2020 COVID Crash Lessons

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travellight
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Re: 2020 COVID Crash Lessons

Post by travellight » Thu Mar 19, 2020 1:04 am

bluquark wrote:
Thu Mar 19, 2020 12:56 am
travellight wrote:
Thu Mar 19, 2020 12:53 am
palanzo wrote:
Wed Mar 18, 2020 11:54 pm

You should be using VLGSX up 8.08% YTD. :D
Why is this so high? What is the downside to this holding?
Long-term treasuries have gone up because they're a haven in terms of credit risk and because they go up when interest rate expectations drop. The downside is that they could someday crash if interest rate expectations rise instead of dropping.
Thanks!
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biturbo
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Re: 2020 COVID Crash Lessons

Post by biturbo » Thu Mar 19, 2020 1:06 am

Some things you kind of have to experience to fully appreciate and learn. I'm not a fan of knee-jerk reactions, but I'm seeing a few things that are changing my thoughts on a few things and will likely lead to some small changes down the road.

1) Asset Allocation

I'm actually ok with my retirement accounts - they are getting absolutely destroyed right now, but I have decades until I'm going to touch them, so I can feel bad about it but not worry too much.

Like some other people, however, I've split my emergency fund up into tiers. Several months of cash, several months of bonds, several months of stocks. This felt like a reasonable compromise between keeping up with inflation and keeping the money fairly stable/liquid. As I've watched a lot of that evaporate, I've realized that I really need an emergency fund that is a lot more cash than it is, and future contributions to it will be 100% cash for a while.

2) Correlation of things happening

Part of my reasoning for the above was the thought "How likely is it for stocks and bonds to go down, at the same time I lose my job?" In two decades in my career, I've never been out of work for more than a week, my field is in really high demand and I have a lot of skills and experience. Well, here's what's happened in the past several months:

a) Had several appliances go out in a short time span.
b) Wife needs a couple of surgeries that will cost a bit of money.
c) Coronavirus tanks the market, stocks are down > 30%, bonds close to 10% in a few weeks.
d) Haven't lost my job and it isn't looking super likely that it will happen, but if this goes on for a lot longer, very few jobs will be safe and it'll be a terrible job market. The company I work for is not directly impacted by the Coronavirus and everything shutting down, but we are already starting to see second-order effects from it.
e) On top of all of this, there was a few moderate earthquakes in our area today. Thankfully little damage, but a little scary for people who aren't used to it and adds yet another thing to worry about.

I guess the point of all that - a bunch of things happened at once, and it would have only taken a few more things going the wrong way to really jeopardize the fruits of years of hard work and sacrifice. I don't want to overcorrect and become too conservative in my finances, but I also don't like how uneasy I feel right now and need to change a few things over the next little while to feel better about it.

travellight
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Re: 2020 COVID Crash Lessons

Post by travellight » Thu Mar 19, 2020 1:13 am

biturbo wrote:
Thu Mar 19, 2020 1:06 am
Some things you kind of have to experience to fully appreciate and learn. I'm not a fan of knee-jerk reactions, but I'm seeing a few things that are changing my thoughts on a few things and will likely lead to some small changes down the road.

1) Asset Allocation

I'm actually ok with my retirement accounts - they are getting absolutely destroyed right now, but I have decades until I'm going to touch them, so I can feel bad about it but not worry too much.

Like some other people, however, I've split my emergency fund up into tiers. Several months of cash, several months of bonds, several months of stocks. This felt like a reasonable compromise between keeping up with inflation and keeping the money fairly stable/liquid. As I've watched a lot of that evaporate, I've realized that I really need an emergency fund that is a lot more cash than it is, and future contributions to it will be 100% cash for a while.

2) Correlation of things happening

Part of my reasoning for the above was the thought "How likely is it for stocks and bonds to go down, at the same time I lose my job?" In two decades in my career, I've never been out of work for more than a week, my field is in really high demand and I have a lot of skills and experience. Well, here's what's happened in the past several months:

a) Had several appliances go out in a short time span.
b) Wife needs a couple of surgeries that will cost a bit of money.
c) Coronavirus tanks the market, stocks are down > 30%, bonds close to 10% in a few weeks.
d) Haven't lost my job and it isn't looking super likely that it will happen, but if this goes on for a lot longer, very few jobs will be safe and it'll be a terrible job market. The company I work for is not directly impacted by the Coronavirus and everything shutting down, but we are already starting to see second-order effects from it.
e) On top of all of this, there was a few moderate earthquakes in our area today. Thankfully little damage, but a little scary for people who aren't used to it and adds yet another thing to worry about.

I guess the point of all that - a bunch of things happened at once, and it would have only taken a few more things going the wrong way to really jeopardize the fruits of years of hard work and sacrifice. I don't want to overcorrect and become too conservative in my finances, but I also don't like how uneasy I feel right now and need to change a few things over the next little while to feel better about it.
It’s been a bit unnerving. I am guessing you are near Salt Lake City... I was shocked by the earthquake as well as I have properties in the area. Between the virus and the earthquake, exposure and risk is higher than the comfort range.
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DoubleClick
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Re: 2020 COVID Crash Lessons

Post by DoubleClick » Thu Mar 19, 2020 1:24 am

Terrific lessons, thanks for sharing, MrSpock! Thank you for saving others the losses you had to go through in learning these.
mrspock wrote:
Wed Mar 18, 2020 9:23 pm
Lesson #2: When TLH'ing, execute simultaneous exchanges of the two funds involved in the TLH. This can be accomplished via two simultaneous orders in Schwab ("Go to classic Stocks & ETFs Trade Ticket" -> "Add an Order"), or via the "Exchange Fund" in Fidelity.
Anyone know how to best do this with Vanguard?

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mrspock
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Re: 2020 COVID Crash Lessons

Post by mrspock » Thu Mar 19, 2020 1:36 am

DoubleClick wrote:
Thu Mar 19, 2020 1:24 am
Terrific lessons, thanks for sharing, MrSpock! Thank you for saving others the losses you had to go through in learning these.
mrspock wrote:
Wed Mar 18, 2020 9:23 pm
Lesson #2: When TLH'ing, execute simultaneous exchanges of the two funds involved in the TLH. This can be accomplished via two simultaneous orders in Schwab ("Go to classic Stocks & ETFs Trade Ticket" -> "Add an Order"), or via the "Exchange Fund" in Fidelity.
Anyone know how to best do this with Vanguard?
For Mutual funds, could you not place both the buy and sell order at the same time? Does any one know how Vanguard or other brokers (Schwab?) would treat this? In theory both transactions should settle on the same day, and cause no violation?
Lee_WSP wrote:
Wed Mar 18, 2020 11:45 pm
mrspock wrote:
Wed Mar 18, 2020 9:23 pm
or via the "Exchange Fund" in Fidelity.
It works with ETF's? I have never seen this tool and would like to know more.
This works for ETFs w/ Schwab, but Fidelity I think it only works with Mutual Funds. HOWEVER, the thing Fidelity has going for it, is being able to buy fractional shares, so while you may get dinged on the volatility, you will save valuable seconds by not having to mess around with your share counts while the market bounces all over the place.

valueashram
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Re: 2020 COVID Crash Lessons

Post by valueashram » Thu Mar 19, 2020 1:47 am

Spreads between NAV and market prices of ETFs do happen from time to time, especially when the market is chaotic. In August of 2015 I noticed at open that the SP500 Index was down 5% however VIG (Vanguard Dividend Appreciation) and a few other ETFs were down double digit percentage wise despite being highly correlated to the SP500. I was scrambling to place orders assuming it was a market problem and got filled at hefty discount on VIG. VIG opened at 71.74, I got shares at 57.75 and change and it closed at around 72.87. Low of the day was 47.70. Other ETFs and individual stocks had flash crashes. I also picked up some AAPL at a hefty discount and it promptly recovered.

People have commented in the past (Carl Icahn and Bill Gross come to mind) on the potential trouble that fixed income ETFs introduce by having a very liquid security whose underlying assets have relatively low liquidity. If I remember correctly they were talking about high yield bond and bank loan ETFs in particular. But I can see how sudden high volume selling of any bond ETF could cause dislocation between the price and NAV. Vanguard does have the unique structure with the ETFs and mutual funds which I assume makes it easier to prevent this dislocation. But sometimes things get crazy.

See the attached screenshot. Look at the volume on the bottom of the chart. VTEB volume is considerably higher recently than it has been in a couple of years. Just a guess, but it seems like the market could not keep up with the NAV/Price arb for whatever reason.

EDIT: This comment is not meant to explain the entire drop, it does look like Munis got re-rated. But it is trying to explain how the NAV and price got disconnected.

Image

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Ben Mathew
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Re: 2020 COVID Crash Lessons

Post by Ben Mathew » Thu Mar 19, 2020 2:48 am

mrspock wrote:
Wed Mar 18, 2020 11:26 pm
MotoTrojan wrote:
Wed Mar 18, 2020 9:40 pm
mrspock wrote:
Wed Mar 18, 2020 9:37 pm
MotoTrojan wrote:
Wed Mar 18, 2020 9:33 pm
Surprised to hear of your market order troubles with VOO, although I haven't made an order in the last week or so when spreads started taking off. I've been getting good prices on MUCH less liquid holdings.
Almost any other time I've done it, it wasn't a problem. I could hardly believe my eyes....when I x-checked the order status with the current price of VOO. That said, I was buying a 7 figure amount of VOO on a super volatile day, so I should have known better. Kinda ruined my day, but lesson learned.
To be clear, is it possible the market had just moved $1.50 before you clicked go (so your quoted bid/ask prices were wrong)? Or did you actually move $1.50 away from the ask?
I was refreshing over and over so I wouldn’t over buy, as I didn’t want to go negative in my account. I actually had to drop my share count 3 times. It likely did move this quick against me, and thus the lesson — use a limit order as if it’s yo-yo ‘ing around... I want to get the “yo” in the downward direction not the upwards one :) .
Limit orders are more dangerous than market orders because you leave yourself open to better informed traders (typically a professional market maker, now usually algorithmic high frequency traders). They can pick off your open limit order when they detect a price change ahead of you. When volatility is high, it should become even more dangerous because the price swings are larger. IMO, the only people placing limit orders should be highly informed professional market makers who have co-located servers, messenger pigeons, and so on.

DoubleClick
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Re: 2020 COVID Crash Lessons

Post by DoubleClick » Thu Mar 19, 2020 4:04 am

Ben Mathew wrote:
Thu Mar 19, 2020 2:48 am
Limit orders are more dangerous than market orders because you leave yourself open to better informed traders (typically a professional market maker, now usually algorithmic high frequency traders). They can pick off your open limit order when they detect a price change ahead of you. When volatility is high, it should become even more dangerous because the price swings are larger. IMO, the only people placing limit orders should be highly informed professional market makers who have co-located servers, messenger pigeons, and so on.
Can you give us a few illustrative examples of cases where limit orders end up with a worse outcome than market orders?

DoubleClick
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Re: 2020 COVID Crash Lessons

Post by DoubleClick » Thu Mar 19, 2020 4:06 am

mrspock wrote:
Thu Mar 19, 2020 1:36 am
DoubleClick wrote:
Thu Mar 19, 2020 1:24 am
Terrific lessons, thanks for sharing, MrSpock! Thank you for saving others the losses you had to go through in learning these.
mrspock wrote:
Wed Mar 18, 2020 9:23 pm
Lesson #2: When TLH'ing, execute simultaneous exchanges of the two funds involved in the TLH. This can be accomplished via two simultaneous orders in Schwab ("Go to classic Stocks & ETFs Trade Ticket" -> "Add an Order"), or via the "Exchange Fund" in Fidelity.
Anyone know how to best do this with Vanguard?
For Mutual funds, could you not place both the buy and sell order at the same time? Does any one know how Vanguard or other brokers (Schwab?) would treat this? In theory both transactions should settle on the same day, and cause no violation?
Yes, you can do an "Exchange" in Vanguard if it's mutual funds. It'll buy exactly for the amount of your sell transaction.

I was wondering how one would best handle placing TLH orders for ETFs in a volatile market.

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LiveSimple
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Re: 2020 COVID Crash Lessons

Post by LiveSimple » Thu Mar 19, 2020 4:14 am

Fat-Tailed Contagion wrote:
Wed Mar 18, 2020 9:45 pm
1/ Slice & Dice Bond Funds to include 25% LT US Treasury Fund

2/ Use strict rebalancing trigger bands to buy and sell based upon IPS AA

THose are the 2 big lessons I have learned so far.
Is my observation correct that LT US Treasury Fund hold well than the total bond ?

Sinsji
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Re: 2020 COVID Crash Lessons

Post by Sinsji » Thu Mar 19, 2020 5:09 am

Despite visiting this forum on a regular basis and implementing most of its 'guidelines', I lost a month of my planned investment savings on speculations .
I discovered options in January and shorted the indexes end of February, both based on the high valuations and China developments.
Getting reckless after this I lost all this 'pocket money' and a bit more on less successfull gambles in March.
Now I feel like the charlatan day-trader with adds in our local newspaper...

Lessons:
* never ever install an trading app on the phone, unless you want to manage your account on a holiday
* don't buy anything with margin or time pressure influencing my decisions
* buy when stocks fall (but not every week)
* it is amazing how I can fool myself into buying stuff I don't know the least about, it's almost a form a masochism.

Even if this lesson only applies to me, I hope this will be a very usefull one.

yoyo6713
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Re: 2020 COVID Crash Lessons

Post by yoyo6713 » Thu Mar 19, 2020 5:19 am

dmcmahon wrote:
Wed Mar 18, 2020 9:35 pm
Lesson #5: always have a month’s worth of toilet paper and canned food on hand.
Lesson #6 1 month is not enough :P

pmmcmu
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Re: 2020 COVID Crash Lessons

Post by pmmcmu » Thu Mar 19, 2020 5:23 am

I learned that having my money invested in target retirement funds rather than slice and dice funds make it easy to stick with a target allocation due to the automatic rebalancing.

sjwoo
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Re: 2020 COVID Crash Lessons

Post by sjwoo » Thu Mar 19, 2020 5:50 am

I've learned that ultra short term bonds like GSY and MINT can have 1% swings during high volatility, and floating rate bonds like FLOT can lose much more. VGSH may be the safer choice going forward for me.

Also, +1 to the writer mentioning sell your profits and pay the taxes. The number of times I thought about selling one of my larger holdings but shied away because I didn't want to pay Uncle Sam... Pay Uncle Sam!

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Re: 2020 COVID Crash Lessons

Post by oldcomputerguy » Thu Mar 19, 2020 5:57 am

Some off-topic posts were removed. Please keep the discussion centered on the OP's original subject. Thanks.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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Re: 2020 COVID Crash Lessons

Post by MotoTrojan » Thu Mar 19, 2020 6:00 am

mrspock wrote:
Wed Mar 18, 2020 11:26 pm
MotoTrojan wrote:
Wed Mar 18, 2020 9:40 pm
mrspock wrote:
Wed Mar 18, 2020 9:37 pm
MotoTrojan wrote:
Wed Mar 18, 2020 9:33 pm
Surprised to hear of your market order troubles with VOO, although I haven't made an order in the last week or so when spreads started taking off. I've been getting good prices on MUCH less liquid holdings.
Almost any other time I've done it, it wasn't a problem. I could hardly believe my eyes....when I x-checked the order status with the current price of VOO. That said, I was buying a 7 figure amount of VOO on a super volatile day, so I should have known better. Kinda ruined my day, but lesson learned.
To be clear, is it possible the market had just moved $1.50 before you clicked go (so your quoted bid/ask prices were wrong)? Or did you actually move $1.50 away from the ask?
I was refreshing over and over so I wouldn’t over buy, as I didn’t want to go negative in my account. I actually had to drop my share count 3 times. It likely did move this quick against me, and thus the lesson — use a limit order as if it’s yo-yo ‘ing around... I want to get the “yo” in the downward direction not the upwards one :) .
Guess I’ve been spoiled with Fidelity lately; my use of market orders coincided with the release of fractional share purchases :).

winterfan
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Re: 2020 COVID Crash Lessons

Post by winterfan » Thu Mar 19, 2020 6:05 am

Nestegg_User wrote:
Wed Mar 18, 2020 10:31 pm

another rule "don't be afraid of taking profits"

and, as always, determine an allocation that you can keep and is within your risk tolerance

I did some "tax gain harvesting" in November, and was at 42% equities (versus 45% per IPS).... I'm retired (with pension). {I was trimming some areas and wanted to keep within allocation after some run up (I'd done TLH year prior). Sometimes you have to take some profit off the table when rebalancing.... and clearly now it's better to pay the taxes on the gains rather than miss the money when the market goes south}
Yes! I posted a question in the forum a while back about whether I should sell part of my taxable account (all in stocks) to pay off our HELOC. We've had that account for a long time and would have to pay quite a bit in taxes. I'm not sure if that would have been a good idea to drain it all, but I wish I had taken a little bit out to pad our emergency fund. I didn't want to pay the taxes, because we already have to pay hefty cap gains for something else this year.

Otherwise, we are sitting tight. I'm happy we moved our NW from 100% stocks to 65/35 almost two years ago though.

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tvubpwcisla
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Re: 2020 COVID Crash Lessons

Post by tvubpwcisla » Thu Mar 19, 2020 6:14 am

I sort of knew this going into the crash and that is you have to be very comfortable with your stock and bond portfolios dropping 50% in value. If you are not, then you need to take some money out of the market and invest it other places like CD's, real estate, land, or maybe a side hustle / small business idea you have been wanting to pursue. I think we will recover from this horrible situation so hang in there and think positive.

GJ48
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Re: 2020 COVID Crash Lessons

Post by GJ48 » Thu Mar 19, 2020 6:46 am

mrspock wrote:
Wed Mar 18, 2020 9:23 pm
What have you learned so far from this?....
Plan ahead to review any automatic RMD service rules that are in place. If stocks are still way down at the end of 2020 it might be best to take the upcoming RMD out of a fixed income investment.

JimmyJammy
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Re: 2020 COVID Crash Lessons

Post by JimmyJammy » Thu Mar 19, 2020 6:47 am

A year ago I was 70 stock / 20 bond / 10% cash and I felt ok about that given my 20 year horizon. But then I got sucked into putting more of the cash into stocks as the market kept going up and up. It was a major case of FOMO. I should have been reducing risk instead, given the economic data. I think I started this crisis at 4% cash.

I guess I’ve learned I need more of a cash buffer.

This week, I did sell off most of my MUB (ouch) holding to raise cash for eventually buying more stock (I need to see bottom first) but also having some emergency funds on hand since the chance of me losing my job (in live event-related media) has skyrocketed. If I were truly rebalancing I would have bought stock with the bond sale, but I’ve chosen to market time instead. We’ll see in a few months how good or bad that decision is.

I want to see this market behave like the bottom is behind it before I buy more stock (at what will be amazing prices).

In the meantime, I’m really questioning what kind of bonds are appropriate to own in this extraordinary low/negative rate environment. Need to do more reading.

ljb1234
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Re: 2020 COVID Crash Lessons

Post by ljb1234 » Thu Mar 19, 2020 7:18 am

1. Hindsight is 2020. Everyone is second guessing themselves that they should have sold out. Even Ray Dalio admits he didn't see it, how could I?

2. There are more market timers here than I would have thought. I follow lots of timing systems (don't use them) and most would have been caught up in this, including Dual Momentum, below 200 day average at end of month, etc. You need a hair trigger system, but that has its problems with whipsawing. Pick your poison.

3. I agree with Mutual Funds over ETFs if only to limit temptations to make rash decisions.

4. Age in bonds is not a bad idea

5. Rick Ferri's 30-70 default allocation now looks pretty awesome vs. Peter Bernstein 60-40 for people at or near retirement. Which will be better? Time will tell.

6. Most people cannot gauge their risk tolerance accurately. Look at all the "I can handle alot of risk" posts. They have dried up.

7. People tell me they are afraid to buy stocks now... but they were more than happy to pay full price 6 weeks ago.

8. In the limit as interest rates approach zero, will bonds continue to be a diversifer? I am not sure anymore.

9. Cash really is king.

10. In ten years, you won't remember this too well and may very well make the same missteps again. Nex time will be different.

One last thing, if I was under the age of 50 (I'm not), I wouldn't do a thing (As in sell anything), unless you need the money for survival. This could be the best buying opportunity of the decade.

PS. These are my opinions only. Yours may vary.

angelescrest
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Re: 2020 COVID Crash Lessons

Post by angelescrest » Thu Mar 19, 2020 7:34 am

bligh wrote:
Thu Mar 19, 2020 12:13 am
angelescrest wrote:
Wed Mar 18, 2020 11:48 pm
bligh wrote:
Wed Mar 18, 2020 10:18 pm
ionball wrote:
Wed Mar 18, 2020 9:38 pm
dmcmahon wrote:
Wed Mar 18, 2020 9:35 pm
Lesson #5: always have a month’s worth of toilet paper and canned food on hand.
+1
I think I will hold strategic toilet paper reserves. Then when disaster strikes I will sit outside my local costco with supplies and help provide liquidity to the market, at a small premium of course.
So...what would have happened with regard to TP if this was a cholera outbreak, as widespread? :shock:
Hard to say.. If I was to guess though, I would think the U.S. Treasury would switch to printing toilet paper instead of money and toilet paper would replace the dollar as the worlds reserve currency.
And Vanguard would have a new ETF for the commodity: TPP

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Bluce
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Re: 2020 COVID Crash Lessons

Post by Bluce » Thu Mar 19, 2020 7:56 am

FOR ALL YOU (too many to count) MARKET TIMERS, DAY TRADERS, CHARTISTS, ETC . . .

I posted this on page one, maybe you should check it out. It came from Schwab's monthly news.

A chart showing three hypothetical investors with different styles, and what they ended up with after 40 years of investing.

SEE HERE.

None of it is news, but maybe it should be pondered by some during bear markets. Or better yet, BEFORE the next bear. :sharebeer
"There are no new ideas, only forgotten ones." -- Amity Shlaes

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Re: 2020 COVID Crash Lessons

Post by Call_Me_Op » Thu Mar 19, 2020 7:59 am

Fat-Tailed Contagion wrote:
Wed Mar 18, 2020 9:45 pm
1/ Slice & Dice Bond Funds to include 25% LT US Treasury Fund

2/ Use strict rebalancing trigger bands to buy and sell based upon IPS AA

THose are the 2 big lessons I have learned so far.
Would you really put 25% into LR treasuries at 1% interest rate?
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: 2020 COVID Crash Lessons

Post by Call_Me_Op » Thu Mar 19, 2020 8:03 am

ljb1234 wrote:
Thu Mar 19, 2020 7:18 am
One last thing, if I was under the age of 50 (I'm not), I wouldn't do a thing (As in sell anything), unless you need the money for survival. This could be the best buying opportunity of the decade.
What do you recommend for those of us over 50 - sell now?
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: 2020 COVID Crash Lessons

Post by Call_Me_Op » Thu Mar 19, 2020 8:05 am

I see everyone second guessing themselves. That really is not fair (to yourself). Looking back, we all wish we had everything in TBills. But is that really the way to reach your long-term goals?
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: 2020 COVID Crash Lessons

Post by Sandtrap » Thu Mar 19, 2020 8:08 am

Behavioral:
1.
The quicker one can adapt to each "new normal", the less stress and tendency to react.
2.
Avoid, "coulda', shoulda', and woulda'."

j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

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Re: 2020 COVID Crash Lessons

Post by Call_Me_Op » Thu Mar 19, 2020 8:09 am

Ben Mathew wrote:
Thu Mar 19, 2020 2:48 am
mrspock wrote:
Wed Mar 18, 2020 11:26 pm
MotoTrojan wrote:
Wed Mar 18, 2020 9:40 pm
mrspock wrote:
Wed Mar 18, 2020 9:37 pm
MotoTrojan wrote:
Wed Mar 18, 2020 9:33 pm
Surprised to hear of your market order troubles with VOO, although I haven't made an order in the last week or so when spreads started taking off. I've been getting good prices on MUCH less liquid holdings.
Almost any other time I've done it, it wasn't a problem. I could hardly believe my eyes....when I x-checked the order status with the current price of VOO. That said, I was buying a 7 figure amount of VOO on a super volatile day, so I should have known better. Kinda ruined my day, but lesson learned.
To be clear, is it possible the market had just moved $1.50 before you clicked go (so your quoted bid/ask prices were wrong)? Or did you actually move $1.50 away from the ask?
I was refreshing over and over so I wouldn’t over buy, as I didn’t want to go negative in my account. I actually had to drop my share count 3 times. It likely did move this quick against me, and thus the lesson — use a limit order as if it’s yo-yo ‘ing around... I want to get the “yo” in the downward direction not the upwards one :) .
Limit orders are more dangerous than market orders because you leave yourself open to better informed traders (typically a professional market maker, now usually algorithmic high frequency traders). They can pick off your open limit order when they detect a price change ahead of you. When volatility is high, it should become even more dangerous because the price swings are larger. IMO, the only people placing limit orders should be highly informed professional market makers who have co-located servers, messenger pigeons, and so on.
I think avoiding trading of ETFs during chaotic times is the best approach.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: 2020 COVID Crash Lessons

Post by Bluce » Thu Mar 19, 2020 8:32 am

Call_Me_Op wrote:
Thu Mar 19, 2020 7:59 am
Fat-Tailed Contagion wrote:
Wed Mar 18, 2020 9:45 pm
1/ Slice & Dice Bond Funds to include 25% LT US Treasury Fund

2/ Use strict rebalancing trigger bands to buy and sell based upon IPS AA

THose are the 2 big lessons I have learned so far.
Would you really put 25% into LR treasuries at 1% interest rate?
This has been noted previously, numerous times elsewhere, but those of us who have a good chunk of Treasuries DO NOT HAVE THEM FOR THE PUNY YIELD.

They typically are a haven during stock or other crises, and the PRICE is driven up.
"There are no new ideas, only forgotten ones." -- Amity Shlaes

Call_Me_Op
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Re: 2020 COVID Crash Lessons

Post by Call_Me_Op » Thu Mar 19, 2020 8:34 am

Bluce wrote:
Thu Mar 19, 2020 8:32 am
Call_Me_Op wrote:
Thu Mar 19, 2020 7:59 am
Fat-Tailed Contagion wrote:
Wed Mar 18, 2020 9:45 pm
1/ Slice & Dice Bond Funds to include 25% LT US Treasury Fund

2/ Use strict rebalancing trigger bands to buy and sell based upon IPS AA

THose are the 2 big lessons I have learned so far.
Would you really put 25% into LR treasuries at 1% interest rate?
This has been noted previously, numerous times elsewhere, but those of us who have a good chunk of Treasuries DO NOT HAVE THEM FOR THE PUNY YIELD.

They typically are a haven during stock or other crises, and the PRICE is driven up.
Sure - but I cannot imagine a 1% 30 year treasury being a good long-term investment.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Bluce
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Re: 2020 COVID Crash Lessons

Post by Bluce » Thu Mar 19, 2020 9:18 am

Call_Me_Op wrote:
Thu Mar 19, 2020 8:34 am
Bluce wrote:
Thu Mar 19, 2020 8:32 am
Call_Me_Op wrote:
Thu Mar 19, 2020 7:59 am
Fat-Tailed Contagion wrote:
Wed Mar 18, 2020 9:45 pm
1/ Slice & Dice Bond Funds to include 25% LT US Treasury Fund

2/ Use strict rebalancing trigger bands to buy and sell based upon IPS AA

THose are the 2 big lessons I have learned so far.
Would you really put 25% into LR treasuries at 1% interest rate?
This has been noted previously, numerous times elsewhere, but those of us who have a good chunk of Treasuries DO NOT HAVE THEM FOR THE PUNY YIELD.

They typically are a haven during stock or other crises, and the PRICE is driven up.
Sure - but I cannot imagine a 1% 30 year treasury being a good long-term investment.
They are generally a non-correlated asset to counter-balance stock plunges. It has nothing to do with yield. They are not the place to be if interest rates are trending up. Again, not because of the yield, but because the price will erode.

Over more than a few days or weeks, Treasury PRICES will normally smooth out radical losses (or gains) from stocks. When you're old, and your PF will be your sole retirement (aside from SS) this stuff matters. I started de-risking when I was 56-57 years old to where I am now @ 30/70.

When I was young I was like 90% + in stocks. When you're old, you should protect what you have and smooth out market disruptions.
"There are no new ideas, only forgotten ones." -- Amity Shlaes

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Fat-Tailed Contagion
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Re: 2020 COVID Crash Lessons

Post by Fat-Tailed Contagion » Thu Mar 19, 2020 10:40 am

Fat-Tailed Contagion wrote:
Wed Mar 18, 2020 9:45 pm
1/ Slice & Dice Bond AA to include 25% LT US Treasury Fund

2/ Use strict rebalancing trigger bands to buy and sell based upon IPS AA

THose are the 2 big lessons I have learned so far.
UPDATE:

3/ 75/25 AA for accumulators max --- 50/50 for middle age early retiree --- 25/75 for older retirees

Ben Graham's suggestion.
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” | ― Benjamin Graham, The Intelligent Investor

ljb1234
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Re: 2020 COVID Crash Lessons

Post by ljb1234 » Thu Mar 19, 2020 11:11 am

Call_Me_Op wrote:
Thu Mar 19, 2020 8:03 am
ljb1234 wrote:
Thu Mar 19, 2020 7:18 am
One last thing, if I was under the age of 50 (I'm not), I wouldn't do a thing (As in sell anything), unless you need the money for survival. This could be the best buying opportunity of the decade.
What do you recommend for those of us over 50 - sell now?
If you need the money you have to, otherwise don't

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Ben Mathew
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Re: 2020 COVID Crash Lessons

Post by Ben Mathew » Thu Mar 19, 2020 11:20 am

DoubleClick wrote:
Thu Mar 19, 2020 4:04 am
Ben Mathew wrote:
Thu Mar 19, 2020 2:48 am
Limit orders are more dangerous than market orders because you leave yourself open to better informed traders (typically a professional market maker, now usually algorithmic high frequency traders). They can pick off your open limit order when they detect a price change ahead of you. When volatility is high, it should become even more dangerous because the price swings are larger. IMO, the only people placing limit orders should be highly informed professional market makers who have co-located servers, messenger pigeons, and so on.
Can you give us a few illustrative examples of cases where limit orders end up with a worse outcome than market orders?
Sure. From a post I made here:
Limit orders are one of those things in finance that seem like a good idea, but isn't. Unless you're a full-time professional market maker--and that's someone with high speed computers, co-located servers, proprietary algorithms, and expensive data feeds-- you should be placing market orders, not limit orders. That's because any time you have a limit order outstanding, you are exposed. Someone with more information than you (professional market makers) can pick you off. Here's an example:

A stock is trading at $100. You place a limit order to buy it at $95 because you think it'll be nice to buy it when it goes on sale. The only problem is stocks don't go on sale. Their prices either jump up or down based on new information. If there's good news--say earnings are higher than expected, the price jumps up to $110. Your order doesn't get filled and you get nothing. But if there's bad news (their factory burned down), the stock price drops to $90. Now your limit order executes! The professional market maker who found out first about the burned down factory sold to you, and you just lost $5. So if the stock price jumps up, you get nothing. If it drops down, you lose something. There's no scenario in which you win from the price change. That's to be expected because the person on the other side of the trade is a professional market maker.

Market orders can seem scary. You're jumping in the deep end and you're just hoping that the markets are working properly. That's okay. Just make sure that the markets are open (delayed bid-ask quotes fooled me once) and the bid-ask spread is tight. Even if you need to trade large amounts, the market is probably thick enough to handle it, especially for the thickly traded ETFs that Bogleheads use. But there's no harm in spreading your trades out (except trading fees). Buy/sell in smaller quantities (say $50K at a time, or whatever you're comfortable at, keeping fees in mind). But avoid limit orders. It's a losing proposition. Marketable limit orders (described in the Wiki here) might be okay. But make sure you cancel your limit order promptly if it doesn't fill.

tombonneau
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Re: 2020 COVID Crash Lessons

Post by tombonneau » Thu Mar 19, 2020 11:26 am

biturbo wrote:
Thu Mar 19, 2020 1:06 am

Like some other people, however, I've split my emergency fund up into tiers. Several months of cash, several months of bonds, several months of stocks. This felt like a reasonable compromise between keeping up with inflation and keeping the money fairly stable/liquid. As I've watched a lot of that evaporate, I've realized that I really need an emergency fund that is a lot more cash than it is, and future contributions to it will be 100% cash for a while.
This is the big one for me. I'm a marketing consultant with solo S-corp and keep a pretty generous (for me) chunk of cash flow in there "just in case", and I'm always thinking I should trim it way down and put it to work in market (my CPA told me to just have 10k liquid) but I've always slept better running a 30-50k surplus. Now I'm glad I have. I've got a quirky tax situation that will temporarily have me out of pocket for a big chunk of that, and now of course clients have evaporated and Im staring down the barrel of a pretty fallow March/April.

I always kind of thought if something went wrong I'd always have my brokerage account piggy bank, but the last thing I want to do now is sell any of that low.

So yeah, when this is all said and done, I'm gonna shift a lot more into a high yield savings account and I have to divorce myself from the notion of being able to just tap into brokerage for emergency, as emergencies tend to hit everywhere at the same time.

protagonist
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Re: 2020 COVID Crash Lessons

Post by protagonist » Thu Mar 19, 2020 11:38 am

If you have enough money to live off for the rest of your life, forget about asset allocation ratios. Keep what you need in ultra-secure investments, and only gamble with the excess (whether it be 1%, 99% or something in between).

Assuming you are happy enough with your current lifestyle, the additional potential joy you might get by being 100% richer is probably insignificant in contrast with the amount of pain losing 50% (or even 10%) of what you need to maintain it would cause.

It will prevent you from climbing a wall of worry in times like this.

Oh, and don't be too confident about any ideas you have of what the future has in store. Especially if you think you are an expert.

Silence Dogood
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Re: 2020 COVID Crash Lessons

Post by Silence Dogood » Thu Mar 19, 2020 11:59 am

This crash has given me a large dose of confirmation bias that my current strategy works for me.

quantAndHold
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Re: 2020 COVID Crash Lessons

Post by quantAndHold » Thu Mar 19, 2020 12:15 pm

It seems too early to be asking a question about lessons learned.
Yes, I’m really that pedantic.

mancich
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Re: 2020 COVID Crash Lessons

Post by mancich » Thu Mar 19, 2020 12:19 pm

ionball wrote:
Wed Mar 18, 2020 9:38 pm
dmcmahon wrote:
Wed Mar 18, 2020 9:35 pm
Lesson #5: always have a month’s worth of toilet paper and canned food on hand.
+1
+1000 I am by no means even close to being a hoarder, but it can't hurt to have 1 month+ of essential supplies tucked away in the basement for just such an emergency.. :sharebeer

Call_Me_Op
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Re: 2020 COVID Crash Lessons

Post by Call_Me_Op » Thu Mar 19, 2020 12:25 pm

ljb1234 wrote:
Thu Mar 19, 2020 11:11 am
Call_Me_Op wrote:
Thu Mar 19, 2020 8:03 am
ljb1234 wrote:
Thu Mar 19, 2020 7:18 am
One last thing, if I was under the age of 50 (I'm not), I wouldn't do a thing (As in sell anything), unless you need the money for survival. This could be the best buying opportunity of the decade.
What do you recommend for those of us over 50 - sell now?
If you need the money you have to, otherwise don't
It was a rhetorical question. I am a buy and holder.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

bighatnohorse
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Re: 2020 COVID Crash Lessons

Post by bighatnohorse » Thu Mar 19, 2020 12:29 pm

Diversify, diversify, diversity.
Stocks, bonds, rental income, annuities, non-traded reits and steady as she goes.

palanzo
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Re: 2020 COVID Crash Lessons

Post by palanzo » Thu Mar 19, 2020 12:34 pm

Don't use Total Bond Index fund.

flyingaway
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Re: 2020 COVID Crash Lessons

Post by flyingaway » Thu Mar 19, 2020 12:39 pm

I should have sold everything when people began to sell.

Call_Me_Op
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Re: 2020 COVID Crash Lessons

Post by Call_Me_Op » Thu Mar 19, 2020 12:46 pm

flyingaway wrote:
Thu Mar 19, 2020 12:39 pm
I should have sold everything when people began to sell.
Yes, and I should have sold everything right before every market crash since 1987 and jumped back in as soon as the market started its recovery.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

bogledogle
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Re: 2020 COVID Crash Lessons

Post by bogledogle » Thu Mar 19, 2020 12:50 pm

ionball wrote:
Wed Mar 18, 2020 9:38 pm
dmcmahon wrote:
Wed Mar 18, 2020 9:35 pm
Lesson #5: always have a month’s worth of toilet paper and canned food on hand.
+1
+2 for Toilet paper :?

Corsair
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Re: 2020 COVID Crash Lessons

Post by Corsair » Thu Mar 19, 2020 12:56 pm

My takeaways and opinions:

1. Total Bond isn't worth it esp. with low rates. Take risk on the stock side.

2. Cash is KING :moneybag and will have a good % of my Fixed allocation.

3. Fixed allocation to age is the way to go.

4. Gold ETFs are useless.

5. Having a good emergency fund in cash is a must.

6. Pay attention to 200 day moving average.

7. Hedging with put options on SPY when inexpensive (IV low) is smart.

8. Don't buy the dips too quickly.

9. Market is not always efficient esp. when in a long bull market.

10. Mutual Funds > ETFs
Stocks only go up?

czaj
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Re: 2020 COVID Crash Lessons

Post by czaj » Thu Mar 19, 2020 1:05 pm

I (attempted to) rebalance + TLH on Monday. From this, I learned:

1. Double, triple, quadruple check your trades. Per my IPS to rebalance, I was going to transfer Prudential 401K stable value to International. I accidentally purchased a total bond fund :oops:, which in my mind looked like International because the first few letters/words were the same. I ended up rebalancing yesterday. Luckily it only “cost” a few hundred as the bond market fell more than international within the two days.

2. Simplicity has its perks. If I had used balanced funds, I wouldn’t be worrying about taking action (rebalancing, TLH, etc). I also wouldn’t be worried about the mistakes made from taking action.

3. While I already knew this, I now “experienced” that total bond funds are not short-term investments and can fluctuate.

4. Patience and/or doing nothing is always an option.

cjking
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Re: 2020 COVID Crash Lessons

Post by cjking » Thu Mar 19, 2020 1:11 pm

My strategy requires me to assign an expected return to all the assets I might invest in, and to switch to higher-yielding ones once they offer a predetermined premium, even after allowing for switching costs.

I've learned
1. When computing the yield difference for a potential switch, to calculate the expected returns much more precisely, basing them on the bid or offer prices as appropriate. (The enhanced precision came after I realised that it wasn't good enough when switching to base yields on on Excel 365's stock price data, as supplied by Microsoft, which I now know is the last traded price, which can lie well outside the current bid-offer price range.)
2. Not to trade a US sector tracker on the London market when conditions are volatile and the US market is closed. Before I refined my approach, I made one trade while oblivious that there was a 13% spread between bid and offer prices. On another day I was unable to place a market-order for the size I wanted while the US market was closed, but had no problem after waiting for it to open.
3. I have size limits for how much I can put into indexes, based on their share of world-market cap. I changed my spreadsheet to recalculate those limits in real time, after over-switching to a couple of indexes that had shrunk significantly due to same big price falls that had triggered the yield increase that made me want to buy in the first place.
4. In these volatile times, many of my non-index holdings are impossible to trade (as market orders) at even a tenth of the size I want. In some cases, I couldn't trade even though I was within the size where market-makers are supposed to guarantee liquidity. I eventually managed to get around this with limit orders, except in the worst case, where after being unable to sell any useful amount for two days, and not having yet learned to resort to limit orders, the price fell to the point the desire to sell was cancelled.

best2u
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Re: 2020 COVID Crash Lessons

Post by best2u » Thu Mar 19, 2020 1:36 pm

My observation is that real estate proved more volatile than a market index during the 2008 selloff and does not offer much consolation so far during the 'Ronawar.
“There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest of them have to pee on the electric fence for themselves.” Will Rogers

elliott1234
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Sage forum people what are the right lessons to draw from this crash?

Post by elliott1234 » Thu Mar 19, 2020 2:15 pm

[merged into existing topic - moderator prudent]

I am 37 and I think I am really fixated on my retirement accounts because I have some nominal control over them vs. having no control over this unfolding disaster we are living in but I could use help with how to process this psychologically...

On the one hand I have followed the playbook, I haven't sold and have no intention to, my safety fund is good, and I am continuing my regular investments. I recognize that either the market will come back at some point and my portfolio will recover or this time really is different and will never come back. I had about $72,000 before and now am down to ~$50,000. This is my first big wallop.

One the other hand, I feel like I was so locked into Buy and Hold investing that even as all these alarm bells were going off in my head I was completely paralyzed. I know 20/20 hindsight and all, but some things like this are just [OT comment removed] moments. It makes sense to ignore the warning of the week, Greek bonds defaulting, some chart doing something weird. But when an earth shaking event happens... wouldn't it make sense to react? If I had gone all cash at the end of February and this thing had blown over then I could have gotten back in having not lost much.

So did I do the right thing not reacting and over the course of the next 30 years not reacting will save me from making a bad decision down the road? Or is there wiggle room to leave yourself the option to act when the "[Oh No]!" moment happens? [edited by Moderator Misenplace]

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