Money on the sidelines

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ChinchillaWhiplash
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Money on the sidelines

Post by ChinchillaWhiplash »

I know a lot of people pulled money out of the market last year during the crash. Any numbers quantified in $ amounts? Would be curious to know how much of that money has been put back into the market vs still sitting and waiting. Would think that there is still a lot of “dry powder” waiting to be deployed. How long will they wait while missing out on huge gains? Would think some of these investors will continue to fuel the bull run for quite a while. I am guilty of selling too early after buying during the crash. All that I pulled from equities profit has been put back in as of last summer during dips. Figured out that the market seemed to have stabilized thanks to the government interventions around the world. Luckily just missed a short period of growth and didn’t get anywhere near totally out of the market.
WyomingFIRE
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Re: Money on the sidelines

Post by WyomingFIRE »

ChinchillaWhiplash wrote: Mon May 03, 2021 12:46 pm I know a lot of people pulled money out of the market last year during the crash.
I don't know any such persons, and I've been in the markets for 35 years. I have an investment plan and an AA, and I stay the course. I actually don't care what happens in the market two minutes from now, later today, next Tuesday, or on March 16, 2028.

The only "money on the sidelines" are in my EF and a few bucks in checking/savings accounts.

[Edit: Typo corrected]
260chrisb
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Re: Money on the sidelines

Post by 260chrisb »

WyomingFIRE wrote: Mon May 03, 2021 12:53 pm
ChinchillaWhiplash wrote: Mon May 03, 2021 12:46 pm I know a lot of people pulled money out of the market last year during the crash.
I don't know any such persons, and I've been in the markets for 35 years. I have an investment plan and an AA, and I stay the course. I actually don't care what happens in the market two minutes from now, later today, next Tuesday, or on March 16, 2028.

The only "money on the sidelines" are in my EF and a few bucks in checking/savings accounts.

[Edit: Typo corrected]
Couldn't have said it better although I do have my first few years of retirement money on the sidelines as it relates to having it in the stock market. What's going on March 16, 2028?? :confused
260chrisb
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Re: Money on the sidelines

Post by 260chrisb »

ChinchillaWhiplash wrote: Mon May 03, 2021 12:46 pm I know a lot of people pulled money out of the market last year during the crash. Any numbers quantified in $ amounts? Would be curious to know how much of that money has been put back into the market vs still sitting and waiting. Would think that there is still a lot of “dry powder” waiting to be deployed. How long will they wait while missing out on huge gains? Would think some of these investors will continue to fuel the bull run for quite a while. I am guilty of selling too early after buying during the crash. All that I pulled from equities profit has been put back in as of last summer during dips. Figured out that the market seemed to have stabilized thanks to the government interventions around the world. Luckily just missed a short period of growth and didn’t get anywhere near totally out of the market.
I've always despised the "dry powder" reference and in all honesty did somebody on one of the financial channels use the famous "there's lots of money on the sidelines" this morning? Seems like somebody is always making this claim. I've consistently invested for 25 years and have never had any money on the sideline waiting for something to happen before I invest and would guess most here are the same. If there truly are a lot of investors who do this then perhaps they will continue to fuel the bull run as maybe they have for the past 30 years as the S&P has gone from the 300s in the early '90s to the 4000s now.
Topic Author
ChinchillaWhiplash
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Re: Money on the sidelines

Post by ChinchillaWhiplash »

You guys/gals must not read many of the post on this forum. There have been tons of them about people selling everything in March/April 2020 and regretting not getting back in the market. There have also been recent posts about keeping “dry powder” on here. Just wondering if there has been any statistics or such on how much money flows out of and back into the market as of late. I have zero plan to act on such info, but I am curious. I find all of this fascinating.
Lee_WSP
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Re: Money on the sidelines

Post by Lee_WSP »

livesoft
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Re: Money on the sidelines

Post by livesoft »

ChinchillaWhiplash wrote: Mon May 03, 2021 5:48 pm You guys/gals must not read many of the post on this forum. There have been tons of them about people selling everything in March/April 2020 and regretting not getting back in the market.
That might be your perception, but it is not mine. Sure, there are some threads, but not "tons."

Also, it doesn't jive with the "How America Invests" stuff from Vanguard even though some of that is problematic in its methodology:
viewtopic.php?t=331685 and viewtopic.php?t=346384
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UpperNwGuy
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Re: Money on the sidelines

Post by UpperNwGuy »

I have never kept "dry powder" or "money on the sidelines". I didn't pull any money out of the market in 2020.
Topic Author
ChinchillaWhiplash
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Re: Money on the sidelines

Post by ChinchillaWhiplash »

Lee_WSP wrote: Mon May 03, 2021 6:18 pm Something like this:
https://www.morningstar.com/articles/10 ... -into-2021

?
Yes. Thank You!
lazynovice
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Re: Money on the sidelines

Post by lazynovice »

ChinchillaWhiplash wrote: Mon May 03, 2021 7:53 pm
Lee_WSP wrote: Mon May 03, 2021 6:18 pm Something like this:
https://www.morningstar.com/articles/10 ... -into-2021

?
Yes. Thank You!
Here is the March version. Money market TTM has gone way down but looks like most of it went into bond funds.

https://www.morningstar.com/articles/10 ... e-in-march
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venkman
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Re: Money on the sidelines

Post by venkman »

Given that it's impossible for anyone to pull money out of the market without someone else putting money in, I'd guess there was already a good bit of dry powder sitting on the sidelines, waiting for a downturn, when the market was at all time highs in early 2020. When the pandemic hit and the market crashed, that dry powder got transferred to all the people who panicked and sold.

The total amount of dry powder didn't change very much; it just moved around.
TheLaughingCow
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Re: Money on the sidelines

Post by TheLaughingCow »

Anecdotally during March I overheard one coworker telling another they should go to 100% bonds in their retirement plan. The second coworker agreed and said things were looking pretty bad for stocks. These were both college educated people making 6 figures.
mr_brightside
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Re: Money on the sidelines

Post by mr_brightside »

buy low / sell high

i plowed money IN during the downturn

will likely be retiring / resigning early as a result. ~ 70% return + on that 'new money' was a real turbo charge

-------------------------------------
MAKsdad
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Re: Money on the sidelines

Post by MAKsdad »

Right now I have about 10 years of expenses sitting in cash (for various reasons). It will be going into the market over the next 6-9 months.
Silverado
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Re: Money on the sidelines

Post by Silverado »

mr_brightside wrote: Tue May 04, 2021 7:47 am buy low / sell high

i plowed money IN during the downturn

will likely be retiring / resigning early as a result. ~ 70% return + on that 'new money' was a real turbo charge

-------------------------------------
But a question is, where was this 'new money' just before the downturn? I plowed money in during the downturn also, but no more or no less than I did the years leading to it, or in the year after it.
livesoft
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Re: Money on the sidelines

Post by livesoft »

TheLaughingCow wrote: Tue May 04, 2021 4:31 am Anecdotally during March I overheard one coworker telling another they should go to 100% bonds in their retirement plan. The second coworker agreed and said things were looking pretty bad for stocks. These were both college educated people making 6 figures.
That was prescient in early March. What happened on / after March 16-23? :twisted:
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firebirdparts
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Re: Money on the sidelines

Post by firebirdparts »

ChinchillaWhiplash wrote: Mon May 03, 2021 5:48 pm You guys/gals must not read many of the post on this forum. There have been tons of them about people selling everything in March/April 2020 and regretting not getting back in the market. There have also been recent posts about keeping “dry powder” on here. Just wondering if there has been any statistics or such on how much money flows out of and back into the market as of late. I have zero plan to act on such info, but I am curious. I find all of this fascinating.
You can easily get total volume info. I don't look at it, but shares traded is widely reported.

In a sense, the money can never really be "in" the market, so it really can never be on the sidelines either.
A fool and your money are soon partners
fortunefavored
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Re: Money on the sidelines

Post by fortunefavored »

Seems like whatever there was, it has piled back into the markets (and real estate, and crypto)

WSJ article: https://www.wsj.com/articles/americans- ... 1619947800

"Stockholdings among U.S. households increased to 41% of their total financial assets in April, the highest level on record"
"Stock funds have seen net inflows for seven straight weeks, including a net $53.7 billion for the week ending March 17, an all-time high"

Leverage at highest level since 1998: https://www.wsj.com/articles/investors- ... 1617799940

Continues to feel like 1998 to me, I will continue to do nothing (and continue to hold my nose and hold my bond allocation.. ugh)
Silverado
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Re: Money on the sidelines

Post by Silverado »

fortunefavored wrote: Tue May 04, 2021 8:10 am
Continues to feel like 1998 to me, I will continue to do nothing (and continue to hold my nose and hold my bond allocation.. ugh)
Yeah, could be like 98, could be like 07, and of course could be like none of them. But sticking to a solid plan throughout all of the possibilities has a good chance of working out. I'll cringe when we see another crash like always, but just shrug and keep going.
JakeyLee
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Re: Money on the sidelines

Post by JakeyLee »

Sometimes I wonder if all this "dry powder" I hear about is just folks itching to sell bonds during the next pullback. Meh, it's just rebalancing, I know.

I noticed that's more guys/gals like me than I noticed in decades past. I'm 100% equities in retirement. But that's just a ruse, 'cause I built up my cash position leading up to retirement to about 2.5 years expenses (money market). I like the flexibility to deal with black swans or down markets those first few years of retirement. For me it's just an easy way to have Insurance without owning bonds. Is it ideal or smart ? Probably not. But it's my plan... And I've never been accused of being smart before. Why start now :oops:
Greg in Idaho
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Re: Money on the sidelines

Post by Greg in Idaho »

I have had an increasing chunk in my Roth, as I've dithered over whether there is much difference what fixed investment makes the most sense for my contributions there...haven't missed out on much and feeling blase about my options.

Not very disciplined...there's the lazy portfolio, and the really really lazy portfolio
RobLyons
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Re: Money on the sidelines

Post by RobLyons »

I can't help as I invested heavier as the market dropped then back to my normal contributions as things leveled out.
I love a good sale.
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goingup
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Re: Money on the sidelines

Post by goingup »

ChinchillaWhiplash wrote: Mon May 03, 2021 5:48 pm You guys/gals must not read many of the post on this forum. There have been tons of them about people selling everything in March/April 2020 and regretting not getting back in the market. There have also been recent posts about keeping “dry powder” on here. Just wondering if there has been any statistics or such on how much money flows out of and back into the market as of late. I have zero plan to act on such info, but I am curious. I find all of this fascinating.
What is fascinating to me is the confirmation bias phenomenon. The market turbulence last Spring got to you and you flinched. You focused on the voices and actions of others that did the same. A different group here on the forum (the majority I think) heard the strong refrain to stay the course--that nothing was different this time.

You can see my confirmation bias is the belief that only a small minority of Bogleheads sold to their detriment last Spring. :D
mr_brightside
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Re: Money on the sidelines

Post by mr_brightside »

Silverado wrote: Tue May 04, 2021 7:58 am
mr_brightside wrote: Tue May 04, 2021 7:47 am buy low / sell high

i plowed money IN during the downturn

will likely be retiring / resigning early as a result. ~ 70% return + on that 'new money' was a real turbo charge

-------------------------------------
But a question is, where was this 'new money' just before the downturn? I plowed money in during the downturn also, but no more or no less than I did the years leading to it, or in the year after it.
bottom line -- AA is a guideline.

when you see a 20-30% drop -- consider it a gift. :happy

--------------------------------------------------
sureshoe
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Re: Money on the sidelines

Post by sureshoe »

Here's the problem, I read lots of posts by people talking about selling during the downturn. Investors are a lot like gamblers. They talk about their wins, they forget about their losses.

Here are the facts, if you simply rode out the noise from Feb 2020 to May 2021 (today), you would be up 22%-32% depending on your AA. When all hell broke loose, I know people who bragged about pulling out, but I'm guessing a lot of them took 10-20% hits. I'm also guessing they missed a lot of the rebound. If you're a genius and sold on 2/19 and bought back in on 3/19, then you made a killing. But how many people did this? Mostly just the liars.

So for my REAL example > I stayed invested. I typically have $10-$50k cash on the side for vacations, big purchases, etc. I bought a little extra in once the market dipped 15%-ish.

In late July 2020,I liquidated around $120k of securities because I was buying a home and the closing of my other house didn't line up. So in August 2020, I had ~$120k liquid and I have bought back into VT/VTI in $20k chunks each month over the last 6 months because I don't like plowing a huge chunk back in a single shot. This is somewhere in range of 5-10% of my total portfolio.

Following this strategy, I'm up about 26% since Feb 20. I'm a tad more bond heavy than I want to be, and foreign stocks have dragged back US performance.
sureshoe
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Re: Money on the sidelines

Post by sureshoe »

goingup wrote: Tue May 04, 2021 9:07 am
ChinchillaWhiplash wrote: Mon May 03, 2021 5:48 pm You guys/gals must not read many of the post on this forum. There have been tons of them about people selling everything in March/April 2020 and regretting not getting back in the market. There have also been recent posts about keeping “dry powder” on here. Just wondering if there has been any statistics or such on how much money flows out of and back into the market as of late. I have zero plan to act on such info, but I am curious. I find all of this fascinating.
What is fascinating to me is the confirmation bias phenomenon. The market turbulence last Spring got to you and you flinched. You focused on the voices and actions of others that did the same. A different group here on the forum (the majority I think) heard the strong refrain to stay the course--that nothing was different this time.

You can see my confirmation bias is the belief that only a small minority of Bogleheads sold to their detriment last Spring. :D
My mother-in-law's "advisor" recommended pulling out. All her "friends" pulled out. I'm like WTF. It's really hard because I hate giving investment advice to anyone I know because it's so random. My only advice was, "I put an extra $10k in, I think this will pass."

It's so hard for people to understand: Once you're spooked, the market already has that spook baked in. You will never reliably time it. If you do, it was LUCK.
sureshoe
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Re: Money on the sidelines

Post by sureshoe »

goingup wrote: Tue May 04, 2021 9:07 am
ChinchillaWhiplash wrote: Mon May 03, 2021 5:48 pm You guys/gals must not read many of the post on this forum. There have been tons of them about people selling everything in March/April 2020 and regretting not getting back in the market. There have also been recent posts about keeping “dry powder” on here. Just wondering if there has been any statistics or such on how much money flows out of and back into the market as of late. I have zero plan to act on such info, but I am curious. I find all of this fascinating.
What is fascinating to me is the confirmation bias phenomenon. The market turbulence last Spring got to you and you flinched. You focused on the voices and actions of others that did the same. A different group here on the forum (the majority I think) heard the strong refrain to stay the course--that nothing was different this time.

You can see my confirmation bias is the belief that only a small minority of Bogleheads sold to their detriment last Spring. :D
My mother-in-law's "advisor" recommended pulling out. All her "friends" pulled out. I'm like WTF. It's really hard because I hate giving investment advice to anyone I know because it's so random. My only advice was, "I put an extra $10k in, I think this will pass."

It's so hard for people to understand: Once you're spooked, the market already has that spook baked in. You will never reliably time it. If you do, it was LUCK.
wolf359
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Re: Money on the sidelines

Post by wolf359 »

ChinchillaWhiplash wrote: Mon May 03, 2021 12:46 pm I know a lot of people pulled money out of the market last year during the crash. Any numbers quantified in $ amounts? Would be curious to know how much of that money has been put back into the market vs still sitting and waiting. Would think that there is still a lot of “dry powder” waiting to be deployed. How long will they wait while missing out on huge gains? Would think some of these investors will continue to fuel the bull run for quite a while. I am guilty of selling too early after buying during the crash. All that I pulled from equities profit has been put back in as of last summer during dips. Figured out that the market seemed to have stabilized thanks to the government interventions around the world. Luckily just missed a short period of growth and didn’t get anywhere near totally out of the market.
Is this what you're looking for?
https://www.morningstar.com/articles/10 ... -into-2021

This chart shows that throughout 2020 and into 2021, money has continued to flow out of equity mutual funds, and into bond funds.
GregG3
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Re: Money on the sidelines

Post by GregG3 »

I have short term bonds in my portfolio which will require rebalancing back to equities at some point.
I guess you could refer to this as 'money on the sidelines'.

BTW you can peek at the snapshot of money flows here:

http://www.lipperusfundflows.com/
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