Stay-the-Course or Sell-and-Buy-later?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
Topic Author
Taylor Larimore
Advisory Board
Posts: 30023
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Stay-the-Course or Sell-and-Buy-later?

Post by Taylor Larimore »

Hi Bogleheads:

Friday the Dow Jones had its worst week since October 2008 and its lowest close since October 2002. TV commentators and newspaper headlines are filled with doom and gloom suggesting investors should cut their losses and sell now. It is the same in every bear market. I have endured 10.

What should we do? Stay-the-course OR sell now and buy back later (market timing)? For the answer, I listen to the advice of acknowledged experts:
"The stock market will fluctuate, but you can't pinpoint when it will tumble or shoot up. If you have allocated your assets properly and have sufficient emergency money, you shouldn't need to worry." (AAII Guide to Mutual Funds)

"Endless tinkering is unlikely to improve performance, and chasing last period's stellar achiever is a losing strategy." (Frank Armstrong, author and adviser)

"It must be apparent to intelligent investors--if anyone possessed the ability to do so (market time) he would become a billionaire--quickly--." (David Babson, author, adviser)

"What it really takes to improve your returns and diminish your risks is a willingness to stop focusing exclusively on the movement of the markets." (Baer & Ginsler, The Great Mutual Fund Trap)

"If we haven't said it enough, we'll say it again: Market timing is dangerous." (Barron's Guide to Making Investment Decisions.)

"Only liars manage to always be "out" during bad times and "in' during good times. (Bernard Baruch, famed investor)

"You have to keep reminding yourself. We don't know what's going to happen with anything, ever." (Peter Bernstein)

"There are two kinds of investors, be thay large or small: those who don't know where the market is headed, and those who don't know that they don't know." (Wm Bernstein, author and adviser)

The Boglehead (forecasting) Contest began in 2001. Of 99 Diehard guesses that year, only 11 even guessed the direction of the stock market. In January 2008, only 2 Bogleheads guessed how low the S&P would go last year. Of 11 professional forecasters, every one thought the S&P would gain (it declined -38%)

"If you're determined to succeed at investing, make it your first priority to become a buy-and-hold investor." (Jack Brennan, Straight Talk on Investing)

"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two." (Warren Buffet)

"Market timing is an ineffective strategy for mutual fund investors." (CDA/Wiesenberger)

"Any investment method that relies on predicting the future is doomed to fail." (Chandan & Sengupta, financial authors)

"A successful investor has a good knowledge base, a well-defined investment plan, and nerves of steel to stick with it." (Andrew Clarke, financial author)

"Most investors are unable to profitably time the market and are left with equity fund returns lower than inflation." (2003 Dalber Study)

"Take my word on it. Buy-and-hold is still your best long-run strategy." (Jonathan Clements, author & journalist)

"Market-timing is bunk." (Pat Dorsey, M* Director of Fund Analysis."

"The performance of 185 tactical asset allocation mutual funds was compared with buy-and-hold strategies and equity mutual funds over the years 1985-97. Over this period the S&P 500 Index increased 734%, average equity funds increased 598%, and tactical asset allocation funds increased 384%." (David Dreman, author)

"Market timing is a wicked idea. Don't try it-ever." (Charles Ellis author of The Loser's Game)

"Forget market timing in any form." (Paul Farrell, (CBS Marketwatch.com)

"The best practice for investors is to design a long-term globally diversified asset allocation based on present and future financial needs. Then follow that plan religiously, through all markets good and bad." (Rick Ferri, author and adviser)

"Benjamin Graham spent much of his career trying to devise a goodformula for when to get into--and out of--the stock market. All formulas, he concluded, failed." (Forbes, 12-27-99)

"Buy and hold. Diversify. But your money in index funds. Pay attention to to the one thing you can control--costs." (Fortune Investor's Guide 2003)

"Dont' sell out of fear or buy out of greed. Just keep making investments, and let the market take its course over the long-term." (Norman Fosback, author, researcher)

"The only function of economic forecastng is to make astrology look respectful." (John Kenneth Galbraith, Economist)

"I've learned that market timing can ruin you." (Elaine Garzarelli)

"Staying on course may be just as difficult in bull markets as in bear markets." (Good & Hermansen, Index Your Way to Investment Success)

"For most investors the odds favor a buy-and-hold strategy." (Carol Gould, author & financial columnist)

"If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting that's going to happen to the stock market." (Benjamin Graham)

"From June 1980 through December 1992, 94.5% of 237 market timing investment newsletters had gone of business." (Graham/Campbell Study)

"Your very refusal to be active, and your renunciation of any pretended ability to predict the future, can become your most powerful weapon." (Graham & Zweig, The Intelligent Investor)

"The best advice: buy and hold." (John Haslem, author and researcher)

"Even in a bear market, market-timing and actively managed mutual funds generally hurt investment performance more than they help it." (Mark Hulbert, N.Y.Times columnist)

"After receiving the Nobel Prize, Daniel Kahneman, was asked by a CNBC anchorman what investment tips he had for viewers. His answer: "Buy and hold."

"Timing the market is for losers. Time IN the market will get you to the winner's circele, and you'll sleep better at night." (Michael Leboeuf, author)

"No one is smart enough to time the market's ups and downs." (Arthur Levitt, former SEC chairman)

"It never was my thinking that made the big money for me. It always was my sitting." (Jesse Livermore, author & famed investor)

"Nobody can predict interest rates, the future direction of the economy or the stock market." (Peter Lynch)

"Buying-and-holding a broad-based market index fund is still the only game in town." (Burton Malkiel, Random Walk Down Wall Street)

"At the peak of the bull market in March of 2000 only 0.7% of all recommendations on stocks issued by Wall Street brokerages and investment banks were to "Sell." (Miami Herald, 1-26-03)

"If you can't handle the short term, if the uncertainty is stressful and the headlines are unbearable, then the markets are too hot for you: get out of the kitchen." (Moshe Milevsky, author & researcher)

"We're not keen on market-timing. It just doesn't work." (Morningstar Course 106)

"We've yet to find anyone who can accurately and consistently predict the market's short-term moves." (Motley Fools)

"Odean and Barber tested over 66,400 investors between 1991 and 1997. Their findings: "The most active traders earned 7% less annually than buy-and-hold investors."

"Forget trying to time the market and do something productive instead." (Gerald Perritt, financial author)

"The market timer's Hall of Fame is an empty room." (Jane Bryant Quinn)

"Countless studies have proved that no one is able to time the market effectively." (Mary Roland, author & journalist)

"Trading is based on the rather arrogant belief that the trader knows more than the buyers and sellers with whom he is trading." (Ron Ross, The Unbeatable Market)

"In the long run it doesn't matter much whether your timing is great or lousy. What matters is that you stay invested." (Louis Rukeyser, TV host)

"For the 10 years that ended 12-31-2000, only one newsletter out of the 112 that Timers Digest follows managed to beat the S&P 500 Benchmark." (Jim Schmidt, editor)

"I have learned the hard way that market timing and trying to pick a fund that will out-perform the market are both losing strategies." (Larry Schultheis, author and advisor)

"I'm a strong advocate of buying and holding." (Charles Schwab)

"It turns out that I should have just bought them (securities), and thereafter I should have just sat on them like a fat, stupid peasant. A peasant however, who is rich beyond his limited dreams of avarice." (Fred Schwed Jr., 'Where are the Customers' Yachts?)

"If you are not going to stick to your chosen investment method through thick and thin, there is almost no chance of your succeeding as an investor. (Chandan Sengupta, financial author)

"Investors should look with a jaundiced eye at any market timing system being peddled by its guru-creator." (W. Scott Simon, financial author)

"Buying and holding a few broad market index funds is perhaps the most important move ordinary invests can make to supercharge their portfolios." (Stein & DeMuth, (authors & advisor)

"It's my belief that it's a waste of time to try to time any market decline, or try to pinpoint a market bottom." (James Stewart, Smart Money columnist)

"It's a staple of personal finance advice: Buy-and-hold, because trading the stock market is a sucker's bet." Larry Swedroe, author and adviser.

"People should stop chasing performance and just put together a sensible portfolio regardless of the ups and downs of the market." (David Swensen, Yale Investments)

"Trust in time and forget market timing. Allow time to work its compounding magic for you. Let market timing inflict its miseries on someone else." (Tweddell & Pierce, financial authors)

"Stay invested. Not only does buy-and-hold investing offer better returns, but it's also less work." (Eric Tyson, author, Mutual Funds for Dummies."

"Few if any investors manage to be consistently successful in timing markets." (Wall Street Journal Lifetime Guide to Money)

"If you're considering doing your own market timing, the best advice is this: Don't." (John Waggoner, USA Today financial columnist)

"If you buy, and then hold a total-stock-market index fund, it is mathematically certain that you will outperform the vast majority of all other investors in the long run." (Jason Zweig, author)
"Stay the course. No matter what happens, stick to your program. I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you." (Jack Bogle)
"Simplicity is the master key to financial success." -- Jack Bogle
Gekko
Posts: 3779
Joined: Fri May 11, 2007 5:00 pm
Location: USA

Post by Gekko »

good stuff! i like that last Bogle quote.
User avatar
deepdrive
Posts: 924
Joined: Sat Dec 20, 2008 5:03 pm

Post by deepdrive »

Great reinforcement, Taylor. Thank you for posting those.
Investment difficulty and long-term success are perfectly negatively correlated. Keep it simple.
User avatar
daryll40
Posts: 1804
Joined: Wed Feb 28, 2007 9:40 am

Re: Stay-the-Course or Sell-and-Buy-later?

Post by daryll40 »

--Copy of lengthy thread deleted to save bandwith--

Wait a minute Taylor......(you KNOW where I am going...)

Daryll
hamishdad
Posts: 315
Joined: Mon Jan 21, 2008 2:16 pm

Re: Stay-the-Course or Sell-and-Buy-later?

Post by hamishdad »

daryll40 wrote:Wait a minute Taylor......(you KNOW where I am going...)
Ah, But the Strawberries! :lol:
User avatar
deepdrive
Posts: 924
Joined: Sat Dec 20, 2008 5:03 pm

Re: Stay-the-Course or Sell-and-Buy-later?

Post by deepdrive »

daryll40 wrote:Wait a minute Taylor......(you KNOW where I am going...)
We all do. Wasn't the thread with 200+ posts of random bickering and nitpicking enough?
Last edited by deepdrive on Sun Feb 22, 2009 12:10 pm, edited 1 time in total.
Investment difficulty and long-term success are perfectly negatively correlated. Keep it simple.
hewhomustnotbenamed
Posts: 572
Joined: Sun Jan 04, 2009 11:27 pm

Post by hewhomustnotbenamed »

I myself hope that those historically drinking the MSM grape flavor-aid ,sell sell sell. :twisted:
I might be crazy but, I ain't stupid.
retiredjg
Posts: 42222
Joined: Thu Jan 10, 2008 12:56 pm

Re: Stay-the-Course or Sell-and-Buy-later?

Post by retiredjg »

daryll40 wrote:Wait a minute Taylor......(you KNOW where I am going...)
Please don't.
YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: Stay-the-Course or Sell-and-Buy-later?

Post by YDNAL »

daryll40 wrote:Wait a minute Taylor......(you KNOW where I am going...)
Daryll,

Next time consider NOT copying entire lenghty threads to save bandwidth. :) Just like everyone else just did!
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
User avatar
danwalk
Posts: 390
Joined: Mon Apr 14, 2008 2:03 pm
Location: The West Coast

Re: Stay-the-Course or Sell-and-Buy-later?

Post by danwalk »

daryll40 wrote:Wait a minute Taylor......(you KNOW where I am going...)
We've been down this road before. Don't want to go down it again.
Image | "Time is your friend; impulse is your enemy."—Jack Bogle
User avatar
rcshouldis
Posts: 673
Joined: Thu Oct 02, 2008 10:28 am

Post by rcshouldis »

hewhomustnotbenamed wrote:I myself hope that those historically drinking the MSM grape flavor-aid ,sell sell sell. :twisted:
Ah yes, but that tainted kool aid ages into the finest wine if you don't panic and dump it down the drain. BUY&HOLD, BUY&HOLD,BUY&HOLD
exoilman
Posts: 773
Joined: Wed Oct 15, 2008 1:38 pm
Location: New Jersey

Post by exoilman »

Hi Taylor,

Good stuff and thanks. I will print these for my own reenforcement.

Regards,
Sam
User avatar
Dutchgirl
Posts: 164
Joined: Mon Mar 05, 2007 5:52 pm
Location: Oakland, California

Post by Dutchgirl »

Thank you, Taylor! Your posts continue to confirm that, tough though these times may be, there is no other choice but to stay calm and do nothing. Meanwhile, my bond allocation continues to rise to my chronological age!
Another lesson?

Best wishes, Yoka
Gregory
Posts: 1554
Joined: Tue Feb 20, 2007 2:26 pm

Re: Stay-the-Course or Sell-and-Buy-later?

Post by Gregory »

Just an aside Taylor, I know you bring out this list of quotes from time to time, and if there's one suspect quote on the list it's Farrell's. Paul Farrell is the author of Think A$trology & Grow Rich, With The New "Money A$trology" Success Formulas For Business, Career & Investment Decision-Making.

http://tinyurl.com/d3fo8t
Taylor Larimore wrote: "Forget market timing in any form." (Paul Farrell, (CBS Marketwatch.com)
From the book's About the Author: "Paul Farrell first discovered the decision-making power of Money A$trology as a vice president with Morgan Stanley's real estate investment banking group....This new discovery occurred while attending a workshop on Mythical Meditation by Joseph Campbell, the author of The Power of Myth and the world's leading scholar on mythology. This unique opportunity opened him to J.P. Morgan's "secret" - the predictive power of astrology as a tool in making successful decisions in the business and financial world."


Notwithstanding other things Farrell may have written, using astrology "success formulas" for investment decision-making hardly squares with buy-and-hold philosophy.
Pecuniae imperare oportet, non servire. | Fortuna vitrea est; tum cum splendit frangitur. -Syrus
User avatar
Topic Author
Taylor Larimore
Advisory Board
Posts: 30023
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Post by Taylor Larimore »

Hi Gregory:
Notwithstanding other things Farrell may have written, using astrology "success formulas" for investment decision-making hardly squares with buy-and-hold philosophy.
Mr. Farrell's astrology book was published in 1993. I suspect he has come to appreciate the importance of "buy and hold." (I prefer "stay-the-course".)
"Simplicity is the master key to financial success." -- Jack Bogle
unclemick
Posts: 1318
Joined: Tue Feb 20, 2007 10:18 am
Location: greater Kansas City

Post by unclemick »

Listen folks - those Vanguard computers rebalancing my Target are just doing what they are programed to do - it's not their fault.

It's not sin - it's rebalancing.

heh heh heh - 8)
User avatar
daryll40
Posts: 1804
Joined: Wed Feb 28, 2007 9:40 am

Post by daryll40 »

The quotes are good reinforcement in these trying times. But I do question the credibility of the poster. Here is what he said on Dec 30, 2008, about the 30th post down on this thread: http://www.bogleheads.org/forum/viewtopic.php?t=30085
I intend to stay our course--which includes getting out of stocks if our portfolio gets to the point we can't afford further losses.
Folks, there HAS to be some reconciliation here. Which definition of "stay the course" is the real one and which is the impostor? The original poster cannot have it both ways.
User avatar
market timer
Posts: 6360
Joined: Tue Aug 21, 2007 1:42 am

Post by market timer »

daryll40 wrote:Folks, there HAS to be some reconciliation here. Which definition of "stay the course" is the real one and which is the impostor? The original poster cannot have it both ways.
It's Taylor's business, but I could see the logic of this for someone who has dual roles for a portfolio, e.g., providing retirement income and an inheritance. The former takes priority, so unexpected expenses or stock market losses could trigger a plan B, where the goals of the portfolio are dominated by the need for safety and income.
User avatar
bob90245
Posts: 6511
Joined: Mon Feb 19, 2007 8:51 pm

Post by bob90245 »

daryll40 wrote:The quotes are good reinforcement in these trying times. But I do question the credibility of the poster. Here is what he said on Dec 30, 2008, about the 30th post down on this thread: http://www.bogleheads.org/forum/viewtopic.php?t=30085
I intend to stay our course--which includes getting out of stocks if our portfolio gets to the point we can't afford further losses.
If one had started with this in mind first ...

"Only put in stocks what you can afford to lose."

... then there wouldn't be the need to get out of stocks because one cannot afford further losses due to market declines.
User avatar
danwalk
Posts: 390
Joined: Mon Apr 14, 2008 2:03 pm
Location: The West Coast

Post by danwalk »

daryll40 wrote:The quotes are good reinforcement in these trying times. But I do question the credibility of the poster. Here is what he said on Dec 30, 2008, about the 30th post down on this thread: http://www.bogleheads.org/forum/viewtopic.php?t=30085
I intend to stay our course--which includes getting out of stocks if our portfolio gets to the point we can't afford further losses.
Folks, there HAS to be some reconciliation here. Which definition of "stay the course" is the real one and which is the impostor? The original poster cannot have it both ways.
Daryll, this brings nothing new to the table. You have made this point incessantly, getting more and more personal each and every time you repeat yourself. I do not believe Taylor has any credibility issues but you certainly may. You haven't been happy with any answer you have been given and have reduced what could have been an interesting discussion into personal attacks.

We should all remember the forum policies:
This is a moderated forum. We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones. Respect your debating opponents. Debates are about issues, not people. If you disagree with an idea, go ahead and marshal all your forces against it. But do not confuse ideas with the person posting them; at all times we must conduct ourselves in a respectful manner to other posters. Attacks on individuals, insults, name calling, trolling, baiting or other attempts to sow dissension are not acceptable.
Dan
Image | "Time is your friend; impulse is your enemy."—Jack Bogle
User avatar
tetractys
Posts: 4831
Joined: Sat Mar 17, 2007 3:30 pm
Location: Along the Salish Sea

Re: Stay-the-Course or Sell-and-Buy-later?

Post by tetractys »

Taylor Larimore wrote:It is the same in every bear market. I have endured 10.
Thanks Taylor,

In unfamiliar curcumstances it's good to hear from someone who has acquired an experiential affinity with those circumstances--someone who's been there. Of course for the listener to benefit, they also must acquire an affinity with the teacher, in order to set aside their own blinders and see things from a new perspective.

Another way is to immerse ourselves in writings of people who have been there. Just as an example I'm currently reading various French and related writers up to and during the French Revolution. It's really something to find one's petty fears and narrow ideas alleviated by experiencing how similar events to today have unfolded in the past. Without going into details I can honestly say, yes revolutionary France was similar in many ways to today's world in crisis, socially, scientifically, philosophically, and economically. But it was also quite different, including the root causes of the revolutionary blood bath, which aren't likely to repeat.

Speculations about the future are always false, even the few lucky guesses, because without any constructive base they generate further false speculations. But looking into the present and past and acquiring a strong affinity with the persons who lived the experience through all their senses, is like living it one's self. And unfounded fears are displaced, like the childish fear of the dark that is displaced as one grows up.

We will get through this relatively mild crisis and reach a new prosperity, just as we've done repeatedly in the past, in the US alone.

Tet
RESISTANCE IS FRUITFUL
retiredjg
Posts: 42222
Joined: Thu Jan 10, 2008 12:56 pm

Post by retiredjg »

daryll40 wrote:Folks, there HAS to be some reconciliation here. Which definition of "stay the course" is the real one and which is the impostor?
I agree that it would be nice to get this straightened out. I do not believe that will occur as long as you insist that what you think you heard is what Taylor actually meant. Harsh as it sounds, Daryll, your attitude is the biggest roadblock to achieving any type of "reconciliation" on this issue of "sell if you have to".

We all understand what you think and feel. Bringing it up over and over does not make our understanding any greater. It only makes you seem less reasonable. I said it in an earlier post - you are ordinarily a very reasonable poster, but on this subject you are obsessed and have lost your clarity.

I would suggest you let it drop and let some people who share your opinion, but who can discuss it rather than argue and get personal, work this out. We would all like to see this issue clarified.
User avatar
alvinsch
Posts: 1612
Joined: Mon Feb 19, 2007 10:16 pm
Location: Northwest

Post by alvinsch »

bob90245 wrote: If one had started with this in mind first ...

"Only put in stocks what you can afford to lose."

... then there wouldn't be the need to get out of stocks because one cannot afford further losses due to market declines.
I totally agree and to me is the crux of issue. If you have to sell equities then you've already violated this tenet because you had money in equities that you couldn't afford to lose. It does NOT say: You can put some of the money you can't afford to lose in stock but will need to sell if stocks fall too much.

My view.
- Al
User avatar
Blues
Posts: 1824
Joined: Wed Dec 10, 2008 11:58 am
Location: Blue Ridge Mtns

Post by Blues »

alvinsch wrote:
bob90245 wrote: If one had started with this in mind first ...

"Only put in stocks what you can afford to lose."

... then there wouldn't be the need to get out of stocks because one cannot afford further losses due to market declines.
I totally agree and to me is the crux of issue. If you have to sell equities then you've already violated this tenet because you had money in equities that you couldn't afford to lose. It does NOT say: You can put some of the money you can't afford to lose in stock but will need to sell if stocks fall too much.

My view.
- Al
Good points. But for those who may have realized too late that their original plan was inadequate (or come to the "Boglehead" point of view later rather than sooner), such action may be necessary to put their house in order going forward.

(I believe that Taylor, (in replying to another poster stating in another thread that he was a "born indexer"), said that it took him some time to work through believing that he could cherry pick the best stocks and later mutual funds before realizing that "indexing" was the best available avenue. I'd put myself in that same category of coming later to the party. But I did finally arrive...though not without having to take some measures to put things in order.)
User avatar
alvinsch
Posts: 1612
Joined: Mon Feb 19, 2007 10:16 pm
Location: Northwest

Post by alvinsch »

Blues wrote: Good points. But for those who may have realized too late that their original plan was inadequate (or come to the "Boglehead" point of view later rather than sooner), such action may be necessary to put their house in order going forward.
Agreed, it always makes sense to fix a bad or incomplete plan. Question is whether any plan that violates, "Only put in stocks what you can afford to lose", (i.e. forced to sell if stocks fall too much), should be considered a good plan instead of a plan that needs to be fixed.

- Al
User avatar
daryll40
Posts: 1804
Joined: Wed Feb 28, 2007 9:40 am

Post by daryll40 »

retiredjg wrote: I said it in an earlier post - you are ordinarily a very reasonable poster, but on this subject you are obsessed and have lost your clarity.

I would suggest you let it drop and let some people who share your opinion, but who can discuss it rather than argue and get personal, work this out. We would all like to see this issue clarified.
A few comments in response:

1. I did leave it alone, but Taylor is back to authoring "hold thru thick and thin" posts like this. It makes me crazy, really, because I don't like being given bull-o-ney. You cannot espouse buying and holding here after espousing sell after stocks decline by x over there.

2. The only ones who can really clarify this are the other Boglehead book authors or Mr. Bogle. And it doesn't have to be personal. But they do need to weigh in.

I still think Taylor is a great guy and means well. But there is a serious credibility issue here and every time I see a post like this I can't help seeing that it's not that different than Cramer's nightly flip flops. Don't we Bogleheads ALSO deserve some respect?
kencc
Posts: 146
Joined: Mon Dec 01, 2008 12:23 am

Post by kencc »

I've seen Taylor Larimore's quotes before and, as a conservative (as in "conserve capital") market timer, I can agree with most of them. I'm not a trader but basically a Graham-like defensive investor who, by moving my allocation between stocks/bonds 75/25 and 25/75, attempts to gain some of the advantages of holding stocks during bull markets while avoiding some of the disadvantages (particularly the psychological effects) of major bear markets. I wouldn't make any claims of beating B&H 75/25 but overall, since the early 70's, have done better than B&H 25/75.

Short term trading and/or chasing the hot funds and/or the constraints under which active mutual funds and news letters have to function under are all going to perform badly. But as a conservative market timer changing allocations on average about every 2 years, I can fully agree with:-
"Endless tinkering is unlikely to improve performance, and chasing last period's stellar achiever is a losing strategy." (Frank Armstrong, author and adviser)

"What it really takes to improve your returns and diminish your risks is a willingness to stop focusing exclusively on the movement of the markets." (Baer & Ginsler, The Great Mutual Fund Trap)

"Only liars manage to always be "out" during bad times and "in' during good times. (Bernard Baruch, famed investor)

"You have to keep reminding yourself. We don't know what's going to happen with anything, ever." (Peter Bernstein)

"There are two kinds of investors, be thay large or small: those who don't know where the market is headed, and those who don't know that they don't know." (Wm Bernstein, author and adviser)

The Boglehead (forecasting) Contest began in 2001. Of 99 Diehard guesses that year, only 11 even guessed the direction of the stock market. In January 2008, only 2 Bogleheads guessed how low the S&P would go last year. Of 11 professional forecasters, every one thought the S&P would gain (it declined -38%)

"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two." (Warren Buffet)

"Any investment method that relies on predicting the future is doomed to fail." (Chandan & Sengupta, financial authors)

"A successful investor has a good knowledge base, a well-defined investment plan, and nerves of steel to stick with it." (Andrew Clarke, financial author)

"Dont' sell out of fear or buy out of greed. Just keep making investments, and let the market take its course over the long-term." (Norman Fosback, author, researcher)

"The only function of economic forecastng is to make astrology look respectful." (John Kenneth Galbraith, Economist)

"Staying on course may be just as difficult in bull markets as in bear markets." (Good & Hermansen, Index Your Way to Investment Success)

"If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting that's going to happen to the stock market." (Benjamin Graham)

"From June 1980 through December 1992, 94.5% of 237 market timing investment newsletters had gone of business." (Graham/Campbell Study)

"Your very refusal to be active, and your renunciation of any pretended ability to predict the future, can become your most powerful weapon." (Graham & Zweig, The Intelligent Investor)

"Even in a bear market, market-timing and actively managed mutual funds generally hurt investment performance more than they help it." (Mark Hulbert, N.Y.Times columnist)

"It never was my thinking that made the big money for me. It always was my sitting." (Jesse Livermore, author & famed investor)

"Nobody can predict interest rates, the future direction of the economy or the stock market." (Peter Lynch)

"At the peak of the bull market in March of 2000 only 0.7% of all recommendations on stocks issued by Wall Street brokerages and investment banks were to "Sell." (Miami Herald, 1-26-03)

"If you can't handle the short term, if the uncertainty is stressful and the headlines are unbearable, then the markets are too hot for you: get out of the kitchen." (Moshe Milevsky, author & researcher)

"We've yet to find anyone who can accurately and consistently predict the market's short-term moves." (Motley Fools)

"Odean and Barber tested over 66,400 investors between 1991 and 1997. Their findings: "The most active traders earned 7% less annually than buy-and-hold investors."

"Trading is based on the rather arrogant belief that the trader knows more than the buyers and sellers with whom he is trading." (Ron Ross, The Unbeatable Market)

"If you are not going to stick to your chosen investment method through thick and thin, there is almost no chance of your succeeding as an investor. (Chandan Sengupta, financial author)

"Investors should look with a jaundiced eye at any market timing system being peddled by its guru-creator." (W. Scott Simon, financial author)
The majority of investors chase hot funds, listen to the talking heads, buy high sell low, etc. Consequently most investors underperform B&H and therefore I agree the following quotes apply to "most" investors (my emphasis and comments in bold):-
"Most investors are unable to profitably time the market and are left with equity fund returns lower than inflation." (2003 Dalber Study)

"For most investors the odds favor a buy-and-hold strategy." (Carol Gould, author & financial columnist)

"Buying-and-holding a broad-based market index fund is still the only game in town." (Burton Malkiel, Random Walk Down Wall Street) General advice for "most" investors.

"If we haven't said it enough, we'll say it again: Market timing is dangerous." (Barron's Guide to Making Investment Decisions.) Only if "trading" type of timing.

"If you're determined to succeed at investing, make it your first priority to become a buy-and-hold investor." (Jack Brennan, Straight Talk on Investing) General advice for "most" investors.

"Market timing is an ineffective strategy for mutual fund investors." (CDA/Wiesenberger) General advice for "most" investors.

"Take my word on it. Buy-and-hold is still your best long-run strategy." (Jonathan Clements, author & journalist) General advice for "most" investors.

"The best practice for investors is to design a long-term globally diversified asset allocation based on present and future financial needs. Then follow that plan religiously, through all markets good and bad." (Rick Ferri, author and adviser) General advice for "most" investors.

"Buy and hold. Diversify. But your money in index funds. Pay attention to to the one thing you can control--costs." (Fortune Investor's Guide 2003) General advice for "most" investors.

"The best advice: buy and hold." (John Haslem, author and researcher) General advice for "most" investors.

"After receiving the Nobel Prize, Daniel Kahneman, was asked by a CNBC anchorman what investment tips he had for viewers. His answer: "Buy and hold." General advice for "most" investors.

"Forget trying to time the market and do something productive instead." (Gerald Perritt, financial author) General advice for "most" investors.

"I'm a strong advocate of buying and holding." (Charles Schwab) General advice for "most" investors.

"Buying and holding a few broad market index funds is perhaps the most important move ordinary invests can make to supercharge their portfolios." (Stein & DeMuth, (authors & advisor) General advice for "most" investors.

"People should stop chasing performance and just put together a sensible portfolio regardless of the ups and downs of the market." (David Swensen, Yale Investments) General advice for "most" investors.

"Stay invested. Not only does buy-and-hold investing offer better returns, but it's also less work." (Eric Tyson, author, Mutual Funds for Dummies." General advice for "most" investors.

"If you buy, and then hold a total-stock-market index fund, it is mathematically certain that you will outperform the vast majority of all other investors in the long run." (Jason Zweig, author)
I have issues with the remaining quotes and my comments are in bold:-
"The stock market will fluctuate, but you can't pinpoint when it will tumble or shoot up. If you have allocated your assets properly and have sufficient emergency money, you shouldn't need to worry." (AAII Guide to Mutual Funds) "Shouldn't" implies that perhaps sometimes you do need to worry.

"It must be apparent to intelligent investors--if anyone possessed the ability to do so (market time) he would become a billionaire--quickly--." (David Babson, author, adviser) Conservative market timing can achieve the aim of, for example, reducing risk but is not designed to make massive profits.

"Market-timing is bunk." (Pat Dorsey, M* Director of Fund Analysis." Depends on the aim of the market timing strategy.

"Market timing is a wicked idea. Don't try it-ever." (Charles Ellis author of The Loser's Game) Depends on the aim of the market timing strategy.

"Forget market timing in any form." (Paul Farrell, (CBS Marketwatch.com) Depends on the aim of the market timing strategy.

"Benjamin Graham spent much of his career trying to devise a goodformula for when to get into--and out of--the stock market. All formulas, he concluded, failed." (Forbes, 12-27-99) Graham was trying to obtain greater returns than B&H. I agree that is likely to fail.

"I've learned that market timing can ruin you." (Elaine Garzarelli) So can certain types of B&H strategies.

"Timing the market is for losers. Time IN the market will get you to the winner's circele, and you'll sleep better at night." (Michael Leboeuf, author) "Sleep better at night" during major bear markets?

"No one is smart enough to time the market's ups and downs." (Arthur Levitt, former SEC chairman) Depends on the aim of the timing strategy.


"We're not keen on market-timing. It just doesn't work." (Morningstar Course 106) Depends on the aim of the timing strategy.

"The market timer's Hall of Fame is an empty room." (Jane Bryant Quinn) Only in terms of beating the market. It depends on the aim of the timing strategy.

"Countless studies have proved that no one is able to time the market effectively." (Mary Roland, author & journalist) Only in terms of beating the market. It depends on the aim of the timing strategy.

"In the long run it doesn't matter much whether your timing is great or lousy. What matters is that you stay invested." (Louis Rukeyser, TV host In the long run there are major bear markets.

"For the 10 years that ended 12-31-2000, only one newsletter out of the 112 that Timers Digest follows managed to beat the S&P 500 Benchmark." (Jim Schmidt, editor) Cherry picking a major bull market.


"I have learned the hard way that market timing and trying to pick a fund that will out-perform the market are both losing strategies." (Larry Schultheis, author and advisor) Only in terms of beating the market. It depends on the aim of the timing strategy.

"It turns out that I should have just bought them (securities), and thereafter I should have just sat on them like a fat, stupid peasant. A peasant however, who is rich beyond his limited dreams of avarice." (Fred Schwed Jr., 'Where are the Customers' Yachts?) Hindsight

"It's my belief that it's a waste of time to try to time any market decline, or try to pinpoint a market bottom." (James Stewart, Smart Money columnist) It depends on the aim of the timing strategy.

"It's a staple of personal finance advice: Buy-and-hold, because trading the stock market is a sucker's bet." Larry Swedroe, author and adviser. It depends on the aim of the timing strategy.


"Trust in time and forget market timing. Allow time to work its compounding magic for you. Let market timing inflict its miseries on someone else." (Tweddell & Pierce, financial authors) For me, B&H has worse miseries.

"Few if any investors manage to be consistently successful in timing markets." (Wall Street Journal Lifetime Guide to Money) Only in terms of beating the market. It depends on the aim of the timing strategy.
I was investing in the early 70's; I know my B&H "sleep-well" factor is stocks/bonds 25/75; but I've wanted to try to get better returns than B&H 25/75 by increasing the stock % up to 75/25 during major uptrends and achieving a good nights sleep during major downtrends by reverting to 25/75. I've always considered it's unlikely I'd do worse than B&H 25/75 and that's turned out to be the case - but it needs as much discipline as B&H and the use of low cost index funds to achieve it - that's why I can fully agree with most of the OP's quotes.
User avatar
Adrian Nenu
Posts: 5228
Joined: Thu Apr 12, 2007 6:27 pm

Post by Adrian Nenu »

Long term buy and hold of the stock markets is incompatible with the investors' lives and work lifespans. Many events can happen which can financially and emotionally ruin them, such as a "bad" stock market decade near their retirement. An understanding of risk is crucial, especially of the stock/bond mix. Simplisitic slogans have to be replaced with realistic, real-life strategies and applications. Zivi Bodie suggests conservative portfolios for buy and hold investors and recent events prove his point, especially to retirees.

Adrian
anenu@tampabay.rr.com
hamishdad
Posts: 315
Joined: Mon Jan 21, 2008 2:16 pm

Post by hamishdad »

I believe that buy and hold is generally good advice for the stock market (works great during bull markets), but a long-term buy and hold strategy assumes that the gains from good years will exceed the losses from bad years. Of course, there are no guarantees in life, but that is every investor's hope. It's like hoping for Heaven, with the possibility of landing in Hell.
Fear and Loathing
Posts: 1025
Joined: Mon May 26, 2008 10:55 pm

Post by Fear and Loathing »

It is official.... I have gained absolutely nothing over the past 10 years. It was thrown down the rat hole. With inflation it is worth substantially less than I started. For the good news, the company has decided to do the following:

Eliminate any matching of 401(k) - not that they did any in the past (except for a select few);
Discussing "reverse auctioning" of positions to further reduce costs;
Change my terms of employment by eliminating my pension (and no compensation for the lost pension); and
Eliminate employee contributions toward health care - they are not eliminating coverage, but merely "enhancing shareholder value by transferring costs to benefit consumers";

It is always a wonderful feeling to know that you are old and worthless - or as we are called internally as "The Geezers". I have given up on retirement. I have given up hope. Then there will be those who will gloat....but remember - this can happen to you.

Remember to negotiate what you want and get it in writing. Trust no one - especially no one in HR or upper management. You will get screwed - you just have to learn to bend over and take it like a man.....
Beagler
Posts: 3442
Joined: Sun Dec 21, 2008 7:39 pm

Post by Beagler »

kb0fhp wrote:It is official.... I have gained absolutely nothing over the past 10 years. It was thrown down the rat hole. With inflation it is worth substantially less than I started. For the good news, the company has decided to do the following:

Eliminate any matching of 401(k) - not that they did any in the past (except for a select few);
Discussing "reverse auctioning" of positions to further reduce costs;
Change my terms of employment by eliminating my pension (and no compensation for the lost pension); and
Eliminate employee contributions toward health care - they are not eliminating coverage, but merely "enhancing shareholder value by transferring costs to benefit consumers";

It is always a wonderful feeling to know that you are old and worthless - or as we are called internally as "The Geezers". I have given up on retirement. I have given up hope. Then there will be those who will gloat....but remember - this can happen to you.

Remember to negotiate what you want and get it in writing. Trust no one - especially no one in HR or upper management. You will get screwed - you just have to learn to bend over and take it like a man.....
Whenever I read one of these sad posts I'm reminded why people like the "safety" of Bodie's advice. Granted it takes a lot more savings, but at least you don't feel you've lost a decade of retirement savings.
“The only place where success come before work is in the dictionary.” Abraham Lincoln. This post does not provide advice for specific individual situations and should not be construed as doing so.
hewhomustnotbenamed
Posts: 572
Joined: Sun Jan 04, 2009 11:27 pm

Post by hewhomustnotbenamed »

kb0fhp wrote:It is official.... I have gained absolutely nothing over the past 10 years. It was thrown down the rat hole. With inflation it is worth substantially less than I started. For the good news, the company has decided to do the following:

Eliminate any matching of 401(k) - not that they did any in the past (except for a select few);
Discussing "reverse auctioning" of positions to further reduce costs;
Change my terms of employment by eliminating my pension (and no compensation for the lost pension); and
Eliminate employee contributions toward health care - they are not eliminating coverage, but merely "enhancing shareholder value by transferring costs to benefit consumers";

It is always a wonderful feeling to know that you are old and worthless - or as we are called internally as "The Geezers". I have given up on retirement. I have given up hope. Then there will be those who will gloat....but remember - this can happen to you.

Remember to negotiate what you want and get it in writing. Trust no one - especially no one in HR or upper management. You will get screwed - you just have to learn to bend over and take it like a man.....
Sorry to hear of your difficulties, but it looks as if part of being underwater 10 yrs out is self inflicted.
Market timing obviously hurt you and I suspect your ultra short ETF's will as well.

Don't let desperation lead to a "hail mary" (jason zweig) strategy .
I might be crazy but, I ain't stupid.
Fear and Loathing
Posts: 1025
Joined: Mon May 26, 2008 10:55 pm

Post by Fear and Loathing »

hewhomustnotbenamed wrote:Sorry to hear of your difficulties, but it looks as if part of being underwater 10 yrs out is self inflicted.
Market timing obviously hurt you and I suspect your ultra short ETF's will as well.

Don't let desperation lead to a "hail mary" (jason zweig) strategy .
Actually - this was all "buy and hope"....the only part self-inflicted was the choice of funds - and the crappy choices in the 401(k). There were no changes in 10 years - Buy and hope incarnate.

It was seeing my investment in GE go south - way south. It was only after I started paying attention within the past year, and taking advantage of the meager money in my IRA with ultra short ETFs have I been able to make any headway. Buy and Hope failed.
User avatar
rcshouldis
Posts: 673
Joined: Thu Oct 02, 2008 10:28 am

Post by rcshouldis »

kb0fhp wrote:
hewhomustnotbenamed wrote:Sorry to hear of your difficulties, but it looks as if part of being underwater 10 yrs out is self inflicted.
Market timing obviously hurt you and I suspect your ultra short ETF's will as well.

Don't let desperation lead to a "hail mary" (jason zweig) strategy .
Actually - this was all "buy and hope"....the only part self-inflicted was the choice of funds - and the crappy choices in the 401(k). There were no changes in 10 years - Buy and hope incarnate.

It was seeing my investment in GE go south - way south. It was only after I started paying attention within the past year, and taking advantage of the meager money in my IRA with ultra short ETFs have I been able to make any headway. Buy and Hope failed.

If you went into buy & hold with expectation that you would never lose money and it would be an undiciplined cake walk, then you were deluded. Buy & Hold doesn't fail. You do.
Fear and Loathing
Posts: 1025
Joined: Mon May 26, 2008 10:55 pm

Post by Fear and Loathing »

I never would have thought that I would be underwater after 10 years. Yes I was stupid in that I didn't have enough bonds in the mix. Yes I was stupid in that I didn't pay enough attention.

Yes, for the most part it was me - I trusted people too much. I didn't get things in writing. I had faith in people. I now have much more faith in my dog. Trust no one.
hewhomustnotbenamed
Posts: 572
Joined: Sun Jan 04, 2009 11:27 pm

Post by hewhomustnotbenamed »

kb0fhp wrote:
hewhomustnotbenamed wrote:Sorry to hear of your difficulties, but it looks as if part of being underwater 10 yrs out is self inflicted.
Market timing obviously hurt you and I suspect your ultra short ETF's will as well.

Don't let desperation lead to a "hail mary" (jason zweig) strategy .
Actually - this was all "buy and hope"....the only part self-inflicted was the choice of funds - and the crappy choices in the 401(k). There were no changes in 10 years - Buy and hope incarnate.

It was seeing my investment in GE go south - way south. It was only after I started paying attention within the past year, and taking advantage of the meager money in my IRA with ultra short ETFs have I been able to make any headway. Buy and Hope failed.
Then perhaps you can shed some more light on these lines.
Maybe I misunderstood the extent of your move into stocks in sept.
kb0fhp wrote: "Yes - I am a bear. I have been putting money in cash in my 401(k) - (except for the stuff I stupidly moved into stocks in September) until I see some sort of signal, sign or manna from heaven that things in the economy are turning around. "
http://www.bogleheads.org/forum/viewtop ... ht=#408098
I might be crazy but, I ain't stupid.
User avatar
ddb
Posts: 5511
Joined: Mon Feb 26, 2007 12:37 pm
Location: American Gardens Building, West 81st St.

Post by ddb »

I, too, am very concerned about the conflicting messages from Taylor. "Stay the course" and "Plan B" are completely different strategies. You can't have both.

I like all of the quotes cited by Taylor, but I don't like how none of them point out that although stay the course is the best option (with a suitable allocation, of course), it could still lead to financial ruin. If you rebalance like you're supposed to with a stay-the-course strategy, and the stock market goes to zero, then your portfolio will drop to zero whether your allocation calls for 100% in stocks or 1% in stocks.

I posit that the impact of the last 16 months of stock market performance has a bigger impact on our society than any previous market declines, even those that were larger (note: I realize that the environment surrounding the Great Depression was far worse, but this was more because of unemployment than beacuse of stock market performance). I say this for the following reasons:

1. Retirement can last as long as 40 years.
2. Defined benefit plans have gone the way of the dodo bird.
3. Our society has demonstrated a lack of ability to live below its means.

The point is, stay-the-course can fail. The problem is that nobody has come up with anything better.

- DDB
"We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern, and less materialism in young people." - PB
User avatar
jeffyscott
Posts: 9186
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Post by jeffyscott »

ddb wrote:I, too, am very concerned about the conflicting messages from Taylor. "Stay the course" and "Plan B" are completely different strategies. You can't have both.
I'm not concerned, I just think the inconsistency is bizarre...as is the idea that pointing out his inconsistency is somehow unfair or taboo.
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
Tabs
Posts: 231
Joined: Mon Dec 08, 2008 8:48 am

Post by Tabs »

I am completely for staying the course, and though it may be against the Boglehead way here, I actually bought even more equities in my Roth last week.
Fear and Loathing
Posts: 1025
Joined: Mon May 26, 2008 10:55 pm

Post by Fear and Loathing »

hewhomustnotbenamed wrote:
kb0fhp wrote: "Yes - I am a bear. I have been putting money in cash in my 401(k) - (except for the stuff I stupidly moved into stocks in September) until I see some sort of signal, sign or manna from heaven that things in the economy are turning around. "
http://www.bogleheads.org/forum/viewtop ... ht=#408098
Not a problem. Because I lost my pension - I knew I had to do something. I had blindly and faithfully putting money in my 401(k) - yes all in equities. I got scared in January 08 - and I knew I needed to do something. I cashed completely out in January - 100% in cash and moved it to my money market fund in my 401(k). I read. I evaluated. I read some more. I waited. Second quarter 08 - I moved 50% into nice index funds....Middle September 08 I moved approximately 20% in equities. It has been ugly ever since. The contributions I have made since 2000 exceed the value of the portfolio by 3% or so. I should have waited - and still be waiting, because it will not get any better.

So at least now I continue to add to my 401(k) - but it goes into money market. The value is such that the average NAV is so high, that any monthly contributions do not move the price by a decimal point. I am waiting until I reach the necessary point where I can either change the NAV sufficiently to make a difference, or achieve my age in bonds (either from making contributions to MM/bonds - or from the continuing collapse of equities). You reach a point of diminishing returns with DCA - I have reached that point.

Truthfully - I bought into the Buy and Hope bit fully - and really still believe it. Except now, I am more skeptical and doubting everything.
User avatar
Topic Author
Taylor Larimore
Advisory Board
Posts: 30023
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Plan B: "Avoid stocks if you can't afford to lose."

Post by Taylor Larimore »

I, too, am very concerned about the conflicting messages from Taylor. "Stay the course" and "Plan B" are completely different strategies. You can't have both.
Mr. Bogle explains:
"Stay-the-Course. No matter what happens stick to your program." (underline mine)

“If you cannot afford to lose another penny, then you simply have no recourse but to get out of the stock market.”
Last edited by Taylor Larimore on Mon Feb 23, 2009 5:21 pm, edited 1 time in total.
"Simplicity is the master key to financial success." -- Jack Bogle
hewhomustnotbenamed
Posts: 572
Joined: Sun Jan 04, 2009 11:27 pm

Post by hewhomustnotbenamed »

deleted
Last edited by hewhomustnotbenamed on Mon Feb 23, 2009 5:32 pm, edited 1 time in total.
I might be crazy but, I ain't stupid.
User avatar
Adrian Nenu
Posts: 5228
Joined: Thu Apr 12, 2007 6:27 pm

Post by Adrian Nenu »

The problem is not with the "buy & hold" or "stay the course". The problem is with investors who do not know risk. If they screw up on the intial stock/bond mix and let it ride or stay the course or buy and hold or whatever, the mistake compounds itself. Then a bear market comes along which they could not imagine let alone account for in their portfolio risk and they get wiped out. Even worse if they are close to or retired.

The solution is this: buy & hold or stay the course work effectively only with conservative portfolios because investors don't know the market and economic risks. The evidence was made clear by this bear market. When you don't know risk, err towards safety.

Adrian
anenu@tampabay.rr.com
User avatar
deepdrive
Posts: 924
Joined: Sat Dec 20, 2008 5:03 pm

Post by deepdrive »

I think this whole "conflicting messages" thing with Taylor is really very simple.

Taylor often says "stay the course."

That's not the same as "buy and hold."

Getting out of the stock market when you can't afford to lose more could be part of your course...even if it's the sand trap! :)
Investment difficulty and long-term success are perfectly negatively correlated. Keep it simple.
retiredjg
Posts: 42222
Joined: Thu Jan 10, 2008 12:56 pm

Post by retiredjg »

deepdrive wrote:I think this whole "conflicting messages" thing with Taylor is really very simple.

Taylor often says "stay the course."

That's not the same as "buy and hold."

Getting out of the stock market when you can't afford to lose more could be part of your course...even if it's the sand trap! :)
I agree.
User avatar
Ariel
Posts: 1361
Joined: Sat Mar 10, 2007 8:17 am

Post by Ariel »

deepdrive wrote:Getting out of the stock market when you can't afford to lose more could be part of your course...even if it's the sand trap! :)
One problem with this approach that hasn't been discussed - What if the market gaps down past your point of must-sell? You've essentially missed the opportunity to sell at a tolerable level. Say the market has lost 28%, and you've decided you can't afford to lose more than 30%. Well, the next day the market might be down another 5%, past your maximum loss.
Do what you will, the capital is at hazard ... - Justice Samuel Putnam (1830), as quoted by John Bogle (1994)
retiredjg
Posts: 42222
Joined: Thu Jan 10, 2008 12:56 pm

Post by retiredjg »

Ariel wrote:One problem with this approach that hasn't been discussed - What if the market gaps down past your point of must-sell? You've essentially missed the opportunity to sell at a tolerable level. Say the market has lost 28%, and you've decided you can't afford to lose more than 30%. Well, the next day the market might be down another 5%, past your maximum loss.
I think the bigger problem is figuring out where that point is (in your example, 30% loss) in the first place. I certainly have no idea.

I suppose the best way to avoid a 30% loss is to hold less than 60% stocks.
User avatar
Ariel
Posts: 1361
Joined: Sat Mar 10, 2007 8:17 am

Post by Ariel »

retiredjg wrote:
Ariel wrote:One problem with this approach that hasn't been discussed - What if the market gaps down past your point of must-sell? You've essentially missed the opportunity to sell at a tolerable level. Say the market has lost 28%, and you've decided you can't afford to lose more than 30%. Well, the next day the market might be down another 5%, past your maximum loss.
I think the bigger problem is figuring out where that point is (in your example, 30% loss) in the first place. I certainly have no idea.

I suppose the best way to avoid a 30% loss is to hold less than 60% stocks.
I agree that yours is the bigger issue. But no one* had raised the issue I raised, which is also important. Volatility comes at the worst possible times in many cases. (*Well, I think I made the same point about the problem of a gap-down months ago when trying to warn markettimer about his stratgey with leveraged futures.)
Do what you will, the capital is at hazard ... - Justice Samuel Putnam (1830), as quoted by John Bogle (1994)
cudaman
Posts: 357
Joined: Wed Feb 28, 2007 8:23 pm

Post by cudaman »

Adrian Nenu wrote:The solution is this: buy & hold or stay the course work effectively only with conservative portfolios because investors don't know the market and economic risks. The evidence was made clear by this bear market.
Adrian,

I wouldn't say that is entirely true. Unless I'm alone, there are stay the course investors with aggressive portfolios who will not give up the ship. I'm cruising along at 80/20 stock/bond, approaching the retirement years, and still buying as this market goes lower to maintain that AA. My strategy was determined a while ago and I just won't deviate. I believe changing the strategy now would leave me with no direction. No, I'll stay with it to the bottom, regardless of how bad it gets. It's the bottom half of this strategy that is crucial to its success.

Knowing what I know now, would I have chosen the asset allocation? No. But it's too late and I am committed. Hopefully, it will work out. I believe it will.

Jerry
Last edited by cudaman on Mon Feb 23, 2009 9:21 pm, edited 1 time in total.
User avatar
bob90245
Posts: 6511
Joined: Mon Feb 19, 2007 8:51 pm

Post by bob90245 »

deepdrive wrote:I think this whole "conflicting messages" thing with Taylor is really very simple.

Taylor often says "stay the course."

That's not the same as "buy and hold."

Getting out of the stock market when you can't afford to lose more could be part of your course...even if it's the sand trap! :)
I will rephrase this. Stay the course until the market drops to a level where you can't afford to lose and then CHANGE YOUR COURSE.

Otherwise, the way you say it (selling below x is part of the original course), makes no sense.


Edit 1: corrected typo
Last edited by bob90245 on Mon Feb 23, 2009 9:24 pm, edited 1 time in total.
Post Reply