. Asset allocation adjustments can be needed. Terminal diseases, job changes, disruptions in life or finance, there are just innumerable things that change one's risk tolerance. Its not a list that can be made except individually.
You have described risk tolerance well, and from books and blogs I have read, are in general accordance with pro Bogleheads Rick Ferri, Larry Swedroe, Jason Zweig, Jonathan Clements, etc. Zweig, in particular, described how astonishingly often and quickly our tolerance can change in his book, Your Money & Your Brain, the chapter on "Risk."

Probably most of the threads on Covid-19 and the market drop are about risk in general and personal risk tolerance, though it's often confused with market timing. The better we understand risk and ourselves, the better chance we have of coming up with an AA to stay the course.
I disagree, because in each instance sambb has included market risk factors in his assessment of personal risk tolerance. Which is inherently wrong, since the tolerance by definition is to market risk (or more accurately, a market decline).

The other factors should indeed be factored in, because they affect ones ability to tolerate a market decline. An increased likely hood of a market decline SHOULD NOT affect ones ability to tolerate a market decline
If I understand you correctly, I agree that a possible market decline by itself should not affect one's ability (key word here) to tolerate it and I don't know how it could. According to growing research, personal risk tolerance is probably a matter of nature and nurture.
That is correct. My point was that the poster you said “did a good job describing risk tolerance” has stated numerous times that those who sold during the last week were simply rebalancing due to their new risk tolerance based on media reports of the Covid 19 outbreak.

Obviously people can do what they want to do. There is no “boglehead police” that snatch an investor up for speculation. But I believe it is important to call selling due to Corona fears what it is- speculation or a response to a poorly drafted investment plan or poorly assessed tolerance to a decreasing investment balance.

If the latter, then don’t confuse the situation by mentioning rebalancing or saying things like “black swan changed risk tolerance” as sambbb has done repeatedly. Instead, chalk up the losses as a lesson, and proceed forward with the new asset allocation until new PERSONAL CIRCUMSTANCES arise that might change it. Not new market circumstances.
In responding to your earlier quote, "An increased likely hood of a market decline SHOULD NOT affect ones ability to tolerate a market decline," I was agreeing that the market can't determine one's "ability" to tolerate risk, i.e., determine one's risk tolerance, which is probably a matter of nature vs. nurture. But a market decline can definitely affect our risk tolerance, which is defined as how well we can stomach market downturns. That's why I said "ability" was the key word. So, maybe you were saying is that a market decline should not affect, or negatively affect, how well one can tolerate its risk, e.g., should not affect how one can "stomach" it.

Also, fwiw, I'm not familiar with smbb's previous posts and was responding to the latest one I had seen. Appears I walked unaware into an ongoing debate.
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Re: The Dark Side of "Stay the Course"

Post by firebirdparts »

Looks like the market timers are going to get a nice chance to sell out today. Every asset class is way up. People want anything but money.

Will you sell? There is a chance you'll be glad. There's a chance you'll be sad. Will you stay the course?
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Re: The Dark Side of "Stay the Course"

Post by Portfolio7 »

firebirdparts wrote: Mon Mar 02, 2020 12:08 pm Looks like the market timers are going to get a nice chance to sell out today. Every asset class is way up. People want anything but money.

Will you sell? There is a chance you'll be glad. There's a chance you'll be sad. Will you stay the course?
My IPS says "Do Nothing. Check again in two weeks" :twisted:

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

Post by lkar »

ukbogler wrote: Mon Mar 02, 2020 10:58 am
HomerJ wrote: 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.
I also said today would be a rally. 1.28% up last time I looked. I also said there's another leg down coming. In 10 days, you can come back to this post and eats some crow.
I don't think anyone on this board discounts the possibility that there are people out there who can successfully market time. It's possible, sure. There are varying levels of skepticism.

But is it possible that the statement "nobody knows nothing" needs to be amended to "nobody knows nothing, except some guy called ukbogler"? Sure. Maybe. Check back in 40 years and we'll see.

But even if the answer turns out to be yes, who cares? What possible relevance does this have for any person in the world other than ukbogler?
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Re: The Dark Side of "Stay the Course"

Post by Barsoom »

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 think that "market timers" don't think of themselves as people who follow hunches about what the market will do based on extreme news reports.

Market timers are people who follow a set of economic indicators that have historically been known to signal structural changes in the economic condition of the country and the world, and take action when these indicators signal impending weakness.

Currently, these indicators are signaling a healthy jobs environment and positive retail sales. Weakness is creeping into industrial production, corporate earnings per share, personal income growth, and the bond market yield curve is inverted again.

The current drop in the market is likely not structural, but a panic response to the Covid-19 that will shortly correct itself. In the end, it might be like the YE2018 whipsaw, although a bit deeper.

-B
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cashboy
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Re: The Dark Side of "Stay the Course"

Post by cashboy »

Three-Fund Portfolio: FSPSX - FXAIX - FXNAX (with slight tilt of CDs - CASH - Canned Beans - Rice - Bottled Water)
coachd50
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Re: The Dark Side of "Stay the Course"

Post by coachd50 »

thelateinvestor43 wrote: Mon Mar 02, 2020 10:17 am
coachd50 wrote: Mon Mar 02, 2020 9:36 am
thelateinvestor43 wrote: Mon Mar 02, 2020 9:34 am So what's the difference if I have $50k in my 50/50 AA on the equity side or I ONLY had $50k in a 100% equity AA portfolio?

I'm still "risking" $50k either way. Yes, in the first situation I have MORE than $50k, BUT I'm still putting $50k at risk in either situation.
What is the difference between risking everything you own, or owning twice as much stuff and risking half of it?
I understand, but you're still risking $50k either way. Isn't $50k $50k either way? That's why I don't really get AA too much. I mean I'm "protecting" most of my PF with AA of 35/65 right now, but someday when 35 side equals my entire PF I'll still be risking what used to be my entire PF I guess.
I am not sure I understand what you are saying.
All I am saying is that risking half of what I own is easier to stomach than risking all. $50,000 to me is a decent amount of money. I am fairly certain there are many posters here whose balances swing up and down by that much on a day with just minimal volatility. So saying “but it is still $50,000 doesnt seem to make sense
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Re: The Dark Side of "Stay the Course"

Post by Dottie57 »

Admiral wrote: Sun Mar 01, 2020 6:58 pm To paraphrase Mike Tyson, everyone has a plan until the get hit.

As I've posted in other threads, it's very, very hard to understand your risk tolerance if you've never been through a bear market or recession.

In 2008 I was 100/0. After that: 70/30. And I still am.

Few people are complaining about their bond holdings this week.

You simply did not understand what your risk tolerance was. Now, perhaps, you do. Not a bad lesson!

:sharebeer
Agree.
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firebirdparts
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Re: The Dark Side of "Stay the Course"

Post by firebirdparts »

coachd50 wrote: Mon Mar 02, 2020 1:09 pm
All I am saying is that risking half of what I own is easier to stomach than risking all. $50,000 to me is a decent amount of money. I am fairly certain there are many posters here whose balances swing up and down by that much on a day with just minimal volatility. So saying “but it is still $50,000 doesnt seem to make sense
You gotta decide when you say "risk" do you mean there's a risk that it might change day in and day out? That's what must people here mean. Doesn't seem like a big deal to me (intellectually). Now, emotionally, it might be a big deal to see your $50,000 become $45,000. but that's a whole lot different from betting $50,000 on Roulette. They zero out all the losers every time they spin that thing.

If you think of stocks as being variable, and you think of the variability as "this is going to make me sick" then you have to decide I think whether you care emotionally about number of dollars it went down or percent of your fortune it went down.
A fool and your money are soon partners
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Re: The Dark Side of "Stay the Course"

Post by 7eight9 »

firebirdparts wrote: Mon Mar 02, 2020 1:26 pm
coachd50 wrote: Mon Mar 02, 2020 1:09 pm
All I am saying is that risking half of what I own is easier to stomach than risking all. $50,000 to me is a decent amount of money. I am fairly certain there are many posters here whose balances swing up and down by that much on a day with just minimal volatility. So saying “but it is still $50,000 doesnt seem to make sense
You gotta decide when you say "risk" do you mean there's a risk that it might change day in and day out? That's what must people here mean. Doesn't seem like a big deal to me (intellectually). Now, emotionally, it might be a big deal to see your $50,000 become $45,000. but that's a whole lot different from betting $50,000 on Roulette. They zero out all the losers every time they spin that thing.

If you think of stocks as being variable, and you think of the variability as "this is going to make me sick" then you have to decide I think whether you care emotionally about number of dollars it went down or percent of your fortune it went down.
^ not necessarily --- it depends on where you are playing ...

In roulette, the en prison rule is an opportunity to recover one's stakes after a spin of zero, provided one's bet was even-odds (i.e. high–low, even–odd, red–black).[1] It is a variant of the la partage rule, in which a player loses only half their even-odds stake if the original spin is a zero, recouping the other half[1] (partage being French for "sharing"). In European casinos, where la partage is customary, the player may be given the option instead to place their original stake en prison ("in prison" in French).[1] The stake is left on the previous bet, and the croupier places a marker on it to show it is en prison.[1] If the bet wins on the next spin, the player's stake is returned; if it loses, it is forfeited.[1] Different casinos adopt different rules for the case where zero comes up a second time: it may be treated as won, lost, la partage or en prison.[1]
https://en.wikipedia.org/wiki/En_prison
I guess it all could be much worse. | They could be warming up my hearse.
actx
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Re: The Dark Side of "Stay the Course"

Post by actx »

Rowan Oak wrote: 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.
I started doing something similar for ALL major life decisions. . buying a house, changing jobs, moving, etc. Not a journal but a 1 or 2 page written note (not in Evernote!) that I put in an envelope and labeled. . .June 2001 - Moving to Texas, November 2004 - Building a Pool, etc. . I have probably 20 of these and have only gone back and read a few when I had second thoughts on a major decision. In each and every case, reading my rationale at the time was hugely positive. I had made the right decision with the info I had at the time. .
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Re: The Dark Side of "Stay the Course"

Post by rascott »

lkar wrote: Sun Mar 01, 2020 6:13 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.
The book isn’t written yet.

Plus, when would you have bought back in? Last Tuesday? Friday? Are you still sitting on the cash. And let’s say you did everything optimally. What happens when you get your next intuition? Are you going to have a false confidence? Would this have been your once in a lifetime? Of course not. People who win a big jackpot on their first time to Vegas lose far more in the long run than this who plod along, often.

Here’s something for you. I know that stocks are going to get pummeled this week. Absolutely know it. There is so much delusion right now about market impacts and it has been building pressure all weekend. I think the Dow will be down over a thousand points again on Monday again. I don’t just think it, I know it in my bones. I even know when I would buy back in. Thursday at noon. I just know that if I dumped all my VTI on Monday and bought it back on Thursday at noon I would go forward with significantly more stock. I have trouble remembering a time when I was this certain of anything in the market.

Know what I am going to do? Absolutely nothing. Nada. Not a single blessed thing.

Know how many regrets I am going to have when it turns out that I was 100 percent right because of course I will be because any idiot can see it?

Zero.

Nobody knows nothin. Nobody. Knows. Nothin.

Seems like you hit the 1000 point move in the Dow almost exactly right. Just had the direction flipped! LOL :sharebeer
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Re: The Dark Side of "Stay the Course"

Post by lkar »

rascott wrote: Mon Mar 02, 2020 3:47 pm
lkar wrote: Sun Mar 01, 2020 6:13 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.
The book isn’t written yet.

Plus, when would you have bought back in? Last Tuesday? Friday? Are you still sitting on the cash. And let’s say you did everything optimally. What happens when you get your next intuition? Are you going to have a false confidence? Would this have been your once in a lifetime? Of course not. People who win a big jackpot on their first time to Vegas lose far more in the long run than this who plod along, often.

Here’s something for you. I know that stocks are going to get pummeled this week. Absolutely know it. There is so much delusion right now about market impacts and it has been building pressure all weekend. I think the Dow will be down over a thousand points again on Monday again. I don’t just think it, I know it in my bones. I even know when I would buy back in. Thursday at noon. I just know that if I dumped all my VTI on Monday and bought it back on Thursday at noon I would go forward with significantly more stock. I have trouble remembering a time when I was this certain of anything in the market.

Know what I am going to do? Absolutely nothing. Nada. Not a single blessed thing.

Know how many regrets I am going to have when it turns out that I was 100 percent right because of course I will be because any idiot can see it?

Zero.

Nobody knows nothin. Nobody. Knows. Nothin.

Seems like you hit the 1000 point move in the Dow almost exactly right. Just had the direction flipped! LOL :sharebeer
They are gonna take away my active trader card now! :0)
TheCowbell
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Re: The Dark Side of "Stay the Course"

Post by TheCowbell »

I made two emotional AA-changing decisions in the last several years. Trump's election & Covid-19.

Wrong on both counts.

Luckily they were relatively small changes, but if I had stayed the course I'd be in better shape today, for sure.

I need to take a breath and re-evaluate what my AA should truly be, and then mechanically re-balance at scheduled intervals. I obviously suck at market timing.
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Enganerd
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Re: The Dark Side of "Stay the Course"

Post by Enganerd »

bluquark wrote: Sun Mar 01, 2020 11:28 pm I've had similar feelings to OP this week. I also basically started investing in 2009. I knew I would be tested by my first real crash but I didn't expect the details of the test.

To me what was most unnerving about this crash was the uncanny week before it. Epidemiologist consensus had firmed up around "pandemic" outcome but the markets blithely ignored it until the outbreak in Italy finally hammered it through their thick skulls. The market as a whole held onto "repeat of SARS" theory after it had already been proven wrong.

The market's behavior during the weeks of suspense was increasingly difficult to explain. What does the market know that I don't, I wondered. Can it be that there is some positive news I'm not aware of justifying a further 15% gain and that with virus risk canceling out this good news, the markets end up flat? Is the market more long-term-minded than it used to be and doesn't care about a 1-year dip in earnings? I had to come up with such implausible hypotheses to avoid facing the fact that this time it was I who knew something the market didn't.

I think the root of why, like OP, I felt a bit shaken in my Boglehead faith this week is that one of the pillars of that faith for me was EMH. If EMH were fully true, then passive investing would be an easy decision. I did know before this crash that there are plenty of holes to poke in EMH, but I still believed it was "true enough for practical purposes". What changed this week is I saw clear as day that EMH is not even slightly true. The entire market can ignore facts right in front of its nose for weeks. So now I have to lean more on the other reasons to remain passive.
Nicely stated. I believe most agree that strong EMH is not true but this seems to be a blow to semi-strong as well. Of course, the market has billions of variables so we cannot know for sure that it would not increase in value in the face of a unexpected global pandemic that has direct effects on gdp. But it seems foolish to think that a global pandemic would not be in someway bad for trade and markets.
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Enganerd
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Re: The Dark Side of "Stay the Course"

Post by Enganerd »

Thanks for all the replies everyone. The discussion has helped me to mentally go through the steps of actually deciding to execute a trade preparation of a expected drop. I regret not making a large trade but in actuality I was never really close to rationally deciding "many like a 60/40 AA; I've been 100/0 but now I lost confidence so I am going to move to 60/40." It was more, the fact that there were new apparent headwinds to market growth that had not effected the market prices and much of conversation regarding this new risk was confused/wrong. So I felt uneasy and wanted to sell, and I did sell a small amount. And then the market dropped 13% and that's when hindsight really factored in and I experienced regret at not making a larger move.

Today I had to face the same process and I realize how much harder it is to decide a specific move not justified by my IPS. I still think many under appreciate the effect this virus is likely to have on USA. So IMO the movement today is what is referred to as a dead cat bounce. But I was not bold enough to make a large trade though I did reallocate another 5% out of equities. I justify that 90/10 is still aggressive enough for my goals and clearly my risk tolerance is not 100/0.

I feel conflicted. I regret not putting more cash in last friday and that likely I will regret not taking more out here in the near future. Anyways I expect to sleep better at night.
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Re: The Dark Side of "Stay the Course"

Post by coachd50 »

firebirdparts wrote: Mon Mar 02, 2020 1:26 pm
coachd50 wrote: Mon Mar 02, 2020 1:09 pm
All I am saying is that risking half of what I own is easier to stomach than risking all. $50,000 to me is a decent amount of money. I am fairly certain there are many posters here whose balances swing up and down by that much on a day with just minimal volatility. So saying “but it is still $50,000 doesnt seem to make sense
You gotta decide when you say "risk" do you mean there's a risk that it might change day in and day out? That's what must people here mean. Doesn't seem like a big deal to me (intellectually). Now, emotionally, it might be a big deal to see your $50,000 become $45,000. but that's a whole lot different from betting $50,000 on Roulette. They zero out all the losers every time they spin that thing.

If you think of stocks as being variable, and you think of the variability as "this is going to make me sick" then you have to decide I think whether you care emotionally about number of dollars it went down or percent of your fortune it went down.
Keep in mind those were my replies to someone who asked "what is the difference between having $50,000 as your entire portfolio in 100% equities, or having $50,000 as 50% of your portfolio in equities (and another $50,000 in bonds). My initial reply was the difference is between "risking" everything you own, or half of what you own. That person's reply is "Yeah, but $50,000 is still $50,000".

I was just trying to demonstrate how seeing the entire equity portion of your portfolio decline is probably easier when it only represents a portion of everything, and is not EVERYthing you have.
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Re: The Dark Side of "Stay the Course"

Post by lkar »

coachd50 wrote: Mon Mar 02, 2020 9:59 pm
firebirdparts wrote: Mon Mar 02, 2020 1:26 pm
coachd50 wrote: Mon Mar 02, 2020 1:09 pm
All I am saying is that risking half of what I own is easier to stomach than risking all. $50,000 to me is a decent amount of money. I am fairly certain there are many posters here whose balances swing up and down by that much on a day with just minimal volatility. So saying “but it is still $50,000 doesnt seem to make sense
You gotta decide when you say "risk" do you mean there's a risk that it might change day in and day out? That's what must people here mean. Doesn't seem like a big deal to me (intellectually). Now, emotionally, it might be a big deal to see your $50,000 become $45,000. but that's a whole lot different from betting $50,000 on Roulette. They zero out all the losers every time they spin that thing.

If you think of stocks as being variable, and you think of the variability as "this is going to make me sick" then you have to decide I think whether you care emotionally about number of dollars it went down or percent of your fortune it went down.
Keep in mind those were my replies to someone who asked "what is the difference between having $50,000 as your entire portfolio in 100% equities, or having $50,000 as 50% of your portfolio in equities (and another $50,000 in bonds). My initial reply was the difference is between "risking" everything you own, or half of what you own. That person's reply is "Yeah, but $50,000 is still $50,000".

I was just trying to demonstrate how seeing the entire equity portion of your portfolio decline is probably easier when it only represents a portion of everything, and is not EVERYthing you have.
It’s like going into a casino with $20. If you know you might like a sandwich only play $10 not all $20.
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Re: The Dark Side of "Stay the Course"

Post by bluquark »

Enganerd wrote: Mon Mar 02, 2020 8:40 pm Today I had to face the same process and I realize how much harder it is to decide a specific move not justified by my IPS. I still think many under appreciate the effect this virus is likely to have on USA.
From the point of view of us amateurs who aren't maintaining quantitative models of businesses and trade, it seems intractable to make a good guess of the magnitude of the damage. Two weeks ago it was more straightforward to perceive with our ordinary individual judgement that the market should be dropping at all. Today I'm relatively comfortable throwing up my hands again and going with the heuristic "any amount of drop = priced in".
70/30 portfolio | Equity: global market weight | Bonds: 20% long-term munis - 10% LEMB
mchop
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Re: The Dark Side of "Stay the Course"

Post by mchop »

I have a friend who has a small clothing company with product and material being manufactured in China. In the week prior to all this chaos I asked him if he was doing a new production run (summer approaching) and he told me that his entire production line was stalling due to "this coronavirus thing".

Right then...I knew it was bigger than what i had ever appreciated...that it could affect a small company like his and the impact it would have up and downstream and then what it would mean for every company in the world.

I opened my investment excel sheet thinking about doing something...saw my IPS and Asset allocation %'s and realized I really didn't need to do anything and shouldn't do anything. Like countless other posters have mentioned - having an IPS really does stop you from taking spontaneous action.

I don't regret not doing anything even though I lost a lot of money last week...i appreciate not stressing about getting out / and timing when to get back in to the market. I have been buying bonds for the last 15 months trying to keep within my balancing bands and I am now am finally able to start buying stocks again. Being 60/40 has worked for me.
beth65
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Re: The Dark Side of "Stay the Course"

Post by beth65 »

So buy and hold means that one never reallocates, even if all of the red flags are up and all signs point to a downturn? Obviously we can't time the market, but rebalancing to prepare for a downturn is not the same as trading, or selling everything in anticipation for a certain event to happen at a certain time. I consider myself a buy-and-hold, fiscal conservative that mostly aligns with the Boglehead philosophy, but I was very happy that I reallocated some of my IRA at the time (30% of my 80% equity holdings) to gold in 2008, and I reallocated back to equities in 2010. I recently reallocated more of my holdings to bonds and chose not to invest excess cash that I have right now in the market, as I am already very well-invested, but I also just see so many red flags in the market including valuations that are detached from reality, a big push by the financial media to get everyone into equities (TINA gets thrown around a lot), record amounts of debt that have not slowed their increase, and geopolitical tensions and a large public health concern. Again, I'm not selling anything, but I sleep well at night knowing that I live well below my means and my allocations are now more conservatively distributed than what most automated recommendations are based upon my age.
Last edited by beth65 on Tue Mar 03, 2020 12:51 pm, edited 1 time in total.
mchop
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Re: The Dark Side of "Stay the Course"

Post by mchop »

Hi beth65,

For me no. I set my AA to what i believe is appropriate for my risk tolerance. I am also conservative like you refer to yourself. I am 60/40 with a paid off home.

I have previously withdrawn from 60/40 investment account to pay off a rental property and then when that sold - i chose to pay off my mortgage when in fact it would have been much more advantageous to have left the money invested and then invested the proceeds of the sale. That small lesson of trying to time the market (which i thought was overheated back in 2015...showed me that i dont know very much). I enjoy not worrying about what to do / blaming myself for doing the wrong thing (as i have done).
beth65
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Re: The Dark Side of "Stay the Course"

Post by beth65 »

mchop wrote: Tue Mar 03, 2020 12:44 pm Hi beth65,

For me no. I set my AA to what i believe is appropriate for my risk tolerance. I am also conservative like you refer to yourself. I am 60/40 with a paid off home.

I have previously withdrawn from 60/40 investment account to pay off a rental property and then when that sold - i chose to pay off my mortgage when in fact it would have been much more advantageous to have left the money invested and then invested the proceeds of the sale. That small lesson of trying to time the market (which i thought was overheated back in 2015...showed me that i dont know very much). I enjoy not worrying about what to do / blaming myself for doing the wrong thing (as i have done).
Thanks for your reply. I agree it's best not to worry what to do, but rebalancing is still not the same as selling off or withdrawing anything. I have never sold or withdrawn from any of my investments, ever. I do think that having a 60/40 now feels better than 75/25 a month ago, and I don't foresee that change of allocation costing me any huge amount if I am wrong.
coachd50
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Re: The Dark Side of "Stay the Course"

Post by coachd50 »

beth65 wrote: Tue Mar 03, 2020 12:17 pm So buy and hold means that one never reallocates, even if all of the red flags are up and all signs point to a downturn? Obviously we can't time the market, but rebalancing to prepare for a downturn is not the same as trading, or selling everything in anticipation for a certain event to happen at a certain time. I consider myself a buy-and-hold, fiscal conservative that mostly aligns with the Boglehead philosophy, but I was very happy that I reallocated some of my IRA at the time (30% of my 80% equity holdings) to gold in 2008, and I reallocated back to equities in 2010. I recently reallocated more of my holdings to bonds and chose not to invest excess cash that I have right now in the market, as I am already very well-invested, but I also just see so many red flags in the market including valuations that are detached from reality, a big push by the financial media to get everyone into equities (TINA gets thrown around a lot), record amounts of debt that have not slowed their increase, and geopolitical tensions and a large public health concern. Again, I'm not selling anything, but I sleep well at night knowing that I live well below my means and my allocations are now more conservatively distributed than what most automated recommendations are based upon my age.
Much like another poster I think you are Not using the term “rebalancing“ correctly (with respect to this site). Rebalancing means that your asset allocation was no longer what you desired to be at due to market factors ( ie rising so that the equities represented two large a percentage, or falling so that they represented two smaller percentage). A buy and hold investor “rebalances“ to meet his or her pre-determined asset allocation which is based off of their financial situation, goals, and risk tolerance (that the market would fall 50+%)

Rebalancing does not mean forecasting market performance based off of factors and then trading accordingly.
CT-Scott
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Re: The Dark Side of "Stay the Course"

Post by CT-Scott »

OP, I made a major move to stable value funds inside of my 401k on Thurs, 2/27. I was asleep at the wheel until posting here the day before, and felt conflicted by my read of the situation vs what most of the bogleheads here advised. I was around 90/10 stocks/bonds, and I'm 48.

I'm not going to recommend that you do one thing vs another, other than this:
1) If you really *think* that things are going to get worse before they get better, and you feel confident that 60/40 (or whatever) is the ratio you want to be at, why mess around making small moves? Just move to your desired AA ASAP.
2) At the end of the day, what they *think* could be right, what you *think* could be right, or the reality could be something completely different. If you're wrong and they're right, but you followed their advice, that's awesome. If you're right and they're wrong, and you followed their advice, they won't be sending you any checks in the mail.
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careytilden
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Re: The Dark Side of "Stay the Course"

Post by careytilden »

I applaud you for posting, it takes some courage to honestly address your own thoughts and actions like this. The thread has been very interesting as well.

But! I'm surprised nobody has yet mentioned nisiprius' wonderful thread, A time to EVALUATE your jitters. (Unless I missed it.) It seems particularly apt at the moment.
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Noobvestor
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Re: The Dark Side of "Stay the Course"

Post by Noobvestor »

sambb wrote: 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)
It worked out fine for Japanese investors with a combination of domestic and international stocks and bonds. It has worked out fine so far for people with diversified portfolio going into the Coronavirus, too, depending on one's definition - a diversified portfolio didn't lose a lot. My (pretty typical Boglehead) 60/40 stock/bond and 50/50 US/international allocation has weathered this pretty well so far.

Notably, there are some huge differences between a single national stock market and a globally diversified allocation, not to mention the timeframes we are talking about. Maybe the whole world's stock and bond markets will stay down for decades. It seems unlikely, but it's possible. There is a lot more in terms of precedents for single national markets going and staying down than the global market, especially with bonds.

If that is the prediction, though, I don't know what to advise - maybe a version of the 'permanent portfolio' or just roaming and living off the land.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
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Re: The Dark Side of "Stay the Course"

Post by Noobvestor »

Enganerd wrote: Sun Mar 01, 2020 5:36 pm
JoeRetire wrote: Sun Mar 01, 2020 11:45 am
Enganerd wrote: Sun Mar 01, 2020 8:50 amSo 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.
Very true. Something I always try to remember that regret is completely wasted energy. So I am just trying to formalize what lesson I should take away here. Because I agree in general it is foolish to think that having no privileged information or competitive advantage it would be foolish to try and make a profitable trade. But I also don't want to refuse myself options due to ideology or group think.
It's not about groupthink, it's about outsmarting the market. You're getting various opinions here, but few of them are about the immediate future of the markets. Mostly, you're getting advice to set and stick to a plan that recognizes you probably can't outguess the market. It's not that the market can't be wrong or unbalanced at times, it's that you (or me) as an individual can't consistently beat it. Advice to have a plan and keep personal emotions out of it is kind of hard to argue against, or categorize as groupthink - it's a good strategy for any big decision-making.

A friend was asking me recently about my market predictions. So I started telling him stories - maybe with China recovering quickly, and with a lot of demand built up for things they make and export, their market will soar! Or maybe tech stocks, because people are working remotely, will continue to outpace other sectors because of remote working options! These are all fun individual theories, but like 'healthcare will do well because the population is aging' I'm not stating anything the market makers haven't considered as well. I have no illusions I can out-invest them.

In the end, your plan will be personal, individualized, your own - it won't be a product of groupthink - the key is to know what you know and what you don't know going in, and to try and keep emotional responses to recent market gyrations out of the equation
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
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Re: The Dark Side of "Stay the Course"

Post by Noobvestor »

bluquark wrote: Sun Mar 01, 2020 11:28 pm I've had similar feelings to OP this week. I also basically started investing in 2009. I knew I would be tested by my first real crash but I didn't expect the details of the test.

To me what was most unnerving about this crash was the uncanny week before it. Epidemiologist consensus had firmed up around "pandemic" outcome but the markets blithely ignored it until the outbreak in Italy finally hammered it through their thick skulls. The market as a whole held onto "repeat of SARS" theory after it had already been proven wrong.

The market's behavior during the weeks of suspense was increasingly difficult to explain. What does the market know that I don't, I wondered. Can it be that there is some positive news I'm not aware of justifying a further 15% gain and that with virus risk canceling out this good news, the markets end up flat? Is the market more long-term-minded than it used to be and doesn't care about a 1-year dip in earnings? I had to come up with such implausible hypotheses to avoid facing the fact that this time it was I who knew something the market didn't.

I think the root of why, like OP, I felt a bit shaken in my Boglehead faith this week is that one of the pillars of that faith for me was EMH. If EMH were fully true, then passive investing would be an easy decision. I did know before this crash that there are plenty of holes to poke in EMH, but I still believed it was "true enough for practical purposes". What changed this week is I saw clear as day that EMH is not even slightly true. The entire market can ignore facts right in front of its nose for weeks. So now I have to lean more on the other reasons to remain passive.
Actually, the market crashed when it did because of [insert something I can't talk about on this forum], is one very solid argument. Or maybe it was overdue for a correction and growing because of speculation too much, and needed an excuse. What you see as a delayed reaction I see as a being too complex to grasp. The parable of the elephant in the unlit room comes to mind - everyone touches a piece of it and concludes the elephant to be one thing or another, but none of them individually can see the full animal for what it is. Also, you don't have to believe in the strong form of EMH (and yes, there are various forms and interpretations about EMH - might want to look into those) to believe that indexing is the best strategy. There are a host of other reasons. This might be a good time to sit back and read few books from the recommended reading list: https://www.bogleheads.org/wiki/Books:_ ... nd_reviews
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
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Re: The Dark Side of "Stay the Course"

Post by watchnerd »

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.

The biggest flaw in your thinking isn't financial, it's behavioral.

Like being in a contact sport, if you're going to play in the stock market you have to learn to take hits.

There is a behavioral training aspect to this and it's an incredibly important lesson to learn.

You're at the right time to learn it -- low amount invested.

Learn to take the hits now while your tuition costs are low.
60% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS 10% cash || RSU + ESPP
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Re: The Dark Side of "Stay the Course"

Post by sergeant »

I have been a huge football fan since I was a kid. I believed that I was all dialed in to predict winners and thought about putting my expertise to the test by gambling on games. Before actually wagering money though I started tracking my skill level. I'm terrible. I have been keeping track for four years and seem to be getting worse. I've decided to stay the course and not wager on football games.

Pick an appropriate AA and stay the course.
AA- 20+ Years of Expenses Fixed Income/The remainder in Equities.
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