Why not stand on the sidelines for a little while?

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jjface
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Re: Why not stand on the sidelines for a little while?

Post by jjface » Thu Mar 26, 2020 10:40 am

Alex GR wrote:
Thu Mar 26, 2020 10:25 am
...someone who is sure that DOW is going to 10000 ... Thoughts?
No one can be sure which way things will go or even close to it. It is all guessing at this point. Those who pulled out this week have been met with double digit increases not decreases and are likely to be struggling to know whether to buy back in higher and lock in losses or to hope their predictions are correct and we will drop further again. It is a very dangerous game to sell off once the market has already dropped 25-30%. So many regret it and many have tried and failed and so are warning against it.

Any strategy may pay off but timing the market is more to do with luck than anything else. Odds are stacked against you.

BW1985
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Re: Why not stand on the sidelines for a little while?

Post by BW1985 » Thu Mar 26, 2020 10:44 am

I'm not understanding the point of this thread. If you're convinced that there's more downside risk than upside gain over the next 9 months then sell it all, only you can make that decision for yourself.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

bltn
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Re: Why not stand on the sidelines for a little while?

Post by bltn » Thu Mar 26, 2020 10:45 am

fitterhappier wrote:
Wed Mar 25, 2020 5:58 am
Sell today and you lock in a 26% YTD loss on the total US stock market. That’s the classic “selling low” error.
That just as true as claiming that someone is "locking in" a gain or loss in the 10 minutes it takes to execute a couple of transactions to shift money around between index funds. I think it's pretty clear from the subject and my post that I'm a buy and hold investor and completely buy into the idea of owning the haystack. But there are reasons for it - it's not some absolute dogma.
Do your homework. Or, if you have carefully read and reviewed a good sampling of articles like the ones suggested above, just let us know that you have. From your original post and replies, it doesn’t sound like you have.
Yes I'm well versed in bogle-ism and understand the risks of timing the market. In short the option I'm considering is clipping out a small part of history that I don't understand. What happens in the next nine months will, moreso than any 9-month span I have experienced, be a strong determinant of the next 5-20 years of economic history. "Things are bad for 5 years" is a lot different from "things will be bad for 20 years".

Arguably the drop isn't even that bad at this point, we've only really given back a few years of growth.
So you think that the economy could well be weak for the next 5-20 years? Possibly, but not likely.

Assuming the stock market remains down for the next couple of years. Do bonds look any better? 0.5-1.0% interest. With marked interest rate risk. Not to mention credit risk in a shaky economy.

Maybe personal real estate investment. Rental houses. From personal experience I can tell you that type of investing takes as much or more expertise than stock picking, and requires a greater investment if your time. Referring to rental real estate investing as a second job is very descriptive.

So the alternative is cash? Maybe ok if you re old. But for a young guy?

Maybe compromise and take some money out of the market and let the rest ride.

Having let my investments continue unchanged through 1987 (a 25% market drop in one day!), 2000, and 2008, I ve decided that is the best course for me now. And I haven t been a fan of Washington politics since before 1987.

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watchnerd
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Re: Why not stand on the sidelines for a little while?

Post by watchnerd » Thu Mar 26, 2020 10:46 am

BW1985 wrote:
Thu Mar 26, 2020 10:44 am
I'm not understanding the point of this thread. If you're convinced that there's more downside risk than upside gain over the next 9 months then sell it all, only you can make that decision for yourself.
As far as I can tell, the point of the thread is to intellectually challenge the premises of buy & hold, rather than to take actual action.
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magicrat
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Re: Why not stand on the sidelines for a little while?

Post by magicrat » Thu Mar 26, 2020 10:52 am

OP - Is there anything else you would like to get out of this thread?

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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier » Thu Mar 26, 2020 10:56 am

magicrat wrote:
Thu Mar 26, 2020 10:52 am
OP - Is there anything else you would like to get out of this thread?
Nope, we're good, thanks everyone.

(I'm always happy to do people the courtesy of following up on on-topic replies, however.)

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Re: Why not stand on the sidelines for a little while?

Post by pkcrafter » Thu Mar 26, 2020 11:03 am

fitterhappier wrote:
Wed Mar 25, 2020 4:16 am
To recap: we are facing a world-historic crisis situation, much of which depends on how the US pandemic plays out, and various economic vicious cycles play out after an unprecedented small-business wipeout and massive unemployment...while at the same time we have (without getting too deep into politics) what everyone will agree is a highly unusual US administration in place, and are in an election year.

Multiply all those factors together and I understand the extreme market volatility. This current situation is so world-historic insane vs any crisis I remember that it's hard to hold it in my head at all.

I'm a buy-and-hold long-term indexing investor, but I also strongly believe in investing in what I understand. I do not understand the world economy right now at all.

So we have a nice bump here from the stimulus announcement. Why not take, say, a 9-month break (past the initial lockdowns, unemployment numbers, earnings announcements, US election), sit in cash, and get back in when we're back to an economic situation in some ballpark of "normal"?

I'm just having a hard time seeing the scenario in which the market rockets in that time and I miss out on some massive gain. The downside risk, however, seems...titanic.

So it's market timing, I know. But what are the arguments against the sensibility of an idea like this - given the circumstances?
fitterhappier, this thread is 5 pages long now because you continue to try to defend what you want to do. You also asked for arguments against and opinions on your idea. You've gotten plenty of responses, which you soundly reject. You write well and sound intelligent. In light of all this I'll suggest you do what you want to do and don't bother with the opinions of others.

Here's the rub--
I'm a buy-and-hold long-term indexing investor, but I also strongly believe in investing in what I understand. I do not understand the world economy right now at all.
At this time I doubt anyone understands the world economy (I know I don't) or the unprecedented reaction to this pandemic, but the bottom line is you really don't seem to be a buy-and hold long term indexing investor. If you were looking for support, you rejected it, so maybe you were just looking or confirmation.

At any rate, I'm going to recommend you do exactly what you want to do and don't worry or try to defend your decision. Maybe you move will turn out to be best, or it won't matter much in the long run.

cheers,


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

H-Town
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Re: Why not stand on the sidelines for a little while?

Post by H-Town » Thu Mar 26, 2020 11:08 am

Just to add to this conversation:

Many of my colleagues told me that they sold everything in their 401k and retreated to cash. No one has offered a real plan of buying back into stocks (or their target date fund). The general consensus is that things will get ugly and they don't have any confidence in the stock market at all.

Personally, I love opportunities like this. During this time, I ignore the loss that I have in equity portion. The plan is on the 1st and the 15th of each month:
1) move 5k of bonds into stocks,
2) add 2k new money into 401k,
3) add 4k new money into taxable account,
4) if it makes sense, do TLH.

I would dip into the bonds holding and cash reserve, but I can sustain this strategy for at least 10 months. Personally, I give it 6 months and the buying opportunities will no longer here.

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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier » Thu Mar 26, 2020 11:11 am

Btw I don't mean to be too coy about what I'm going to do or not do, I just find it irrelevant (and think I can correctly predict where the conversation would spiral into...this thread has been a pretty frustrating exercise in trying to keep discussion quality high and on topic).

I will call out that someone earlier had a suggestion about making an options purchase in order to hedge against my concerns. This should have been the blindingly obvious primary option in the first place. If I had to redo the question it would be like "what hedging strategies would you use right now if you buy into my concerns about unaccounted-for downside risk". And of course options exist for just such situations.

My general takeaway is that buy and hold is a great strategy and if you ever encounter a situation like this where the market makes no sense and you strongly sense unaccounted for risk in its movements, and you can think of a specific timeframe in which such risky bad events might occur, blow a little money on puts (or calls, depending).

elchalten
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Re: Why not stand on the sidelines for a little while?

Post by elchalten » Thu Mar 26, 2020 11:24 am

I did what the OP said but two weeks ago and moved all my money into cash because I wanted to make sure I preserved the retirement and school fund.
But now I'm really wondering what my next move should be. On the one hand, there is this huge stimulus and bailout loans from the Fed that the market is reacting to. On the other hand we really seem at least three weeks away from the virus peak, huge unemployment, massive supply chain disruptions (India is totally shut down. A couple of their ports have declared force majeure!)...
Any advice for me?

Leesbro63
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Re: Why not stand on the sidelines for a little while?

Post by Leesbro63 » Thu Mar 26, 2020 11:26 am

elchalten wrote:
Thu Mar 26, 2020 11:24 am
I did what the OP said but two weeks ago and moved all my money into cash because I wanted to make sure I preserved the retirement and school fund.
But now I'm really wondering what my next move should be. On the one hand, there is this huge stimulus and bailout loans from the Fed that the market is reacting to. On the other hand we really seem at least three weeks away from the virus peak, huge unemployment, massive supply chain disruptions (India is totally shut down. A couple of their ports have declared force majeure!)...
Any advice for me?
It's always this way. A bull argument and a bear argument. Seems you timed it right this time...congrats. Pick an allocation you can live with and do that. Then don't just do something...stand there.

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Kenkat
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Re: Why not stand on the sidelines for a little while?

Post by Kenkat » Thu Mar 26, 2020 11:29 am

This whole discussion in my opinion could be boiled down to:

- I think you believe you can predict the future; I think you can’t and would be better served by following the soap box, dogma, etc. of buy and hold
- you think that you have insight on this particular situation that the market is not taking into account; you think it would be foolish to just keep using the same buy and hold strategy in a world that has changed

There’s no way to know who is right and there’s not much point in trying to convince one another beyond the mental exercise of framing your thoughts around it - which is actually of quite a bit of value honestly and a lot of why I post here.

BW1985
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Re: Why not stand on the sidelines for a little while?

Post by BW1985 » Thu Mar 26, 2020 11:39 am

elchalten wrote:
Thu Mar 26, 2020 11:24 am
I did what the OP said but two weeks ago and moved all my money into cash because I wanted to make sure I preserved the retirement and school fund.
But now I'm really wondering what my next move should be. On the one hand, there is this huge stimulus and bailout loans from the Fed that the market is reacting to. On the other hand we really seem at least three weeks away from the virus peak, huge unemployment, massive supply chain disruptions (India is totally shut down. A couple of their ports have declared force majeure!)...
Any advice for me?
This is a classic dilemma with market timing. Even if you're right the first time, like you were, now you're all consumed with when to buy back in. Some people never do, or do so well into the next bull market.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

bltn
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Re: Why not stand on the sidelines for a little while?

Post by bltn » Thu Mar 26, 2020 11:58 am

BW1985 wrote:
Thu Mar 26, 2020 11:39 am
elchalten wrote:
Thu Mar 26, 2020 11:24 am
I did what the OP said but two weeks ago and moved all my money into cash because I wanted to make sure I preserved the retirement and school fund.
But now I'm really wondering what my next move should be. On the one hand, there is this huge stimulus and bailout loans from the Fed that the market is reacting to. On the other hand we really seem at least three weeks away from the virus peak, huge unemployment, massive supply chain disruptions (India is totally shut down. A couple of their ports have declared force majeure!)...
Any advice for me?
This is a classic dilemma with market timing. Even if you're right the first time, like you were, now you're all consumed with when to buy back in. Some people never do, or do so well into the next bull market.
And ,an investor who times the market correctly one time will most likely try to time the market again, reducing his odds of overall success.

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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier » Thu Mar 26, 2020 11:59 am

You've gotten plenty of responses, which you soundly reject.
Thanks for writing Paul. I think this deserves a bit of nuance. I did get a suggestion about options, and suggestions about following my idea, also some good pushback (in favor of doing nothing), much of which I was careful to call out and applaud. So category 1, the 20-40% of replies in which the posters seemed to actually be reading what I wrote and engaging with me thoughtfully.

What you might be referring to is my categorical rejection of simple restatements of buy-and-hold theory, that weren't really discussion, more like one-way proselytizing (or satisfying some psychological needs of the posters, I'm not sure). I get that probably a lot of random people who come on this board posing questions about how exactly they should be timing the market, probably need such responses because it's just not how this investing worldview works. There is a LOT of that in these 6 pages, in spite of my best efforts to explain, and let me tell you it's very challenging to navigate that. I will be ultra-careful with my word choices in my OP's should I ever decide to post here again (let me well you I will never, even self-deprecatingly as here, use the phrase "timing the market" again, for any reason).
I'm a buy-and-hold long-term indexing investor, but I also strongly believe in investing in what I understand. I do not understand the world economy right now at all.
At this time I doubt anyone understands the world economy (I know I don't) or the unprecedented reaction to this pandemic, but the bottom line is you really don't seem to be a buy-and hold long term indexing investor.
With all due respect I think I am and that such an extremely narrow characterization might be peculiar to this forum. I mean, if I didn't propose selling and instead buying a bunch of puts, would you say the same thing?

A person who holds broad index funds and averages maybe 1 day of trading per year for mostly mechanical rebalancing reasons is a buy-and-hold investor as the vast majority of people understand that idea. I claim.
Maybe you move will turn out to be best, or it won't matter much in the long run.
I give the latter better-than-even odds of being the outcome

rgs92
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Re: Why not stand on the sidelines for a little while?

Post by rgs92 » Thu Mar 26, 2020 12:09 pm

The problem is that even if the OP's strategy works well for this crisis, the same approach for the next crisis a few years down the road may fail, causing a major disaster. If you look at some the legendary fund managers like Bill Miller and the Legg Mason Value trust, he had all sorts of big rises and falls (some of which involved big stakes in AOL). There were some famous investors in emerging markets who also had major failures.

They all had well thought out theories that worked for 10-15 years and then things fell apart.

I mean, this is a really long game for most people, and and making any major change in your portfolio is a gamble by definition, and even one major error out 10 could spell disaster and undo a lifetime of success.

Even you do something great like the Big Short, the next time you could do the opposite.

Alex GR
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Re: Why not stand on the sidelines for a little while?

Post by Alex GR » Thu Mar 26, 2020 12:41 pm

BW1985 wrote:
Thu Mar 26, 2020 11:39 am
elchalten wrote:
Thu Mar 26, 2020 11:24 am
I did what the OP said but two weeks ago and moved all my money into cash because I wanted to make sure I preserved the retirement and school fund.
But now I'm really wondering what my next move should be. On the one hand, there is this huge stimulus and bailout loans from the Fed that the market is reacting to. On the other hand we really seem at least three weeks away from the virus peak, huge unemployment, massive supply chain disruptions (India is totally shut down. A couple of their ports have declared force majeure!)...
Any advice for me?
This is a classic dilemma with market timing. Even if you're right the first time, like you were, now you're all consumed with when to buy back in. Some people never do, or do so well into the next bull market.
What if you use the Conditional Order, OTO (one triggers another) and set entry points before the sale even executes? That way, you make the decision ahead of time and you won't need to get anxious and constantly check the account.

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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier » Thu Mar 26, 2020 1:01 pm

rgs92 wrote:
Thu Mar 26, 2020 12:09 pm
The problem is that even if the OP's strategy works well for this crisis, the same approach for the next crisis
Ah there's the rub. Not all crises are alike. There are 10 year floods and then there are 100 year floods. I think this crisis is different (in terms of both badness and unprecedented-ness) and I think I'm on pretty solid ground here, especially regarding downside risk.
a few years down the road may fail, causing a major disaster. If you look at some the legendary fund managers like Bill Miller and the Legg Mason Value trust, he had all sorts of big rises and falls (some of which involved big stakes in AOL). There were some famous investors in emerging markets who also had major failures.
Like what, dotcom crash, Asian financial crisis, Black Thursday maybe? 10-year floods.

Leesbro63
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Re: Why not stand on the sidelines for a little while?

Post by Leesbro63 » Thu Mar 26, 2020 1:06 pm

What if the OP goes to cash and the Fed inflates? Stocks go up and the cash can't keep up with inflation.

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watchnerd
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Re: Why not stand on the sidelines for a little while?

Post by watchnerd » Thu Mar 26, 2020 1:24 pm

Leesbro63 wrote:
Thu Mar 26, 2020 1:06 pm
What if the OP goes to cash and the Fed inflates? Stocks go up and the cash can't keep up with inflation.
You can also get stagflation: stocks don't go up, and you have inflation.
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tsohg
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Re: Why not stand on the sidelines for a little while?

Post by tsohg » Thu Mar 26, 2020 1:32 pm

fitterhappier wrote:
Thu Mar 26, 2020 11:11 am
I will call out that someone earlier had a suggestion about making an options purchase in order to hedge against my concerns. This should have been the blindingly obvious primary option in the first place. If I had to redo the question it would be like "what hedging strategies would you use right now if you buy into my concerns about unaccounted-for downside risk". And of course options exist for just such situations.
Doesn't the fact that you missed a "blindingly obvious" option give you pause and cause you to reconsider whether you should be making moves and eschewing the dumb buy-and-hold strategy?

I'm about your age, and this crisis has taught me a lot about basic investing principles e.g., tax loss harvesting, what money market funds are available and their relative risks. These are also blindingly obvious concepts, but I'm experiencing some of them for the first time. To me, this is another piece of evidence that my strategy of "being dumb" (to quote an earlier post) is likely to be the least worst.

I was also in the camp of folks expecting a drop today on big unemployment numbers, and that turned out to be dead wrong (for today, anyway). Glad I didn't act on that prediction.

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Re: Why not stand on the sidelines for a little while?

Post by Leesbro63 » Thu Mar 26, 2020 1:37 pm

watchnerd wrote:
Thu Mar 26, 2020 1:24 pm
Leesbro63 wrote:
Thu Mar 26, 2020 1:06 pm
What if the OP goes to cash and the Fed inflates? Stocks go up and the cash can't keep up with inflation.
You can also get stagflation: stocks don't go up, and you have inflation.
Perhaps that will indeed be the end result of all this Fed action. Both stocks and bonds/cash decline in real terms.

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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier » Thu Mar 26, 2020 2:17 pm

tsohg wrote:
Thu Mar 26, 2020 1:32 pm
fitterhappier wrote:
Thu Mar 26, 2020 11:11 am
I will call out that someone earlier had a suggestion about making an options purchase in order to hedge against my concerns. This should have been the blindingly obvious primary option in the first place. If I had to redo the question it would be like "what hedging strategies would you use right now if you buy into my concerns about unaccounted-for downside risk". And of course options exist for just such situations.
Doesn't the fact that you missed a "blindingly obvious" option give you pause and cause you to reconsider whether you should be making moves and eschewing the dumb buy-and-hold strategy?

I'm about your age, and this crisis has taught me a lot about basic investing principles e.g., tax loss harvesting, what money market funds are available and their relative risks. These are also blindingly obvious concepts, but I'm experiencing some of them for the first time. To me, this is another piece of evidence that my strategy of "being dumb" (to quote an earlier post) is likely to be the least worst.

I was also in the camp of folks expecting a drop today on big unemployment numbers, and that turned out to be dead wrong (for today, anyway). Glad I didn't act on that prediction.
No, not at all. Bogle-ish buy and hold (and being dumb - all for it - dumb and lazy is even better) is an investing strategy based on a theory and (arguably) has a lot to show for it in terms of results. In order for it some be something approaching a science-like proposition (like, anything we should bother with), it should be falsifiable. Dumb investing (and, even better: dumb and lazy) is a great idea and all great ideas come with contextual assumptions and limits.

The basic idea of Bogleism is we're betting on world growth and not paying attention to the ups and downs in-between. Businesses are producing stuff, people and governments are buying the stuff, people are innovating, and we have a nice civilization that improves. Betting on a massive basket of companies is about the best one can do if one aims to get a return off civilization improving.

Viruses don't care about our civilization - or to the extent that they "care", civilization is making their mission easier, via jetplanes and such. Fortunately, really successful viruses are rare. But that's also the problem - they're so rare that except in a select few countries, nobody is really ready for a bad virus-exponential-growth problem now. We think linearly and that tends to work out. The story of the doubling of a single grain of rice on the checkerboard was surprising to the emperor because it's not how we usually think - it's counterintuitive.

Now we are dealing with empty cities and 3 million unemployed in the initial US job report and knock-on vicious cycles I can't predict and maybe political instability ahead of us, with decisions individual politicians can make being far more important economically than is typically the case. "The market", a human institution, has bipolar disorder - maybe not surprising.

If another pandemic comes along in 20 years, it'll be bad but I bet we'll handle it relatively well. But here in pandemic #1, everyone is learning on the job, very literally, at the highest reaches of govt, and I just don't have confidence that the downside risk of that is priced in. I don't trust that they will make the right calls in the runup to an election if "do the right thing scientifically and ethically" vs "win" are in opposition.

Long winded, but, your theories have to have contexts and limits, and they have to be falsifiable, or you're just fooling yourself and it's a dogma. I would have never believed it could happen, but I think this crisis is a great candidate for an experiment in which we even test buy-and-hold. I hope I'm wrong that it would be seriously tested - I'd bet I'm wrong, but for the first time I think it's like 60/40 odds.

I like the idea of buy-and-hold coupled with employing a small amount of insurance in world-historical crises (this thread has helped me realize that). In part it's appealing to me because it implies that buy-and-hold is a really good idea but isn't completely infallible.

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Re: Why not stand on the sidelines for a little while?

Post by watchnerd » Thu Mar 26, 2020 2:34 pm

fitterhappier wrote:
Thu Mar 26, 2020 2:17 pm

I like the idea of buy-and-hold coupled with employing a small amount of insurance in world-historical crises (this thread has helped me realize that). In part it's appealing to me because it implies that buy-and-hold is a really good idea but isn't completely infallible.
That's why we keep enough liquidity in risk-free assets to ride things out for 5-6 years, or 10 in extremis.
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Re: Why not stand on the sidelines for a little while?

Post by TimeTheMarket » Thu Mar 26, 2020 2:38 pm

It's a rookie move. You miss those big-gain days like we had today, yesterday, day before, you might as well just buy CDs like grandma.

Either you accept the market is volatile or you do not invest in stocks. Trying to avoid these nasty drops you're going to end up in a world of hurt. You'll waste emotion, make no money. It's a lose-lose.

https://www.cnbc.com/2020/03/26/thinkin ... et-it.html
fitterhappier wrote:
Wed Mar 25, 2020 4:16 am
I'm just having a hard time seeing the scenario in which the market rockets in that time and I miss out on some massive gain. The downside risk, however, seems...titanic.
You wrote this the day after a stratospheric appreciation in the market. And later that day it shot up, and again skyrocketing today. 20% gain in the DOW in 3 days. This is a perfect case in point of why you do not try tricks like the one you're proposing.

BTW, the market may drop another 1000 points tomorrow. Nobody has a clue what the bottom is. You just need to hang on.
fitterhappier wrote:
Wed Mar 25, 2020 5:07 am
35% up in 9 months. Having a really hard time with that.
Me, too. I'm having a hard time, though, with 20% in 3 days, and that's exactly what just happened.
Username is not serious :)

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ram
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Re: Why not stand on the sidelines for a little while?

Post by ram » Thu Mar 26, 2020 2:52 pm

fitterhappier wrote:
Wed Mar 25, 2020 4:16 am
To recap: we are facing a world-historic crisis situation
I have benefited by investing in stocks during the following world historic crisis situations:
-9.11.2001
-2008 financial crisis
-Brexit
Ram

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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier » Thu Mar 26, 2020 2:59 pm

watchnerd wrote:
Thu Mar 26, 2020 2:34 pm
fitterhappier wrote:
Thu Mar 26, 2020 2:17 pm

I like the idea of buy-and-hold coupled with employing a small amount of insurance in world-historical crises (this thread has helped me realize that). In part it's appealing to me because it implies that buy-and-hold is a really good idea but isn't completely infallible.
That's why we keep enough liquidity in risk-free assets to ride things out for 5-6 years, or 10 in extremis.
Insurance as in, I make money (or lose less) on the downside risk that I am guessing is not being accounted-for.

(Cash on hand isn't an issue)

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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier » Thu Mar 26, 2020 3:03 pm

ram wrote:
Thu Mar 26, 2020 2:52 pm
fitterhappier wrote:
Wed Mar 25, 2020 4:16 am
To recap: we are facing a world-historic crisis situation
I have benefited by investing in stocks during the following world historic crisis situations:
-9.11.2001
-2008 financial crisis
-Brexit
Love it, but here's what I consider these in flooding terms: 10-year-flood, 50-year-flood, high tide.

I think of this as a 100-year flood.

tsohg
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Re: Why not stand on the sidelines for a little while?

Post by tsohg » Thu Mar 26, 2020 3:11 pm

fitterhappier wrote:
Thu Mar 26, 2020 2:17 pm
tsohg wrote:
Thu Mar 26, 2020 1:32 pm
fitterhappier wrote:
Thu Mar 26, 2020 11:11 am
I will call out that someone earlier had a suggestion about making an options purchase in order to hedge against my concerns. This should have been the blindingly obvious primary option in the first place. If I had to redo the question it would be like "what hedging strategies would you use right now if you buy into my concerns about unaccounted-for downside risk". And of course options exist for just such situations.
Doesn't the fact that you missed a "blindingly obvious" option give you pause and cause you to reconsider whether you should be making moves and eschewing the dumb buy-and-hold strategy?
No, not at all.
Best of luck!

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Cubicle
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Re: Why not stand on the sidelines for a little while?

Post by Cubicle » Thu Mar 26, 2020 3:26 pm

I didn't read all the posts. I'm not as learned as most posters here. I'm not in the financial industry. I'm young, have a high risk tolerance, & decent income. Because of all that, I'm not doing anything.

Because no one, on the planet, can know what the market will look like next week. Next month. Or in 9 months. It isn't possible.

Factor in transaction costs, taxes generated by selling, anxiety of missing the good days, anxiety of what day to get back in...

There is just as much risk staying in the market compared to taking a break from the market.
"Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be.

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Re: Why not stand on the sidelines for a little while?

Post by magicrat » Thu Mar 26, 2020 3:34 pm

fitterhappier wrote:
Thu Mar 26, 2020 3:03 pm
ram wrote:
Thu Mar 26, 2020 2:52 pm
fitterhappier wrote:
Wed Mar 25, 2020 4:16 am
To recap: we are facing a world-historic crisis situation
I have benefited by investing in stocks during the following world historic crisis situations:
-9.11.2001
-2008 financial crisis
-Brexit
Love it, but here's what I consider these in flooding terms: 10-year-flood, 50-year-flood, high tide.

I think of this as a 100-year flood.
And people rebuild after a 100-year flood, too.

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Re: Why not stand on the sidelines for a little while?

Post by JLJL » Thu Mar 26, 2020 3:35 pm

Leesbro63 wrote:
Thu Mar 26, 2020 11:26 am
elchalten wrote:
Thu Mar 26, 2020 11:24 am
I did what the OP said but two weeks ago and moved all my money into cash because I wanted to make sure I preserved the retirement and school fund.
But now I'm really wondering what my next move should be. On the one hand, there is this huge stimulus and bailout loans from the Fed that the market is reacting to. On the other hand we really seem at least three weeks away from the virus peak, huge unemployment, massive supply chain disruptions (India is totally shut down. A couple of their ports have declared force majeure!)...
Any advice for me?
It's always this way. A bull argument and a bear argument. Seems you timed it right this time...congrats. Pick an allocation you can live with and do that. Then don't just do something...stand there.
Um... define "about 2 weeks ago". If this was the weekend of the 14th, elchalten didn't get it right this time... at least at the moment.

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Re: Why not stand on the sidelines for a little while?

Post by H-Town » Thu Mar 26, 2020 3:40 pm

fitterhappier wrote:
Thu Mar 26, 2020 3:03 pm
ram wrote:
Thu Mar 26, 2020 2:52 pm
fitterhappier wrote:
Wed Mar 25, 2020 4:16 am
To recap: we are facing a world-historic crisis situation
I have benefited by investing in stocks during the following world historic crisis situations:
-9.11.2001
-2008 financial crisis
-Brexit
Love it, but here's what I consider these in flooding terms: 10-year-flood, 50-year-flood, high tide.

I think of this as a 100-year flood.
Houston has back-to-back 100-year flood. In 9 months later, there could be a second wave of virus. So your 9 month timeline is an arbitrary timeline at best.

It makes more sense if you use a benchmark milestone to get back in, i.e. 2700 S&P for example.

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2pedals
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Re: Why not stand on the sidelines for a little while?

Post by 2pedals » Thu Mar 26, 2020 3:56 pm

fitterhappier wrote:
Wed Mar 25, 2020 6:15 pm
fitterhappier wrote:
Wed Mar 25, 2020 6:03 pm
I think you are saying the market valuations today does not support the downside fat tail risks that people or you should be taking. Your prediction is by re-risking now for the short term (a few months) even though you are a long term investor you will be better off because the odds in your favor. I think you should ponder carefully over what Andrew Lo believes. Andrew Lo, the Adaptive Market Hypothesis theory founder, believes that people are mainly rational, but sometimes can overreact during periods of heightened market volatility. Are you overreacting? I think you are.
That is really exactly what I'm saying, only your words are better than mine, thank you for this post. I will read up on what you recommend here.
Sorry for the extra post here...

I would be remiss, and I think, unfair to my own position, to not point out that my suspicions about downside risks were triggered by hard facts about market behavior in the past three weeks. It's really not a good story, and as close to a clearly damning natural experiment as one will find about market rationality in the short term. It's not to say that in the long run - or more precisely, in more normal times - the market isn't broadly reflective of the future value of expected profits...but it is to say that something seems really wrong right now. Something was clearly, factually, wrong from early March to about right now, if one looks at the information available vs equity price movements. Which led to a string of thoughts along the lines of, maybe something is just really wrong right now, and why am I "in"? And then, thinking about a local peak where I could get out for a while...
Should you should be thinking you're either in or out? I say don't do that, I tried that several times before and I was burned often. I wished I learned that lesson earlier in life. A lot a very smart people are not good investors because of this kind of in or out thinking. Jack Bogle said something about that being a really dumb strategy back in Dec 2018 when we were very close to a bear market.
Barron's chat with Jack Bogle wrote:With that in mind, and after a tumultuous December in which stocks have both plummeted and had a record-setting one-day surge, what’s an investor to do? “It’s time to really be thinking how much risk you want to have,” counsels Bogle, rather than simply making a binary decision to be either in or out of the market, an approach that he calls “a really dumb strategy.”
https://www.barrons.com/articles/vangua ... 1545950443
Last edited by 2pedals on Thu Mar 26, 2020 4:04 pm, edited 1 time in total.

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sergeant
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Re: Why not stand on the sidelines for a little while?

Post by sergeant » Thu Mar 26, 2020 4:02 pm

TimeTheMarket wrote:
Thu Mar 26, 2020 2:38 pm
It's a rookie move. You miss those big-gain days like we had today, yesterday, day before, you might as well just buy CDs like grandma.

Either you accept the market is volatile or you do not invest in stocks. Trying to avoid these nasty drops you're going to end up in a world of hurt. You'll waste emotion, make no money. It's a lose-lose.

https://www.cnbc.com/2020/03/26/thinkin ... et-it.html
fitterhappier wrote:
Wed Mar 25, 2020 4:16 am
I'm just having a hard time seeing the scenario in which the market rockets in that time and I miss out on some massive gain. The downside risk, however, seems...titanic.
You wrote this the day after a stratospheric appreciation in the market. And later that day it shot up, and again skyrocketing today. 20% gain in the DOW in 3 days. This is a perfect case in point of why you do not try tricks like the one you're proposing.

BTW, the market may drop another 1000 points tomorrow. Nobody has a clue what the bottom is. You just need to hang on.
fitterhappier wrote:
Wed Mar 25, 2020 5:07 am
35% up in 9 months. Having a really hard time with that.
Me, too. I'm having a hard time, though, with 20% in 3 days, and that's exactly what just happened.
Good post, maybe OP will have a reply.
Lincoln 3 EOW! AA 40/60.

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Re: Why not stand on the sidelines for a little while?

Post by VeganBH » Thu Mar 26, 2020 4:03 pm

fitterhappier wrote:
Wed Mar 25, 2020 4:16 am
To recap: we are facing a world-historic crisis situation, much of which depends on how the US pandemic plays out, and various economic vicious cycles play out after an unprecedented small-business wipeout and massive unemployment...while at the same time we have (without getting too deep into politics) what everyone will agree is a highly unusual US administration in place, and are in an election year.

Multiply all those factors together and I understand the extreme market volatility. This current situation is so world-historic insane vs any crisis I remember that it's hard to hold it in my head at all.

I'm a buy-and-hold long-term indexing investor, but I also strongly believe in investing in what I understand. I do not understand the world economy right now at all.

So we have a nice bump here from the stimulus announcement. Why not take, say, a 9-month break (past the initial lockdowns, unemployment numbers, earnings announcements, US election), sit in cash, and get back in when we're back to an economic situation in some ballpark of "normal"?

I'm just having a hard time seeing the scenario in which the market rockets in that time and I miss out on some massive gain. The downside risk, however, seems...titanic.

So it's market timing, I know. But what are the arguments against the sensibility of an idea like this - given the circumstances?
+1
Thought we were more "buy & hold" types...
But in light of all the uncertainties, we found out - we're not. We're on the cusp of retirement - and we're fortunate to not need to take unnecessary risk. So, we de-risked a bit yesterday/today. Moving from a conservative AA of 25:75, to ~15:85.
If we were younger, and had more years to accumulate, we might do otherwise.

Good luck to you, OP. :beer
"Until we extend our circle of compassion to all living things, humanity will not find peace."​ ~ Albert Sc​hweitzer

LFKB
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Re: Why not stand on the sidelines for a little while?

Post by LFKB » Thu Mar 26, 2020 4:19 pm

fitterhappier wrote:
Thu Mar 26, 2020 2:46 am
Better reeeeally believe that Bogleism works in all circumstances, folks

Image
That was announced this morning. What did the market do today? Why has it done the last 3 days?

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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier » Thu Mar 26, 2020 4:28 pm

magicrat wrote:
Thu Mar 26, 2020 3:34 pm
And people rebuild after a 100-year flood, too.
True, also in The Day After they started rebuilding after a nuclear exchange.

LFKB
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Re: Why not stand on the sidelines for a little while?

Post by LFKB » Thu Mar 26, 2020 4:33 pm

fitterhappier wrote:
Thu Mar 26, 2020 9:31 am
Elysium wrote:
Thu Mar 26, 2020 9:22 am
Oh Boy, this is going to be one of those classic threads to be pulled out when this is all over and flogged thoroughly as an example of everything that is wrong with emotions based investing. OP is going to be poster child for everything emotional that could stand in your way to become successful investor, showing such classic traits as moving from greed, fear, panic, overconfidence, hubris, hesitation, self-doubt, and an overall need for attention.
This subgenre of posts continues to confuse and sort of fascinate me. You have a real need to paint me as reacting "emotionally", you and others keep using that word. In spite of anything I write. And I mean, what do you think you are, the Commander Data of buy-and-hold?

Is characterizing someone as "reacting emotionally" a catch-all way of disparaging the person and giving yourself an excuse to ignore any of the specifics of the debate, here in Bogle-land?

I'm feeling an emotion...for some reason I want to hit Submit. Boom.
Can you please summarize your asset allocation over time. Based on what I’ve seen
- June 2018 - you’re in a 3 fund portfolio
- at some point between June 2018 and February 2020 - you move to 100% equities toward tail end of longest bull market in history
- March 2020 - you’re ready to move to zero equities

Do I have that correct?

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Re: Why not stand on the sidelines for a little while?

Post by Waiting_for_Godot » Thu Mar 26, 2020 4:34 pm

Day 1 post-sell: the fence stings a bit... was irritating seeing today's rally that should have been captured yesterday, only to dive 30 mins prior to close when I sold 40 min prior.

While I might be destined to learn the hard way about timing, this feels more comfortable than staying in at the moment. I've placed my bet; we shall see how this goes. Better to learn while the stakes are small I suppose.

This whole ordeal has inspired me to try and learn more about this whole system, particularly to try and understand more about the objectives of the major market movers, for lack of a better term. What is the time frame for world events being 'priced in' ... was there a giant blind spot this time, or is the time frame that the major players use much shorter, and the game being akin to a game of chicken.

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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier » Thu Mar 26, 2020 4:36 pm


Houston has back-to-back 100-year flood. In 9 months later, there could be a second wave of virus. So your 9 month timeline is an arbitrary timeline at best.

It makes more sense if you use a benchmark milestone to get back in, i.e. 2700 S&P for example.
I don't care about the virus, I care about world leaders compounding the problems. I think 9 months is enough time for whatever stupidity-that-really-matters that might occur, to have happened. Obviously no one has a crystal ball but I don't see away around picking some kind of timeframe.

This proposition isn't shockingly different to me (in arbitrariness, or timing, or anything other aspect) than your typical saver taking a chunk out of their paycheck and buying some VTI every month.

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Re: Why not stand on the sidelines for a little while?

Post by BajaBowl » Thu Mar 26, 2020 4:37 pm

First timer here....Retired 11 yrs, me 64 wife 59. We're 50/50 with Vanguard robo adviser who I'm scheduled to talk to tomorrow.

So tempted to sideline 50% of (deferred) equities if the market doesn't tank, leaving me with something like 25% exposed.

Is this so bad an idea? Creating a cash position aka dry powder? I see the economy getting SLAMMED. It's a ghost town out there.

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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier » Thu Mar 26, 2020 4:41 pm

2pedals wrote:
Thu Mar 26, 2020 3:56 pm

Should you should be thinking you're either in or out? I say don't do that, I tried that several times before and I was burned often. I wished I learned that lesson earlier in life. A lot a very smart people are not good investors because of this kind of in or out thinking. Jack Bogle said something about that being a really dumb strategy back in Dec 2018 when we were very close to a bear market.
Barron's chat with Jack Bogle wrote:With that in mind, and after a tumultuous December in which stocks have both plummeted and had a record-setting one-day surge, what’s an investor to do? “It’s time to really be thinking how much risk you want to have,” counsels Bogle, rather than simply making a binary decision to be either in or out of the market, an approach that he calls “a really dumb strategy.”
https://www.barrons.com/articles/vangua ... 1545950443
Sure works for me, I was saying cash just to keep the discussion simple. How about instead: 10/90 VTI/BND for 9 months.

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Re: Why not stand on the sidelines for a little while?

Post by jjface » Thu Mar 26, 2020 4:42 pm

watchnerd wrote:
Thu Mar 26, 2020 10:46 am
BW1985 wrote:
Thu Mar 26, 2020 10:44 am
I'm not understanding the point of this thread. If you're convinced that there's more downside risk than upside gain over the next 9 months then sell it all, only you can make that decision for yourself.
As far as I can tell, the point of the thread is to intellectually challenge the premises of buy & hold, rather than to take actual action.
Or rather to talk him off the ledge :D

H-Town
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Re: Why not stand on the sidelines for a little while?

Post by H-Town » Thu Mar 26, 2020 4:49 pm

fitterhappier wrote:
Thu Mar 26, 2020 4:36 pm

Houston has back-to-back 100-year flood. In 9 months later, there could be a second wave of virus. So your 9 month timeline is an arbitrary timeline at best.

It makes more sense if you use a benchmark milestone to get back in, i.e. 2700 S&P for example.
I don't care about the virus, I care about world leaders compounding the problems. I think 9 months is enough time for whatever stupidity-that-really-matters that might occur, to have happened. Obviously no one has a crystal ball but I don't see away around picking some kind of timeframe.

This proposition isn't shockingly different to me (in arbitrariness, or timing, or anything other aspect) than your typical saver taking a chunk out of their paycheck and buying some VTI every month.
But isn't the virus is the reason why we are where we are now? The world leaders are still the world leaders couple months ago when market is at the top. That hasn't changed. Why do you think it will change 9 months from now? The election? If the election is the real reason you time the market, you shouldn't do that.

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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier » Thu Mar 26, 2020 4:54 pm

sergeant wrote:
Thu Mar 26, 2020 4:02 pm
TimeTheMarket wrote:
Thu Mar 26, 2020 2:38 pm
It's a rookie move. You miss those big-gain days like we had today, yesterday, day before, you might as well just buy CDs like grandma.

Either you accept the market is volatile or you do not invest in stocks. Trying to avoid these nasty drops you're going to end up in a world of hurt. You'll waste emotion, make no money. It's a lose-lose.

https://www.cnbc.com/2020/03/26/thinkin ... et-it.html
fitterhappier wrote:
Wed Mar 25, 2020 4:16 am
I'm just having a hard time seeing the scenario in which the market rockets in that time and I miss out on some massive gain. The downside risk, however, seems...titanic.
You wrote this the day after a stratospheric appreciation in the market. And later that day it shot up, and again skyrocketing today. 20% gain in the DOW in 3 days. This is a perfect case in point of why you do not try tricks like the one you're proposing.

BTW, the market may drop another 1000 points tomorrow. Nobody has a clue what the bottom is. You just need to hang on.
fitterhappier wrote:
Wed Mar 25, 2020 5:07 am
35% up in 9 months. Having a really hard time with that.
Me, too. I'm having a hard time, though, with 20% in 3 days, and that's exactly what just happened.
Good post, maybe OP will have a reply.
I get really confused when committed buy-and-hold investors say that everyone should ignore the market in the short term and not time or pay attention to that stuff but then use ultra-short-term fluctuations to try to prove points.

The context of the discussion has gotten lost, which was me making a point about downside risk. It's much more believable to me that we'll see a >30% drop in 9 months than we'd see a > 30% rise (and of course what I really should have said was a > 50% rise, from this point). The only relevance for me of the market increase today is that if I were to decide to take a break, I'll have been a little luckier in my timing of the break.

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Re: Why not stand on the sidelines for a little while?

Post by Unladen_Swallow » Thu Mar 26, 2020 4:59 pm

Pinotage wrote:
Wed Mar 25, 2020 5:00 am
OP - do it.

You’ve made up your mind and likely any narrative you create over the unfolding months will hinge on “I knew”. “I knew and should have acted” or “I knew and it was better to be safe than sorry”

OP - do it.

Some people will agree, others will disagree. This can be substantiated by reading the seemingly DOZENS of other threads exactly like this.

OP - do it.

You know your own financial and emotional situations far better than internet strangers. You know your own relative job security. You know how solid your emergency fund is. You know how old you are, how many people depend on you, and your near vs long term goals

You know all of this and you are posting this question.

OP - do it.
+1
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

MittensMoney
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Re: Why not stand on the sidelines for a little while?

Post by MittensMoney » Thu Mar 26, 2020 5:00 pm

I think the only real point here is that moving your assets in & out is a crapshoot. You may get the timing right and save some losses, you may get the timing wrong and lose some gains. People three days ago felt we had a lot further to drop and sold at SPY $225, kicking themselves only a few days later at SPY $260. You could sell today and see SPY at 300 in a month, or it could drop down to 200. Because the market moves up more often then down, over a long period of time those who try to time the market end up making less money than those who stay invested & continue to invest the entire time.

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fitterhappier
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Re: Why not stand on the sidelines for a little while?

Post by fitterhappier » Thu Mar 26, 2020 5:23 pm

H-Town wrote:
Thu Mar 26, 2020 4:49 pm
But isn't the virus is the reason why we are where we are now? The world leaders are still the world leaders couple months ago when market is at the top. That hasn't changed. Why do you think it will change 9 months from now? The election? If the election is the real reason you time the market, you shouldn't do that.
Political leaders have vast power to make a crisis like this worse. I keep referencing 1929 but the nature of this crisis means it could theoretically be even worse: public health crises mean widespread restrictions on liberty, and constituents don't like that, and given exponential growth math, it doesn't take many politicians facing elections to ease up on the lockdowns and other restrictions on freedom and really screw the world up.

That's just the biological/health part of the crisis. I don't know about you but I have a hard time wrapping my head around the ramifications of the supply chain disruptions and mass business failures and unemployment that are all happening simultaneously. Obviously the list of problems could go on.

9 months is a good timeframe in which to get a handle on which direction the world is going (not great vs really terrible). Elections create pressure for politicians to make decisions they might not otherwise. Many would rather win the election than do what's in the common interest if it means keeping their jobs! In a normal year that's of course true, but this year the consequences are potentially much bigger. But the timeframe is just a guess as to what it takes to get past the unaccounted-for downside risk (my pet theory).

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Re: Why not stand on the sidelines for a little while?

Post by Elysium » Thu Mar 26, 2020 5:26 pm

Unladen_Swallow wrote:
Thu Mar 26, 2020 4:59 pm
Pinotage wrote:
Wed Mar 25, 2020 5:00 am
OP - do it.

You’ve made up your mind and likely any narrative you create over the unfolding months will hinge on “I knew”. “I knew and should have acted” or “I knew and it was better to be safe than sorry”

OP - do it.

Some people will agree, others will disagree. This can be substantiated by reading the seemingly DOZENS of other threads exactly like this.

OP - do it.

You know your own financial and emotional situations far better than internet strangers. You know your own relative job security. You know how solid your emergency fund is. You know how old you are, how many people depend on you, and your near vs long term goals

You know all of this and you are posting this question.

OP - do it.
+1
OP is all talk no action. Has no courage or conviction to pull the plug and sit on the sidelines for 9 months. Time to move on.

I have bookmarked it for future lesson learned for new posters. :twisted:

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