Selling on the way up and buying on the way down - don't want to be a market timer

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markcoop
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Selling on the way up and buying on the way down - don't want to be a market timer

Post by markcoop » Thu Mar 26, 2020 9:49 am

I never really viewed myself as a market timer. For the most part, I have an AA and I have rebalanced. I did this not really triggered by any specific formula (although my spreadsheet turns red if out of rebalancing bands I set up). If I have felt the market was way over (or way under), I would over-rebalance a little but still stay within my bands. The past few years I have been selling as the market went up and up. At some point I broke past my bands thinking the market was just crazy (I guess I became a market timer). I started at 55% stocks and was down to 30% before the virus hit the markets. Well, now I've been buying on the way down but careful to do it slowly, buying back with the same amounts that I had sold, when that amount was 8-10% lower than I had sold it. I have kept track of it and have bought back at these points:

VTI (Vanguard Total Stock Market ETF)
159 - this one matched me hitting the top of the market (pure luck)
146.42
140
138.57
137.95
129.18
124.49
120.43
118.92
111.63

I am now at my original AA. After all this trading, my guess is I'm up around the 8-10% higher than if I just bought, held, re-balanced. Was it worth it? Well, I don't know. When I was sitting at 30% stocks, I was wondering if I ever would have an opportunity to get back in. I feel I got very lucky to get that extra gain. So, I feel I touched the devil (market timing/greed), didn't get burned, but hopefully learned a lesson. I know myself and will continue to play within my bands, but I am planning not to break out of those bands again. I have to admit that it is harder than I thought not to be a market timer.
Last edited by markcoop on Thu Mar 26, 2020 10:02 am, edited 3 times in total.
Mark

rbaldini
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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by rbaldini » Thu Mar 26, 2020 9:53 am

Congrats on your success. Now you have to wonder whether it was luck or skill. I'd suggest not straying too far from your rebalancing bands next time - but then, what do I know?

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Stinky
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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by Stinky » Thu Mar 26, 2020 3:35 pm

markcoop wrote:
Thu Mar 26, 2020 9:49 am
I never really viewed myself as a market timer.....

After all this trading, my guess is I'm up around the 8-10% higher than if I just bought, held, re-balanced. Was it worth it? Well, I don't know. When I was sitting at 30% stocks, I was wondering if I ever would have an opportunity to get back in. I feel I got very lucky to get that extra gain. So, I feel I touched the devil (market timing/greed), didn't get burned, but hopefully learned a lesson. I know myself and will continue to play within my bands, but I am planning not to break out of those bands again. I have to admit that it is harder than I thought not to be a market timer.
Yes, you have been market timing.

Congratulations, you were a winner this time. Sometimes things work out fine. Many times, they don’t.

If you’ve really learned your lesson, you’ll resist the urge to market time the next time you feel that stocks are over- or under-valued.
It's a GREAT day to be alive - Travis Tritt

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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by livesoft » Thu Mar 26, 2020 3:42 pm

It's not market timing if it is in your IPS.

So I followed my IPS and bought on some recent RBDs when my allocation to equities had dropped below the trigger point. Can you see how both of those MUST coincide and happen on the same day? And today I sold some equities when I was above my desired AA for equities. Probably more selling in the future, too, but who knows? None of my transactions are decided by the future --- they are only decided by the past.

Plan the work and work the plan.

Maybe I need to go car shopping now?
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markcoop
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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by markcoop » Thu Mar 26, 2020 4:12 pm

I think I still believe there are extremes which would be hard to quantify in an IPS where I want to be a little more aggressive. To be honest, I have thought we were in such an extreme for the past few years. That is why I was tempted to break past my bands. But I think, with these lessons learned, that on big up days in an extreme high market (or big down days in an extreme low market), I'd be ok to just rebalance back to at most the lower (or higher) edge of my bands. The reason - if the craziness continues too long (like from 2017 to Feb 2020), then you may actually never get back to your bands and being out of the market would be worse. I do keep my bands a bit more narrow than others I have heard here (4% absolute move or 10% relative move). So, for example, if my AA says 50% stock, I would rebalance at 54% or 46%. From 54%, I would typically go back to 50%. But in an extreme situation, I give myself the ability to go down to at most 46% with the understanding that I will start buying after the market starts to drop from that point. To be honest, I don't think any of this nibbling at the edges amounts to much.
Mark

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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by livesoft » Thu Mar 26, 2020 4:18 pm

markcoop wrote:
Thu Mar 26, 2020 4:12 pm
To be honest, I don't think any of this nibbling at the edges amounts to much.
That is true. If you are overweight (or overebalance) by 5% and the market moves 20% in your favor, then that is only a 1% outperformance versus a benchmark. So if the market moves 10% in your favor that is only a 0.5% outperformance. Most folks would consider a 1% outperformance in a year to be in the noise since such variations can happen just from the ratio of US:foreign stocks or Intermediate-term:cash fixed income.
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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by markcoop » Thu Mar 26, 2020 8:33 pm

livesoft wrote:
Thu Mar 26, 2020 4:18 pm
markcoop wrote:
Thu Mar 26, 2020 4:12 pm
To be honest, I don't think any of this nibbling at the edges amounts to much.
That is true. If you are overweight (or overebalance) by 5% and the market moves 20% in your favor, then that is only a 1% outperformance versus a benchmark. So if the market moves 10% in your favor that is only a 0.5% outperformance. Most folks would consider a 1% outperformance in a year to be in the noise since such variations can happen just from the ratio of US:foreign stocks or Intermediate-term:cash fixed income.
I will add that although I don't think it amounts to much, it sure is a positive feeling to do it. If outperformance amounts to something less than 1%, then under-performance would amount to less than -1%. So, as long as I'm not tempted to make any bigger moves, like I did the last few years, I feel this little bit satisfies my itch to tinker with little potential harm.
Mark

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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by livesoft » Thu Mar 26, 2020 8:37 pm

I agree completely with the good psychological feeling that one gets when things work out. What is the opposite of "regret"? "Satisfaction" doesn't seem to be sufficient and "smugness" is not right either. "Anti-regret"?
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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by tetractys » Thu Mar 26, 2020 10:46 pm

Lucky’s a good feeling.

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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by Monsterflockster » Thu Mar 26, 2020 11:05 pm

Fun money is ok in my opinion but would never mess around with retirement. Heck for the last month you’d do pretty good selling one day and buying the next. As long as you’re ok gettingbit wrong have fun & enjoy. Personally I’m usually on the wrong side of things so staying put is best.

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markcoop
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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by markcoop » Fri Mar 27, 2020 8:28 am

I don't view this as fun money. Although I believe (or think I believe) in the buy and hold philosophy, I don't believe you should do anything blindly. I am comfortable in extreme situations (hard to define but that doesn't mean you don't try) making small modifications in those situations. The past few years I went past small modifications. I may have gotten lucky, but I do believe there was a lesson learned.
Mark

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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by KlangFool » Fri Mar 27, 2020 8:41 am

OP,

So, you adjust your AA based on how you feel about the market. Is that correct? Why do you think that you are doing better than a fixed AA with 5/25 rebalancing?

KlangFool

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markcoop
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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by markcoop » Fri Mar 27, 2020 8:59 am

KlangFool wrote:
Fri Mar 27, 2020 8:41 am
OP,

So, you adjust your AA based on how you feel about the market. Is that correct? Why do you think that you are doing better than a fixed AA with 5/25 rebalancing?

KlangFool
I guess we have the full range of investors around here. Some make a fixed AA and will never change no matter what is happening in the world. Other market time based on current information. A third group is somewhere in the middle. On the spectrum, I believe I am alot closer to the buy and hold investor as I only do it when I "feel" the market is in an extreme position (the last few years on the up side) and (at least plan) to do it with a small shift of my AA to the edge. I prefer my plan because it does not make a big bet but does react. If the market is really high it is defensive, which maybe hurts returns, but allows me to sleep better at night.
Mark

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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by KlangFool » Fri Mar 27, 2020 9:07 am

markcoop wrote:
Fri Mar 27, 2020 8:59 am
KlangFool wrote:
Fri Mar 27, 2020 8:41 am
OP,

So, you adjust your AA based on how you feel about the market. Is that correct? Why do you think that you are doing better than a fixed AA with 5/25 rebalancing?

KlangFool
I guess we have the full range of investors around here. Some make a fixed AA and will never change no matter what is happening in the world. Other market time based on current information. A third group is somewhere in the middle. On the spectrum, I believe I am alot closer to the buy and hold investor as I only do it when I "feel" the market is in an extreme position (the last few years on the up side) and (at least plan) to do it with a small shift of my AA to the edge. I prefer my plan because it does not make a big bet but does react. If the market is really high it is defensive, which maybe hurts returns, but allows me to sleep better at night.
markcoop,

You did not answer my question. Have you benchmarked your solution versus a fixed AA with 5/25 rebalancing? I made money from my REIT Index fund through 2008/2009 crash. My 5/25 rebalancing forced me to sell right before the crash.

Conversely, my 5/25 forced me to rebalance last week by selling my bond to buy the stock.

<<I only do it when I "feel" the market is in an extreme position>>

Over the last few years, I have been buying the bond and rebalancing by selling the stock. No feeling is needed. It is part and parcel of having a fixed AA.

KlangFool

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markcoop
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Re: Selling on the way up and buying on the way down - don't want to be a market timer

Post by markcoop » Fri Mar 27, 2020 10:10 am

KlangFool wrote:
Fri Mar 27, 2020 9:07 am
You did not answer my question. Have you benchmarked your solution versus a fixed AA with 5/25 rebalancing? I made money from my REIT Index fund through 2008/2009 crash. My 5/25 rebalancing forced me to sell right before the crash.

Conversely, my 5/25 forced me to rebalance last week by selling my bond to buy the stock.

<<I only do it when I "feel" the market is in an extreme position>>

Over the last few years, I have been buying the bond and rebalancing by selling the stock. No feeling is needed. It is part and parcel of having a fixed AA.
No. I did not benchmark it. Don't plan to, although it would have some value.

As far as "feel", I do believe everything is not a science and there is an art element here. I feel things are not normal right now. My guess many here are holding off re-balancing because they don't want to try to catch a falling knife. I don't think it is always easy to describe an extreme situation, but I do know when I'm in it.

Again, I do understand I can be wrong. That is why I believe in only making a small move based on it.
Mark

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