Is anyone waiting until after the election?

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bottlecap
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Re: Hedging the 2020 Election

Post by bottlecap »

Presidential elections do not matter in the grand scheme of things.

We are heading down the same road no matter who gets elected.

The stock market doesn’t care.

Sorry to spoil the narrative!

JT
Kookaburra
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Re: Hedging the 2020 Election

Post by Kookaburra »

bottlecap wrote: Sun Oct 18, 2020 8:46 pm Presidential elections do not matter in the grand scheme of things.

We are heading down the same road no matter who gets elected.

The stock market doesn’t care.

Sorry to spoil the narrative!

JT
What is that road, exactly? Asking for a friend.
ChinchillaWhiplash
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Re: Hedging the 2020 Election

Post by ChinchillaWhiplash »

Ron Ronnerson wrote: Sun Oct 18, 2020 9:31 am
ChinchillaWhiplash wrote: Sun Oct 18, 2020 9:26 am One thing a lot of people seem to miss is that you can jump back in any time the funds you sold are at a lower price than you sold and you would be ahead of where you were.
What if they are never that low again?
Guess you would lose some gains, but on average the market has a downturn of at least 5% at least once a year. That is also why I suggested to the OP to do it with 10%.
Elysium
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Re: Hedging the 2020 Election

Post by Elysium »

Lensvik wrote: Sun Oct 18, 2020 4:02 am Just wondering if anyone is going to try to hedge the 2020 election? I doubt the election will be decided quickly, and expect a lot of volitivity. Has anyone else given thought to this? I am considering moving all my 401k equity holdings to a bond fund for the duration of the volatility, and then move back to equities when things settle down.

I know I cannot time the market, but in this case I think volatility is a safe bet. I am willing to forego any market gains that might incur in order to preserve capital.

Anyone else thinking along these lines?
OP: This election will be decided very quickly and decisively on election night, with very little volatility following it. You will miss out on the gains if you try to time and get out. This is the opposite side of your calculation. That is how the market works, everyone's opinions are counted, in the end they cancel each other out, then what remains is earnings, growth, strength of the businesses. Focus on the long term and ignore short term noises such as elections.
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whodidntante
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Re: Hedging the 2020 Election

Post by whodidntante »

This will be a fun thread to revisit around mid-November.
Kookaburra
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Re: Hedging the 2020 Election

Post by Kookaburra »

Lensvik wrote: Sun Oct 18, 2020 4:02 am Just wondering if anyone is going to try to hedge the 2020 election? I doubt the election will be decided quickly, and expect a lot of volitivity. Has anyone else given thought to this? I am considering moving all my 401k equity holdings to a bond fund for the duration of the volatility, and then move back to equities when things settle down.

I know I cannot time the market, but in this case I think volatility is a safe bet. I am willing to forego any market gains that might incur in order to preserve capital.

Anyone else thinking along these lines?
OP- please keep us all posted how it works out for you. If/when you get out, and if/when you get back in. We wish you luck.
tibbitts
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Re: Hedging the 2020 Election

Post by tibbitts »

rghost wrote: Sun Oct 18, 2020 12:40 pm
tibbitts wrote: Sun Oct 18, 2020 10:30 am
For all we know this could be one of the most boring periods in U.S. history.
Ha how you define "period" must be very interesting. :-P

Whether its finance, politics, technology, medical advancement, or environmental conditions of land, air and sea, and of course the worldwide pandemic, we are living out one of the most impactful times in the history of the human species.

Of course, those living various periods always think that they are living "in a different/impactful time" but certainly scale and impact wise (e.g. the printing press) the overall impact to humans on what is happening now could never be marked in future history as "boring" me thinks!
I don't see any greater pace of developments than I have for the other six-plus decades of my life, and don't see anything all that exciting on the horizon. So I'll stick with my story that what's happening now could easily be characterized as "boring" by someone looking back in the future, unless something unforeseen materializes.
Mode32
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Re: Hedging the 2020 Election

Post by Mode32 »

https://m.youtube.com/watch?v=HYHu9PMY_C4

Interesting analysis by Ben Felix on US elections and the market.

Overall, I would change nothing (avoid any temptation of timing the market) and continue investing based on your IPS. The more I learn about investing, the more I understand and respect how many experienced Bogleheads admit to ‘knowing nothing’ 😊
Last edited by Mode32 on Sun Oct 18, 2020 10:07 pm, edited 1 time in total.
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Quirkz
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Re: Hedging the 2020 Election

Post by Quirkz »

I do not subscribe to the theory that the stock market and US Presidential Elections have any form of correlation. I don't think it's a reliable decision that the market will do anything in particular -- positive, negative, or oscillating -- as a result. I think there's better statistical evidence that the Superbowl winner affects the market, but I'm not going to make any bets based on that, either.

Still, if you're worried, as others have noted, that may mean your AA needs adjusting, but if so it ought to be on a more permanent basis. After all, presidents are elected literally every four years, and there's a major presidential issue roughly quarterly, right?
BernardShakey
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Re: Hedging the 2020 Election

Post by BernardShakey »

As others have noted, the impending Covid-19 resurgence might be more likely to pummel markets than the election. Frankly, it seems markets have been less volatile than one might expect given what seems like a lot of uncertainty.

I'm just going to stay the course and watch it unfold.

In times like this, it's imperative that you have homed in on the right AA for your portfolio.
An important key to investing is having a well-calibrated sense of your future regret.
abc132
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Re: Hedging the 2020 Election

Post by abc132 »

I think people have trouble filtering their own political biases, and I would say this kind of speculation probably has a much higher than normal risk of investor error.

I believe I recall data showing election years usually being good for the market. Likely because a change is made when things are perceived to be in the wrong direction, and a change is not made when they are perceived to be going well. You want to invest based on what other people believe and how they will act, not based on what you believe personally.
chipperd
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Re: Hedging the 2020 Election

Post by chipperd »

TheDDC wrote: Sun Oct 18, 2020 8:09 pm
chipperd wrote: Sun Oct 18, 2020 2:50 pm If you think volatility will increase in the future, place a bet on the VIX.
I wouldn’t go to cash because there is an election. I would go to cash if a shooting war in the streets were to to cap off the election. Then I would pray that cooler heads prevail and that it ends soon with civil liberties intact. Nothing good happens from a civil war in terms of economic growth. However, even the market recovered relatively quickly during the late 1860s, considering.

-TheDDC
The VIX isn't cash, it's a way to "bet" or "invest" (depending on your viewpoint) on volatility.
Here's an explanation: https://www.investopedia.com/terms/v/vix.asp
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
snailderby
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Re: Hedging the 2020 Election

Post by snailderby »

Welcome to the forum!

OP, what's your asset allocation? You said you're 2 years away from retirement with a +$3 million portfolio. This election aside, if you've already hit your target figure for retirement, would you be more comfortable moving permanently to a more conservative asset allocation?
chw
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Re: Hedging the 2020 Election

Post by chw »

Not trying to hedge. Generally difficult to predict what will happen- all you have to do is go back to this spring- who could have predicted how fast the market recovery took place after the massive March pullback. If you had the foresight to have gone to cash in February, you may have likely missed the recovery entry point thinking there was more pain coming.

Point is, for the average investor it’s difficult to hedge an election- especially one that is predicted to be unpredictable...
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galawdawg
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Re: Hedging the 2020 Election

Post by galawdawg »

Words of wisdom from Jack Bogle:
It is difficult enough to make even one timing decision correctly. But you have to be right twice. For the act of, say, getting out of the market implies the act of getting in later, and at a more favorable level. But when?
The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently.
Time is your friend; impulse is your enemy.
The two greatest enemies of the equity fund investor are expenses and emotions.
Stay the course!
If you can't stomach the volatility or risk of a downturn, your asset allocation is not right for you at this point in your investing life. Pick an asset allocation based upon your willingness, need and ability to take risk that will allow you to weather market turbulence and stay the course without fear or anxiety.

But trying to get out of equities to avoid volatility and then getting back in is a fool's errand. Market volatility is a fact of life...the way to avoid it is to stay invested. Market volatility only affects the investor when buying and selling, which is precisely what you propose to do!
Lensvik
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Re: Hedging the 2020 Election

Post by Lensvik »

snailderby wrote: Mon Oct 19, 2020 6:01 am Welcome to the forum!

OP, what's your asset allocation? You said you're 2 years away from retirement with a +$3 million portfolio. This election aside, if you've already hit your target figure for retirement, would you be more comfortable moving permanently to a more conservative asset allocation?
AA is 50% rental properties, 35% index funds, 15% bonds

Though I'm guessing some on the forum might argue I shouldn't include the rental properties in my calculation of portfolio. The rental properties are owned free and clear.
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galawdawg
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Re: Hedging the 2020 Election

Post by galawdawg »

Lensvik wrote: Mon Oct 19, 2020 7:35 am
snailderby wrote: Mon Oct 19, 2020 6:01 am Welcome to the forum!

OP, what's your asset allocation? You said you're 2 years away from retirement with a +$3 million portfolio. This election aside, if you've already hit your target figure for retirement, would you be more comfortable moving permanently to a more conservative asset allocation?
AA is 50% rental properties, 35% index funds, 15% bonds

Though I'm guessing some on the forum might argue I shouldn't include the rental properties in my calculation of portfolio. The rental properties are owned free and clear.
If I'm understanding this correctly, you have a $1.5m portfolio that is allocated 70/30, plus rental properties valued at $1.5 million that provide an income stream, is that right?

How much of your anticipated retirement spending needs are met by the income produced by your rental properties? Will you have other stable monthly income sources in retirement?
sschoe2
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Re: Hedging the 2020 Election

Post by sschoe2 »

Unless the total stockmarket goes up 500% in one year I am probably 2+ decades away from retirement. I'm not doing anything for short term events. That's the beauty of being a Boglehead one just keeps putting money in and let the day traders have coronaries worrying about stuff like elections and covid.
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Stinky
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Re: Hedging the 2020 Election

Post by Stinky »

sschoe2 wrote: Mon Oct 19, 2020 8:07 am I'm not doing anything for short term events.

That's the beauty of being a Boglehead one just keeps putting money in and let the day traders have coronaries worrying about stuff like elections and covid.
+1000
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JnyVuko
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Re: Hedging the 2020 Election

Post by JnyVuko »

galawdawg wrote: Mon Oct 19, 2020 7:08 am Words of wisdom from Jack Bogle:
It is difficult enough to make even one timing decision correctly. But you have to be right twice. For the act of, say, getting out of the market implies the act of getting in later, and at a more favorable level. But when?
The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently.
Time is your friend; impulse is your enemy.
The two greatest enemies of the equity fund investor are expenses and emotions.
Stay the course!
If you can't stomach the volatility or risk of a downturn, your asset allocation is not right for you at this point in your investing life. Pick an asset allocation based upon your willingness, need and ability to take risk that will allow you to weather market turbulence and stay the course without fear or anxiety.

But trying to get out of equities to avoid volatility and then getting back in is a fool's errand. Market volatility is a fact of life...the way to avoid it is to stay invested. Market volatility only affects the investor when buying and selling, which is precisely what you propose to do!
+1
JnyVuko
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Re: Hedging the 2020 Election

Post by JnyVuko »

BernardShakey wrote: Sun Oct 18, 2020 11:16 pm As others have noted, the impending Covid-19 resurgence might be more likely to pummel markets than the election. Frankly, it seems markets have been less volatile than one might expect given what seems like a lot of uncertainty.

I'm just going to stay the course and watch it unfold.

In times like this, it's imperative that you have homed in on the right AA for your portfolio.
+1!!!!!!
JnyVuko
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Re: Hedging the 2020 Election

Post by JnyVuko »

KingRiggs wrote: Sun Oct 18, 2020 3:16 pm
ram wrote: Sun Oct 18, 2020 2:50 pm I am planning to do some market timing in the next few weeks if I get the opportunity.

Assumptions:
1) The chances of volatility are higher than average over the next few weeks.
2) Stock markets will go higher in the next 8 years. (my time to retire).

Lets start with a portfolio of 1 million.
My current AA is 62:38

If the market drops by 5% I will buy stocks to make my AA 67:33 (Buy approx 50 K worth of stocks)

If markets go up to todays level (or higher) by early 2021 I sell stocks to get back to my original AA of 62:38. I have made $2500 (5% of 50K). All transactions will be done in tax deferred accounts.

If markets stay below current levels I do not sell any stocks. I put 100% of all new money in bonds till I get back to my original AA of 62:38. In this case I have bought my stocks at a lower cost than what I would have paid otherwise.

In summary I am market timing with 5% of my portfolio and hoping to make 5%.
5% of 5% is 0.25%. This is the (modest) expected additional portfolio return.

Anything wrong with this plan?
It sounds exhausting...
+1
Church Lady
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Re: Hedging the 2020 Election

Post by Church Lady »

OP,
I haven't seen this observation yet....

My 401K plan has 'trading' restrictions. If I sell Vanguard Total Stock Market (for example), I can't buy it back for 90 days. I could identify the perfect re-entry point, but if it's inside that 90 day window, I'm out of luck. :oops:

Actually, I am not out of 'luck' because I should have looked into trading restrictions before I made my move. I'm reaping the penalty of carelessness. :oops: Have you looked into this?

Is there a similar fund you could trade into to avoid this? One you would be happy holding for the lockout period, or perhaps forever?

Another issue is 'short term trading' fees on certain funds. I could swap from Good Fund to Bad Fund, planning to switch back to Good Fund when the restriction window opens, only to be hit with Bad Fund's fee for short term trading. :oops: Have you looked into this?

I keep some dry powder in my 401K at all times. But that policy is not specifically tied to the election.

Good luck, whatever you do!
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity.
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David Jay
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Re: Hedging the 2020 Election

Post by David Jay »

goingup wrote: Sun Oct 18, 2020 2:22 pm
Lensvik wrote: Sun Oct 18, 2020 12:25 pmBasically, I have been buying and holding for 30 years. I am two years away from retirement. Also, it would only be a portion of my portfolio I would be reallocating. The 401k, where I can reallocate without tax consequences. The taxable equities stay where they are.
I think most Bogleheads would say it's a fine idea to dial back equities if you're close to retirement. Choose an asset allocation that suits you. However, the idea that you can jump in and out of the market to avoid downturns is probably a bad idea. Most here don't do that. Pick your allocation and stick with it.
This!

You should evaluate your Asset Allocation as you approach retirement. So a search for “sequence of risk”.

If appropriate, you should make a permanent change in your AA, not try to time the election.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Beehave
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Re: Hedging the 2020 Election

Post by Beehave »

David Jay wrote: Mon Oct 19, 2020 11:01 am
goingup wrote: Sun Oct 18, 2020 2:22 pm
Lensvik wrote: Sun Oct 18, 2020 12:25 pmBasically, I have been buying and holding for 30 years. I am two years away from retirement. Also, it would only be a portion of my portfolio I would be reallocating. The 401k, where I can reallocate without tax consequences. The taxable equities stay where they are.
I think most Bogleheads would say it's a fine idea to dial back equities if you're close to retirement. Choose an asset allocation that suits you. However, the idea that you can jump in and out of the market to avoid downturns is probably a bad idea. Most here don't do that. Pick your allocation and stick with it.
This!

You should evaluate your Asset Allocation as you approach retirement. So a search for “sequence of risk”.

If appropriate, you should make a permanent change in your AA, not try to time the election.
+1

My two cents:

Your asset allocation should be set so that these types of events (banking crises, disputed elections, pandemics, etc.), which happen regularly, are NOT a hair on fire occasion for you. Your asset allocation should allow you to move money from the bond/money market/cash portion of the allocation into the stock portion to reset the stock level and cash/bond levels back to their target allocation if the market falls. That way there's no conundrum about when to re-enter the market, (a) because you have remained in the market and (b) because you are buying when the market is low with no guessing games.
Robert20
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Re: Hedging the 2020 Election

Post by Robert20 »

Lensvik wrote: Sun Oct 18, 2020 4:02 am Just wondering if anyone is going to try to hedge the 2020 election? I doubt the election will be decided quickly, and expect a lot of volitivity. Has anyone else given thought to this? I am considering moving all my 401k equity holdings to a bond fund for the duration of the volatility, and then move back to equities when things settle down.

I know I cannot time the market, but in this case I think volatility is a safe bet. I am willing to forego any market gains that might incur in order to preserve capital.

Anyone else thinking along these lines?
You have two options..

1) Sell everything NOW and stay on CASH till Jan 2021 or Feb 2021 or whenever you are comfortable to invest back in

2) If you are already contributing monthly then continue - no need to change anything. May be you can make it invest every 15 days instead of monthly.
bumbojumbo
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Re: Hedging the 2020 Election

Post by bumbojumbo »

Lensvik wrote: Sun Oct 18, 2020 4:02 am I am willing to forego any market gains that might incur in order to preserve capital.
This is a sign that you need to rethink your overall allocation strategy. Do you need your capital anytime soon? Why would be willing to forego market gains if you don't need the money anytime soon?
JS-Elcano
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Re: Hedging the 2020 Election

Post by JS-Elcano »

Lensvik wrote: Sun Oct 18, 2020 10:21 am
TomatoTomahto wrote: Sun Oct 18, 2020 7:32 am
Lensvik wrote: Sun Oct 18, 2020 4:02 am I know I cannot time the market, but in this case I think volatility is a safe bet.
I propose a drinking game where we have to take a shot when a poster says some variant of “I know I can’t time the market, but I’m a gonna.”
I'm not asking to be trolled. I am a conservative, disciplined investor with a $3M+ portfollio. I also work in risk management. I am not speculating. I am asking if anyone is making an calculated choice to forego potential gains by reallocating equities to bonds, in order to preserve capital, in light of what undoubtedly to one of most tumultuous periods of US history.
So, would you keep the money you shift to bonds in bonds thereafter, or are you planning to shift it back to stocks on the day the election is decided?
Trader Joe
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Re: Hedging the 2020 Election

Post by Trader Joe »

Lensvik wrote: Sun Oct 18, 2020 4:02 am Just wondering if anyone is going to try to hedge the 2020 election? I doubt the election will be decided quickly, and expect a lot of volitivity. Has anyone else given thought to this? I am considering moving all my 401k equity holdings to a bond fund for the duration of the volatility, and then move back to equities when things settle down.

I know I cannot time the market, but in this case I think volatility is a safe bet. I am willing to forego any market gains that might incur in order to preserve capital.

Anyone else thinking along these lines?
No, not at all.
Frank the Tank
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Re: Hedging the 2020 Election

Post by Frank the Tank »

Raryn wrote: Sun Oct 18, 2020 12:58 pm Many people had the same thoughts in 2016. Those who acted on it lost quite a bit - From Tuesday, November 8, 2016 through Friday, December 30, 2016, the S&P500 went up 4.6%.

This was followed by the least volatile year on recent record - from Nov 8 2016 through Dec 29, 2017, the market went up *25%*, and at no point dipped as low as it was on election day.

I think that right now, there's uncertainty in the market - and that in the days or weeks following the election, the uncertainty will decrease and so will volatility. No matter who wins, some businesses will go up (due to an expected friendly administration) and some will go down (due to an expected unfriendly one).

If you sell with the election anticipated - you're very likely to miss out on the benefits of this settling down. Perhaps you'll miss some transient decrease - or perhaps you won't.
Great point about 2016. I recall being personally worried about volatility in the wake of that Election Day - in fact, I would have bet on the stock market tanking at that time. However, I made no changes since my investment horizon is for the next 20-plus years as opposed to the next 20 days and thank goodness that I made no moves.

My personal takeaway: don't mix financial decisions with political opinions. Markets will go up and down regardless of the party that's in office (even if one might personally disagree with the party that's in office at any given time).
RetiredCSProf
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Re: Hedging the 2020 Election

Post by RetiredCSProf »

The longer-term affects of the election may play more of a role in financial planning than any immediate volatility.

I often see BHs reference the scheduled sunsetting of Tax Reform in 2026, as if no other changes in tax rates or deductions can or may possibly happen before then. Without knowing what changes may occur or whether they would affect me personally, I'm staying focused on my current plan, which is to continue Roth conversions.
AquaBliss
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Re: Hedging the 2020 Election

Post by AquaBliss »

burritoLover wrote: Sun Oct 18, 2020 10:04 am Biden, Harris, Trump, and Pence could all die on Nov. 2nd and the market is not going to crash 30%. Why? Because government will continue to function, business will continue to function, and future earnings are unlikely to be impacted by this event.
You sir, may get a visit from the secret service :wink:
milktoast
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Re: Hedging the 2020 Election

Post by milktoast »

RetiredCSProf wrote: Tue Oct 20, 2020 4:49 pm I often see BHs reference the scheduled sunsetting of Tax Reform in 2026, as if no other changes in tax rates or deductions can or may possibly happen before then.
That's due to forum rules. We cannot speculate about future changes to the law. But we can comment on upcoming changes due to current law.
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Oak&Elm
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Re: Hedging the 2020 Election

Post by Oak&Elm »

I’d be lying if I said I haven’t considered reducing my equity allocation before the election. Considering the very different views of the candidates I don’t think my concerns are unfounded. I’ve researched which fund’s I would purchase in multiple accounts but so far have done nothing. I’m not a young man and this is not like all the other elections.
burritoLover
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Re: Hedging the 2020 Election

Post by burritoLover »

AquaBliss wrote: Tue Oct 20, 2020 5:19 pm
burritoLover wrote: Sun Oct 18, 2020 10:04 am Biden, Harris, Trump, and Pence could all die on Nov. 2nd and the market is not going to crash 30%. Why? Because government will continue to function, business will continue to function, and future earnings are unlikely to be impacted by this event.
You sir, may get a visit from the secret service :wink:
Ha!
"Your money is like a bar of soap. The more you handle it, the less you’ll have." - Gene Fama
tibbitts
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Re: Hedging the 2020 Election

Post by tibbitts »

Oak&Elm wrote: Tue Oct 20, 2020 5:38 pm Considering the very different views of the candidates I don’t think my concerns are unfounded... I’m not a young man and this is not like all the other elections.
Yes, it's not like 2016, when the candidates had similar views and were practically best friends.
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whodidntante
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Re: Hedging the 2020 Election

Post by whodidntante »

chipperd wrote: Mon Oct 19, 2020 5:11 am
TheDDC wrote: Sun Oct 18, 2020 8:09 pm
chipperd wrote: Sun Oct 18, 2020 2:50 pm If you think volatility will increase in the future, place a bet on the VIX.
I wouldn’t go to cash because there is an election. I would go to cash if a shooting war in the streets were to to cap off the election. Then I would pray that cooler heads prevail and that it ends soon with civil liberties intact. Nothing good happens from a civil war in terms of economic growth. However, even the market recovered relatively quickly during the late 1860s, considering.

-TheDDC
The VIX isn't cash, it's a way to "bet" or "invest" (depending on your viewpoint) on volatility.
Here's an explanation: https://www.investopedia.com/terms/v/vix.asp
Buying options is also a way to be long volatility. I like to let the volatility show up and then short it. Someone has to take the other side of the WSB trades. :twisted:
neverpanic
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Re: Hedging the 2020 Election

Post by neverpanic »

Frank the Tank wrote: Tue Oct 20, 2020 2:56 pm My personal takeaway: don't mix financial decisions with political opinions.
Sage advice, however, all trading and investing is based on some amount of speculation. When one looks at existing laws and current legislative trends, one can make an informed prediction about the total market or specific sectors and about individual companies within those sectors. I recognize that seeking those types of advantages vs the house runs counter to the core philosophy here, but I also believe that the total market - and the ways to win with it, over time - is always evolving.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
tibbitts
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Re: Hedging the 2020 Election

Post by tibbitts »

neverpanic wrote: Wed Oct 21, 2020 11:12 am
Frank the Tank wrote: Tue Oct 20, 2020 2:56 pm My personal takeaway: don't mix financial decisions with political opinions.
Sage advice, however, all trading and investing is based on some amount of speculation. When one looks at existing laws and current legislative trends, one can make an informed prediction about the total market or specific sectors and about individual companies within those sectors. I recognize that seeking those types of advantages vs the house runs counter to the core philosophy here, but I also believe that the total market - and the ways to win with it, over time - is always evolving.
But the question is what makes your personal "informed predictions" better than those of the market? They have to be in order for you to capitalize on them.
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LilyFleur
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Re: Hedging the 2020 Election

Post by LilyFleur »

Lensvik wrote: Sun Oct 18, 2020 12:20 pm
tibbitts wrote: Sun Oct 18, 2020 10:30 am
Vandring wrote: Sun Oct 18, 2020 10:21 am
TomatoTomahto wrote: Sun Oct 18, 2020 7:32 am
Lensvik wrote: Sun Oct 18, 2020 4:02 am I know I cannot time the market, but in this case I think volatility is a safe bet.
I propose a drinking game where we have to take a shot when a poster says some variant of “I know I can’t time the market, but I’m a gonna.”
I'm not asking to be trolled. I am a conservative, disciplined investor with a $3M+ portfollio. I also work in risk management. I am not speculating. I am asking if anyone is making an calculated choice to forego potential gains by reallocating equities to bonds, in order to preserve capital, in light of what undoubtedly to one of most tumultuous periods of US history.
"You" are asking? So exactly how many usernames are you posting under?

Not speculating, eh? You can't possibly make a statement like
undoubtedly to one of most tumultuous periods of US history.
For all we know this could be one of the most boring periods in U.S. history.

If you work in risk management, you should be able to employ a strategy to actually hedge downward movement (why do you say "volatility" when everyone knows you only care about downside volatility?) with a known maximum insurance cost.
Apologies for the mix-up on accounts.

I work in engineering risk management, not financial. So perhaps I am too colored by my profession when I apply it everywhere.
Be careful. I have two very bright engineer friends who thought their knowledge extended to finance and made bad financial decisions.
Bronko
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Re: Hedging the 2020 Election

Post by Bronko »

Lensvik wrote: Sun Oct 18, 2020 10:21 am
TomatoTomahto wrote: Sun Oct 18, 2020 7:32 am
Lensvik wrote: Sun Oct 18, 2020 4:02 am I know I cannot time the market, but in this case I think volatility is a safe bet.
I propose a drinking game where we have to take a shot when a poster says some variant of “I know I can’t time the market, but I’m a gonna.”
I'm not asking to be trolled. I am a conservative, disciplined investor with a $3M+ portfollio. I also work in risk management. I am not speculating. I am asking if anyone is making an calculated choice to forego potential gains by reallocating equities to bonds, in order to preserve capital, in light of what undoubtedly to one of most tumultuous periods of US history.
You'll always be trolled on this site if you breath the slightest reference to timing a market. I believe in the philosophy of Bogle but I also am a free thinker. I'll admit I "timed" the initial Covid market dump. OR did I look at all the facts and realize people would react harshly thus causing market decline. Depends on which moniker is chiming in. WillThrill did a great post on a similar position and got relentlessly "trolled" and I think attacked because of his personal observations. I see your post for what it is, an educated person trying to have a conversation with other educated people. Like minded or not.

I say educate yourself, have a plan, and do exactly what you want to do with no regard for other peoples opinions.

Good luck!
Never let a little bit of money get in the way of a real good time.
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Stinky
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Re: Hedging the 2020 Election

Post by Stinky »

[ quoted post removed by admin LadyGeek]

I've been concerned about the financial markets following the election of several presidents during my investing lifetime. Thankfully, I didn't take any action on my investments.

Somehow the financial markets have survived each president.

That's the way it's worked in the past. I expect that it will continue to work that way in the future.
It's a GREAT day to be alive - Travis Tritt
Ryzen
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Re: Hedging the 2020 Election

Post by Ryzen »

I personally think that accumulators are too afraid of volatility. Volatility can bring some good opportunity to get a value on some good equities at an artificially depressed price. That philosophy is basically how Warren Buffet got as wealthy as he did - buy good companies for cheap.

This does not apply to people who are retired or close to retired, but at that point your AA and investing style should match your comfort with volatility anyways.
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dogagility
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Re: Hedging the 2020 Election

Post by dogagility »

Ryzen wrote: Wed Oct 21, 2020 11:51 am I personally think that accumulators are too afraid of volatility. Volatility can bring some good opportunity to get a value on some good equities at an artificially depressed price. That philosophy is basically how Warren Buffet got as wealthy as he did - buy good companies for cheap.

This does not apply to people who are retired or close to retired, but at that point your AA and investing style should match your comfort with volatility anyways.
I'm not convinced that any of us have access to the money-making tools Buffett uses. An example is his deal with Dow Chemical during the financial crisis: https://money.com/warren-buffett-dow-chemical-stock/.
All children spill milk. Learn to smile and wipe it up. -- A Farmer's Wife
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LadyGeek
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Re: Hedging the 2020 Election

Post by LadyGeek »

This is a "no politics" forum. I removed an off-topic post. As a reminder, see: Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
  • Common religious expressions such as sending your prayers to an ailing member.
  • Usage of factual and non-derogatory political labels when necessary to the discussion at hand.
  • Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed legislation are prohibited.
  • Proposed regulations that are directly related to investing may be discussed if and when they are published for public comments.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Ryzen
Posts: 73
Joined: Tue Jul 07, 2020 9:00 pm

Re: Hedging the 2020 Election

Post by Ryzen »

dogagility wrote: Wed Oct 21, 2020 11:59 am
Ryzen wrote: Wed Oct 21, 2020 11:51 am I personally think that accumulators are too afraid of volatility. Volatility can bring some good opportunity to get a value on some good equities at an artificially depressed price. That philosophy is basically how Warren Buffet got as wealthy as he did - buy good companies for cheap.

This does not apply to people who are retired or close to retired, but at that point your AA and investing style should match your comfort with volatility anyways.
I'm not convinced that any of us have access to the money-making tools Buffett uses. An example is his deal with Dow Chemical during the financial crisis: https://money.com/warren-buffett-dow-chemical-stock/.
Buffett has become more saavy and more sophisticated the more money he has, and obviously has much better access to investments than us. But his roots are as a (somewhat cut-throat) value investor. We can't directly emulate his deals but his philosophy lives on - buy good companies and don't overpay!
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ruralavalon
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Re: Hedging the 2020 Election

Post by ruralavalon »

Stinky wrote: Wed Oct 21, 2020 11:47 am [ quoted post removed by admin LadyGeek]

I've been concerned about the financial markets following the election of several presidents during my investing lifetime. Thankfully, I didn't take any action on my investments.

Somehow the financial markets have survived each president.

That's the way it's worked in the past. I expect that it will continue to work that way in the future.
As I recall people have had substantial worries surrounding every Presidential election which I can recall, starting with Johnson/Goldwater in 1964.

It's best not to make investing decisions based on election jitters.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
neverpanic
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Re: Hedging the 2020 Election

Post by neverpanic »

tibbitts wrote: Wed Oct 21, 2020 11:23 am
neverpanic wrote: Wed Oct 21, 2020 11:12 am
Frank the Tank wrote: Tue Oct 20, 2020 2:56 pm My personal takeaway: don't mix financial decisions with political opinions.
Sage advice, however, all trading and investing is based on some amount of speculation. When one looks at existing laws and current legislative trends, one can make an informed prediction about the total market or specific sectors and about individual companies within those sectors. I recognize that seeking those types of advantages vs the house runs counter to the core philosophy here, but I also believe that the total market - and the ways to win with it, over time - is always evolving.
But the question is what makes your personal "informed predictions" better than those of the market? They have to be in order for you to capitalize on them.
If one can be an early mover because they guessed correctly, that's the win. Example: Draftkings.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
musicmom
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Re: Hedging the 2020 Election

Post by musicmom »

Before retirement last year, my 403b was 80% equities.
Rolled 403b into IRA.
Last week I adjusted AA to 50/50.
Living well on SS and 2% IRA withdrawal.
Not market timing, allocation will remain at 50/50.
Sleeping well and waking whenever I feel like it now.
corp_sharecropper
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Re: Hedging the 2020 Election

Post by corp_sharecropper »

This is simple, for me at least, and in my mind at least. I probably won't do anything until there's good news on stimulus pre-election. When that happens, or if we get down to the wire and hasn't happened, I will move a good amount of investments to cash in my tax advantaged accounts. There's no taxable event, I can literally do it with a click of a mouse and I can restore it just as easily afterward. For taxable, I will use a little margin to put on some partial hedges, long volatility and puts... Partial is the key here, and the puts will be far OTM, basically temporary catastrophe insurance. This is less than ideal in my mind (versus going to cash in tax advantaged) as it requires one to have a plan to monetize the downside temporally (as in time, not temporarily). Volatility tends to melt back down quickly (relative to the usual mundane movements of the market) so I will set a threshold to cash in puts and long vol positions to mechanically monetize those. It's not perfect, no hedge is, but I think those are the best options for me as I already have plenty of treasury exposure and I think the downside scenario here doesn't necessarily bode well for treasuries as the hedge.

To me it's such an easy decision, I'm perfectly at peace if it's all quiet on the western front and I miss out on a little pop from investors letting out a sigh of relief. Really, I'd prefer that, for reasons far beyond my finances. Missing out on whatever possible upward move might occur just doesn't come close to balancing the scales when on the other side is A) the potential drop (even if temporary) and B) the potential of possibly taking advantage of the drop. All my own opinion of course and it's my money so I'll do what I want regardless of any tired bogle rhetoric thrown my way. I'm totally ok with being slightly worse off than someone who stoically "stands there and does nothing", like I said, I'd prefer that to be the outcome for lots of reasons that aren't in the scope of bogleheads.org discussions, to me, the alternative to doing nothing just has a far greater risk/utility function to me. My only prerequisite is to have all the rules and decision tree mapped out before doing anything, it's easy to go to cash, it's much harder and prone to irrational behavior how to get back in from cash, has to be rules based, mechanical, in my opinion.
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