Bogleheads are good at market timing

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telemark
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Re: Bogleheads are good at market timing

Post by telemark »

Leesbro63 wrote: Sat Oct 17, 2020 8:40 am
telemark wrote: Sat Oct 17, 2020 12:54 am Bogleheads have been predicting poor returns or an outright crash in bonds for as long as I can remember, and perhaps someday they will be right.
I don't think this is quite right. What "Bogleheads" have been "predicting" is that real bond yields are at the low end of historical range. And that for our "safe money" (fixed income), the most prudent place is/will be short term fixed income. It's not a prediction of a "crash", but more an acknowledgment of the severe consequences (loss of safe money) of a bond crash. Starting in about 2003, for me, I took to heart Dr. Bernstein's thinking that anything longer than short term bonds was too risky for safe money. He's been totally wrong, so far, about the direction of interest rates...and for a very long time. It never occurred to me in 2003 that our interest rates might end up like Japan's....very very low for very very long. Yet, Bernstein was and still is right about the risk/reward and about Pascal's Wager...if you're wrong about your safe money, you're condemned to a bad place for eternity. Sure I wish I had invested in longer term bonds in 2003 as I wish I had invested in Amazon and Apple then. But I don't regret either miss-out because my longer term goal requires optimizing risk and reward and longer bonds/Apple/Amazon do/does not meet that requirement.
That is a more nuanced position. But if we go by the standard proposed by the topic author, looking at the kinds of threads that are common, it's easy to get the impression that you are better off setting your money on fire than putting it in bonds. Picking up various denominations of coin in front of a steamroller comes up a lot.
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Re: Bogleheads are good at market timing

Post by TravelforFun »

nedsaid wrote: Fri Oct 16, 2020 2:23 pm
celia wrote: Fri Oct 16, 2020 2:22 pm
nedsaid wrote: Fri Oct 16, 2020 2:10 pm Most Bogleheads have practiced milder forms of market timing, for me it is based upon valuations and is more about risk control than trying to beat the markets.
I consider re-balancing as a form of market timing. That is popular on Bogleheads.
Yes, I do too, but certainly rebalancing is a very mild form of market timing.
Rebalancing is not market timing because you take action after the fact. Market timers take action in anticipation of something that might happen.

TravelforFun
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telemark
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Re: Bogleheads are good at market timing

Post by telemark »

nedsaid wrote: Fri Oct 16, 2020 2:23 pm
celia wrote: Fri Oct 16, 2020 2:22 pm
nedsaid wrote: Fri Oct 16, 2020 2:10 pm Most Bogleheads have practiced milder forms of market timing, for me it is based upon valuations and is more about risk control than trying to beat the markets.
I consider re-balancing as a form of market timing. That is popular on Bogleheads.
Yes, I do too, but certainly rebalancing is a very mild form of market timing.
Rebalancing is self-limiting. You can rebalance, but you can't leverage up and go wild with it. Even increasing how often you do it only means moving less money each time.
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Re: Bogleheads are good at market timing

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TravelforFun wrote: Sat Oct 17, 2020 11:58 am
nedsaid wrote: Fri Oct 16, 2020 2:23 pm
celia wrote: Fri Oct 16, 2020 2:22 pm
nedsaid wrote: Fri Oct 16, 2020 2:10 pm Most Bogleheads have practiced milder forms of market timing, for me it is based upon valuations and is more about risk control than trying to beat the markets.
I consider re-balancing as a form of market timing. That is popular on Bogleheads.
Yes, I do too, but certainly rebalancing is a very mild form of market timing.
Rebalancing is not market timing because you take action after the fact. Market timers take action in anticipation of something that might happen.

TravelforFun
You sell an expensive asset in anticipation that its future expected returns will be relatively low, you then take the proceeds and buy a relatively cheap asset in anticipation that its future expected returns will be relatively high. I have done this myself with Growth to Value, US to International, and Large to Small rebalancing within the world stock markets. In practice, I might only be able to limit risk and not boost returns doing this but we will see.
A fool and his money are good for business.
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The Three-Fund Portfolio

Post by Taylor Larimore »

Nedsaid wrote:
Even the three fund portfolio is passe now.
Nedsaid:

The Three-Fund Portfolio post just received its 3006th reply. Fortunately for investors, it's still alive and working better than nearly all who try to beat it. :happy

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan."
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: Bogleheads are good at market timing

Post by GreenLawn »

TravelforFun wrote: Sat Oct 17, 2020 11:58 am
nedsaid wrote: Fri Oct 16, 2020 2:23 pm
celia wrote: Fri Oct 16, 2020 2:22 pm
nedsaid wrote: Fri Oct 16, 2020 2:10 pm Most Bogleheads have practiced milder forms of market timing, for me it is based upon valuations and is more about risk control than trying to beat the markets.
I consider re-balancing as a form of market timing. That is popular on Bogleheads.
Yes, I do too, but certainly rebalancing is a very mild form of market timing.
Rebalancing is not market timing because you take action after the fact. Market timers take action in anticipation of something that might happen.

TravelforFun
I'm a market timer and I take action during the event, not prior. I can't predict when the market will crash, but I can recognize when it does.

There appears to be differing opinions on when to rebalance. Myself, I would rebalance during the crash, others like to go by the calendar. I'm too much of a bargain hound to ignore a big sale in the market.
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Re: Bogleheads are good at market timing

Post by grabiner »

flaccidsteele wrote: Fri Oct 16, 2020 2:58 pm Market timing is simple. I’ve been doing it successfully since the 1990s. It’s a dirty word on BH so some posters call it rebalancing
There is a fundamental difference between market timing and rebalancing. Market timing is based on an assumption that expected future returns change; rebalancing to the same allocation is consistent with an assumption that expected future returns are the same, and you are correcting your risk level.

For example, foreign stocks are riskier than US stocks, but have about the same expected return. Therefore, you might determine that an optimal US/foreign allocation is 60/40 (which is what Vanguard uses); as your allocation moves away from 60/40, you take more risk for no increase in return. When the foreign markets rise and your allocation becomes 55/45, you can rebalance and move back to 60/40, not because you expect them to fall, but because this reduces the risk.

For a stock/bond portfolio, you are considering the trade-off between risk and return. If you choose to hold 60% stock, this is because the additional risk of holding more than 60% stock is not worth the potential additional return. When the stock market rises and takes you to 70/30, you can rebalance and sell some stock to get back to 60/40, not because you expect the stock market to fall, but because the risk reduction is worth the cost in returns.

For similar reasons, changing your allocation because of a change in your personal situation is not market timing. The day you buy a house, or the day your daughter gets a college scholarship, or they day you cash in your employer stock options, your risk tolerance has increased, and you may choose to hold a larger stock portfolio independent of any expectations of market movements.

(edited to clarify assumptions)
Last edited by grabiner on Sat Oct 17, 2020 3:54 pm, edited 1 time in total.
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Re: Bogleheads are good at market timing

Post by flaccidsteele »

grabiner wrote: Sat Oct 17, 2020 3:38 pm
flaccidsteele wrote: Fri Oct 16, 2020 2:58 pm Market timing is simple. I’ve been doing it successfully since the 1990s. It’s a dirty word on BH so some posters call it rebalancing
There is a fundamental difference between market timing and rebalancing. Market timing is based on an assumption that expected future returns change; rebalancing is based on an assumption that expected future returns are the same.
But when the US stock market goes into a bear, my future expected returns do change. That’s why I buy more during bears. Isn’t that market timing?
grabiner wrote: Sat Oct 17, 2020 3:38 pm For example, foreign stocks are riskier than US stocks, but have about the same expected return. Therefore, you might determine that an optimal US/foreign allocation is 60/40 (which is what Vanguard uses); as your allocation moves away from 60/40, you take more risk for no increase in return. When the foreign markets rise and your allocation becomes 55/45, you can rebalance and move back to 60/40, not because you expect them to fall, but because this reduces the risk.

For a stock/bond portfolio, you are considering the trade-off between risk and return. If you choose to hold 60% stock, this is because the additional risk of holding more than 60% stock is not worth the potential additional return. When the stock market rises and takes you to 70/30, you can rebalance and sell some stock to get back to 60/40, not because you expect the stock market to fall, but because the risk reduction is worth the cost in returns.

For similar reasons, changing your allocation because of a change in your personal situation is not market timing. The day you buy a house, or the day your daughter gets a college scholarship, or they day you cash in your employer stock options, your risk tolerance has increased, and you may choose to hold a larger stock portfolio independent of any expectations of market movements.
I don’t have a pre-set asset allocation so I can’t speak to that. For example I’m not aiming for 60/80/100 equities or anything like that. My asset allocation is what it happens to be.

Not sure how that impacts whether or not what I do is market timing

According to the BH wiki page on Market Timing, it is:
Market timing refers to act(s) of investing based on the condition of the market as opposed to personal characteristics.[notes 1]
As far as this definition is concerned, I invest based on the condition of the market so I’m technically a market timer

Technically I’m also rebalancing, but only as a consequence of my actions and not as a predetermined desire to rebalance
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Re: Bogleheads are good at market timing

Post by grabiner »

flaccidsteele wrote: Sat Oct 17, 2020 3:53 pm
grabiner wrote: Sat Oct 17, 2020 3:38 pm
flaccidsteele wrote: Fri Oct 16, 2020 2:58 pm Market timing is simple. I’ve been doing it successfully since the 1990s. It’s a dirty word on BH so some posters call it rebalancing
There is a fundamental difference between market timing and rebalancing. Market timing is based on an assumption that expected future returns change; rebalancing is based on an assumption that expected future returns are the same.
But when the US stock market goes into a bear, my future expected returns do change. That’s why I buy more during bears. Isn’t that market timing?
If this is the case, then you would have over-rebalanced. Your decision of how much stock to hold is based on your expectations of stock and bond returns. If your expectation of stock returns was higher in April than in March, while your expectation of bond returns was the same, then you should have held a higher percentage of stock in April; the optimal stock/bond ratio changed.
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Re: Bogleheads are good at market timing

Post by flaccidsteele »

grabiner wrote: Sat Oct 17, 2020 3:57 pm
flaccidsteele wrote: Sat Oct 17, 2020 3:53 pm
grabiner wrote: Sat Oct 17, 2020 3:38 pm
flaccidsteele wrote: Fri Oct 16, 2020 2:58 pm Market timing is simple. I’ve been doing it successfully since the 1990s. It’s a dirty word on BH so some posters call it rebalancing
There is a fundamental difference between market timing and rebalancing. Market timing is based on an assumption that expected future returns change; rebalancing is based on an assumption that expected future returns are the same.
But when the US stock market goes into a bear, my future expected returns do change. That’s why I buy more during bears. Isn’t that market timing?
If this is the case, then you would have over-rebalanced. Your decision of how much stock to hold is based on your expectations of stock and bond returns. If your expectation of stock returns was higher in April than in March, while your expectation of bond returns was the same, then you should have held a higher percentage of stock in April; the optimal stock/bond ratio changed.
Do I need to hold bonds to be market timing? I’ve never held bonds ever. My optimal stock/bond ratio is 0 bonds

My expectation of stock returns is just higher during bears. I don’t think about bonds because I don’t have any

It just feels like I’m market timing
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Re: Bogleheads are good at market timing

Post by GreenLawn »

grabiner wrote: Sat Oct 17, 2020 3:38 pm
flaccidsteele wrote: Fri Oct 16, 2020 2:58 pm Market timing is simple. I’ve been doing it successfully since the 1990s. It’s a dirty word on BH so some posters call it rebalancing
There is a fundamental difference between market timing and rebalancing. Market timing is based on an assumption that expected future returns change; rebalancing to the same allocation is consistent with an assumption that expected future returns are the same, and you are correcting your risk level.

For example, foreign stocks are riskier than US stocks, but have about the same expected return. Therefore, you might determine that an optimal US/foreign allocation is 60/40 (which is what Vanguard uses); as your allocation moves away from 60/40, you take more risk for no increase in return. When the foreign markets rise and your allocation becomes 55/45, you can rebalance and move back to 60/40, not because you expect them to fall, but because this reduces the risk.

For a stock/bond portfolio, you are considering the trade-off between risk and return. If you choose to hold 60% stock, this is because the additional risk of holding more than 60% stock is not worth the potential additional return. When the stock market rises and takes you to 70/30, you can rebalance and sell some stock to get back to 60/40, not because you expect the stock market to fall, but because the risk reduction is worth the cost in returns.

For similar reasons, changing your allocation because of a change in your personal situation is not market timing. The day you buy a house, or the day your daughter gets a college scholarship, or they day you cash in your employer stock options, your risk tolerance has increased, and you may choose to hold a larger stock portfolio independent of any expectations of market movements.

(edited to clarify assumptions)
I buy VTI during a market crash to minimize my risk. If a Boglehead pays 172/share 6 months prior to a crash and I pay 120/share during a crash, is not paying more for the same share riskier? And if it's riskier why is it the standard investment advice? We both end up owning the same equity so if there's economic turbulence we're equally at risk of the share decreasing in value, except my risk is less as I paid less.

I've never understood why Bogleheads aren't advised to buy shares when they're on sale (assuming they have sufficient Fixed Income reserves remaining after the purchase to use as a safety net of course).
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Re: Bogleheads are good at market timing

Post by TheDDC »

GreenLawn wrote: Sat Oct 17, 2020 8:02 pm
grabiner wrote: Sat Oct 17, 2020 3:38 pm
flaccidsteele wrote: Fri Oct 16, 2020 2:58 pm Market timing is simple. I’ve been doing it successfully since the 1990s. It’s a dirty word on BH so some posters call it rebalancing
There is a fundamental difference between market timing and rebalancing. Market timing is based on an assumption that expected future returns change; rebalancing to the same allocation is consistent with an assumption that expected future returns are the same, and you are correcting your risk level.

For example, foreign stocks are riskier than US stocks, but have about the same expected return. Therefore, you might determine that an optimal US/foreign allocation is 60/40 (which is what Vanguard uses); as your allocation moves away from 60/40, you take more risk for no increase in return. When the foreign markets rise and your allocation becomes 55/45, you can rebalance and move back to 60/40, not because you expect them to fall, but because this reduces the risk.

For a stock/bond portfolio, you are considering the trade-off between risk and return. If you choose to hold 60% stock, this is because the additional risk of holding more than 60% stock is not worth the potential additional return. When the stock market rises and takes you to 70/30, you can rebalance and sell some stock to get back to 60/40, not because you expect the stock market to fall, but because the risk reduction is worth the cost in returns.

For similar reasons, changing your allocation because of a change in your personal situation is not market timing. The day you buy a house, or the day your daughter gets a college scholarship, or they day you cash in your employer stock options, your risk tolerance has increased, and you may choose to hold a larger stock portfolio independent of any expectations of market movements.

(edited to clarify assumptions)
I buy VTI during a market crash to minimize my risk. If a Boglehead pays 172/share 6 months prior to a crash and I pay 120/share during a crash, is not paying more for the same share riskier? And if it's riskier why is it the standard investment advice? We both end up owning the same equity so if there's economic turbulence we're equally at risk of the share decreasing in value, except my risk is less as I paid less.

I've never understood why Bogleheads aren't advised to buy shares when they're on sale (assuming they have sufficient Fixed Income reserves remaining after the purchase to use as a safety net of course).
Because “on sale” is unknown, just like knowing whether or not you are truly “buying the dip”. We joke a lot about “BAH THE DIYUP” but really, who knows where the bottom of anything is, and for how long? Our advice is to invest as soon as you have the cash. The sooner the better. Waiting on the sidelines is silly.

I schedule automatic investing, personally. One tranche goes to 403(b) and taxable on the 15th and another on the 30th 403(b) only. Those are the only dates I care about for investing monthly.

-TheDDC

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Re: Bogleheads are good at market timing

Post by GreenLawn »

TheDDC wrote: Sat Oct 17, 2020 8:07 pm
GreenLawn wrote: Sat Oct 17, 2020 8:02 pm
grabiner wrote: Sat Oct 17, 2020 3:38 pm
flaccidsteele wrote: Fri Oct 16, 2020 2:58 pm Market timing is simple. I’ve been doing it successfully since the 1990s. It’s a dirty word on BH so some posters call it rebalancing
There is a fundamental difference between market timing and rebalancing. Market timing is based on an assumption that expected future returns change; rebalancing to the same allocation is consistent with an assumption that expected future returns are the same, and you are correcting your risk level.

For example, foreign stocks are riskier than US stocks, but have about the same expected return. Therefore, you might determine that an optimal US/foreign allocation is 60/40 (which is what Vanguard uses); as your allocation moves away from 60/40, you take more risk for no increase in return. When the foreign markets rise and your allocation becomes 55/45, you can rebalance and move back to 60/40, not because you expect them to fall, but because this reduces the risk.

For a stock/bond portfolio, you are considering the trade-off between risk and return. If you choose to hold 60% stock, this is because the additional risk of holding more than 60% stock is not worth the potential additional return. When the stock market rises and takes you to 70/30, you can rebalance and sell some stock to get back to 60/40, not because you expect the stock market to fall, but because the risk reduction is worth the cost in returns.

For similar reasons, changing your allocation because of a change in your personal situation is not market timing. The day you buy a house, or the day your daughter gets a college scholarship, or they day you cash in your employer stock options, your risk tolerance has increased, and you may choose to hold a larger stock portfolio independent of any expectations of market movements.

(edited to clarify assumptions)
I buy VTI during a market crash to minimize my risk. If a Boglehead pays 172/share 6 months prior to a crash and I pay 120/share during a crash, is not paying more for the same share riskier? And if it's riskier why is it the standard investment advice? We both end up owning the same equity so if there's economic turbulence we're equally at risk of the share decreasing in value, except my risk is less as I paid less.

I've never understood why Bogleheads aren't advised to buy shares when they're on sale (assuming they have sufficient Fixed Income reserves remaining after the purchase to use as a safety net of course).
Because “on sale” is unknown, just like knowing whether or not you are truly “buying the dip”. We joke a lot about “BAH THE DIYUP” but really, who knows where the bottom of anything is, and for how long? Our advice is to invest as soon as you have the cash. The sooner the better. Waiting on the sidelines is silly.

I schedule automatic investing, personally. One tranche goes to 403(b) and taxable on the 15th and another on the 30th 403(b) only. Those are the only dates I care about for investing monthly.

-TheDDC

-TheDDC
I have no problem with folks who enjoy paying full price, most Bogleheads do. If you don't recognize last March as a sale, then you're better off with continuing with your present investing strategy.
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Re: Bogleheads are good at market timing

Post by TheDDC »

GreenLawn wrote: Sat Oct 17, 2020 8:58 pm I have no problem with folks who enjoy paying full price, most Bogleheads do. If you don't recognize last March as a sale, then you're better off with continuing with your present investing strategy.
Oh, the clairvoyance, eh? So you knew the exact date in March to call the bottom and you didn’t tell any of us? We pay a fair price for equities, but holding and gesturing as though you know the bottom when it happens is a fools errand.

-TheDDC
Rules to wealth building: 90-100% VTSAX piled high and deep, 0-10% VIGAX tilt, 0% given away to banks, minimize amount given to medical-industrial complex
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Re: Bogleheads are good at market timing

Post by GreenLawn »

TheDDC wrote: Sat Oct 17, 2020 9:19 pm
GreenLawn wrote: Sat Oct 17, 2020 8:58 pm I have no problem with folks who enjoy paying full price, most Bogleheads do. If you don't recognize last March as a sale, then you're better off with continuing with your present investing strategy.
Oh, the clairvoyance, eh? So you knew the exact date in March to call the bottom and you didn’t tell any of us? We pay a fair price for equities, but holding and gesturing as though you know the bottom when it happens is a fools errand.

-TheDDC
No need to know the exact bottom. I don't need the best deal, just a great deal. But if you're happy with your strategy, then continue on. I'm happy with mine. I won't convince you and you won't convince me. Of that I am sure.
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Re: Bogleheads are good at market timing

Post by davebeers »

I market time on occasion. When the market is down on multiple days I buy more VTSAX, when it climbs to new highs I move to Wellesley. When COVID became mainstream in Jan I bought all the way down and 2 months ago I moved it over. Not perfect timing but better than just buying consistently in either fund
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Re: Bogleheads are good at market timing

Post by flaccidsteele »

TheDDC wrote: Sat Oct 17, 2020 8:07 pm
GreenLawn wrote: Sat Oct 17, 2020 8:02 pm
grabiner wrote: Sat Oct 17, 2020 3:38 pm
flaccidsteele wrote: Fri Oct 16, 2020 2:58 pm Market timing is simple. I’ve been doing it successfully since the 1990s. It’s a dirty word on BH so some posters call it rebalancing
There is a fundamental difference between market timing and rebalancing. Market timing is based on an assumption that expected future returns change; rebalancing to the same allocation is consistent with an assumption that expected future returns are the same, and you are correcting your risk level.

For example, foreign stocks are riskier than US stocks, but have about the same expected return. Therefore, you might determine that an optimal US/foreign allocation is 60/40 (which is what Vanguard uses); as your allocation moves away from 60/40, you take more risk for no increase in return. When the foreign markets rise and your allocation becomes 55/45, you can rebalance and move back to 60/40, not because you expect them to fall, but because this reduces the risk.

For a stock/bond portfolio, you are considering the trade-off between risk and return. If you choose to hold 60% stock, this is because the additional risk of holding more than 60% stock is not worth the potential additional return. When the stock market rises and takes you to 70/30, you can rebalance and sell some stock to get back to 60/40, not because you expect the stock market to fall, but because the risk reduction is worth the cost in returns.

For similar reasons, changing your allocation because of a change in your personal situation is not market timing. The day you buy a house, or the day your daughter gets a college scholarship, or they day you cash in your employer stock options, your risk tolerance has increased, and you may choose to hold a larger stock portfolio independent of any expectations of market movements.

(edited to clarify assumptions)
I buy VTI during a market crash to minimize my risk. If a Boglehead pays 172/share 6 months prior to a crash and I pay 120/share during a crash, is not paying more for the same share riskier? And if it's riskier why is it the standard investment advice? We both end up owning the same equity so if there's economic turbulence we're equally at risk of the share decreasing in value, except my risk is less as I paid less.

I've never understood why Bogleheads aren't advised to buy shares when they're on sale (assuming they have sufficient Fixed Income reserves remaining after the purchase to use as a safety net of course).
Because “on sale” is unknown, just like knowing whether or not you are truly “buying the dip”. We joke a lot about “BAH THE DIYUP” but really, who knows where the bottom of anything is, and for how long? Our advice is to invest as soon as you have the cash. The sooner the better. Waiting on the sidelines is silly.
There’s no need to know if the US index is on sale

All we need to know that $80 is a better price than $100

Always buy and buy more during bears

Simple 😴
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Re: Bogleheads are good at market timing

Post by garlandwhizzer »

I don't believe that there are set and inflexible investing rules that everyone should always follow in all economic, personal, and market circumstances. I suspect that most market timing moves done by most investors fail to work out as anticipated. I do believe however that when significant changes occur in the markets, in the underlying economy, and in ones own financial circumstances, that some market timing decisions made by some investors are appropriate and can turn out well. Among examples of buy-and-hold investors who have on occasion done market timing to their benefit are Bogle who sold stocks and went into bonds at the height of the tech boom in 1999 - 2000, and Buffett who does the vast majority of his stock purchases in what others consider to be frightening bear markets. Buffett also largely defers buying into equity in long running bull markets that have inflated equity valuations. His idea of value investing has evolved over time (APPL largest BRK holding). Responding to secular shifts in markets and the economy, if done wisely (that's the hard part), can be very helpful.

I myself have sometimes done slight/modest degrees of market timing not on a regular basis but in response to market or economic situations. Some have failed--doubling down with margin accounts in rapidly declining high beta tech in 2000 which turned into a disaster. I mistook 18 years of investing success in the greatest bull market of all time for investing genius. I learned a costly but important lesson about human fallibility which all of us to some extent share. Some market timing moves have succeeded--anticipating the housing price/debt/financial collapse in 2007 and liquidating sufficient stock to cover all living expenses for 3 years. I also, mostly by pure luck, anticipated a significant chance of recession is 2020 at the end of 2019. At that time I reduced portfolio equity to provide cash assets with which to buy the same equity back at lower prices in the event of a recession or other risk events. I didn't foresee Covid-19 at all, I simply thought that stocks were richly priced at the end of 2019 relative to what I perceived to be multiple risks including a 50% chance of recession in 2020. That also worked and I bought back in not at the lows but at prices a lot better than when I sold at the end of 2019.

Having done market timing and experienced its both its upside and its downside, I have learned to do it rarely, only when I have what appears to me to be a compelling reason. Even then, I make only slight/modest changes in my portfolio and take a long hard look at potential risk/downside of this move. For buy-and-hold investors which I am, sinning a little on infrequent occasions, is okay IMO.

Garland Whizzer
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Re: Bogleheads are good at market timing

Post by GreenLawn »

garlandwhizzer wrote: Sun Oct 18, 2020 4:53 pm I don't believe that there are set and inflexible investing rules that everyone should always follow in all economic, personal, and market circumstances. I suspect that most market timing moves done by most investors fail to work out as anticipated. I do believe however that when significant changes occur in the markets, in the underlying economy, and in ones own financial circumstances, that some market timing decisions made by some investors are appropriate and can turn out well. Among examples of buy-and-hold investors who have on occasion done market timing to their benefit are Bogle who sold stocks and went into bonds at the height of the tech boom in 1999 - 2000, and Buffett who does the vast majority of his stock purchases in what others consider to be frightening bear markets. Buffett also largely defers buying into equity in long running bull markets that have inflated equity valuations. His idea of value investing has evolved over time (APPL largest BRK holding). Responding to secular shifts in markets and the economy, if done wisely (that's the hard part), can be very helpful.

I myself have sometimes done slight/modest degrees of market timing not on a regular basis but in response to market or economic situations. Some have failed--doubling down with margin accounts in rapidly declining high beta tech in 2000 which turned into a disaster. I mistook 18 years of investing success in the greatest bull market of all time for investing genius. I learned a costly but important lesson about human fallibility which all of us to some extent share. Some market timing moves have succeeded--anticipating the housing price/debt/financial collapse in 2007 and liquidating sufficient stock to cover all living expenses for 3 years. I also, mostly by pure luck, anticipated a significant chance of recession is 2020 at the end of 2019. At that time I reduced portfolio equity to provide cash assets with which to buy the same equity back at lower prices in the event of a recession or other risk events. I didn't foresee Covid-19 at all, I simply thought that stocks were richly priced at the end of 2019 relative to what I perceived to be multiple risks including a 50% chance of recession in 2020. That also worked and I bought back in not at the lows but at prices a lot better than when I sold at the end of 2019.

Having done market timing and experienced its both its upside and its downside, I have learned to do it rarely, only when I have what appears to me to be a compelling reason. Even then, I make only slight/modest changes in my portfolio and take a long hard look at potential risk/downside of this move. For buy-and-hold investors which I am, sinning a little on infrequent occasions, is okay IMO.

Garland Whizzer
Pulling out in 2019 really is market timing:) I had the same thought at the time, that the chances of a recession in 2020 were great. I'm gun shy about taking action ahead of the event ever since Alan Greenspan proclaimed there was "irrational exuberance" in the market in 1996. He of course was correct, but the market continued upward for several more years after that.

For now I'm a cautious market timer, if that's not an oxymoron. I wait until the crash then buy stock.

I didn't dig deep into learning investing until late last year and then this year during the crash. I'm astounded at how ignorant the so called experts are on Marketwatch and CNBC. They are essentially worthless, though certainly entertaining.

This forum is the best source of investment information I've found so far, though Bogleheads tend to be overly conservative in how they manage money. I'll take that any day over the casino mentality at Robinhood.
kimura king
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Re: Bogleheads are good at market timing

Post by kimura king »

patrick wrote: Fri Oct 16, 2020 2:59 pm Here are a few of many examples of false alarms:

April 2010 Time To Sell Stocks? Is the party over? Today's extreme drop is scary. Is it only the beginning?

January 2013 Overvalued Equities ... US equities are 40 to 50 percent overpriced.

November 2013 Advice: Should I invest when Stocks are at all time high ... feel that investing it now when stock are crushing it will surely set me up for a big loss in the near future.

December 2014 Frankly, we do not understand the current market. We still think its overvalued ... Although we have cash to invest, we see the current market as too risky

June 2015 Safe haven for next crash ... many that say that the stock market is overdue a correction

March 2017 Sitting on cash....Waiting for a crash ... Is there any Bogleheads out there that has decided to hold onto cash right now since valuations are so high and interest rates are so low? ... it just feels so foolish right now to put money into such an inflated market

October 2017 Extreme Valuations, and why you should reconsider I have been crunching data and couldn't figure out how I keep seeing prognosticators saying PE's aren't too stretched. ... Let someone else hold the bag - and be fearful when others are greedy.

January 2018 Anyway to compare metrics of today w stock bubble in 2000 ... I feel its sort of the same thing now.

March 2020 (near the crash bottom) Looming Crash ... we’re certainly going lower. And if the same trajectory holds, it’ll take about 10 or more years before we even sniff the previous all-time highs

If you had bought at the time any of these posts were made and held until today, you would have made a lot of money.
wowza, great post
TheDDC
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Re: Bogleheads are good at market timing

Post by TheDDC »

GreenLawn wrote: Sat Oct 17, 2020 9:25 pm
TheDDC wrote: Sat Oct 17, 2020 9:19 pm
GreenLawn wrote: Sat Oct 17, 2020 8:58 pm I have no problem with folks who enjoy paying full price, most Bogleheads do. If you don't recognize last March as a sale, then you're better off with continuing with your present investing strategy.
Oh, the clairvoyance, eh? So you knew the exact date in March to call the bottom and you didn’t tell any of us? We pay a fair price for equities, but holding and gesturing as though you know the bottom when it happens is a fools errand.

-TheDDC
No need to know the exact bottom. I don't need the best deal, just a great deal. But if you're happy with your strategy, then continue on. I'm happy with mine. I won't convince you and you won't convince me. Of that I am sure.
Okay. Very simplistic. Apparently I have followed your "strategy" (I guess that's what you call it?) then in that case, by the sheer fact that investment occurs on a random basis when recent volatility is factored in, and I have a 50/50 shot at buying "low". Carry on?

-TheDDC
Rules to wealth building: 90-100% VTSAX piled high and deep, 0-10% VIGAX tilt, 0% given away to banks, minimize amount given to medical-industrial complex
GreenLawn
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Re: Bogleheads are good at market timing

Post by GreenLawn »

There you go, no need to change your strategy then! Bogleheads don't like change from what I've seen. Stay the course I believe the saying is.
GreenLawn
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Re: Bogleheads are good at market timing

Post by GreenLawn »

kimura king wrote: Sun Oct 18, 2020 9:21 pm
patrick wrote: Fri Oct 16, 2020 2:59 pm Here are a few of many examples of false alarms:

April 2010 Time To Sell Stocks? Is the party over? Today's extreme drop is scary. Is it only the beginning?

January 2013 Overvalued Equities ... US equities are 40 to 50 percent overpriced.

November 2013 Advice: Should I invest when Stocks are at all time high ... feel that investing it now when stock are crushing it will surely set me up for a big loss in the near future.

December 2014 Frankly, we do not understand the current market. We still think its overvalued ... Although we have cash to invest, we see the current market as too risky

June 2015 Safe haven for next crash ... many that say that the stock market is overdue a correction

March 2017 Sitting on cash....Waiting for a crash ... Is there any Bogleheads out there that has decided to hold onto cash right now since valuations are so high and interest rates are so low? ... it just feels so foolish right now to put money into such an inflated market

October 2017 Extreme Valuations, and why you should reconsider I have been crunching data and couldn't figure out how I keep seeing prognosticators saying PE's aren't too stretched. ... Let someone else hold the bag - and be fearful when others are greedy.

January 2018 Anyway to compare metrics of today w stock bubble in 2000 ... I feel its sort of the same thing now.

March 2020 (near the crash bottom) Looming Crash ... we’re certainly going lower. And if the same trajectory holds, it’ll take about 10 or more years before we even sniff the previous all-time highs

If you had bought at the time any of these posts were made and held until today, you would have made a lot of money.
wowza, great post
That's the great thing about a stock market that continues to rise over time. Anytime you buy will provide a positive return in the long run. Removes a lot of stress from decision making, just continue to invest on a regular basis and you can't go wrong! Hey that's what Bogleheads do :beer
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HomerJ
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Re: Bogleheads are good at market timing

Post by HomerJ »

GreenLawn wrote: Mon Oct 19, 2020 9:20 am That's the great thing about a stock market that continues to rise over time. Anytime you buy will provide a positive return in the long run. Removes a lot of stress from decision making, just continue to invest on a regular basis and you can't go wrong! Hey that's what Bogleheads do :beer
Long-term is how to look at it.

Look at 2000... Highest valuations in U.S. history... Two crashes followed in the next 10 years.

Yet, even if you were worst market-timer ever and put all your money in the market (Total Stock Market Index Fund) on January 1st 2000, you still would have made 7.37% nominal return (5.20% real) a year over the past 20 years.

That was the WORST time to invest in recent history.

Why worry about trying to time the market? Buy and Hold has worked pretty well.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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nedsaid
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Re: The Three-Fund Portfolio

Post by nedsaid »

Taylor Larimore wrote: Sat Oct 17, 2020 12:10 pm Nedsaid wrote:
Even the three fund portfolio is passe now.
Nedsaid:

The Three-Fund Portfolio post just received its 3006th reply. Fortunately for investors, it's still alive and working better than nearly all who try to beat it. :happy

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan."
Well, I will have to write a book about the Zero Fund portfolio and give tips on where to find the cheap mattresses in which to stuff cash. Lots of folks here can't stick with even 3 funds as they are disappointed with International Stocks. Interest rates are really low and folks are itchy about Bonds. Recency bias. When we hit the next bear market, out come the mattresses.

I have never said anything bad about the 3 fund portfolio, I am commenting on recency bias and lack of conviction I see here on certain threads. Amazing that Bogleheads, of all people, who should know better, are wanting to be in whatever has done well recently. TIPS and REITs have already hit the trash bin and many here have pitched International Stocks. Sort of like the countdown on a rocket launch. . .5. . . 4. . . .3. . .now we are down to 2. The "stay the course" forum isn't necessarily staying the course.

The 3 fund portfolio is perfectly fine, I recommended it to a family member a couple of months back. Anyhow, congratulations on the success of your book.
A fool and his money are good for business.
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Re: Bogleheads are NOT good at market timing

Post by sschoe2 »

Taylor Larimore wrote: Fri Oct 16, 2020 1:48 pm TheoLeo:

Market timing is contrary to The Boglehead Philosophy -- Here's why:

https://www.bogleheads.org/wiki/Taylor_ ... ing_quotes

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "After nearly 50 years in this business, I do not know of anybody who has done market timing successfully and consistently. I don't even know anybody who knows anybody who has done it successfully and consistently."
I Know of some, but they didn't do it legally.
Fallible
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Re: Bogleheads are good at market timing

Post by Fallible »

True or false:

Since market timing is predicting/forecasting/expecting/guessing the future and no one can know the future, market timing is entirely a matter of luck, good or bad.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
whereskyle
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Re: Bogleheads are good at market timing

Post by whereskyle »

TheoLeo wrote: Fri Oct 16, 2020 1:40 pm I was reading through the threads of summer and autumn of 2007 and there were lots of threads questioning if markets have really priced in the mortgage crisis.

Then, when covid cases started to show up all over the world, these kinds of threads were common again and the market didnt react at first.

This makes it seem like if there is serious trouble on the horizon, it sometimes actually is anticipated and the market does ignore it for a while. Is this just hindsight bias? How common is an increased occurence of alarming threads that turn out to be false alarms?
This is quintessential hindsight bias. Calling two crises does not a good market timer make unless the market timer makes no incorrect predictions in the meantime. So, only if you can make sure that over the intervening 12 years no one who called these crises overreacted to an apparent, incoming crisis could you conclude that the market timing is actually effective. In other words, if you react to every potential crisis, you are not a good market timer. You have to react to only the true crises. No one's good at proving this point: that they never overreact.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
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Re: The Three-Fund Portfolio

Post by Fallible »

nedsaid wrote: Wed Oct 21, 2020 11:47 pm
Taylor Larimore wrote: Sat Oct 17, 2020 12:10 pm Nedsaid wrote:
Even the three fund portfolio is passe now.
Nedsaid:

The Three-Fund Portfolio post just received its 3006th reply. Fortunately for investors, it's still alive and working better than nearly all who try to beat it. :happy

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan."
Well, I will have to write a book about the Zero Fund portfolio and give tips on where to find the cheap mattresses in which to stuff cash. Lots of folks here can't stick with even 3 funds as they are disappointed with International Stocks. Interest rates are really low and folks are itchy about Bonds. Recency bias. When we hit the next bear market, out come the mattresses.

I have never said anything bad about the 3 fund portfolio, I am commenting on recency bias and lack of conviction I see here on certain threads. Amazing that Bogleheads, of all people, who should know better, are wanting to be in whatever has done well recently. TIPS and REITs have already hit the trash bin and many here have pitched International Stocks. Sort of like the countdown on a rocket launch. . .5. . . 4. . . .3. . .now we are down to 2. The "stay the course" forum isn't necessarily staying the course.
[/b]
The 3 fund portfolio is perfectly fine, I recommended it to a family member a couple of months back. Anyhow, congratulations on the success of your book.
Yes, it would seem that Bogleheads "should know better," but they (me) are still all too human and it's difficult for human beings to stay just about any course in life, even a good course that is right for them. The Bogleheads' philosophy and the 3-fund portfolio are aimed at helping us all-too-human investors to find and stay the right course in an all-too-human stock market and this has been successful. But to one degree or another depending on individual differences, that decidedly human element will always be there, always tempting, always challenging, always questioning, and especially when it comes to money.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Rowan Oak
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Re: Bogleheads are good at market timing

Post by Rowan Oak »

nedsaid wrote: Sat Oct 17, 2020 11:30 am The Boglehead portfolio keeps shrinking hence my joking about the Zero Fund portfolio, Bogleheads will be shopping for the lowest cost mattress to stuff their cash into. Even the three fund portfolio is passe now.
nedsaid wrote: Wed Oct 21, 2020 11:47 pm Amazing that Bogleheads, of all people, who should know better, are wanting to be in whatever has done well recently.
When you say Bogleheads are you talking about someone who follows the Bogleheads investment philosophy or just any registered user at the Bogleheads forum?
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger
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nedsaid
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Re: Bogleheads are good at market timing

Post by nedsaid »

Rowan Oak wrote: Thu Oct 22, 2020 3:33 pm
nedsaid wrote: Sat Oct 17, 2020 11:30 am The Boglehead portfolio keeps shrinking hence my joking about the Zero Fund portfolio, Bogleheads will be shopping for the lowest cost mattress to stuff their cash into. Even the three fund portfolio is passe now.
nedsaid wrote: Wed Oct 21, 2020 11:47 pm Amazing that Bogleheads, of all people, who should know better, are wanting to be in whatever has done well recently.
When you say Bogleheads are you talking about someone who follows the Bogleheads investment philosophy or just any registered user at the Bogleheads forum?
I have seen thread after thread that we don't need TIPS, that we don't need REITs, that we don't need International. I have seen several threads wondering why we should invest in bonds.
A fool and his money are good for business.
Leesbro63
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Re: Bogleheads are good at market timing

Post by Leesbro63 »

nedsaid wrote: Fri Oct 23, 2020 9:23 am When you say Bogleheads are you talking about someone who follows the Bogleheads investment philosophy or just any registered user at the Bogleheads forum?
I think the term "Bogleheads" is sort of like "Steelers Fans". A somewhat generalized term, not limited to people on this forum, but who follow investment indexing as outlined by Jack Bogle as well as some general "common sense" and conservatism when dealing with financial matters. At least that's how I use it. It's sort of like other stuff that can't be exactly defined, but you know what it is and is not.

Buying a Rolls Royce is not Bogleheadish; buying a Corolla is.

Retiring and planning to withdraw 7% is not Bogleheadish; 3% is. (4% is scary to many Bogleheads, but probably is ok!)

Buying grown children houses is not Bogleheadish; putting money in 529 plans for children and grandchildren is.

I'm sure others can add to this. Might be an interesting thread unto itself!
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