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

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jh
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Blue
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Post by Blue »

Taylor,

I always appreciate the wisdom you impart. Your posts always seem to calm the view of these stormy seas.

Much appreciated as always,
Blue
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Taylor Larimore
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Storms don't last forever

Post by Taylor Larimore »

Blue wrote:Taylor,

I always appreciate the wisdom you impart. Your posts always seem to calm the view of these stormy seas.

Much appreciated as always,
Blue
Hi Blue:

After every storm expect clear skies.

Thank you for your kind words.
"Simplicity is the master key to financial success." -- Jack Bogle
Norris
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Post by Norris »

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 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


DDB,

Excellent post and spot on IMO!

I would just add (with benefit of Taylor's later post where he quotes Mr. Bogle) this:


Quote:
"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.”

Stay the course and rebalance as necessary. If this means eating into your cash and bonds beyond the point of sleeping well, etc. then you cannot afford to lose another penny so quit rebalancing, purchase no more equities and remain with your cash and bonds.
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Post by ddb »

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."
Odd, then, that so many of the quotes that he cites in the OP reference "buy and hold".

- 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
james22
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Post by james22 »

daryll40 wrote:You cannot espouse buying and holding here after espousing sell after stocks decline by x over there.
Again, not by x%, but to $x.
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Post by hamishdad »

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jeffyscott
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Post by jeffyscott »

ddb wrote:
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."
Odd, then, that so many of the quotes that he cites in the OP reference "buy and hold".

- DDB
To avoid embarrassing the knee-jerk apologists, I suggest that the following be removed from the approved list of feel-good quotes:
"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)

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

"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)

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

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

"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."

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

"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."

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

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

"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."

"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)
In fact, maybe the only one we need now is:
"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)
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
lostcowboy
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Re: Stay-the-Course or Sell-and-Buy-later?

Post by lostcowboy »

Taylor Larimore wrote: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:

Hi Taylor, you need to learn how to time your questions better. If this was the top of the bull market, that would be the time for this type of question.
Now is very likely to be near the bottom of the bear market. Here is the type of question you should be asking.

What should we do? Stay-the-course OR Buy now and Sell back later (market timing)? For the answer, I listen to the advice of acknowledged experts:
From the experts you quoted, I would say you are not a market timer, but a stay the course type of guy.

There are two types of market timers. Momentum timers, and contrary timers. Contrary timers try to do the opposite than the crowd. When the crowed is buying stocks, they are selling stocks. When the crowed is selling stocks they are buying stocks.

If you re-balance your portfolio based on the value of the different parts, like it or not you are a contrary timer.
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Re: Stay-the-Course or Sell-and-Buy-later?

Post by avalpert »

lostcowboy wrote:If you re-balance your portfolio based on the value of the different parts, like it or not you are a contrary timer.
No your not, market timing (of any kind) is predicated on the notion that you can time when to buy/sell to increase returns. Rebalancing to maintain a static portfolio allocation is not designed to increase returns but maintain a balance risk/return profile - to call it market timing is disingenious, it is targeting a completely different goal.
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Re: Stay-the-Course or Sell-and-Buy-later?

Post by lostcowboy »

avalpert wrote:
lostcowboy wrote:If you re-balance your portfolio based on the value of the different parts, like it or not you are a contrary timer.
No your not, market timing (of any kind) is predicated on the notion that you can time when to buy/sell to increase returns. Rebalancing to maintain a static portfolio allocation is not designed to increase returns but maintain a balance risk/return profile - to call it market timing is disingenious, it is targeting a completely different goal.
Hogwash, of course re-balancing is designed to preserve capital, and increase returns. If that was not the case then the colleges and universities that invented the concept would not have used it, nor would it have spread through out the financial world. Back when this concept was invented, The colleges and universities noticed, that when the market went up they showed a profit, but when the market went back down they were right back where they started with no profit, except for dividends. They decided to start selling stock as the market went up, transferring the profits to ether bonds or cash. This had two effects, one when the market dropped they kept some of the profits, two when the market dropped they had less stocks at risk, so they had less of a loss.

The proper name for rebalancing is called "the constant ratio plan", but if you want to call it "maintaining a static portfolio allocation" be my guest.
All of these types of plans are called formula plans, and if you want to get into the details of how they work, I would recommend reading Practical Formulas for Successful Investing by Lucile Tomlinson. She also talks about the other popular formula plans of her day.

I think you are confusing market timing with predicting what the market will do, and when it will do it. I don't think that can be done.
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Re: Stay-the-Course or Sell-and-Buy-later?

Post by richard »

avalpert wrote:No your not, market timing (of any kind) is predicated on the notion that you can time when to buy/sell to increase returns. Rebalancing to maintain a static portfolio allocation is not designed to increase returns but maintain a balance risk/return profile - to call it market timing is disingenious, it is targeting a completely different goal.
Another goal of market timing is to reduce risk.

Rebalancing does not necessarily maintain a risk return profile. It maintains an asset allocation. The risk levels and expected returns of different assets changes over time. For example, stocks now have a higher expected return and higher risk level than they did a short while back.
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Re: Stay-the-Course or Sell-and-Buy-later?

Post by jeffyscott »

richard wrote:For example, stocks now have a higher expected return and higher risk level than they did a short while back.
I don't think they have a higher risk level, it is just that more of us are aware of the risk that was there all along.
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
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Re: Stay-the-Course or Sell-and-Buy-later?

Post by richard »

jeffyscott wrote:
richard wrote:For example, stocks now have a higher expected return and higher risk level than they did a short while back.
I don't think they have a higher risk level, it is just that more of us are aware of the risk that was there all along.
If you accept stocks have a higher expected return (which you seem to, implicitly), and believe fundamental tenets of finance on the relation between risk and expected return, you must believe they have higher risks.
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Re: Stay-the-Course or Sell-and-Buy-later?

Post by dbr »

richard wrote:
jeffyscott wrote:
richard wrote:For example, stocks now have a higher expected return and higher risk level than they did a short while back.
I don't think they have a higher risk level, it is just that more of us are aware of the risk that was there all along.
If you accept stocks have a higher expected return (which you seem to, implicitly), and believe fundamental tenets of finance on the relation between risk and expected return, you must believe they have higher risks.
I was going to say the same thing, and indeed part of that Bogle 12 pieces thing was a mention of the fundamental relationship between risk and return.
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Post by jeffyscott »

I don't buy any arguement that says that the lower the price of stocks go, the greater is the risk.

So, no I do not believe that stocks were truely less risky when the S&P was at 1500 than they are now.
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
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Post by bob90245 »

jeffyscott wrote:I don't buy any arguement that says that the lower the price of stocks go, the greater is the risk.

So, no I do not believe that stocks were truely less risky when the S&P was at 1500 than they are now.
Stocks simply reflect of risk perceived by market participants.

Healthy companies with robust sales and earnings growth are perceived to have lower risk. Their stock prices are correspondingly high.

Distressed companies with poor prospects and erratic sales and earnings growth are perceived to have higher risk. Their stock prices are correspondingly low.

Right now, the vast majority of companies are in distress with diminished prospect for sales and earnings. This is a time of higher risk. This is why you are seeing very low stock prices.
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Post by jeffyscott »

bob90245 wrote:Stocks simply reflect of risk perceived by market participants.
Agree and the key word is perceived.

While many did not, perhaps, perceive in October 2007 that some unknown event(s) could result in the vast majority of companies becoming distressed and create diminished prospects for sales and earnings, that risk did exist then. That risk did not appear in October or November of 2008 all that happened was that the unknown began to become known.

In October 2007, I certainly knew that there was a possibility of some unknown something occuring and resulting in equities declining by 50% or more, didn't you?
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
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Post by bob90245 »

jeffyscott wrote:In October 2007, I certainly knew that there was a possibility of some unknown something occuring and resulting in equities declining by 50% or more, didn't you?
Even before October 2007, I had experienced the market bottom of 2002. So, I knew stocks had the possibility of declining by 50% from a market peak.
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Post by PatrickS »

bob90245 wrote:Even before October 2007, I had experienced the market bottom of 2002. So, I knew stocks had the possibility of declining by 50% from a market peak.
Where does that come from? I believe GDI (Great Depression I) had something like an 89% decline from peak. So it certainly CAN loose more than 50%. The only certainty is that it will not decline by 100% (without an event that will render the loss meaningless anyway).

Interesting to see how many "diehards" are folding their hands. I'm sticking to my IPS and rebalancing (twice since the decline began). At times I question myself since I know two people who got out earlier (one at only a 7% decline). If we do indeed go into GDII and loose 90% from peak, I will certainly feel like a fool for not cashing out, but I see no better options that are based on sound principles. I will continue to remain at 70/30 and rebalance as needed, but I may at some point go to an 80/20 since I tend to be a bit of a gambler.

Staying the course.
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Post by spam »

I have successfully timed the market more than a dozen times during the past year. I have not been either all in or all out, but I have been buying and selling to average down.

It is sort of like rebalancing, except I am also including selling and rebuying the same mutual fund down the road a bit. I started doing this with 15% changes, but I have done it with differences as little as 10%

The result: I have significantly more shares than I started with across the board. I also trade for free.
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Post by PlainJane »

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.
To me the most troubling aspect of this conversation is that somehow max tolerable loss has become %100. I don't remember many conversations in the past recommending that you limit your allocation to stocks to only what you can afford to lose completely. In the many threads on risk tolerance. I rarely remember seeing this advice. Yet now suddenly it is present as something we should have known all along. It may be a great rule of thumb, but I doubt it was the official diehard method of the past.

Jane
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Post by deepdrive »

spam wrote:I have successfully timed the market more than a dozen times during the past year. I have not been either all in or all out, but I have been buying and selling to average down.

It is sort of like rebalancing, except I am also including selling and rebuying the same mutual fund down the road a bit. I started doing this with 15% changes, but I have done it with differences as little as 10%

The result: I have significantly more shares than I started with across the board. I also trade for free.
Why are you sharing your secrets with us? Go make today's million!
Investment difficulty and long-term success are perfectly negatively correlated. Keep it simple.
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Post by bob90245 »

PlainJane 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.
To me the most troubling aspect of this conversation is that somehow max tolerable loss has become %100. I don't remember many conversations in the past recommending that you limit your allocation to stocks to only what you can afford to lose completely. In the many threads on risk tolerance. I rarely remember seeing this advice. Yet now suddenly it is present as something we should have known all along. It may be a great rule of thumb, but I doubt it was the official diehard method of the past.

Jane
No, it wasn't a diehard method of the past. It came from recent discussions starting a few months ago of what happens when a retired person has suffered losses and if the losses were to continue, it would put the retirement plan at grave risk. Do a search on 'Plan B' threads.
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Re: Stay-the-Course or Sell-and-Buy-later?

Post by avalpert »

richard wrote:
avalpert wrote:No your not, market timing (of any kind) is predicated on the notion that you can time when to buy/sell to increase returns. Rebalancing to maintain a static portfolio allocation is not designed to increase returns but maintain a balance risk/return profile - to call it market timing is disingenious, it is targeting a completely different goal.
Another goal of market timing is to reduce risk.

Rebalancing does not necessarily maintain a risk return profile. It maintains an asset allocation. The risk levels and expected returns of different assets changes over time. For example, stocks now have a higher expected return and higher risk level than they did a short while back.
What makes you think that is true? I don't think stocks have a higher expected return now - in fact I think most people are expecting lower returns going forward than in the past.
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Post by spam »

Why are you sharing your secrets with us? Go make today's million!
spam wrote:
I have successfully timed the market more than a dozen times during the past year. I have not been either all in or all out, but I have been buying and selling to average down.

It is sort of like rebalancing, except I am also including selling and rebuying the same mutual fund down the road a bit. I started doing this with 15% changes, but I have done it with differences as little as 10%

The result: I have significantly more shares than I started with across the board. I also trade for free.
Well I thought the thread was titled, are you selling to rebuy later, or holding? I did not realize that all discussion had to agree with you.

You: 100 shares
Me: 145 shares

oops, sorry about your pain
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Post by james22 »

bob90245 wrote:No, it wasn't a diehard method of the past.
Yes, it was.
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Post by deepdrive »

spam wrote:
Why are you sharing your secrets with us? Go make today's million!
spam wrote:
I have successfully timed the market more than a dozen times during the past year. I have not been either all in or all out, but I have been buying and selling to average down.

It is sort of like rebalancing, except I am also including selling and rebuying the same mutual fund down the road a bit. I started doing this with 15% changes, but I have done it with differences as little as 10%

The result: I have significantly more shares than I started with across the board. I also trade for free.
Well I thought the thread was titled, are you selling to rebuy later, or holding? I did not realize that all discussion had to agree with you.

You: 100 shares
Me: 145 shares

oops, sorry about your pain
Wow, and you even have access to my portfolio! How do you do these things?!
Investment difficulty and long-term success are perfectly negatively correlated. Keep it simple.
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Post by Bounca »

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

- DDB


You should add that one to the collection of quotes from here on out Taylor.

Cause it's the dead on truth.
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Post by alvinsch »

PlainJane 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.
To me the most troubling aspect of this conversation is that somehow max tolerable loss has become %100. I don't remember many conversations in the past recommending that you limit your allocation to stocks to only what you can afford to lose completely. In the many threads on risk tolerance. I rarely remember seeing this advice. Yet now suddenly it is present as something we should have known all along. It may be a great rule of thumb, but I doubt it was the official diehard method of the past.

Jane
Just to reiterate what Bob has said. This came out of a recent suggestion that if the market falls too far so as to threaten a required minimum balance, then one should sell all equities to preserve the remaining assets, plan B. Plan B was subsequently redefined to say don't put in equities what you can't afford to lose.

I find the idea of buying equities for rebalancing as long as the market only falls to x, say 50%, but then sell all if it falls 50.1% to be illogical (original plan B). The post was to second Bob's point that if you follow the second version of plan B, don't put in equities funds you can't afford to lose, then you wouldn't need to sell equities if markets fall too far. To me this seems infinitely more logical than selling if it falls too far but I'm only suggesting it as a more logical approach for those who have a "minimum balance" requirement.

I'm also not sure if the minimum balance idea (I think of this as something a retiree may have to meet minimum expenses), is the same as what people talk about as maximum tolerable risk (I think of this as something an accumulator needs to consider so they don't panic in a downturn and panic sell). So I think of them as different concepts.

I've been a poster since 1999 and don't ever recall a serious discussion suggesting that selling if equities fall too much would be part of a recommended plan but rather only something you might have to do if you had a poor or no plan.

Hopefully this gives you a bit of the history and may explain some of the controversy, enhanced by a lack of consistent definitions so it's hard to know if people are really disagreeing or not.

- Al
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Post by bob90245 »

alvinsch wrote:I'm also not sure if the minimum balance idea (I think of this as something a retiree may have to meet minimum expenses), is the same as what people talk about as maximum tolerable risk (I think of this as something an accumulator needs to consider so they don't panic in a downturn and panic sell). So I think of them as different concepts.
I agree that they are two different concepts. This confusion was also mentioned in the threads where 'Plan B' was first mentioned.

Plan B doesn't apply to accumulators because they have decades until retirement. It should start to be a consideration within a decade of retirement. At which time, the pre-retiree can consider strenghtening his Plan A by either

- building a TIPS ladder or

- upon leaving the workforce, purchasing an immediate annuity to cover basic expenses.

Should the pre-retiree decide to pursue the Trinty-style withdrawal plan, he must be prepared for the possibility that portfolio balance has in the past fallen by 25% when poor returns occur during the early years of retirement.
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spam
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Post by spam »

Wow, and you even have access to my portfolio! How do you do these things?!
Elementary my dear watson. You buy and hold. If you had bought 100 shares two years ago, then you would still have those same 100 shares.

Not me young cub, my 100 shares have turned into 145.

Do me a favor and continue to hold those shares if the dow continues to shed another 20%. You will still have a whopping 100 shares and I will have gained an additional 20%.

Hey, since you got it all working like a fine tractor, then by all means keep right on doing it. My strategy should be of no consequence to you.

Just try to forget that the 100 S&P 500 shares you bought in 1985 are worth about the same today.
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deepdrive
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Post by deepdrive »

spam wrote:
Wow, and you even have access to my portfolio! How do you do these things?!
Elementary my dear watson. You buy and hold. If you had bought 100 shares two years ago, then you would still have those same 100 shares.

Not me young cub, my 100 shares have turned into 145.

Do me a favor and continue to hold those shares if the dow continues to shed another 20%. You will still have a whopping 100 shares and I will have gained an additional 20%.

Hey, since you got it all working like a fine tractor, then by all means keep right on doing it. My strategy should be of no consequence to you.

Just try to forget that the 100 S&P 500 shares you bought in 1985 are worth about the same today.
You must have the wrong person. I buy shares weekly. I also periodically rebalance, which involves buying or selling shares to get my portfolio back to the level of risk that I want to take.

Since when do newborns invest in the stock market?
Investment difficulty and long-term success are perfectly negatively correlated. Keep it simple.
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Post by hewhomustnotbenamed »

spam wrote:
Wow, and you even have access to my portfolio! How do you do these things?!
Elementary my dear watson. You buy and hold. If you had bought 100 shares two years ago, then you would still have those same 100 shares.

Not me young cub, my 100 shares have turned into 145.

Do me a favor and continue to hold those shares if the dow continues to shed another 20%. You will still have a whopping 100 shares and I will have gained an additional 20%.

Hey, since you got it all working like a fine tractor, then by all means keep right on doing it. My strategy should be of no consequence to you.

Just try to forget that the 100 S&P 500 shares you bought in 1985 are worth about the same today.
Forgive me if I sound dense in asking.

How is it that you are so certain to have gained 20% if the dow drops 20%

Are you saying you are short now or just skillfully able to see the future?
I might be crazy but, I ain't stupid.
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spam
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Post by spam »

Forgive me if I sound dense in asking. How is it that you are so certain to have gained 20% if the dow drops 20% Are you saying you are short now or just skillfully able to see the future?
Lord Voldermort,

First of all, I certianly do not consider you to be dense. I just use a method based on simple arithemetic. To answer your specific question:

Sell 10 shares at $1 = $10 cash
The price drops 20%
Buy $10 worth at 0.80 each = 12.5 shares

10 shares is 80% of 12.5

It really does not matter to me at this point what the market does ... if it goes up or down. Of course, it is my long-term hope that it will go up up up. In the meantime though, I am accumulating more shares.

This is the point that deep dive overlooked. I am gaining on the shares I already purchased. I don't care if he regularly buys more. I regularly buy more. That is not my point.

The origional post said something like "do you buy and hold, or sell to re-buy later" Well, I do both based on arithmetic.

I read here sometimes, but I already know what everyone is going to say.

Asset allocation, never change, buy and hold, stay the course, vanguard is great, everything else sucks, low fees and costs, tax efficient, and so on. I rarely post because new ideas are a lightening rod around here. Even if they are simple and work.

As for details, I am not so sure I am in the mood for it. It is not worth the grief.
Last edited by spam on Fri Feb 27, 2009 4:07 pm, edited 1 time in total.
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spam
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Post by spam »

Since when do newborns invest in the stock market?
On second thought, this does not even require a response. Lots of people are bitter because they have lost their ass, and we should try to be understanding and helpful. I think Jack would want that.
avalpert
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Post by avalpert »

spam wrote:
Forgive me if I sound dense in asking. How is it that you are so certain to have gained 20% if the dow drops 20% Are you saying you are short now or just skillfully able to see the future?
Lord Voldermort,

First of all, I certianly do not consider you to be dense. I just use a method based on simple arithemetic. To answer your specific question:

Sell 10 shares at $1 = $10 cash
The price drops 20%
Buy $10 worth at 0.80 each = 12.5 shares

12.5 shares is 20% larger than 10

It really does not matter to me at this point what the market does ... if it goes up or down. Of course, it is my long-term hope that it will go up up up. In the meantime though, I am accumulating more shares.

This is the point that deep dive overlooked. I am gaining on the shares I already purchased. I don't care if he regularly buys more. I regularly buy more. That is not my point.

The origional post said something like "do you buy and hold, or sell to re-buy later" Well, I do both based on arithmetic.

I read here sometimes, but I already know what everyone is going to say.

Asset allocation, never change, buy and hold, stay the course, vanguard is great, everything else sucks, low fees and costs, tax efficient, and so on. I rarely post because new ideas are a lightening rod around here. Even if they are simple and work.

As for details, I am not so sure I am in the mood for it. It is not worth the grief.
The fallacy in your arithmetic is it assumes you can know when you sell that price will go down and you can buyback. It is just as likely that you sell 10 shares at $10 and the shares never fall below $15 again and you either buy fewer shares than before or you don't get back in.
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deepdrive
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Post by deepdrive »

spam wrote:
Since when do newborns invest in the stock market?
On second thought, this does not even require a response. Lots of people are bitter because they have lost their ass, and we should try to be understanding and helpful. I think Jack would want that.
It doesn't require a response, yet you gave one. Funny how that works, isn't it?

Besides, your strategy has lots of flaws. For one, it looks great on paper but isn't practical. What happens if after you sell 10 shares at $1 each and get your $10 cash, the market never goes back down to $0.80 per share? You've just sold at bottom, and anything you buy going forward will be higher. That's buying high and selling low.

All strategies are great if we make unrealistic assumptions.
Investment difficulty and long-term success are perfectly negatively correlated. Keep it simple.
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spam
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Post by spam »

The fallacy in your arithmetic is it assumes you can know when you sell that price will go down and you can buyback. It is just as likely that you sell 10 shares at $10 and the shares never fall below $15 again and you either buy fewer shares than before or you don't get back in.
Hi Avalpert,

No that really is no a fallacy because it does not matter which way the market goes. Therefore, it is not important for me to be predictive.

I typically do this in IRA accounts as there are periods of opportunity when no fresh cash can be injected.

I have more bonds when the dow is at 14,000 and fewer bonds when the dow is at 7,000. I use high quality bonds because I dont want the NAV to change a lot. I get lower yields, but market risk is reduced which is what I am looking for.

If the market drops, bonds are sold to buy equities. This money is on loan and gets repaid when the price goes above by the margin you want. The first step is to sell equities to cash and hold. If the market continues to go up, then the loan is repaid to the bond fund. If it goes the other way, then additional shares are bought when the lower limit is hit.

So, it does not matter to me. If it goes up, then I buy bonds. If it goes down, then I buy equities. I am not going "all in" and "all out"

Bernstien said "Identify the conventional wisdom of your era, and assume that it is wrong". I am doing this on a small scale.
hewhomustnotbenamed
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Post by hewhomustnotbenamed »

spam wrote:
The fallacy in your arithmetic is it assumes you can know when you sell that price will go down and you can buyback. It is just as likely that you sell 10 shares at $10 and the shares never fall below $15 again and you either buy fewer shares than before or you don't get back in.
Hi Avalpert,

No that really is no a fallacy because it does not matter which way the market goes. Therefore, it is not important for me to be predictive.

I typically do this in IRA accounts as there are periods of opportunity when no fresh cash can be injected.

I have more bonds when the dow is at 14,000 and fewer bonds when the dow is at 7,000. I use high quality bonds because I dont want the NAV to change a lot. I get lower yields, but market risk is reduced which is what I am looking for.

If the market drops, bonds are sold to buy equities. This money is on loan and gets repaid when the price goes above by the margin you want. The first step is to sell equities to cash and hold. If the market continues to go up, then the loan is repaid to the bond fund. If it goes the other way, then additional shares are bought when the lower limit is hit.

So, it does not matter to me. If it goes up, then I buy bonds. If it goes down, then I buy equities. I am not going "all in" and "all out"

Bernstien said "Identify the conventional wisdom of your era, and assume that it is wrong". I am doing this on a small scale.
Makes sense to me. I just recognize luck plays a large role , but when does it not?

"chance favors the prepared mind" Louis Pasteur
I might be crazy but, I ain't stupid.
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spam
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Post by spam »

Lord Voldermort,
Makes sense to me. I just recognize luck plays a large role , but when does it not?
Yes, luck does not really matter that much. Three buckets. Equities, Bonds and Cash. Cash is in the middle and can go either way in response to real movements (not anticipated ones) in the market. There is a hysterisis between cash and either Bond or Equity to help smoothe bumps.

The risk part of this particular IRA is not stagnent. Bogle said "the market tends to revert to the mean" This might mean that it is not 100% efficient. Therefore, 60/40 makes sense at the mean. I want more bonds at 14,000 and fewer at 7,000 so the scale is upside down to what most investors do. As the risk of a significant downturn / upturn increases as support or resistance levels are met, the scale is roughly correlated with it. The S&P support was broken on friday which triggered a small sell to cash. The hysterisis will slow the transaction rate. If she drops, the next buy for me will probably be around 6200.

So to use the example from a different post

10 shares sold at a buck = 10 shares
10 bucks buys shares at .80 = 12.5 shares
10 shares repays loan from bonds, and 2.5 shars stay in equities.
The focus is to increase the number of shares using preinvested money.

So, this is what I am doing in this particular IRA. Of course, there are more details that take too much typing to go into, but I do believe you could fill in the blanks if so inspired and do as well as I am, which is meeger but better than just sitting there.

I am not recommending this to anyone, I am only commenting on what I am trying inside one of my IRA's. The problem with the IRA is that opportunities come and go when no extra cash can be injected.

Simple rebalancing is good, but this method is rebalancing with a turbo. At least I think it is right now ..... time will tell.
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Ricky63
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My Brothers, I have sinned...

Post by Ricky63 »

PatrickS wrote:
bob90245 wrote:Even before October 2007, I had experienced the market bottom of 2002. So, I knew stocks had the possibility of declining by 50% from a market peak.
Where does that come from? I believe GDI (Great Depression I) had something like an 89% decline from peak. So it certainly CAN loose more than 50%. The only certainty is that it will not decline by 100% (without an event that will render the loss meaningless anyway).

Interesting to see how many "diehards" are folding their hands. I'm sticking to my IPS and rebalancing (twice since the decline began). At times I question myself since I know two people who got out earlier (one at only a 7% decline). If we do indeed go into GDII and loose 90% from peak, I will certainly feel like a fool for not cashing out, but I see no better options that are based on sound principles. I will continue to remain at 70/30 and rebalance as needed, but I may at some point go to an 80/20 since I tend to be a bit of a gambler.

Staying the course.
I folded my hand last summer 2008.

I have been meaning to post to this site for awhile... so here it goes.

I used to be a "Buy and Hold, Stay the course" type invester. Then I turned into an day trader/speculator.

In May 2008 I saw my retirement and taxable accounts lose ~ 10% of their value. I thought "how can this be?" and I started searching online to find the answer.

I found allot of gloom and doom online, and I found a website that discussed Real Estate, and the economy in general: www.patrick.net.
From this site, I was lucky enough to find a good RIA who advised me, and then I did something about it.

In August 2008 I sold all of my Vanguard funds, moved the $$ to Fidelity, and started shorting the markets via various positions. I did this for both my taxable and non taxable (retirement) accounts.

The DOW has declined ~41% since I moved. My accounts are up approx 95% since my move to "the short side."

The current markets are great for traders/speculators, bad for investors.

The tools available to us (stock markets, online trading platforms, finanacial information online and through the other media, our MINDS, etc) and the volatility in the markets, have given us a great opportunity to profit. Why not take advantage of these circumstances?

I transformed from an investor, to a speculator. There will be a time when I will become and investor (buy and hold) again.

There is nothing wrong with being an investor. But now is not that time, IMHO.
"Everybody ought to be happy every day. Play hard, have fun doing it, and despise wickedness." - Dwight D. Eisenhower
mark500
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Post by mark500 »

The DOW has declined ~41% since I moved. My accounts are up approx 95% since my move to "the short side."

I have seen several of these types of posts. Another poster said he had successfully timed the market several times the past year. Similar unverifiable claims spew out during bull markets.
In bear markets, these claims come of in droves. I don't believe 95% of them. Next time someone claims they have timed the market, asked if they would mind if you looked at their brokerage statements.

"No one has ever timed the market correctly more than once as far as I know..." Peter Lynch
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Ricky63
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Post by Ricky63 »

http://finance.yahoo.com/echarts?s=sh

Please take a look at the chart linked to, above.

If you had shorted the S&P 500 via the Proshares fund "SH," in Aug. 2008, you would be up ~24% now. And that isn't day trading.

In the last year, we shorted the Builders, Retailers, Financials, REITs, and oil. In fact, you could have shorted almost anything in the last year, and made money, as it seems as though all of the equities have gone down in tandem.

I never considered shorting until mid last year. I was very fortuneate (literally) to find my RIA online, and follow his instructions.

The point of my post is not to boast. My point is that there are other trades other than long positions, or Index Funds. There are other plays other than "buy and hold."

Now, the S&P500 is at historic lows, so "the party is over," (or close to it) IMO. Most stocks have been hammered down so far, that there is "lean pickins" on the short side. So you guys pondering selling now might as well wait for things to come back (1 year? 2 years? longer?), unless you think your positions will go to zero.

I have been preparing to "go long," again, and eventually will go back to Vanguard Index funds (I still have my accounts there).

I am in Northern Nevada, and you are welcome to come see my trading and retirement acct. statements.

Best Regards,
"Everybody ought to be happy every day. Play hard, have fun doing it, and despise wickedness." - Dwight D. Eisenhower
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