But really, are you going to sit through 40% plus losses?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.

But really, are you going to sit through 40% plus losses?

Yes. I've done it before and I can do it again.
84
29%
Yes, but it will be my first time.
3
1%
I'm not at 100% stocks. Within my stock allocation, I'll sit through a 40% loss. I've done it before and I can do it again.
140
48%
I'm not at 100% stocks. Within my stock allocation, I'll sit through a 40% loss. But it will be my first time.
20
7%
I'm not at 100% stocks. Within my stock allocation, I'll sit through a 40% loss. But it will be my first time.
20
7%
I'm already out of stocks, bailed recently.
2
1%
I bailed out of stocks back in 2008-2009 and haven't gotten back in.
9
3%
It's too early to decide. I'll wait and see and follow my instincts.
7
2%
Other, explain in post
6
2%
 
Total votes: 291

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nisiprius
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But really, are you going to sit through 40% plus losses?

Post by nisiprius » Sat May 08, 2010 8:52 am

A market timer writes:
As an investment advisor that uses Market Timing and other Tactical Approaches to the market, I get my share of criticism from the Buy and Hold crowd. The best system over the last 12 months has been Buy and Hold. But really, are you going to sit through 40% plus losses? I don’t think so.
We've had a startling couple of days, and it is certainly seems more possible that we could be headed for that kind of a fall than it has seemed on recent weekends.

Darn it all, I'd finally gotten to the point where I literally was not even looking at the Dow every week. Now this.

Image

What is our personal answer to the market timer's perennial question?
Last edited by nisiprius on Sat May 08, 2010 9:12 am, edited 2 times in total.
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Post by livesoft » Sat May 08, 2010 8:58 am

If my past actions indicates what I will do in the future, then I will be purchasing equities all the way down to the bottom and beyond. I will sell only to tax-loss harvest which means I will buy replacement shares right away.

I just can't help myself despite my brain telling me this is like October 1987.
http://en.wikipedia.org/wiki/Black_Monday_%281987%29
Last edited by livesoft on Sat May 08, 2010 9:11 am, edited 8 times in total.

Harold
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Post by Harold » Sat May 08, 2010 8:59 am

But really, are you going to sit through 40% plus losses?
I saw that thread about how sitting is bad for me -- so I'll probably stand.

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grave outlook

Post by rustymutt » Sat May 08, 2010 9:13 am

Hell, it's only money and we can't spend it in the grave.
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Post by jeffyscott » Sat May 08, 2010 9:22 am

livesoft wrote:If my past actions indicates what I will do in the future, then I will be purchasing equities all the way down to the bottom and beyond.
Same here...and I don't think I fit in any of the categories (aside from the explain in post one). I'm not going to just sit, I will buy and attempt to slowly increase my stock allocation, but I do not have a written plan.

I have gone from 50% stocks (well, it got a little lower at the very bottom, because I did not have time to catch up) to 40% on the way up.
Last edited by jeffyscott on Sat May 08, 2010 9:25 am, edited 1 time in total.
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Post by neverknow » Sat May 08, 2010 9:24 am

..
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ResNullius
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Post by ResNullius » Sat May 08, 2010 9:38 am

At the start of the downturn, I was about 38% equity and 62% fixed. I held on thoughout all of the previous crashes and corrections over the past 35 years, and I plan on holding pat if the current drop turns into a bombshell. With my large fixed allocation, if the SP500 drops by as much as 30% from it's 2010 high, I just might consider moving a couple hundred thousand within my IRA from fixed into either the SP500 or the Total Market Index in order to ride the snap back for about 10% or 15%, then switch back to fixed. I did this in March 2009 at the last major bottom. I think trading at the bottom isn't a particularly risky proposition, so long as you switch back to your fixed after the usually quick 10% uptick. Even if the bottom is a little further away, you still aren't putting much money at risk, and you still get to ride the snap back for whatever percentage you feel comfortable.

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Post by Dan Moroboshi » Sat May 08, 2010 9:47 am

livesoft wrote:If my past actions indicates what I will do in the future, then I will be purchasing equities all the way down to the bottom and beyond. I will sell only to tax-loss harvest which means I will buy replacement shares right away.

I just can't help myself despite my brain telling me this is like October 1987.
http://en.wikipedia.org/wiki/Black_Monday_%281987%29
Black Monday, huh? So, what appellation will be assigned to last Thursday? "Black Thursday" just doesn't have any oomph.

Given the shape of the Dow's intra-day movement chart, how about "@$$crack Thursday"?

Image

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Post by livesoft » Sat May 08, 2010 9:58 am

Dan Moroboshi wrote:Black Monday, huh? So, what appellation will be assigned to last Thursday? "Black Thursday" just doesn't have any oomph.
When all the busted trades are removed from the databases, the crack will go away. :)

Did you read that link I gave? It talked about the what happened the week before the Monday.

The European Financial Honchos are on record that they are gonna do something before Monday to help "defend the euro."
http://www.nytimes.com/2010/05/08/busin ... achma.html
If they fail, the FTSE, CAC, DAX will plummet next week just like in 1987. If they succeed, I will be very happy. :)
Last edited by livesoft on Sat May 08, 2010 10:03 am, edited 1 time in total.

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Judsen
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Post by Judsen » Sat May 08, 2010 10:01 am

If you are going to panic, panic early.
It is too late to panic early.
Go to the wiki and read the Boglehead philosophy.
Relax.
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Post by Febreze » Sat May 08, 2010 10:03 am

I think the term "black" shouldn't be used to connotate something bad because that is racism. It should just be considered Terrible Thursday or something.

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Post by jeffyscott » Sat May 08, 2010 10:23 am

livesoft wrote: When all the busted trades are removed from the databases, the crack will go away. :)
What about the hand?
press on, regardless - John C. Bogle

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Post by GammaPoint » Sat May 08, 2010 10:28 am

If we get close to the March 2009 lows I'm likely to use up a portion of my emergency fund (probably twice as big as it needs to be anyway) to buy more stocks and take advantage of the opportunity.

But will I sell? No way. If I simultaneously feel that I should be buying stocks and selling stocks then I know that I'm not thinking clearly. So I'll just buy. It's what the AA calls for anyway.

Again, having said that, this will be my first real market crash (if it happens), so maybe I'll completely freak out and sell at market bottom. But I doubt it :wink:

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Post by Opponent Process » Sat May 08, 2010 10:29 am

Febreze wrote:I think the term "black" shouldn't be used to connotate something bad because that is racism. It should just be considered Terrible Thursday or something.
I think securities in negative territory shouldn't be shown in red, as this might offend Native Americans.
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Post by livelife » Sat May 08, 2010 10:32 am

I think it would be silly to sell now and guess when we hit the low. Market timing does not work. Set your allocation and enjoy your life.

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Post by marco100 » Sat May 08, 2010 10:38 am

Valuations matter. That's the only rational response to your question.

You wouldn't mindlessly buy another other commodities by rote without regard to valuation. Why should we mindlessly buy investments without any regard to valuation? The answer is we shouldn't.

After a 70% plus run up since March 2009 the only rational expectation for anyone invested in the markets would have been to make the assumption that it was too much too fast and that reversion to the mean would occur at some point.

Does this mean you should get out of the stock market entirely? Maybe it does. When the market peaked in late 2007 I realized what was happening and questioned whether I should do exactly that. But I was greedy and didn't want to miss further upside.

Behavioral finance is what we are talking about. We are depressed when the market crashes by 40% or more and ecstatic when it increases by 70%.


The stock market clearly exhibits chaotic/fractal behavior as to its pricing. Ie it is self-similar, which means there is no guarantee that returns will "smooth out" over time. A longer time period may simply mean that the booms and busts get bigger in scale.

If you believe the market to be significantly overvalued, then you should reduce your equity allocation. IOW the AA should be metered according to both 1) your risk tolerance level and 2) your view of market valuation.

Please don't claim that it's impossible to arrive at a valuation estimate, because clearly, it is, within ranges.

I would say where the market is right now is probably fairly valued. When it was over 11,000 DOW I believed it to be over valued but didn't do anything about it. Behavioral finance again--fear of making a mistake.

If the DOW goes below 9,000 then I will believe it to be the market to be somewhat undervalued.

That's just a personal opinion not a sophisticated analysis.

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Post by Christine_NM » Sat May 08, 2010 10:41 am

GammaPoint wrote:If I simultaneously feel that I should be buying stocks and selling stocks then I know that I'm not thinking clearly.
Gamma -

A credible case can be made for buying and for selling at any time, whatever the conditions. That's normal. Welcome to the strange world of markets.

I heard about a Ned Davis presentation (it's a market timing outfit) years, possibly decades, ago where the presenter made a terrific case for buying stocks at that time, then broke for lunch. All were persuaded. After lunch, the same presenter made the bearish case based on the same conditions and it was just as persuasive.

We build stories around stocks and bonds and call it a plan. There's a lot of hope in it but very little reason.

So maybe seeing both sides of the market is the only way to think clearly.
17% cash 47% stock 36% bond. Retired, w/d rate 2.85%

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Post by GammaPoint » Sat May 08, 2010 10:56 am

Christine_NM wrote:
A credible case can be made for buying and for selling at any time, whatever the conditions. That's normal. Welcome to the strange world of markets.
Sure, I'm just saying when I feel like "maybe I should sell" I realize that as soon as I was awash in cash I'd probably think "omg now I can buy a lot of stocks!" which doesn't really make sense. I only have a 50% chance of timing that sell/buy combo right anyway.

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Post by Rodc » Sat May 08, 2010 11:07 am

I'm not at 100% stocks. Within my stock allocation, I'll sit through a 40% loss. I've done it before and I can do it again.
Been there, done that, don't especially like it, but will do it again: "If my past actions indicates what I will do in the future, then I will be purchasing equities all the way down to the bottom and beyond."

Sometimes reality bites and retreating to a fantasy world where I always have a witty reply to jerks, I am a great athlete and super brilliant, and I can dispatch bad guys and jerks with a single punch is appealing.

Believing I personally have a good chance of beating buy and hold by market timing etc. would be retreating to that fantasy world.

In the long run I think I am better off living in the real world.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Post by SP-diceman » Sat May 08, 2010 11:17 am

Dan Moroboshi wrote:
livesoft wrote:If my past actions indicates what I will do in the future, then I will be purchasing equities all the way down to the bottom and beyond. I will sell only to tax-loss harvest which means I will buy replacement shares right away.

I just can't help myself despite my brain telling me this is like October 1987.
http://en.wikipedia.org/wiki/Black_Monday_%281987%29
Black Monday, huh? So, what appellation will be assigned to last Thursday? "Black Thursday" just doesn't have any oomph.

Given the shape of the Dow's intra-day movement chart, how about "@$$crack Thursday"?

Image

Call it the 2pm to 3pm V shaped recovery.


Thanks
SP-diceman

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Re: But really, are you going to sit through 40% plus losses

Post by YDNAL » Sat May 08, 2010 11:20 am

nisiprius wrote:A market timer writes:
As an investment advisor that uses Market Timing and other Tactical Approaches to the market, I get my share of criticism from the Buy and Hold crowd. The best system over the last 12 months has been Buy and Hold. But really, are you going to sit through 40% plus losses? I don’t think so.
What is our personal answer to the market timer's perennial question?
Hey, a lot of the answers fit, so I'm the first "other" answer. :sharebeer

I no longer care about Equity market(s) volatility in 2 days, 2 years, 20 years*.... my kids are 32 and 28yo.

* that doesn't mean I don't care about market direction. :D
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Post by 9Iron » Sat May 08, 2010 11:24 am

Look at that chart!!! I guess something happened in the market last week! :shock:
:P

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Post by mcblum » Sat May 08, 2010 11:35 am

I look at it this way. I started investing in the early 90's. Just before the .Com crash, I had 50K in my accounts (Ira+TSP) I felt like Croesus! It dropped to 32K and I felt terrible. I held on,not knowing about rebalancing, and it went up over the years to 90K in 2001. I felt like Croesus, again. It dropped after 911 to 60K. I felt terrible but not SO terrible as I was more experienced.
This ebb and flow has continued over the past ten years. In 2008 it went from 150K to 90K and now up to 177K. I see it as an opportunity to buy bargains and involuntarily rebalance.
Greece is serious and will be dealt with. I have confidence in the future.
Have patience, everybody

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Post by bluto » Sat May 08, 2010 11:54 am

Another 40% drop means another potential buying opportunity and a tactical shift. My equity allocation will rise and I'll increase my contributions.

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Post by tetractys » Sat May 08, 2010 12:29 pm

I was very pleased with the utility of my IPS through the last downturn, and will stick with it. The last time the markets were at this point, my portfolio was down much more that it is now. And theoretically as an accumulator, another 40% drop will improve my overall retirement position going forward.

The speed with which these bear markets strike is really an advantage, because time-wise, a lot of oomph is added to rebalancing and new buying on the upturn. And it has a similar effect of gulping down the medicine fast, instead of sipping it in disgust with a wrenching stomach.

And it really can be medicine for the long term accumulator.

Best regards, Tet
Last edited by tetractys on Sat May 08, 2010 12:39 pm, edited 1 time in total.
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Portfolio Protection

Post by JerryB » Sat May 08, 2010 12:36 pm

Might buy some protection through options or VXX, but never done this before.

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Cosmo
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Post by Cosmo » Sat May 08, 2010 12:40 pm

What 40% losses?

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Post by neverknow » Sat May 08, 2010 12:43 pm

..
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CodeMaster
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Post by CodeMaster » Sat May 08, 2010 12:51 pm

I started investing then DOW was 6000, I've invested in it when it was 14000, then when it went back down to 6000, I was blessed to continue buying cause now its double again lol

Buy and hold and buy more when its on sale!! :) Joys of life.

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Post by retiredjg » Sat May 08, 2010 12:56 pm

But really, are you going to sit through 40% plus losses?
Of course not. I'm retired and in withdrawal. But I would not have a portfolio of 80 to 100% stocks either. I suppose all things are possible, but I don't believe my current portfolio could lose 40% (baring a complete collapse, in which case, what would it matter?)

I may have sat through such a loss many years ago. I don't know. I was not watching.

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Post by gotherelate » Sat May 08, 2010 1:17 pm

retiredjg wrote:
But really, are you going to sit through 40% plus losses?
Of course not. I'm retired and in withdrawal. But I would not have a portfolio of 80 to 100% stocks either. I suppose all things are possible, but I don't believe my current portfolio could lose 40% (baring a complete collapse, in which case, what would it matter?)

I may have sat through such a loss many years ago. I don't know. I was not watching.
You certainly know how to turn a phrase. ;-)

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Post by ausgenf » Sat May 08, 2010 1:19 pm

My IPS calls for increasing my equity allocation when stocks are cheap and decreasing my equity allocation when stocks are pricy. Since the market was relatively expensive until a few days ago, my current equity allocation is fairly low. But I will have to slowly increase it if the market slides further.

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Post by mcblum » Sat May 08, 2010 2:31 pm

right now, my equity position has dropped from a +5% to +4% because of the weeks festivities Still a little heavy, bot not enought to rebalance My AA is 50/50. Roth IRA is maxed and 403b is on auto-pilot. I have FTSE-US to buy into. All is will....
Marty

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Post by VictoriaF » Sat May 08, 2010 2:43 pm

jeffyscott wrote:
livesoft wrote: When all the busted trades are removed from the databases, the crack will go away. :)
What about the hand?
It will become an invisible hand.

Victoria
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Post by VictoriaF » Sat May 08, 2010 3:11 pm

marco100 wrote:Valuations matter. That's the only rational response to your question.

...

If the DOW goes below 9,000 then I will believe it to be the market to be somewhat undervalued.

That's just a personal opinion not a sophisticated analysis.
Valuations matter but we don't really know if they are too high, too low, or just right. They may be high in comparison to a year ago. They may be low in comparison to two years ago. They may be high based on the European uncertainties, or low if the Europeans are about to start buying the U.S. stocks.

We just don't know.

Incidentally, Jim Cramer is advocating to wait until Dow drops below 9,000. I treat his calls as contrarian signals ;).

Victoria
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Post by tetractys » Sat May 08, 2010 3:22 pm

Dan Moroboshi wrote:Given the shape of the Dow's intra-day movement chart, how about "@$$crack Thursday"?
Yeah, that sounds good to me. :D Or just "Crack Thursday."

For one thing, I don't believe the "fat thumb" theory for a moment. Maybe it will come down to that story wise; but my view of human ingenuity (not necessarily intelligence) leads me to imagine at least an experimental motive of greed--by a small team of CRACKS. Hopefully they won't get away with it. -- Tet
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Re: But really, are you going to sit through 40% plus losses

Post by bearwolf » Sat May 08, 2010 3:53 pm

nisiprius wrote:What is our personal answer to the market timer's perennial question?
I was between 70-80% equities in the 2008 drop and didn't sell. I've since decided that 50/50 is more appropriate for me. With the recent rise in stocks I've been buying bonds to try and get back to 50/50. Now I may have to change my purchases to stocks to keep at 50/50. Sell? Who is selling I'm still in the accumulation phase. The question is what am I buying, stocks or bonds. I guess this could be called laissez faire rebalancing. I don't ever really sell anything. I just buy whichever class is low when I have money that is to be invested.

BearWolf

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Post by meckaneck » Sat May 08, 2010 4:01 pm

There is way too much risk in the market right now. I am 100% cash and will watch the events unfold from the sidelines. Those in equities I hope understand the risks involved.

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Post by bearwolf » Sat May 08, 2010 4:39 pm

meckaneck wrote:There is way too much risk in the market right now. I am 100% cash and will watch the events unfold from the sidelines. Those in equities I hope understand the risks involved.
There is also risk not being in equities as well. You may miss some downside, but you also risk missing the upside by being 100% in cash.

BearWolf

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Post by retiredjg » Sat May 08, 2010 4:46 pm

gotherelate wrote:
retiredjg wrote:Of course not. I'm retired and in withdrawal
.
You certainly know how to turn a phrase. ;-)
Yeah, the 60's were tough... :twisted: tee hee

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Post by DiscoBunny1979 » Sat May 08, 2010 4:56 pm

marco100 wrote:Valuations matter.

I would say where the market is right now is probably fairly valued. When it was over 11,000 DOW I believed it to be over valued but didn't do anything about it. Behavioral finance again--fear of making a mistake.

If the DOW goes below 9,000 then I will believe it to be the market to be somewhat undervalued.
------------------------

That's it. One has to determine what is needed in terms of market momentum or valuation to make it worth the time or effort to invest at certain levels. . .

I can't believe that bogleheads are sitting back not wanting to double their money over time. DOW will have to hit 20,000 in order for the average Index investor to double their money over time . . . and what are the reasons for that to occur?

In my opinion, we might be in a trading range (6,000 - 14,000) for decades. One way to "make money" would be to contribute in a Periodic way, making more purchases when the market is below 10,000 and finally sell when the market peaks at the 14,000 range. Another way to make money would be to short the DOW when it reaches 10,000 or 11,000 and keep making short bets as the DOW goes to 12,000 or 13,000...buying more short shares at a lower price and SELL when the DOW goes below 9,000.

I often view the faith that Bogleheads have on Index Investing funny because the only way an Index investor can make money is that their average purchase NAV is less than the current NAV. It's a bet that the market always goes up. "ALWAYS" is a prediction . . . but unfortunately Past performance is not indicative of future results.

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Post by Rodc » Sat May 08, 2010 5:04 pm

DiscoBunny1979 wrote:
marco100 wrote:Valuations matter.

I would say where the market is right now is probably fairly valued. When it was over 11,000 DOW I believed it to be over valued but didn't do anything about it. Behavioral finance again--fear of making a mistake.

If the DOW goes below 9,000 then I will believe it to be the market to be somewhat undervalued.
------------------------

That's it. One has to determine what is needed in terms of market momentum or valuation to make it worth the time or effort to invest at certain levels. . .

I can't believe that bogleheads are sitting back not wanting to double their money over time. DOW will have to hit 20,000 in order for the average Index investor to double their money over time . . . and what are the reasons for that to occur?

In my opinion, we might be in a trading range (6,000 - 14,000) for decades. One way to "make money" would be to contribute in a Periodic way, making more purchases when the market is below 10,000 and finally sell when the market peaks at the 14,000 range. Another way to make money would be to short the DOW when it reaches 10,000 or 11,000 and keep making short bets as the DOW goes to 12,000 or 13,000...buying more short shares at a lower price and SELL when the DOW goes below 9,000.

I often view the faith that Bogleheads have on Index Investing funny because the only way an Index investor can make money is that their average purchase NAV is less than the current NAV. It's a bet that the market always goes up. "ALWAYS" is a prediction . . . but unfortunately Past performance is not indicative of future results.
Over the long haul it is likely the overall economy will grow. If it does investors will likely be provided some benefit. Might not happen, sure.

If you try to game the system you might win or you might lose, relative to the market average: this is a zero sum game, before costs. Personally I don't much like zero sum minus cost games, especially played against pros.

Believing that you can successfully game the system seems like a rather greater leap of faith than a belief that the world economy will grow over time.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Post by bearwolf » Sat May 08, 2010 5:10 pm

Rodc wrote:Believing that you can successfully game the system seems like a rather greater leap of faith than a belief that the world economy will grow over time.
I think the phrase "The market can remain irrational longer than you can remain solvent" applies here.

BearWolf

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Post by nisiprius » Sat May 08, 2010 6:55 pm

bearwolf wrote:
Rodc wrote:Believing that you can successfully game the system seems like a rather greater leap of faith than a belief that the world economy will grow over time.
I think the phrase "The market can remain irrational longer than you can remain solvent" applies here.
I don't think it does apply to Boglehead-style investing. I don't see how you can become insolvent as the result of market irrationality unless you are using leverage, or taking short positions.

If you have no leverage or short positions, and a reasonable asset allocation tailored to your risk tolerance, then it seems to me the market could literally drop to zero, leaving you unhappy but solvent.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Rodc
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Post by Rodc » Sat May 08, 2010 7:10 pm

bearwolf wrote:
Rodc wrote:Believing that you can successfully game the system seems like a rather greater leap of faith than a belief that the world economy will grow over time.
I think the phrase "The market can remain irrational longer than you can remain solvent" applies here.

BearWolf
Other than what Nisi said, how does playing the market timing zero sum game help that?

If you are really concerned about that make sure you hold plenty of bonds, perhaps better TIPS, and if old enough, add in some annuity.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

Scottner
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Post by Scottner » Sat May 08, 2010 7:56 pm

What loss if I don't sell?

walkinwood
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Post by walkinwood » Sat May 08, 2010 8:41 pm

Even though I wasn't 100% in stock, I did live through a 40% drop in my portfolio value from 2000 - 2002. I kept my AA intact, but got out of all the individual stocks and bought broad based mutual funds.

UrbanMedic
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Post by UrbanMedic » Sat May 08, 2010 10:40 pm

GammaPoint wrote:
Christine_NM wrote:
A credible case can be made for buying and for selling at any time, whatever the conditions. That's normal. Welcome to the strange world of markets.
Sure, I'm just saying when I feel like "maybe I should sell" I realize that as soon as I was awash in cash I'd probably think "omg now I can buy a lot of stocks!" which doesn't really make sense. I only have a 50% chance of timing that sell/buy combo right anyway.
I got lucky. Not super lucky, but kind of lucky. On Monday, I had an old 401k that I rolled over to an IRA. However the old custodian would only sell the securites and issue a check. This 401k was a huge piece of my retirement. As such, I have been in cash for much of this week and was dumb luck fortunate to miss out on a lot of these losses. Particularly since I was about 50% foreign investments which took a savage beat down.

I wish I was this lucky all the time, but sometimes you just happen to get lucky. About a year ago, before I really understood the best way to invest for retirement (following the Boglehead philosophy), I also got lucky with some AIG, Royal Bank of Scotland, and Citibank stock. Made a handsome 150% return before thinking I could do no wrong and promptly paid back about 70% of those gains in the form of ill timed leveraged ETF purchases.

In the end, net of fees, I made about market returns had I just purchased the equivalent dollar amount of VTI and VBR. I sat on cash for a while last year from Down 7500 to Dow 9000 thinking, "oh this can't continue. It's got to drop" and it never did. That cost me. Plus the stress of it. Constantly fretting. Worrying. Thinking that maybe today is the day. Maybe I need to put in a trailing stop. Maybe I need to fuss with it.

So much easier just to remind myself that my time horizon is 25 years and not next week. I still am trying to wean myself from the habit of checking my IRA balance at the close of business day every day. I've gotten down to checking only a few times per week. I'd consider it a victory to get to the once a month point. But that might take a while.

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Post by djw » Sat May 08, 2010 11:53 pm

I started paying attention to the stock market in 1986 when I was ready to invest my first $30,000 towards retirement, just in time for my first crash.

As of 3:59 p.m. last Friday, 18% of my net worth was invested in stock mutual funds, most of that in Vanguard funds.

After much anguish and reflection and in consideration of what I've witnessed in prior crashes, I decided to reduce my stock mutual fund percentage from 18% to 14% at close of market last Friday, putting that 4% into my checking account and money market funds.

For comparison, on 6/30/07, 27% of my net worth was in stock mutual funds.

During the 2007 - 2009 decline, I rode it all the way down and didn't cash out to any significant extent. I did aggressively rebalance on the way down, which I believe mitigated my losses somewhat. In retrospect, reversion to mean appears to have taken hold beginning last March and my biggest losers in 2007 -2009 became my biggest gainers in 2009-2010. I also rebalanced aggressively on the way back up, while 20/20 hindsight suggests that leaving my investments untouched beginning last March would have been more profitable.

I felt that if I was going to reduce my exposure, last Friday might be my last opportunity to do so. I recognized that I was giving up potential gains if my decision proved to be wrong, but I was comfortable with my decision and rationalized that having some cash available would make it possible to take advantage of any buying opportunities that might arise during the coming days and weeks.

For better or worse that's what I decided to do. In making this decision, as with all other decisions I've made in my life, I take full responsibility and will not be blaming any other person or entity if my decision proves to have been wrong. By contrast, my sister always blamed her bad decisions on someone else and never took responsibility for any of them.
Love many, trust few, and always paddle your own canoe

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bearwolf
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Post by bearwolf » Sun May 09, 2010 12:04 am

Rodc wrote:
bearwolf wrote:
Rodc wrote:Believing that you can successfully game the system seems like a rather greater leap of faith than a belief that the world economy will grow over time.
I think the phrase "The market can remain irrational longer than you can remain solvent" applies here.

BearWolf
Other than what Nisi said, how does playing the market timing zero sum game help that?
If you are really concerned about that make sure you hold plenty of bonds, perhaps better TIPS, and if old enough, add in some annuity.
I was referring to this part of the post. Specifically the part about shorting the DOW and selling if it goes below a certain point. What if it never goes below 9000 again?
disco bunny wrote: In my opinion, we might be in a trading range (6,000 - 14,000) for decades. One way to "make money" would be to contribute in a Periodic way, making more purchases when the market is below 10,000 and finally sell when the market peaks at the 14,000 range. Another way to make money would be to short the DOW when it reaches 10,000 or 11,000 and keep making short bets as the DOW goes to 12,000 or 13,000...buying more short shares at a lower price and SELL when the DOW goes below 9,000.

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