U.S. stocks in freefall

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HomerJ
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Re: U.S. stocks in freefall

Postby HomerJ » Sun Dec 13, 2015 11:26 pm

Maynard F. Speer wrote:I posted Asness' article earlier, which makes the distinction between 'binary' market timing (all in or all out), and systematic approaches to adjusting equity exposure (in this case it's simply using the previous 12 month's return to determine where to be, between 50 and 150% equities - as a way to meaningfully measure performance against a 100% equities benchmark)

Image

http://www.institutionalinvestor.com/ar ... kYaD1WrTC0

Personally I prefer to think in terms of risk vs opportunity .. Bogle didn't exit the market in 1999 (when stock valuations were very high, and bonds were very cheap), but rather shifted exposure from something with a lot of risk and less potential upside, to something with less risk and a fairly attractive return .. So you could say there was some opportunity risk, but as it turned out there was also a lot of downside risk

If only we had such an attractive alternative today .. I've mentioned my own defection to hedge funds


If you look at that chart, they had one big success in the 30s, and then basically mirrored buy and hold for the next 80 years... And is that back-tested data or actual real-time results? Anyone can go back and find a trend timing system that will beat buy and hold in the past.

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Maynard F. Speer
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Re: U.S. stocks in freefall

Postby Maynard F. Speer » Mon Dec 14, 2015 12:28 am

HomerJ wrote:If you look at that chart, they had one big success in the 30s, and then basically mirrored buy and hold for the next 80 years... And is that back-tested data or actual real-time results? Anyone can go back and find a trend timing system that will beat buy and hold in the past.


You should read the article - it explains they're not get-rich-quick trading strategies, but rather simple illustrations of known market phenomena .. And the red line underneath tracks cumulative outperformance logarithmically (so it's more consistent than it perhaps appears)

In fact if they were level pegging on a logarithmic scale, it may appear that the buy-and-hold is catching up after the 1930s

They show rolling outperformance of the combined (val + mom) system - but again, I don't think he'd recommend this as an actual strategy .. Back-testing is virtually meaningless for that - useful for demonstrating principles

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cfs
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Re: U.S. stocks in freefall

Postby cfs » Fri Dec 18, 2015 3:32 pm

Good day!

IF you are a buyer !!!

Have a Feliz Navidad.
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Toons
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Re: U.S. stocks in freefall

Postby Toons » Fri Dec 18, 2015 3:35 pm

Remember the S&P was at 676.53 .
March 2009.
Its more than tripled.
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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TomatoTomahto
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Re: U.S. stocks in freefall

Postby TomatoTomahto » Fri Dec 18, 2015 4:25 pm

Toons wrote:Remember the S&P was at 676.53 .
March 2009.
Its more than tripled.
:happy

AND paid out dividends.

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Re: U.S. stocks in freefall

Postby Johno » Fri Dec 18, 2015 4:44 pm

HomerJ wrote:
Maynard F. Speer wrote:I posted Asness' article earlier, which makes the distinction between 'binary' market timing (all in or all out), and systematic approaches to adjusting equity exposure (in this case it's simply using the previous 12 month's return to determine where to be, between 50 and 150% equities - as a way to meaningfully measure performance against a 100% equities benchmark)

Image

http://www.institutionalinvestor.com/ar ... kYaD1WrTC0

Personally I prefer to think in terms of risk vs opportunity .. Bogle didn't exit the market in 1999 (when stock valuations were very high, and bonds were very cheap), but rather shifted exposure from something with a lot of risk and less potential upside, to something with less risk and a fairly attractive return .. So you could say there was some opportunity risk, but as it turned out there was also a lot of downside risk

If only we had such an attractive alternative today .. I've mentioned my own defection to hedge funds


If you look at that chart, they had one big success in the 30s, and then basically mirrored buy and hold for the next 80 years... And is that back-tested data or actual real-time results? Anyone can go back and find a trend timing system that will beat buy and hold in the past.

It is an interest article. To clarify they go through CAPE timing strategy, then trend, then combination (50/50 weighted signal), then a strategy which does value/momentum for both stocks and bonds (real yield of the 10 yr being the value measure). It's not a binary 'sell or not', but 100% stocks plus or minus ~50% depending strength of the combined value/momentum signal. CAPE timing alone was more successful in the distant past, trend timing more in the recent past, both together more even over the whole period.

I used a different data source to see if I could reconstruct their stock (only) result for last 60 yrs and I got similar, ~0.5% return advantage relatively consistent 1955-85 and 85 to now, likewise Sharpe Ratio and max drawdown advantages. The way I implemented the formula the min max positions were also theoretically close to 50% and 150% but again the position change is proportional to the signal, how far CAPE or trend are from their historical medians, so position was between ~85% and ~110% half the time (as of recently the signal was around -20%). The result could hardly be dramatic IOW because it's never 'sell everything' or 'double up', and often is 'don't do much' especially when the signals contradict one another. But it seems to have a pretty consistently modestly positive effect, not very sensitive to tweaking, but almost always better to use val+momentum than just one or the other.

It was earlier said someone should pick some plausible simple rule, not test lots and lots of rules, and see if it could improve risk/return over long past periods. This formula seems one you might actually come up with first and test second. The complementary effect of value and momentum has a fundamental explanation: trends tend to continue, but if so tend to eventually result in offsetting changes in value. These debates tend therefore to revolve around burden of proof. One can't say the results are false, only that at some high std of proof not compelling enough. They might not be repeated in the future but then again there might not be any compensation for taking equity risk at all in the future, nobody can prove anything about the future. But why should the burden be tilted so far in one direction? I think a person without preconceptions about the topic would read the article, and assuming the numbers were correct, simply accept that methods like this have actually worked to some degree in the past more often than not.

And speaking of tilting, it's also basically the same principlal as tilting to value or momentum stocks, except that's cross sectional (favor momentum/value stocks more among all stocks) and this is time series (favor all stocks more when on the whole they show more favorable value/momentum). For some reason tilting cross sectionally seems less intensely controversial, I'm not sure why that is.
Last edited by Johno on Fri Dec 18, 2015 5:18 pm, edited 2 times in total.

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Toons
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Re: U.S. stocks in freefall

Postby Toons » Fri Dec 18, 2015 4:46 pm

TomatoTomahto wrote:
Toons wrote:Remember the S&P was at 676.53 .
March 2009.
Its more than tripled.
:happy

AND paid out dividends.



:sharebeer
Bingo!
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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cfs
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Re: U.S. stocks in freefall

Postby cfs » Fri Dec 18, 2015 5:11 pm

You got it !!!

Tripled . . . plus dividends . . . all this fun, and getting paid too!!!

Already then, wishing all my BH shipmates a Feliz Navidad and an Awesome New Year 2016.
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ofcmetz
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Re: U.S. stocks in freefall

Postby ofcmetz » Fri Dec 18, 2015 5:13 pm

It has been an interesting week in the market for sure. Of course my 457B contributions went in on Wednesday at the week's highs. That should have been the sign for me that things were going to turn down for a bit. :oops:

Invest we must, so let's keep following our allocations and rebalance when necessary.
Never underestimate the power of the force of low cost index funds.

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cfs
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Re: U.S. stocks in freefall

Postby cfs » Mon Dec 28, 2015 10:51 am

Interesting week.

Here we are, first day of the last week of 2015 and Miss Market is having another interesting day.

Portfolio rebalance and IRA contribution weekend coming up.

Wishing you a productive 2016.
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Re: U.S. stocks in freefall

Postby dbCooperAir » Mon Dec 28, 2015 11:09 am

cfs wrote:Interesting week.

Here we are, first day of the last week of 2015 and Miss Market is having another interesting day.


You made me look :wink:

I was thinking I may break even this year, still have a few days for rally, the glass is half full!
Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him. | -Dwight D. Eisenhower-

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cfs
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Re: U.S. stocks in freefall

Postby cfs » Mon Dec 28, 2015 12:11 pm

dbCooperAir wrote:. . . I was thinking I may break even this year . . .

I just took a look at the Vanguard website, about 50 of the Vanguard funds are trying to break even this year. Wishing everyone a good Wall Street's Window Dressing Final Week and a productive 2016.
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walletless
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Re: U.S. stocks in freefall

Postby walletless » Mon Jan 04, 2016 11:29 am

Happy New Year! Great start to 2016, and time to bump this thread!

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Re: U.S. stocks in freefall

Postby BogleMe » Mon Jan 04, 2016 11:31 am

I am so sick of TLH.

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cfs
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Re: U.S. stocks in freefall

Postby cfs » Mon Jan 04, 2016 11:34 am

BogleMe wrote:I am so sick of TLH.

Relax. If Miss Market provides, just take it.
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Re: U.S. stocks in freefall

Postby SquawkIdent » Mon Jan 04, 2016 11:40 am

cfs wrote:
BogleMe wrote:I am so sick of TLH.

Relax. If Miss Market provides, just take it.


Agree. :sharebeer

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walletless
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Re: U.S. stocks in freefall

Postby walletless » Mon Jan 04, 2016 11:41 am

Any suggestion for a good, low-cost harvesting pair for VBR/VSIAX (Small-cap Value)?

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Re: U.S. stocks in freefall

Postby ofcmetz » Mon Jan 04, 2016 12:45 pm

walletless wrote:Happy New Year! Great start to 2016, and time to bump this thread!


At least everyone who is still working has some new IRA, 401K, 403B, and 457B space to buy their equity mutual funds with.


Happy New Year Bogleheads.
Never underestimate the power of the force of low cost index funds.

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cfs
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Re: U.S. stocks in freefall

Postby cfs » Mon Jan 04, 2016 12:49 pm

walletless wrote:Any suggestion for a good, low-cost harvesting pair for VBR/VSIAX (Small-cap Value)?

Do a search for TLH Pairs conversations in the Bogleheads forum for some ideas.
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Re: U.S. stocks in freefall

Postby grettman » Mon Jan 04, 2016 12:52 pm

I love this thread! :sharebeer

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Re: U.S. stocks in freefall

Postby Leeraar » Mon Jan 04, 2016 1:37 pm

grettman wrote:I love this thread! :sharebeer

I do too! The Henny Penny thread:

https://en.wikipedia.org/wiki/Henny_Penny

But, I am mystified by the TLH crowd who seem to be looking for down days to maximize their losses rather than up days to maximize their gains.

As we scientists would say, TLH is a second order effect.

L.
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packet
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Re: U.S. stocks in freefall

Postby packet » Mon Jan 04, 2016 1:53 pm

If only we could invest in this thread... with its -1 correlation to VTI, we'd have a perfect balancer!

:beerCheers,
packet
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Re: U.S. stocks in freefall

Postby chipmonk » Mon Jan 04, 2016 2:43 pm

Let's see... today I am buying $5,500 of money market in my Vanguard Traditional IRA account.

Tomorrow will be a great day for buying stock at a discount in my Roth IRA.

It's always great to get a discount on my annual early-January Backdoor Two-Step™.

:moneybag :sharebeer 8-)

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cfs
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Re: U.S. stocks in freefall

Postby cfs » Mon Jan 04, 2016 2:47 pm

Leeraar wrote:. . . . I am mystified by the TLH crowd who seem to be looking for down days to maximize their losses rather than up days to maximize their gains . . . .

Ding, Ding, Ding . . . Bingo !!!
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ray.james
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Re: U.S. stocks in freefall

Postby ray.james » Mon Jan 04, 2016 2:50 pm

I go back and read this awesome post by Nisi on days like this. Tell myself international is going to come back :D :( :D :(

http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

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Re: U.S. stocks in freefall

Postby chipmonk » Mon Jan 04, 2016 3:01 pm

cfs wrote:
Leeraar wrote:But, I am mystified by the TLH crowd who seem to be looking for down days to maximize their losses rather than up days to maximize their gains.
Ding, Ding, Ding . . . Bingo !!!


TLH is an essentially risk-free opportunity to reduce your capital gains for this your, or your capital gains carryover for subsequent years. I get the benefit of hindsight when I TLH: I can create a past capital loss that is really only a loss on paper.

If I see that the market is way down at 3:50pm ET, I can TLH immediately and be guaranteed to reduce my capital gains without any meaningful change to my asset allocation, by TLH-ing between correctly-matched pairs.

The only possible risk to TLH-ing is the opportunity cost of TLH-ing today, when it might actually be better to wait till tomorrow if my assets decline further. Of course, by not TLH-ing at all you lose this opportunity as well. You can never actually end up "behind" due to TLH-ing.

Leeraar wrote:As we scientists would say, TLH is a second order effect.


So what? TLH can have a large effect on your bottom line, and more importantly it is risk-free as I wrote above, which makes it precious.

Due to TLH, I have reduced my taxable income by $3,000/year for the past several years, and will continue to do so for the foreseeable future. Because I am in a high bracket and have high state income taxes, that alone worth about $1,000/year to me.

If I decided to "spend" my remaining $18,000 capital loss carryover by offsetting a large capital gain, it would be worth far more to me. (About $6,000 in reduced taxes for that year.)

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Re: U.S. stocks in freefall

Postby cfs » Mon Jan 04, 2016 3:22 pm

chipmonk wrote: . . . If I decided to "spend" my remaining $18,000 capital loss carryover by offsetting a large capital gain, it would be worth far more to me. (About $6,000 in reduced taxes for that year.) . . .

Congratulations.
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Re: U.S. stocks in freefall

Postby Leeraar » Mon Jan 04, 2016 3:40 pm

Due to TLH, I have reduced my taxable income by $3,000/year for the past several years, and will continue to do so for the foreseeable future.

Unfortunately, I cannot use your strategy, since my investments have gained value over the past few years.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")

goingup
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Re: U.S. stocks in freefall

Postby goingup » Mon Jan 04, 2016 3:42 pm

I can never remember if the term is an auspicious beginning or an inauspicious beginning to describe a notable start of something. Regardless, the new year in the Market is beginning notably. :shock:

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Re: U.S. stocks in freefall

Postby cfs » Mon Jan 04, 2016 4:30 pm

goingup wrote:I can never remember if the term is an auspicious beginning or an inauspicious beginning to describe a notable start of something. Regardless, the new year in the Market is beginning notably. :shock:

Well, let me see, let's call it "an interesting day in the global markets" but we have another 362 days to go in 2016.
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Re: U.S. stocks in freefall

Postby tennisplyr » Mon Jan 04, 2016 4:36 pm

Two rules for 2016:
-don't sweat the small stuff
-it's all small stuff
Those who move forward with a happy spirit will find that things always work out.

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Re: U.S. stocks in freefall

Postby chipmonk » Mon Jan 04, 2016 10:14 pm

Leeraar wrote:
Due to TLH, I have reduced my taxable income by $3,000/year for the past several years, and will continue to do so for the foreseeable future.

Unfortunately, I cannot use your strategy, since my investments have gained value over the past few years.


That doesn't matter. Perhaps you don't fully understand how TLH works?

My investments have done very well too (just like everyone else who's heavily invested in US-TSM over the last ~5 years).

However, there have been dips where one or two tax lots are worth, say, $1,000 less than when I bought them. I take these moments to TLH: I sell that tax lot for a "paper" loss and replace it with a fund or combination of funds whose asset allocation is almost identical.

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Re: U.S. stocks in freefall

Postby chipmonk » Mon Jan 04, 2016 10:17 pm

cfs wrote:
chipmonk wrote: . . . If I decided to "spend" my remaining $18,000 capital loss carryover by offsetting a large capital gain, it would be worth far more to me. (About $6,000 in reduced taxes for that year.) . . .

Congratulations.

Thanks :). It seems like a really good payoff for TLH-ing, which probably takes me an hour or two per year to actually do.

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ChasingSirens
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Re: U.S. stocks in freefall

Postby ChasingSirens » Mon Jan 04, 2016 10:35 pm

Maxing out my 2014 Roth IRA contribution tomorrow with VTSMX, what a great time to buy! :moneybag :beer

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Re: U.S. stocks in freefall

Postby dougger5 » Mon Jan 04, 2016 10:39 pm

ChasingSirens wrote:Just maxed out my 2014 Roth IRA contribution for the year, what a great time to buy! :moneybag :beer


Indeed, I had an auto-invest and some other shuffling arbitrarily scheduled for today. Not a bad day for either :)
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Re: U.S. stocks in freefall

Postby boglerdude » Mon Jan 04, 2016 11:44 pm

ChasingSirens wrote:Maxing out my 2014 Roth IRA contribution tomorrow with VTSMX

Is that supposed to say 2015?

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Re: U.S. stocks in freefall

Postby Leeraar » Tue Jan 05, 2016 12:18 am

boglerdude wrote:
ChasingSirens wrote:Maxing out my 2014 Roth IRA contribution tomorrow with VTSMX

Is that supposed to say 2015?

IMO, it should be 2016!

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")

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Re: U.S. stocks in freefall

Postby dbCooperAir » Tue Jan 05, 2016 1:51 pm

Did the deed today, filled up the his and hers Roth IRA with some international VXUS. They were still on sale, not as good as yesterday but not to bad :wink:
Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him. | -Dwight D. Eisenhower-

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Re: U.S. stocks in freefall

Postby boglerdude » Tue Jan 05, 2016 8:37 pm

Leeraar wrote:
boglerdude wrote:
ChasingSirens wrote:Maxing out my 2014 Roth IRA contribution tomorrow with VTSMX

Is that supposed to say 2015?

IMO, it should be 2016!

You can make a 2015 contribution until April 2016. Is 2014 a typo or is it possible to retroactively contribute
Edit: VVV thanks
Last edited by boglerdude on Tue Jan 05, 2016 9:35 pm, edited 2 times in total.

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Re: U.S. stocks in freefall

Postby ChasingSirens » Tue Jan 05, 2016 9:14 pm

Haha typo :oops:. Meant 2015.

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fortyofforty
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Re: U.S. stocks in freefall

Postby fortyofforty » Wed Jan 06, 2016 7:38 am

Just did the backdoor Roth conversion. Don't know why Vanguard always has a one-day delay in the entire process, but it should go through today. Hope the markets keep plummeting for a while longer.
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Re: U.S. stocks in freefall

Postby goodenyou » Wed Jan 06, 2016 7:52 am

fortyofforty wrote:Just did the backdoor Roth conversion. Don't know why Vanguard always has a one-day delay in the entire process, but it should go through today. Hope the markets keep plummeting for a while longer.


It appears that you will be getting what you are hoping for. Unfortunately, those at or near retirement age don't share the same sentiment even if they have a smaller allocation of equities.
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

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Re: U.S. stocks in freefall

Postby dbCooperAir » Wed Jan 06, 2016 10:19 am

Yesterday I was thinking how smart I was getting my 2016 Roth Funded, I Should have waited another day :twisted:

I fund the Roth every year around this time, sticking with the plan!
Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him. | -Dwight D. Eisenhower-

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Re: U.S. stocks in freefall

Postby InvestorNewb » Wed Jan 06, 2016 10:23 am

dbCooperAir wrote:Yesterday I was thinking how smart I was getting my 2016 Roth Funded, I Should have waited another day :twisted:

Me too.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

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Re: U.S. stocks in freefall

Postby cfs » Wed Jan 06, 2016 10:40 am

Be early on those IRA contributions!

Well, shipmates DBC and IN, Charles Schwab used to recommend to invest full contribution in your IRA on the first day of the year, in this way the money works for you from day one [or words to that effect]. Let Miss Market do whatever she wants to do, and as long as you don't sell low at the end of the road you win.

Thank you.
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Re: U.S. stocks in freefall

Postby dbCooperAir » Wed Jan 06, 2016 11:07 am

cfs wrote:Be early on those IRA contributions!

Well, shipmates DBC and IN, Charles Schwab used to recommend to invest full contribution in your IRA on the first day of the year, in this way the money works for you from day one [or words to that effect]. Let Miss Market do whatever she wants to do, and as long as you don't sell low at the end of the road you win.

Thank you.


Exactly, we are not market timers so getting in the market sooner just means its working faster, in theory anyway!
Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him. | -Dwight D. Eisenhower-

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Re: U.S. stocks in freefall

Postby ray.james » Wed Jan 06, 2016 2:12 pm

It is disheartening, if I have to TLH emerging markets again :?
Between dividends and EPS growth, international small cap was at least doing OK.
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avenger
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Re: U.S. stocks in freefall

Postby avenger » Wed Jan 06, 2016 6:32 pm

$5500 went into VTIAX in my Roth and did my annual rebalancing (into stocks) within my 457 yesterday.

$2100 going into VTSAX and VTIAX today per regular biweekly contributions to taxable account.

Just ignoring the noise and going to keep things on autopilot per my IPS.
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [Four fund portfolio + Stable Value fund]

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Re: U.S. stocks in freefall

Postby Taylor Larimore » Wed Jan 06, 2016 6:44 pm

Just ignoring the noise and going to keep things on autopilot per my IPS.

Avenger:

Jack Bogle would approve!

Stay-the-course and best wishes.

Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

Rodc
Posts: 13601
Joined: Tue Jun 26, 2007 9:46 am

Re: U.S. stocks in freefall

Postby Rodc » Wed Jan 06, 2016 8:15 pm

goodenyou wrote:
fortyofforty wrote:Just did the backdoor Roth conversion. Don't know why Vanguard always has a one-day delay in the entire process, but it should go through today. Hope the markets keep plummeting for a while longer.


It appears that you will be getting what you are hoping for. Unfortunately, those at or near retirement age don't share the same sentiment even if they have a smaller allocation of equities.



I am nearing retirement. While I would love to see the market go on a 20 year run up up up, I don't expect it. If we are going to have a fairly serious melt down I would just as soon get it over with now rather than 6 months after I retire.

It has been a long time since 2008-2009 so no one should be surprised if we get a market downturn. You know it has to happen some 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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