Hitting The Sell Button

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Dasnyc
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Re: Hitting The Sell Button

Post by Dasnyc » Sat Jan 06, 2018 3:05 am

67 years old, retired almost 4 years. I’ve gradually adjusted my asset allocation down to 35/55/10, so that no matter what the market does, I can pay my bills without having to change my lifestyle, and sleep at night without the anxieties of 2000 and 2008. I am not willing to lose what took me a lifetime to accumulate, due to greed. We all know that markets rise and fall, unpredictably Should the next big pullback last more than a few years, I will be OK. I am also quite content with last year’s 11.1% returns on my portfolio.

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fishandgolf
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Re: Hitting The Sell Button

Post by fishandgolf » Sat Jan 06, 2018 11:10 am

Dasnyc wrote:
Sat Jan 06, 2018 3:05 am
67 years old, retired almost 4 years. I’ve gradually adjusted my asset allocation down to 35/55/10, so that no matter what the market does, I can pay my bills without having to change my lifestyle, and sleep at night without the anxieties of 2000 and 2008. I am not willing to lose what took me a lifetime to accumulate, due to greed. We all know that markets rise and fall, unpredictably Should the next big pullback last more than a few years, I will be OK. I am also quite content with last year’s 11.1% returns on my portfolio.
+1 x 100

I am right there with ya Dasnyc. I have been contemplating a 40/60 realignment for several months; this weeks' incredible gains made me pull the trigger. I can live with a 40/60 AA....still have skin in the game but enough on the sideline when (not if ) the hammer falls. If I was a 30 year old (like my kids) just getting started, I would be at 90/10.

I sleep very well last night :sharebeer

vested1
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Re: Hitting The Sell Button

Post by vested1 » Sat Jan 06, 2018 11:53 am

nedsaid wrote:
Wed Jan 03, 2018 11:24 pm
Despite crying in my root beer all weekend over a portfolio return of "only" 15.01%, I can't help but notice the tremendous power of this bull market. Since July 2013, I have been mildly rebalancing from stocks to bonds. It seems like all I have been doing has been hitting the "sell" button, selling stocks in wave after wave as the market advances. Sort of like the hedge growing faster than you would have ever dreamed possible and it seems like you have to trim it back almost monthly. A nice problem to have but if I was 35 years old, I would simply be enjoying the ride. At 58, it seems to be like that laurel hedge growing out of control, a big chore to maintain. This is because I am concerned about controlling my risk as I get older. Ah to be young again!

How are other older investors like me reacting to this? Am I alone in how I feel about this?
I resemble that remark. Wife and I, 64.5/65.5, retired for two years next month and at 60/40 indefinitely with 15% of stocks in international. Right at rebalancing bands but having recently directed dividends to MM, imbalance is slowing. Don't sell anything for withdrawals until RMD.

Being old gives one more perspective, sometimes called wisdom, but more accurately greater experience in the consequence of temporary failure. Having set a series of seemingly unattainable goals during accumulation years, and passing them unexpectedly, a new goal was set at retirement. Delay SS to age 70 and spend from funds not subject to market influence. Zero gain assumed in expectations, and no selling of stocks or bonds, other than rebalancing until RMD's begin in 2023 has resulted in unexpected gains. Now only 10k from 7 figure target, translation: Luck. I'll take it.

At this point my wife and I could sustain a 40% loss in indexed stocks and still be at our estimated portfolio balance for this date, made at retirement. I refuse to react to the noise of an overheated stock market. If the sky does fall, the "Valium" provided by wiser heads here should keep us all well rested.

NotWhoYouThink
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Re: Hitting The Sell Button

Post by NotWhoYouThink » Sat Jan 06, 2018 12:55 pm

Ask me in 3 years. That will be the first year since retirement I won't be getting a payout from my Megacorp deferred income plan. That payout has been coming in January. The money is in a Target Fund at Megacorp, but gets liquidated when paid out to me, and then I have to figure out what to do with it. This year, that means selling off some TSM in the IRA, and buying TSM/International in the after-tax account. IRA is almost all bonds now, next year I'll probably have to start using DH's IRA to do the re-balance.

In 2021, there will be no forcing function in January, we'll see whether I am disciplined enough to make an adjustment anyway.

JimmyJammy
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Re: Hitting The Sell Button

Post by JimmyJammy » Sun Jan 07, 2018 1:05 am

I'm 41 and 90/10. Unfortunately, I have not been sleeping well at night lately as I've been seeing and hearing signs of stock market euphoria all around me. Everyone at work is crazy about Bitcoin. Friends and family who haven't been investing much in the stock market for the last ten years are asking me for stock advice - "what should I buy?" And the market is frothy indeed.

So, I think, to sleep better, I need to adjust my asset allocation. Probably down to 65/35. What holds me back are long term capital gains in my taxable account. I guess I could make the move to bonds in my Roth IRA and 401(k) only...
Any advice?

HenrySouthernCal
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Re: Hitting The Sell Button

Post by HenrySouthernCal » Sun Jan 07, 2018 2:03 am

JimmyJammy wrote:
Sun Jan 07, 2018 1:05 am
I'm 41 and 90/10. Unfortunately, I have not been sleeping well at night lately as I've been seeing and hearing signs of stock market euphoria all around me. Everyone at work is crazy about Bitcoin. Friends and family who haven't been investing much in the stock market for the last ten years are asking me for stock advice - "what should I buy?" And the market is frothy indeed.

So, I think, to sleep better, I need to adjust my asset allocation. Probably down to 65/35. What holds me back are long term capital gains in my taxable account. I guess I could make the move to bonds in my Roth IRA and 401(k) only...
Any advice?
I doubt stock market is now in euphoria stage, it is probably in rational exuberance, maybe close to irrational level. My take is U.S. stock market is richly valued, but not in bubble. The bond market is equally richly valued. I know many many people stayed out of stock market from 2009-2016 and just some are gradually moving back to stocks last and this year. Many more crowd follower could move in later after they learn how their friends make money from stock market. Greenspan made famous irrational exuberance speech, but the market didn't crash until 4 years later. The near term trigger point for me to meanful selling stock to bonds is any of the two:
1) Overal market run up huge like 40-50% from now in 1 or 2 years time frame
2) Significant move-up in bond yield such as 10 year treasury moves to 3.2%.

Yukon
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Re: Hitting The Sell Button

Post by Yukon » Sun Jan 07, 2018 6:19 am

JimmyJammy wrote:
Sun Jan 07, 2018 1:05 am
I'm 41 and 90/10. Unfortunately, I have not been sleeping well at night lately as I've been seeing and hearing signs of stock market euphoria all around me. Everyone at work is crazy about Bitcoin. Friends and family who haven't been investing much in the stock market for the last ten years are asking me for stock advice - "what should I buy?" And the market is frothy indeed.

So, I think, to sleep better, I need to adjust my asset allocation. Probably down to 65/35. What holds me back are long term capital gains in my taxable account. I guess I could make the move to bonds in my Roth IRA and 401(k) only...
Any advice?
Similar age and dilemma here. I was 80:20 for the previous 15 years but in the last year or two have started shifting tax deferred space to bonds and gliding towards 60:40 by age 50+. That glide speed is dependent on how quickly the goal is within reach. If I'm 90% to goal than my allocation can be 90% closer towards being 60:40. I think forum member VAN on here has a glide path post?
Don't Work Forever.

Agggm
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Re: Hitting The Sell Button

Post by Agggm » Sun Jan 07, 2018 6:34 am

triceratop wrote:
Thu Jan 04, 2018 1:31 am
nedsaid,
The converse is that it feels painful to buy intermediate-term bonds as a young accumulator, despite my aggressively-tilted 90/10 portfolio. These days it seems like all of my dividends go towards bonds. However, most of my contributions still do go towards stocks. However, I'm sure I'll appreciate those bonds when the next bear market happens. I was able to buy into the 2016 bear market solely with cash flow.
2016 bear? There was a ~10% pullback starting from Sept from memory. But the year ended up.

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triceratop
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Re: Hitting The Sell Button

Post by triceratop » Sun Jan 07, 2018 7:04 am

Agggm wrote:
Sun Jan 07, 2018 6:34 am
triceratop wrote:
Thu Jan 04, 2018 1:31 am
nedsaid,
The converse is that it feels painful to buy intermediate-term bonds as a young accumulator, despite my aggressively-tilted 90/10 portfolio. These days it seems like all of my dividends go towards bonds. However, most of my contributions still do go towards stocks. However, I'm sure I'll appreciate those bonds when the next bear market happens. I was able to buy into the 2016 bear market solely with cash flow.
2016 bear? There was a ~10% pullback starting from Sept from memory. But the year ended up.
Many investors hold asset classes other than US large cap. Even the median S&P500 stock was in bear market territory, in addition to many other asset classes. Judging an entire portfolio by how US large cap equities are performing seems like a mistake.

Also, using Jan 1 as a reset marker for any beat market to be judged against is not correct. January 1 is arbitrary, and is why people measure max drawdowns rather than calendar year returns
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

Agggm
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Re: Hitting The Sell Button

Post by Agggm » Sun Jan 07, 2018 8:32 am

triceratop wrote:
Sun Jan 07, 2018 7:04 am
Agggm wrote:
Sun Jan 07, 2018 6:34 am
triceratop wrote:
Thu Jan 04, 2018 1:31 am
nedsaid,
The converse is that it feels painful to buy intermediate-term bonds as a young accumulator, despite my aggressively-tilted 90/10 portfolio. These days it seems like all of my dividends go towards bonds. However, most of my contributions still do go towards stocks. However, I'm sure I'll appreciate those bonds when the next bear market happens. I was able to buy into the 2016 bear market solely with cash flow.
2016 bear? There was a ~10% pullback starting from Sept from memory. But the year ended up.
Many investors hold asset classes other than US large cap. Even the median S&P500 stock was in bear market territory, in addition to many other asset classes. Judging an entire portfolio by how US large cap equities are performing seems like a mistake.

Also, using Jan 1 as a reset marker for any beat market to be judged against is not correct. January 1 is arbitrary, and is why people measure max drawdowns rather than calendar year returns
Jan 1 is arbitrary but calendar year returns are commonly quoted in reports.

Sp500 is also arbitrary but it's ~80% of public U.S. market which itself is ~ 50% public world market and is often quoted.

My own portfolio is over 60% ex sp500 and hold size and sector tilts so I agree that it's only a crude proxy.

That said, even intl did well in 2016. VT (the market portfolio) returned nearly 9% in 2016. I would prefer VT be common instead of sp500, but it's practically convention.

If someone's portfolio H entered a bear market in 2016 (20%+ pullback) in 2016, then H was far from the market weight and does fall out of scope of ordinary market dialogue of historical events.

So the reply is inapplicable.

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triceratop
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Re: Hitting The Sell Button

Post by triceratop » Sun Jan 07, 2018 8:44 am

Agggm wrote:
Sun Jan 07, 2018 8:32 am
triceratop wrote:
Sun Jan 07, 2018 7:04 am
Agggm wrote:
Sun Jan 07, 2018 6:34 am
triceratop wrote:
Thu Jan 04, 2018 1:31 am
nedsaid,
The converse is that it feels painful to buy intermediate-term bonds as a young accumulator, despite my aggressively-tilted 90/10 portfolio. These days it seems like all of my dividends go towards bonds. However, most of my contributions still do go towards stocks. However, I'm sure I'll appreciate those bonds when the next bear market happens. I was able to buy into the 2016 bear market solely with cash flow.
2016 bear? There was a ~10% pullback starting from Sept from memory. But the year ended up.
Many investors hold asset classes other than US large cap. Even the median S&P500 stock was in bear market territory, in addition to many other asset classes. Judging an entire portfolio by how US large cap equities are performing seems like a mistake.

Also, using Jan 1 as a reset marker for any beat market to be judged against is not correct. January 1 is arbitrary, and is why people measure max drawdowns rather than calendar year returns
Jan 1 is arbitrary but calendar year returns are commonly quoted in reports.

Sp500 is also arbitrary but it's ~80% of public U.S. market which itself is ~ 50% public world market and is often quoted.

My own portfolio is over 60% ex sp500 and hold size and sector tilts so I agree that it's only a crude proxy.

That said, even intl did well in 2016. VT (the market portfolio) returned nearly 9% in 2016. I would prefer VT be common instead of sp500, but it's practically convention.

If someone's portfolio H entered a bear market in 2016 (20%+ pullback) in 2016, then H was far from the market weight and does fall out of scope of ordinary market dialogue of historical events.

So the reply is inapplicable.
I don't know what year-end VT returns for 2016 have to do with whether a pullback occurred in equities, including international. The fact reports commonly quote calendar year returns is unconvincing; they're making the same mistake. Max Drawdowns is simply a much better metric than calendar year returns. Given that I don't know why you mentioned it. Pullback doesn't reset at Jan 1, and international especially EM dipped significantly. It was certainly a bear market. EM value was especially in bear territory--its PE ratios were in single digits too! Also, SCV, say Russell 2000 Value, was definitely in bear territory. All this is easily confirmable.

See also: http://ritholtz.com/2017/09/no-not-seco ... rket-ever/

My reply was perfectly accurate.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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CyclingDuo
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Re: Hitting The Sell Button

Post by CyclingDuo » Sun Jan 07, 2018 9:06 am

Agggm wrote:
Sun Jan 07, 2018 6:34 am
triceratop wrote:
Thu Jan 04, 2018 1:31 am
nedsaid,
The converse is that it feels painful to buy intermediate-term bonds as a young accumulator, despite my aggressively-tilted 90/10 portfolio. These days it seems like all of my dividends go towards bonds. However, most of my contributions still do go towards stocks. However, I'm sure I'll appreciate those bonds when the next bear market happens. I was able to buy into the 2016 bear market solely with cash flow.
2016 bear? There was a ~10% pullback starting from Sept from memory. But the year ended up.
....we resumed a NEW Bull Market in July 2016 (that really began in Jan 2013, NOT March 2009). Very few people want to talk about the Bear Market that recently happened from mid 2015 to mid 2016 where the average stock corrected over 20% and many of the leading sectors corrected between 25-50%. A similar thing happened from early 1994 to early 1995 BEFORE the market went on a strong run as shown below...
https://www.joefahmy.com/2017/04/29/mar ... rmedbroker

https://en.wikipedia.org/wiki/2015%E2%8 ... et_selloff

https://www.cnbc.com/2015/09/29/we-are- ... worth.html

http://money.cnn.com/2016/01/08/investi ... index.html
"Everywhere is within walking distance if you have the time." ~ Steven Wright

Dudley
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Re: Hitting The Sell Button

Post by Dudley » Sun Jan 07, 2018 9:16 am

JimmyJammy wrote:
Sun Jan 07, 2018 1:05 am
I'm 41 and 90/10. Unfortunately, I have not been sleeping well at night ....

So, I think, to sleep better, I need to adjust my asset allocation. Probably down to 65/35. What holds me back are long term capital gains in my taxable account. ...
Any advice?
Sometimes paying tax is a necessary evil. Don't let the (tax) tail wag the (investment) dog.

BigJohn
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Re: Hitting The Sell Button

Post by BigJohn » Sun Jan 07, 2018 10:03 am

Dudley wrote:
Sun Jan 07, 2018 9:16 am
Sometimes paying tax is a necessary evil. Don't let the (tax) tail wag the (investment) dog.
+1, especially if you are not sleeping well at night because you feel your risk is too high. What's worse, locking in gains, paying taxes and sleeping better or..... a significant correction that lowers your stock allocation and allows tax lost harvesting?

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Ethelred
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Re: Hitting The Sell Button

Post by Ethelred » Sun Jan 07, 2018 10:28 am

For a forum that "doesn't believe in market timing", there's an unreasonable amount of market timing going on in this thread.

Agggm
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Re: Hitting The Sell Button

Post by Agggm » Sun Jan 07, 2018 11:58 am

triceratop wrote:
Sun Jan 07, 2018 8:44 am
Agggm wrote:
Sun Jan 07, 2018 8:32 am
triceratop wrote:
Sun Jan 07, 2018 7:04 am
Agggm wrote:
Sun Jan 07, 2018 6:34 am
triceratop wrote:
Thu Jan 04, 2018 1:31 am
nedsaid,
The converse is that it feels painful to buy intermediate-term bonds as a young accumulator, despite my aggressively-tilted 90/10 portfolio. These days it seems like all of my dividends go towards bonds. However, most of my contributions still do go towards stocks. However, I'm sure I'll appreciate those bonds when the next bear market happens. I was able to buy into the 2016 bear market solely with cash flow.
2016 bear? There was a ~10% pullback starting from Sept from memory. But the year ended up.
Many investors hold asset classes other than US large cap. Even the median S&P500 stock was in bear market territory, in addition to many other asset classes. Judging an entire portfolio by how US large cap equities are performing seems like a mistake.

Also, using Jan 1 as a reset marker for any beat market to be judged against is not correct. January 1 is arbitrary, and is why people measure max drawdowns rather than calendar year returns
Jan 1 is arbitrary but calendar year returns are commonly quoted in reports.

Sp500 is also arbitrary but it's ~80% of public U.S. market which itself is ~ 50% public world market and is often quoted.

My own portfolio is over 60% ex sp500 and hold size and sector tilts so I agree that it's only a crude proxy.

That said, even intl did well in 2016. VT (the market portfolio) returned nearly 9% in 2016. I would prefer VT be common instead of sp500, but it's practically convention.

If someone's portfolio H entered a bear market in 2016 (20%+ pullback) in 2016, then H was far from the market weight and does fall out of scope of ordinary market dialogue of historical events.

So the reply is inapplicable.
I don't know what year-end VT returns for 2016 have to do with whether a pullback occurred in equities, including international. The fact reports commonly quote calendar year returns is unconvincing; they're making the same mistake. Max Drawdowns is simply a much better metric than calendar year returns. Given that I don't know why you mentioned it. Pullback doesn't reset at Jan 1, and international especially EM dipped significantly. It was certainly a bear market. EM value was especially in bear territory--its PE ratios were in single digits too! Also, SCV, say Russell 2000 Value, was definitely in bear territory. All this is easily confirmable.

See also: http://ritholtz.com/2017/09/no-not-seco ... rket-ever/

My reply was perfectly accurate.
EM value is small inside VT.
I agree pull backs are more important. But conventions exist and we model by them.
Agree to disagree on the applicability of said reply.

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nedsaid
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Re: Hitting The Sell Button

Post by nedsaid » Sun Jan 07, 2018 12:19 pm

JimmyJammy wrote:
Sun Jan 07, 2018 1:05 am
I'm 41 and 90/10. Unfortunately, I have not been sleeping well at night lately as I've been seeing and hearing signs of stock market euphoria all around me. Everyone at work is crazy about Bitcoin. Friends and family who haven't been investing much in the stock market for the last ten years are asking me for stock advice - "what should I buy?" And the market is frothy indeed.

So, I think, to sleep better, I need to adjust my asset allocation. Probably down to 65/35. What holds me back are long term capital gains in my taxable account. I guess I could make the move to bonds in my Roth IRA and 401(k) only...
Any advice?
In early 2000, I was 94% stocks/6% bonds and cash in my retirement. I was 40 years old at the time. The market was frothy and I was starting to learn about portfolio theory. So what I did was sell about 15% of my stocks and that took me to 80% stocks and 20% bonds and cash. I also invested my new monies for investment at a ratio of 60% stocks and 40% bonds. After a few years, I worked down to about 70% stocks and 30% bonds and cash. What you are considering sounds a lot like what I did.

The difference is that early 2000, we were in a true euphoria. People had been quitting their jobs to take up day trading. A family member was doing day trading. The forward P/E on the US Total Stock Market Index is almost 22, as I recall forward P/E's got up to about 32 in early 2000 before it all crashed. Recently, individual investors were pulling money out of stock market mutual funds, this was probably just prudent rebalancing of portfolios. We are not experiencing euphoria now. This thread is evidence of that. So the market is expensive but this doesn't feel like the late 1990's.
A fool and his money are good for business.

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Sandtrap
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Re: Hitting The Sell Button

Post by Sandtrap » Sun Jan 07, 2018 12:40 pm

nedsaid wrote:
Wed Jan 03, 2018 11:24 pm
Despite crying in my root beer all weekend over a portfolio return of "only" 15.01%, I can't help but notice the tremendous power of this bull market. Since July 2013, I have been mildly rebalancing from stocks to bonds. It seems like all I have been doing has been hitting the "sell" button, selling stocks in wave after wave as the market advances. Sort of like the hedge growing faster than you would have ever dreamed possible and it seems like you have to trim it back almost monthly. A nice problem to have but if I was 35 years old, I would simply be enjoying the ride. At 58, it seems to be like that laurel hedge growing out of control, a big chore to maintain. This is because I am concerned about controlling my risk as I get older. Ah to be young again!

How are other older investors like me reacting to this? Am I alone in how I feel about this?
Thanks for the great post, "Nedsaid". Always on target. Touche!

I felt like I was the only one thinking about this. I'm in retirement and have let the "bull" run and run. Now, my allocation is out of wack.

I have a monster CD that's coming out in a few days, and am tempted to rebalance at the existing "out of wack" allocation instead of according to my IPS (30/70). The "Bogle" way would be to rebalance to fixed with the new money. . . .but. . . .I worry about "losing out" when I know I should "stay the course".

For seniors, there's not time to go through a "recover" because we're already looking at the "exit sign" at the end of the hallway. And, being 35 is no longer visible in the rear view mirror.

I had a long discussion with DW about this recently. That's why my recent post on "Sequence of Returns Risk".

You're not alone at all.

Thanks for posting this topic.
j :D

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nedsaid
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Re: Hitting The Sell Button

Post by nedsaid » Sun Jan 07, 2018 1:21 pm

Sandtrap, everybody has a unique situation. What I am doing is stimulating people's thinking and not necessarily telling them exactly what to do.

One reason I am nervous is that my income stream has been somewhat erratic over the last three years. After an October 2014 lay-off, I have lived off of severance, contract work, tax work, and unemployment. I am working now but it took almost 6 months to find work. During that time, I pretty much have worked two years and been off for one. In my case, I am thinking about asset allocation and valuations because of a potential need to tap retirement savings earlier than expected. In other words, my time horizon seems a lot shorter than it would be were I in a secure well-paying job.

I have not "won the game" but I am getting closer. I also wonder if I am getting my future gains up front with this terrific stock market rally. What I don't want to experience is a market crash with a relatively aggressive portfolio just before winning the game.

As for you, you have won the game and thus aren't missing out. You are experiencing the natural human tendency to want to chase performance. Successful investing involves tuning out those unhelpful emotions. Warren Buffett was right about being greedy when others are fearful and fearful when others are being greedy. You are doing fine and as I recall you have real estate investments as well. In some areas of the country, including mine, real estate is doing well.
A fool and his money are good for business.

Random Walker
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Re: Hitting The Sell Button

Post by Random Walker » Sun Jan 07, 2018 2:11 pm

Ethelred,
I think most of us are not talking about market timing. We are talking about substantial few times in a lifetime changes to the asset allocation. Valuations do matter. High past returns result in high valuations, lower future expected returns, whole dispersion of potential future returns shifts left. Potential good outcomes are pretty modest and potential bad outcomes are really bad. I would consider this opportunistically adjusting The Glidepath to retirement portfolio rather than blatant market timing.

Dave

Silverado
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Re: Hitting The Sell Button

Post by Silverado » Sun Jan 07, 2018 3:32 pm

Random Walker wrote:
Sun Jan 07, 2018 2:11 pm
Ethelred,
I think most of us are not talking about market timing. We are talking about substantial few times in a lifetime changes to the asset allocation. Valuations do matter. High past returns result in high valuations, lower future expected returns, whole dispersion of potential future returns shifts left. Potential good outcomes are pretty modest and potential bad outcomes are really bad. I would consider this opportunistically adjusting The Glidepath to retirement portfolio rather than blatant market timing.

Dave
Ah, so fancy, obfuscated market timing.

With the crazy run of international coupled with the continued climb of US, some unblances in our portfolio became more magnified, so we have been gliding slowly but steadily back to our AA. That has meant monthly shifting from international to US. All in IRA, so no tax worries. We also paid off the mortgage early last year, so our taxable inflow has greatly increased, somI have tracked things a little closer. As a result of all that taxable money, we also moved money into bond in one pf our 401k accounts. We have a large enough portfolio that new purchases don't move the AA much, so just once every six or so months I look to see if some rebalancing is needed. The international move is just once a month I shift $10k. Not too much contemplating.

I am poised in the event of downtown to get out from under two funds in taxable that have a lot of gains. It's fun to look at the graphs of those. You can tell exactly when I moved to Boglehead mentality. Monthly purchases stopped and reinvesting distributions stopped. And the purchases went to VTSAX.

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Ethelred
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Re: Hitting The Sell Button

Post by Ethelred » Sun Jan 07, 2018 3:35 pm

Random Walker wrote:
Sun Jan 07, 2018 2:11 pm
Ethelred,
I think most of us are not talking about market timing. We are talking about substantial few times in a lifetime changes to the asset allocation. Valuations do matter. High past returns result in high valuations, lower future expected returns, whole dispersion of potential future returns shifts left. Potential good outcomes are pretty modest and potential bad outcomes are really bad. I would consider this opportunistically adjusting The Glidepath to retirement portfolio rather than blatant market timing.

Dave
I'm not sure. I just re-read the thread, and most people talk about how frequently they need to rebalance to keep within their asset allocation bands, but there are also plenty of people who are adjusting their AA because they don't feel comfortable. None of those posts talk about back-testing against historic CAPE or other metrics as justification, it's all about "being able to sleep at night". And amusingly, the clearest example of this sort of market timing is actually the quoted interview with Bill Bernstein.

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Re: Hitting The Sell Button

Post by Atilla » Sun Jan 07, 2018 3:38 pm

Tomorrow I'm selling my next-to-last individual stock holding. Looking back the 10 years I've held it I'm up 300% including dividends.

Time to declare victory, sell and put the money into a 5 year CD to coincide with the time I may be stepping away from my career to do something less stressful and less profitable. It's a small step, but it's a step. :sharebeer
The Village Idiot - here for your entertainment.

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Sandtrap
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Re: Hitting The Sell Button

Post by Sandtrap » Sun Jan 07, 2018 4:03 pm

nedsaid wrote:
Sun Jan 07, 2018 1:21 pm
Sandtrap, everybody has a unique situation. What I am doing is stimulating people's thinking and not necessarily telling them exactly what to do.

One reason I am nervous is that my income stream has been somewhat erratic over the last three years. After an October 2014 lay-off, I have lived off of severance, contract work, tax work, and unemployment. I am working now but it took almost 6 months to find work. During that time, I pretty much have worked two years and been off for one. In my case, I am thinking about asset allocation and valuations because of a potential need to tap retirement savings earlier than expected. In other words, my time horizon seems a lot shorter than it would be were I in a secure well-paying job.

I have not "won the game" but I am getting closer. I also wonder if I am getting my future gains up front with this terrific stock market rally. What I don't want to experience is a market crash with a relatively aggressive portfolio just before winning the game.

As for you, you have won the game and thus aren't missing out. You are experiencing the natural human tendency to want to chase performance. Successful investing involves tuning out those unhelpful emotions. Warren Buffett was right about being greedy when others are fearful and fearful when others are being greedy. You are doing fine and as I recall you have real estate investments as well. In some areas of the country, including mine, real estate is doing well.
Thanks "nedsaid". Always value your input.
I also had a similar experience, sort of, in 2012. I was also in a R/E group and got layed off. (greedy partners :( ) No monthly check and went on unemployment. Financials were in limbo.

Fortunately I had my own holdings to help keep me afloat. The transition was stressful for 3 years but worked out ok. I was not planning to ever retire but it's nicer than I thought. :D

Yes. I've been blessed with some success in R/E.
I will be tested if there is a R/E downturn to expand again but will resist. :shock:
Ambition can be difficult to "dial down" in retirement when one is no longer in the "accumulation phase".
Will "heed" Mr. Buffett.

mahalo,
j :D

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nedsaid
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Re: Hitting The Sell Button

Post by nedsaid » Sun Jan 07, 2018 4:16 pm

Ethelred wrote:
Sun Jan 07, 2018 10:28 am
For a forum that "doesn't believe in market timing", there's an unreasonable amount of market timing going on in this thread.
I think that a lot of people here including myself practice mild forms of market timing. What I and others are doing is most likely a re-evaluation of our risk profile and asset allocation in response to advancing age and zooming markets. As asset classes achieve higher and higher valuations, future expected returns get to be lower and lower in return for taking higher and higher risks. There is little talk of using particular market or economic indicators as timing signals. The discussion echoes the John Bogle theme of reversion to the mean. Speaking for myself, I am looking to decrease risk and portfolio volatility.

What I am doing is looking at history and applying the lessons learned. If you believe that expected future returns decrease and pricing risk increase with higher valuations, it is perfectly rational to cut back as the markets advance. One reason I am concerned is that we are seeing continued Price/Earnings expansion, in other words the market is continuing to pay more and more for the same dollar of earnings. If the market was advancing and yet P/E ratios were staying the same or even falling a tiny bit, I would not be so concerned.

Recall John Bogle's discussion of business return and speculative return. Business return comes from growth of earnings and speculative return relates to how much the market is willing to pay for a dollar of earnings.

Over the last few years, I have seen forward P/E ratios based upon optimistic Wall Street earnings forecasts rise from 17-18 to 21-22. That my friend is speculative return. Instead of paying $17 for $1 of forecasted earnings, Wall Street now is willing to pay $22 for every $1 of forecasted earnings. Can't speak for anyone else but at least for me, it causes a raised eyebrow. Investors have to make the judgment whether or not the increase in P/E ratios are justified.
A fool and his money are good for business.

ColoradoRick
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Re: Hitting The Sell Button

Post by ColoradoRick » Sun Jan 07, 2018 4:31 pm

Stormbringer wrote:
Fri Jan 05, 2018 8:10 am
What I've been selling is BONDS ... and building a CD ladder in my 401(k) instead. The yields a bit higher and I don't have to worry about principal loss.
+1

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triceratop
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Re: Hitting The Sell Button

Post by triceratop » Sun Jan 07, 2018 4:58 pm

Agggm wrote:
Sun Jan 07, 2018 11:58 am
triceratop wrote:
Sun Jan 07, 2018 8:44 am
Agggm wrote:
Sun Jan 07, 2018 8:32 am
triceratop wrote:
Sun Jan 07, 2018 7:04 am
Agggm wrote:
Sun Jan 07, 2018 6:34 am


2016 bear? There was a ~10% pullback starting from Sept from memory. But the year ended up.
Many investors hold asset classes other than US large cap. Even the median S&P500 stock was in bear market territory, in addition to many other asset classes. Judging an entire portfolio by how US large cap equities are performing seems like a mistake.

Also, using Jan 1 as a reset marker for any beat market to be judged against is not correct. January 1 is arbitrary, and is why people measure max drawdowns rather than calendar year returns
Jan 1 is arbitrary but calendar year returns are commonly quoted in reports.

Sp500 is also arbitrary but it's ~80% of public U.S. market which itself is ~ 50% public world market and is often quoted.

My own portfolio is over 60% ex sp500 and hold size and sector tilts so I agree that it's only a crude proxy.

That said, even intl did well in 2016. VT (the market portfolio) returned nearly 9% in 2016. I would prefer VT be common instead of sp500, but it's practically convention.

If someone's portfolio H entered a bear market in 2016 (20%+ pullback) in 2016, then H was far from the market weight and does fall out of scope of ordinary market dialogue of historical events.

So the reply is inapplicable.
I don't know what year-end VT returns for 2016 have to do with whether a pullback occurred in equities, including international. The fact reports commonly quote calendar year returns is unconvincing; they're making the same mistake. Max Drawdowns is simply a much better metric than calendar year returns. Given that I don't know why you mentioned it. Pullback doesn't reset at Jan 1, and international especially EM dipped significantly. It was certainly a bear market. EM value was especially in bear territory--its PE ratios were in single digits too! Also, SCV, say Russell 2000 Value, was definitely in bear territory. All this is easily confirmable.

See also: http://ritholtz.com/2017/09/no-not-seco ... rket-ever/

My reply was perfectly accurate.
EM value is small inside VT.
I agree pull backs are more important. But conventions exist and we model by them.
Agree to disagree on the applicability of said reply.
I see no reason to model by flawed conventions when better metrics exist. I also disagree that it is the convention, at least among the better investment professionals. I mean, the well known statistics associated with the 2008 bear market measure from market top to market bottom not individual 2007,2008, and 2009 returns which hide the severity of losses investors experienced.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Hitting The Sell Button

Post by Agggm » Sun Jan 07, 2018 8:50 pm

triceratop wrote:
Sun Jan 07, 2018 4:58 pm
Agggm wrote:
Sun Jan 07, 2018 11:58 am
triceratop wrote:
Sun Jan 07, 2018 8:44 am
Agggm wrote:
Sun Jan 07, 2018 8:32 am
triceratop wrote:
Sun Jan 07, 2018 7:04 am


Many investors hold asset classes other than US large cap. Even the median S&P500 stock was in bear market territory, in addition to many other asset classes. Judging an entire portfolio by how US large cap equities are performing seems like a mistake.

Also, using Jan 1 as a reset marker for any beat market to be judged against is not correct. January 1 is arbitrary, and is why people measure max drawdowns rather than calendar year returns
Jan 1 is arbitrary but calendar year returns are commonly quoted in reports.

Sp500 is also arbitrary but it's ~80% of public U.S. market which itself is ~ 50% public world market and is often quoted.

My own portfolio is over 60% ex sp500 and hold size and sector tilts so I agree that it's only a crude proxy.

That said, even intl did well in 2016. VT (the market portfolio) returned nearly 9% in 2016. I would prefer VT be common instead of sp500, but it's practically convention.

If someone's portfolio H entered a bear market in 2016 (20%+ pullback) in 2016, then H was far from the market weight and does fall out of scope of ordinary market dialogue of historical events.

So the reply is inapplicable.
I don't know what year-end VT returns for 2016 have to do with whether a pullback occurred in equities, including international. The fact reports commonly quote calendar year returns is unconvincing; they're making the same mistake. Max Drawdowns is simply a much better metric than calendar year returns. Given that I don't know why you mentioned it. Pullback doesn't reset at Jan 1, and international especially EM dipped significantly. It was certainly a bear market. EM value was especially in bear territory--its PE ratios were in single digits too! Also, SCV, say Russell 2000 Value, was definitely in bear territory. All this is easily confirmable.

See also: http://ritholtz.com/2017/09/no-not-seco ... rket-ever/

My reply was perfectly accurate.
EM value is small inside VT.
I agree pull backs are more important. But conventions exist and we model by them.
Agree to disagree on the applicability of said reply.
I see no reason to model by flawed conventions when better metrics exist. I also disagree that it is the convention, at least among the better investment professionals. I mean, the well known statistics associated with the 2008 bear market measure from market top to market bottom not individual 2007,2008, and 2009 returns which hide the severity of losses investors experienced.
We're still having this conversation?
We disagree. Moving on...

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Re: Hitting The Sell Button

Post by thx1138 » Mon Jan 08, 2018 7:05 am

The longer a bull market runs the more people are going to "win the game" or "make their number" before they expected to. Unless they happened to write their IPS in a particularly forward looking way they are likely going to need to revisit their IPS and make some changes. Even if their "IPS" is a vague plan in their head the same holds true. Throw in some very significant tax changes of late (increased std. deduction plus cap on SALT deduction making a large fraction of mortgage interest no longer deductible, changes in marginal rates, significant 529 changes) and lots of people should be revisiting their physical or mental IPS.

Now of course there really isn't as a practical sense an exact point of "winning the game" or "making the number" but a long bull market gets people to where they need to think about what their risk profile is and what it really needs to be before they thought they needed to think about such things. It doesn't have to have anything to do with CAPE, P/E or reversion to the mean. Folks just have more assets earlier in life than they originally planned to and unless you wrote some obsessive and over analyzed IPS that took into account every possible future path chances are it is time for a course correction or at a minimum thinking about a course correction.

To me the most important part of an IPS is planning for what happens in a downturn and I suspect that's what many IPS writers think the most about. That's also the case in which a needling "what does your IPS say?" post makes a lot of sense - don't panic sell in a downturn and just execute your already formed plan for bad market conditions. Certainly the same principle holds in helping to not get cold feet in a market that feels "frothy" and attempting to market time by pulling equities to cash/FI only to endlessly wait for a "good time to get back in" while losing out on returns. That said, I think the trite "what does your IPS say?" post isn't a particularly useful or realistic response to the "sell button" question as posed. If your portfolio is where you expected it to be at age 65 when you are only 55 now you've got some rethinking to do. Can you retire earlier? How should your portfolio be positioned if you are going to do so? Adding five or ten years of draw down without SS and Medicare is a big change that potentially requires significant rethinking of a glide slope. In that case "what does your IPS say?" is akin to saying "put your head back in the ground and shut up" which isn't particularly good advice.

The danger then is being forced to rethink an IPS by a long bull market means that you are making new decisions and could potentially make bad ones. You could suffer recency bias and make a plan based on those juiced returns continuing indefinitely. Or you could get cold feet and pull back from equities too far to some degree. So it needs to be done with a cool head - but I suspect for 90% or more of the IPS out there they really aren't meant to be static documents that when written at age 30 have already considered the draw down phase and all future possible tax and market changes. The typical IPS needs a periodic update and one of the triggers for that is getting near "the number". More people get near "the number" faster in a long bull market.

As for our portfolio it ran 100/0 all through the dotcom explosion and the Great Unhappiness of 2008/9. Didn't blink an eye and just continued buying. Eventually because of age started to move to 90/10. A little later 80/20. Well as nedsaid said the market just keeps climbing and just maintaining that ratio means selling. I don't like to rebalance frequently, usually only every two years or so with annual shifts in where contributions are going. We are back at 87/13 just now. It is also about time to ratchet down to 75/25 so this month will be a pretty significant move to FI compared to any of our previous moves. Also reshuffling asset locations based on changes in fund availability in some of our retirement plans.

Due to the new tax laws we paid off the mortgage. We would have probably wanted to refi by the end of the year since our 5/5 was about to adjust to 5yr CMT+2% in the fall. Without the mortgage interest deduction the liquidity premium for holding the mortgage was just too high. Paying off the mortgage has effectively significantly de-risked our portfolio and was akin to a large shift to FI.

Does CAPE scare me? No. I've been through the "end of the world" twice now with a 100/0 allocation. Since I hope to have to plan a good 50 year long retirement I need to be comfortable with something like 75/25 or 70/30 for the long haul anyway. But we did see effectively a pretty significant shift to FI this month due to a perfect storm of high past returns combined with a mortgage choice driven by a significant tax law change. Our IPS evolved a bit as a consequence as well.

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Re: Hitting The Sell Button

Post by RudyS » Mon Jan 08, 2018 9:43 am

deleted - wrong topic, sorry
Last edited by RudyS on Mon Jan 08, 2018 1:46 pm, edited 1 time in total.

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Ethelred
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Re: Hitting The Sell Button

Post by Ethelred » Mon Jan 08, 2018 10:20 am

nedsaid wrote:
Sun Jan 07, 2018 4:16 pm
I think that a lot of people here including myself practice mild forms of market timing. What I and others are doing is most likely a re-evaluation of our risk profile and asset allocation in response to advancing age and zooming markets. As asset classes achieve higher and higher valuations, future expected returns get to be lower and lower in return for taking higher and higher risks. There is little talk of using particular market or economic indicators as timing signals. The discussion echoes the John Bogle theme of reversion to the mean. Speaking for myself, I am looking to decrease risk and portfolio volatility.

What I am doing is looking at history and applying the lessons learned. If you believe that expected future returns decrease and pricing risk increase with higher valuations, it is perfectly rational to cut back as the markets advance. One reason I am concerned is that we are seeing continued Price/Earnings expansion, in other words the market is continuing to pay more and more for the same dollar of earnings. If the market was advancing and yet P/E ratios were staying the same or even falling a tiny bit, I would not be so concerned.

Recall John Bogle's discussion of business return and speculative return. Business return comes from growth of earnings and speculative return relates to how much the market is willing to pay for a dollar of earnings.

Over the last few years, I have seen forward P/E ratios based upon optimistic Wall Street earnings forecasts rise from 17-18 to 21-22. That my friend is speculative return. Instead of paying $17 for $1 of forecasted earnings, Wall Street now is willing to pay $22 for every $1 of forecasted earnings. Can't speak for anyone else but at least for me, it causes a raised eyebrow. Investors have to make the judgment whether or not the increase in P/E ratios are justified.
I understand what you're saying, but it seems reasonable here to ask "What does your IPS say?" Does it say, "I will increase my bond allocation in response to high market valuations"? Because you are a well-read and experienced investor, and you already know that stocks can reach such valuations and have been through it before. My prior post was triggered by several different comments in this thread, not just yours, but I do wonder if you are over-reacting to your experiences in 2007/8: firstly, surely the reaction to your regret at not rebalancing then should be that you rebalance to your AA now, not both shift your AA and rebalance; and secondly, your experiences then should have already directed your AA to enable you to come through a similar event. What has changed?

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Re: Hitting The Sell Button

Post by nedsaid » Mon Jan 08, 2018 9:08 pm

Ethelred wrote:
Mon Jan 08, 2018 10:20 am
nedsaid wrote:
Sun Jan 07, 2018 4:16 pm
I think that a lot of people here including myself practice mild forms of market timing. What I and others are doing is most likely a re-evaluation of our risk profile and asset allocation in response to advancing age and zooming markets. As asset classes achieve higher and higher valuations, future expected returns get to be lower and lower in return for taking higher and higher risks. There is little talk of using particular market or economic indicators as timing signals. The discussion echoes the John Bogle theme of reversion to the mean. Speaking for myself, I am looking to decrease risk and portfolio volatility.

What I am doing is looking at history and applying the lessons learned. If you believe that expected future returns decrease and pricing risk increase with higher valuations, it is perfectly rational to cut back as the markets advance. One reason I am concerned is that we are seeing continued Price/Earnings expansion, in other words the market is continuing to pay more and more for the same dollar of earnings. If the market was advancing and yet P/E ratios were staying the same or even falling a tiny bit, I would not be so concerned.

Recall John Bogle's discussion of business return and speculative return. Business return comes from growth of earnings and speculative return relates to how much the market is willing to pay for a dollar of earnings.

Over the last few years, I have seen forward P/E ratios based upon optimistic Wall Street earnings forecasts rise from 17-18 to 21-22. That my friend is speculative return. Instead of paying $17 for $1 of forecasted earnings, Wall Street now is willing to pay $22 for every $1 of forecasted earnings. Can't speak for anyone else but at least for me, it causes a raised eyebrow. Investors have to make the judgment whether or not the increase in P/E ratios are justified.
I understand what you're saying, but it seems reasonable here to ask "What does your IPS say?" Does it say, "I will increase my bond allocation in response to high market valuations"? Because you are a well-read and experienced investor, and you already know that stocks can reach such valuations and have been through it before. My prior post was triggered by several different comments in this thread, not just yours, but I do wonder if you are over-reacting to your experiences in 2007/8: firstly, surely the reaction to your regret at not rebalancing then should be that you rebalance to your AA now, not both shift your AA and rebalance; and secondly, your experiences then should have already directed your AA to enable you to come through a similar event. What has changed?
My Investment Policy Statement is a strategic and not a tactical document. Markets and the economy change over time so it seems rather presumptuous to have tactical moves figured out 3, 5, and 10 years ahead of time. For example, each bear market has different causes and each bear market has a different economic context. I have discussed many times that diversification strategies that worked in 2000-2002 didn't work in 2008-2009. My IPS is a statement of what I believe and my preferred investment approach, I state that I am value oriented and don't chase performance.

What has changed is that once I was young and now I am old. I was 40 years old when the 2000-2002 bear market hit. When 2008-2009 hit, I was approaching 50 years old. Now in 2017, I am 58 years old. My secure job disappeared in October 2014 and employment has been spotty since. That also has changed.

My bark is a lot worse than my bite. My asset allocation had 69% stocks in 2013, when I started the program of mild rebalancing and de-risking and now I am at 66% stocks. That is hardly panic selling. I am doing a lot of thinking aloud here on the forum but in real life my approach to change is cautious and slow.
A fool and his money are good for business.

protagonist
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Re: Hitting The Sell Button

Post by protagonist » Mon Jan 08, 2018 10:12 pm

Rebalancing is more work than I would like to do, and in a Japan-like scenario could be quite disconcerting to say the least.

I prefer keeping a safe bucket of money I might need in CD's, I-bonds and the like and gambling the rest in the market (index funds). It keeps me from riding a sea of worry.

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Ethelred
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Re: Hitting The Sell Button

Post by Ethelred » Mon Jan 08, 2018 10:31 pm

nedsaid wrote:
Mon Jan 08, 2018 9:08 pm
My Investment Policy Statement is a strategic and not a tactical document. Markets and the economy change over time so it seems rather presumptuous to have tactical moves figured out 3, 5, and 10 years ahead of time. For example, each bear market has different causes and each bear market has a different economic context. I have discussed many times that diversification strategies that worked in 2000-2002 didn't work in 2008-2009. My IPS is a statement of what I believe and my preferred investment approach, I state that I am value oriented and don't chase performance.

What has changed is that once I was young and now I am old. I was 40 years old when the 2000-2002 bear market hit. When 2008-2009 hit, I was approaching 50 years old. Now in 2017, I am 58 years old. My secure job disappeared in October 2014 and employment has been spotty since. That also has changed.

My bark is a lot worse than my bite. My asset allocation had 69% stocks in 2013, when I started the program of mild rebalancing and de-risking and now I am at 66% stocks. That is hardly panic selling. I am doing a lot of thinking aloud here on the forum but in real life my approach to change is cautious and slow.
Difficult to say precisely, but it sounds like your IPS does at least leave open the choice to adjust your AA in line with your view of valuations. And yes, I agree your changes are relatively small, especially when considered with the changes in your overall financial situation.

I will say that it seems there are others in this thread for whom neither of these are true, and their posts come across much more as anxious reaction, combined with a bigger increase in bond allocation.

flyingaway
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Re: Hitting The Sell Button

Post by flyingaway » Mon Jan 08, 2018 10:36 pm

nedsaid wrote:
Mon Jan 08, 2018 9:08 pm
Ethelred wrote:
Mon Jan 08, 2018 10:20 am
nedsaid wrote:
Sun Jan 07, 2018 4:16 pm
I think that a lot of people here including myself practice mild forms of market timing. What I and others are doing is most likely a re-evaluation of our risk profile and asset allocation in response to advancing age and zooming markets. As asset classes achieve higher and higher valuations, future expected returns get to be lower and lower in return for taking higher and higher risks. There is little talk of using particular market or economic indicators as timing signals. The discussion echoes the John Bogle theme of reversion to the mean. Speaking for myself, I am looking to decrease risk and portfolio volatility.

What I am doing is looking at history and applying the lessons learned. If you believe that expected future returns decrease and pricing risk increase with higher valuations, it is perfectly rational to cut back as the markets advance. One reason I am concerned is that we are seeing continued Price/Earnings expansion, in other words the market is continuing to pay more and more for the same dollar of earnings. If the market was advancing and yet P/E ratios were staying the same or even falling a tiny bit, I would not be so concerned.

Recall John Bogle's discussion of business return and speculative return. Business return comes from growth of earnings and speculative return relates to how much the market is willing to pay for a dollar of earnings.

Over the last few years, I have seen forward P/E ratios based upon optimistic Wall Street earnings forecasts rise from 17-18 to 21-22. That my friend is speculative return. Instead of paying $17 for $1 of forecasted earnings, Wall Street now is willing to pay $22 for every $1 of forecasted earnings. Can't speak for anyone else but at least for me, it causes a raised eyebrow. Investors have to make the judgment whether or not the increase in P/E ratios are justified.
I understand what you're saying, but it seems reasonable here to ask "What does your IPS say?" Does it say, "I will increase my bond allocation in response to high market valuations"? Because you are a well-read and experienced investor, and you already know that stocks can reach such valuations and have been through it before. My prior post was triggered by several different comments in this thread, not just yours, but I do wonder if you are over-reacting to your experiences in 2007/8: firstly, surely the reaction to your regret at not rebalancing then should be that you rebalance to your AA now, not both shift your AA and rebalance; and secondly, your experiences then should have already directed your AA to enable you to come through a similar event. What has changed?
My Investment Policy Statement is a strategic and not a tactical document. Markets and the economy change over time so it seems rather presumptuous to have tactical moves figured out 3, 5, and 10 years ahead of time. For example, each bear market has different causes and each bear market has a different economic context. I have discussed many times that diversification strategies that worked in 2000-2002 didn't work in 2008-2009. My IPS is a statement of what I believe and my preferred investment approach, I state that I am value oriented and don't chase performance.

What has changed is that once I was young and now I am old. I was 40 years old when the 2000-2002 bear market hit. When 2008-2009 hit, I was approaching 50 years old. Now in 2017, I am 58 years old. My secure job disappeared in October 2014 and employment has been spotty since. That also has changed.

My bark is a lot worse than my bite. My asset allocation had 69% stocks in 2013, when I started the program of mild rebalancing and de-risking and now I am at 66% stocks. That is hardly panic selling. I am doing a lot of thinking aloud here on the forum but in real life my approach to change is cautious and slow.
I like your way of thinking and the program of mild rebalancing and de-risking. I am doing a similar thing and a little bit faster.

NibbanaBanana
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Re: Hitting The Sell Button

Post by NibbanaBanana » Tue Jan 09, 2018 7:07 pm

Started 2017 100% stocks. Ended the year 90/10. Accomplished by selling individual stocks and using new money to buy VWELX, VGSTX, and VFIIX.
Painful to pay those capital gains but I feel quite a bit more secure. Probably going to repeat this year and buy VBIIX.

mariezzz
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Re: Hitting The Sell Button

Post by mariezzz » Tue Jan 09, 2018 7:36 pm

Most of my retirement money goes into bonds. I've been at about 78% equities all year.

We're 10 years since the start of the great recession; 8.5 years since the end. We're due for another recession, based on "historical performance". I keep reminding myself that would be an investment opportunity.

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nedsaid
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Re: Hitting The Sell Button

Post by nedsaid » Tue Jan 09, 2018 10:39 pm

Ethelred wrote:
Mon Jan 08, 2018 10:31 pm
nedsaid wrote:
Mon Jan 08, 2018 9:08 pm
My Investment Policy Statement is a strategic and not a tactical document. Markets and the economy change over time so it seems rather presumptuous to have tactical moves figured out 3, 5, and 10 years ahead of time. For example, each bear market has different causes and each bear market has a different economic context. I have discussed many times that diversification strategies that worked in 2000-2002 didn't work in 2008-2009. My IPS is a statement of what I believe and my preferred investment approach, I state that I am value oriented and don't chase performance.

What has changed is that once I was young and now I am old. I was 40 years old when the 2000-2002 bear market hit. When 2008-2009 hit, I was approaching 50 years old. Now in 2017, I am 58 years old. My secure job disappeared in October 2014 and employment has been spotty since. That also has changed.

My bark is a lot worse than my bite. My asset allocation had 69% stocks in 2013, when I started the program of mild rebalancing and de-risking and now I am at 66% stocks. That is hardly panic selling. I am doing a lot of thinking aloud here on the forum but in real life my approach to change is cautious and slow.
Difficult to say precisely, but it sounds like your IPS does at least leave open the choice to adjust your AA in line with your view of valuations. And yes, I agree your changes are relatively small, especially when considered with the changes in your overall financial situation.

I will say that it seems there are others in this thread for whom neither of these are true, and their posts come across much more as anxious reaction, combined with a bigger increase in bond allocation.
If you are interested, you can read my IPS in my "How Do You Like My New 'Doo" thread. Pretty much, I took the Morningstar worksheet and answered the questions. It is a statement of investment philosophy. I talk about a relaxed rebalancing philosophy, rebalancing bands of up to 10%, and looking for an opportune time to take advantage of bargains. So yes, the IPS does leave open the possibility for tactical asset allocation based on valuations. Obviously, since July 2013, I have changed my rebalancing strategies. My rebalancing bands are more like 1% now.

But other than a general discussion of investment philosophy and my take on rebalancing, I don't have tactical moves in there. You might say that I reserve the right to do what I please when the situation calls for it. For example, I set my target asset allocation at 60% stocks/40% bonds but I have stayed more aggressive than that in part because of very low interest rates. So it is a goal, but I strayed from my IPS a bit when the situation called for it.

I see the Investment Policy Statement as a guideline and not as a set of rigid rules. I didn't state this in my IPS but I have posted on the forum my dislike for rigid, mechanical investment strategies. Certainly I follow a Value discipline but I reserve for myself the right to flexibility.
A fool and his money are good for business.

gator15
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Re: Hitting The Sell Button

Post by gator15 » Wed Jan 10, 2018 12:05 am

I’m glad this thread came along. For the first time I’m really starting to think about my AA. While I have a huge risk tolerance, I’m not sure I need to anymore. I was in my late 20s in 2008 and lost what seemed like half of the money I saved. While it sucked, I knew I had time on my side. I didn’t change my AA and I have been throwing money at my accounts for the last 10 years without rebalancing. Today, I’ve saved a decent amount by most people’s standard and I feel the need to protect it. I’m also eligible for a decent pension in 7 years. I guess I need to figure out what my AA should be. As of today, I figure I will retire sometime in the next 12-17 yrs.

Snowjob
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Re: Hitting The Sell Button

Post by Snowjob » Wed Jan 10, 2018 9:18 am

nedsaid wrote:
Wed Jan 03, 2018 11:24 pm
A nice problem to have but if I was 35 years old, I would simply be enjoying the ride. At 58, it seems to be like that laurel hedge growing out of control, a big chore to maintain. This is because I am concerned about controlling my risk as I get older. Ah to be young again!

How are other older investors like me reacting to this? Am I alone in how I feel about this?
It depends how young -- if you were 35 like you me, you might remember a couple good years in 05/06 followed by the 2007->2009 dumpster-fire and want to keep taking money off the table just the same. I suppose if you were maybe 30 and younger you've been all in 100% stock and have never even seen a down year.

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SpartanFan
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Re: Hitting The Sell Button

Post by SpartanFan » Wed Jan 10, 2018 3:17 pm

Dasnyc wrote:
Sat Jan 06, 2018 3:05 am
67 years old, retired almost 4 years. I’ve gradually adjusted my asset allocation down to 35/55/10, so that no matter what the market does, I can pay my bills without having to change my lifestyle, and sleep at night without the anxieties of 2000 and 2008. I am not willing to lose what took me a lifetime to accumulate, due to greed. We all know that markets rise and fall, unpredictably Should the next big pullback last more than a few years, I will be OK. I am also quite content with last year’s 11.1% returns on my portfolio.
Pretty much the same boat we are in. Retired at 56 (now 65) (Wife retired at 55). Current overall AA at 40/60. All expenses covered by Pension and my SS. No bills. Dont need to take any risk.

VTI, VWIAX, VBTLX are primary holdings.
"There's a crack in everything, that's how the light gets in" - Leonard Cohen

Yohanson
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Re: Hitting The Sell Button

Post by Yohanson » Wed Jan 10, 2018 7:44 pm

I'm 53 and 100/0. I still don't see any value in bonds.

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Ethelred
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Re: Hitting The Sell Button

Post by Ethelred » Wed Jan 10, 2018 7:48 pm

nedsaid wrote:
Tue Jan 09, 2018 10:39 pm
If you are interested, you can read my IPS in my "How Do You Like My New 'Doo" thread. Pretty much, I took the Morningstar worksheet and answered the questions. It is a statement of investment philosophy. I talk about a relaxed rebalancing philosophy, rebalancing bands of up to 10%, and looking for an opportune time to take advantage of bargains. So yes, the IPS does leave open the possibility for tactical asset allocation based on valuations. Obviously, since July 2013, I have changed my rebalancing strategies. My rebalancing bands are more like 1% now.
Thanks, sounds good, I'll have a look through your thread when I get a chance, and ask questions if I have any.

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nedsaid
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Re: Hitting The Sell Button

Post by nedsaid » Wed Jan 10, 2018 11:17 pm

Snowjob wrote:
Wed Jan 10, 2018 9:18 am
nedsaid wrote:
Wed Jan 03, 2018 11:24 pm
A nice problem to have but if I was 35 years old, I would simply be enjoying the ride. At 58, it seems to be like that laurel hedge growing out of control, a big chore to maintain. This is because I am concerned about controlling my risk as I get older. Ah to be young again!

How are other older investors like me reacting to this? Am I alone in how I feel about this?
It depends how young -- if you were 35 like you me, you might remember a couple good years in 05/06 followed by the 2007->2009 dumpster-fire and want to keep taking money off the table just the same. I suppose if you were maybe 30 and younger you've been all in 100% stock and have never even seen a down year.
When you are 35 you have relatively long time horizons coupled with relatively small portfolios compared to older investors like me at age 58. In theory, your pain from loss ought to be a lot less than mine since the dollar amounts of loss for you will be a lot smaller than for me. In fact, it doesn't work that way. I lost hundreds of dollars in the October 1987 crash and my financial life seemingly came to an end. I lost many thousands of dollars (two years of take home pay) in the 2008-2009 financial crisis and bear market and though the losses hurt I knew that life goes on. My emotional pain was greater in October 1987 than it was in 2008-2009. This doesn't make any rational sense but human emotion is not rational.
A fool and his money are good for business.

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nedsaid
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Re: Hitting The Sell Button

Post by nedsaid » Wed Jan 10, 2018 11:19 pm

Ethelred wrote:
Wed Jan 10, 2018 7:48 pm
nedsaid wrote:
Tue Jan 09, 2018 10:39 pm
If you are interested, you can read my IPS in my "How Do You Like My New 'Doo" thread. Pretty much, I took the Morningstar worksheet and answered the questions. It is a statement of investment philosophy. I talk about a relaxed rebalancing philosophy, rebalancing bands of up to 10%, and looking for an opportune time to take advantage of bargains. So yes, the IPS does leave open the possibility for tactical asset allocation based on valuations. Obviously, since July 2013, I have changed my rebalancing strategies. My rebalancing bands are more like 1% now.
Thanks, sounds good, I'll have a look through your thread when I get a chance, and ask questions if I have any.
If all that gives you one, maybe two good ideas, the effort will all be worth it.
A fool and his money are good for business.

Snowjob
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Re: Hitting The Sell Button

Post by Snowjob » Thu Jan 11, 2018 10:21 am

nedsaid wrote:
Wed Jan 10, 2018 11:17 pm
When you are 35 you have relatively long time horizons coupled with relatively small portfolios compared to older investors like me at age 58. In theory, your pain from loss ought to be a lot less than mine since the dollar amounts of loss for you will be a lot smaller than for me. In fact, it doesn't work that way. I lost hundreds of dollars in the October 1987 crash and my financial life seemingly came to an end. I lost many thousands of dollars (two years of take home pay) in the 2008-2009 financial crisis and bear market and though the losses hurt I knew that life goes on. My emotional pain was greater in October 1987 than it was in 2008-2009. This doesn't make any rational sense but human emotion is not rational.
100% agree

asif408
Posts: 1478
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Re: Hitting The Sell Button

Post by asif408 » Thu Jan 11, 2018 11:00 am

nedsaid wrote:
Wed Jan 10, 2018 11:17 pm
When you are 35 you have relatively long time horizons coupled with relatively small portfolios compared to older investors like me at age 58. In theory, your pain from loss ought to be a lot less than mine since the dollar amounts of loss for you will be a lot smaller than for me. In fact, it doesn't work that way. I lost hundreds of dollars in the October 1987 crash and my financial life seemingly came to an end. I lost many thousands of dollars (two years of take home pay) in the 2008-2009 financial crisis and bear market and though the losses hurt I knew that life goes on. My emotional pain was greater in October 1987 than it was in 2008-2009. This doesn't make any rational sense but human emotion is not rational.
That sounds mostly like an experience issue, as you were more emotionally prepared in 2008-2009 because of your previous experience in 1987 and probably 2000-2002 as well. That would seem to support the idea of an investor starting off more conservative when they are younger and then learning their tolerance over time when stocks fall. If you find you have a higher tolerance you can always move up your stock allocation, and you would be buying low. The harder lesson is starting out aggressive then selling after a loss and going more conservative, as you would be locking in losses.

I started out more conservative than most my age when I began but have come to realize over the years, even after the drops, that my risk tolerance is higher, so I've gradually upped my stock allocation. I've also gotten more comfortable buying when things were down, which was hard to do at first. The temptation I had the first time I experienced a significant drop (20%+) was to do nothing. I made myself buy some more (though not as much as I should have), and it has gotten easier to buy low as I've seen the benefit in action and become more emotionally comfortable. For me it wasn't a natural instinct to buy low, but it obviously can be learned. Fortunately, with most of my investing decisions, I've gone with my rational part of the brain and not the emotional part.

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Padlin
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Re: Hitting The Sell Button

Post by Padlin » Thu Jan 11, 2018 12:09 pm

I'm 61, retired at 57. When I retired I changed allocation down to 50/50. Took about a year or so but I slowly stopped looking at my allocation and balance, I look a few times a year at the moment, when I look I rebalance if it's called for. I also cut back on how much news exposure I have, working at the WSJ for 30+ years I got where I'd pay attention to market direction pretty much constantly, not so any more. Sure knocks back the stress.

I've been blessed that for the 4 years I've been making 401k withdrawals the market has continued to grow as has my balance.
Regards | Bob

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nedsaid
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Re: Hitting The Sell Button

Post by nedsaid » Thu Jan 11, 2018 8:37 pm

asif408 wrote:
Thu Jan 11, 2018 11:00 am
nedsaid wrote:
Wed Jan 10, 2018 11:17 pm
When you are 35 you have relatively long time horizons coupled with relatively small portfolios compared to older investors like me at age 58. In theory, your pain from loss ought to be a lot less than mine since the dollar amounts of loss for you will be a lot smaller than for me. In fact, it doesn't work that way. I lost hundreds of dollars in the October 1987 crash and my financial life seemingly came to an end. I lost many thousands of dollars (two years of take home pay) in the 2008-2009 financial crisis and bear market and though the losses hurt I knew that life goes on. My emotional pain was greater in October 1987 than it was in 2008-2009. This doesn't make any rational sense but human emotion is not rational.
That sounds mostly like an experience issue, as you were more emotionally prepared in 2008-2009 because of your previous experience in 1987 and probably 2000-2002 as well. That would seem to support the idea of an investor starting off more conservative when they are younger and then learning their tolerance over time when stocks fall. If you find you have a higher tolerance you can always move up your stock allocation, and you would be buying low. The harder lesson is starting out aggressive then selling after a loss and going more conservative, as you would be locking in losses.

I started out more conservative than most my age when I began but have come to realize over the years, even after the drops, that my risk tolerance is higher, so I've gradually upped my stock allocation. I've also gotten more comfortable buying when things were down, which was hard to do at first. The temptation I had the first time I experienced a significant drop (20%+) was to do nothing. I made myself buy some more (though not as much as I should have), and it has gotten easier to buy low as I've seen the benefit in action and become more emotionally comfortable. For me it wasn't a natural instinct to buy low, but it obviously can be learned. Fortunately, with most of my investing decisions, I've gone with my rational part of the brain and not the emotional part.
You go right to the head of the class. Great post. Yes, this is an experience issue. In 1987, I had never experienced such a large drop before, 22% in one day! I would add that you really don't know your risk tolerance until you go through your first bear market, experience is great but you really need that bear market under your belt. The thing is, I don't honestly know my risk tolerance right now. Age 58, spotty employment, getting closer to winning the game. New factors in my risk profile that I haven't experienced before. Thus you can hear the voice of caution in my more recent posts. I have never been a near retiree before.
A fool and his money are good for business.

ggburt
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Re: Hitting The Sell Button

Post by ggburt » Thu Jan 11, 2018 8:41 pm

Thanks, Nedsaid. My sentiments exactly.

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