Are you a closet market-timer?

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LiveSimple
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Re: Are you a closet market-timer?

Post by LiveSimple »

hisdudeness wrote: Thu Jan 16, 2020 10:32 am What happens in my closet
Stays in my closet
8-)
:D :D :D
Invest when you have the money, sell when you need the money, for real life expenses...
rockstar
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Re: Are you a closet market-timer?

Post by rockstar »

abc132 wrote: Mon Jun 10, 2024 1:29 pm My entire investing career Boglehead's have predicted low returns and we have instead gotten completely normal investing returns. I think Boglehead's tend towards not market timing but they do tend towards unrealistic planning based on their belief the mark is going to fail in a non-historical manner. As one example I can't find even a 30 year career where investing in more stocks was not helpful. Boglehead's ignore accumulation and accumulate based on unrealistic decumulation studies. I come here and people only post worst stock sequences while ignoring the run-ups before the big declines. It is such an unrealistic analysis that it can only be justified by behavioral preference for stocks to be considered risky despite what they actually have done for a portfolio. It is possible to talk about stock risk in a more representative manner. Anyone that understands risk would have had a good amount of fixed income in those worst sequences simply because of the run-up before the big declines. Discussing risk fairly also emphasizes the importance of the addition of fixed income. We can't do this when we are posting worst sequences with equal starting portfolios. It is equivalent to cherry picking starting dates when comparing funds.

I make my changes in AA based on my current portfolio relative to my goals. That means a market run up will naturally put me in a better position and justify the purchase of more bonds. I can do this without making a single prediction or worrying about lower than average future returns. My plan is to take whatever the market gives without worry about the outcome. I will adjust to that result rather than trying to use the portfolio to prevent some predicted result. It is very I likely I will get twice the lifetime spending out of this approach as compared to those predicting low future returns.
There is a worst case scenario tilt here for sure. I definitely don’t plan that way.
AlwaysLearningMore
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Re: Are you a closet market-timer?

Post by AlwaysLearningMore »

abc132 wrote: Mon Jun 10, 2024 1:29 pm My entire investing career Boglehead's have predicted low returns and we have instead gotten completely normal investing returns. I think Boglehead's tend towards not market timing but they do tend towards unrealistic planning based on their belief the mark is going to fail in a non-historical manner. As one example I can't find even a 30 year career where investing in more stocks was not helpful. Boglehead's ignore accumulation and accumulate based on unrealistic decumulation studies. I come here and people only post worst stock sequences while ignoring the run-ups before the big declines. It is such an unrealistic analysis that it can only be justified by behavioral preference for stocks to be considered risky despite what they actually have done for a portfolio. It is possible to talk about stock risk in a more representative manner. Anyone that understands risk would have had a good amount of fixed income in those worst sequences simply because of the run-up before the big declines. Discussing risk fairly also emphasizes the importance of the addition of fixed income. We can't do this when we are posting worst sequences with equal starting portfolios. It is equivalent to cherry picking starting dates when comparing funds.

I make my changes in AA based on my current portfolio relative to my goals. That means a market run up will naturally put me in a better position and justify the purchase of more bonds. I can do this without making a single prediction or worrying about lower than average future returns. My plan is to take whatever the market gives without worry about the outcome. I will adjust to that result rather than trying to use the portfolio to prevent some predicted result. It is very I likely I will get twice the lifetime spending out of this approach as compared to those predicting low future returns.
For a lot of BH it's always 1965 or 1928, and The Next Big Crash is just around the corner.
Retirement is best when you have a lot to live on, and a lot to live for. * None of what I post is investment advice.* | FIRE'd July 2023
abc132
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Re: Are you a closet market-timer?

Post by abc132 »

AlwaysLearningMore wrote: Mon Jun 10, 2024 2:28 pm
abc132 wrote: Mon Jun 10, 2024 1:29 pm My entire investing career Boglehead's have predicted low returns and we have instead gotten completely normal investing returns. I think Boglehead's tend towards not market timing but they do tend towards unrealistic planning based on their belief the mark is going to fail in a non-historical manner. As one example I can't find even a 30 year career where investing in more stocks was not helpful. Boglehead's ignore accumulation and accumulate based on unrealistic decumulation studies. I come here and people only post worst stock sequences while ignoring the run-ups before the big declines. It is such an unrealistic analysis that it can only be justified by behavioral preference for stocks to be considered risky despite what they actually have done for a portfolio. It is possible to talk about stock risk in a more representative manner. Anyone that understands risk would have had a good amount of fixed income in those worst sequences simply because of the run-up before the big declines. Discussing risk fairly also emphasizes the importance of the addition of fixed income. We can't do this when we are posting worst sequences with equal starting portfolios. It is equivalent to cherry picking starting dates when comparing funds.

I make my changes in AA based on my current portfolio relative to my goals. That means a market run up will naturally put me in a better position and justify the purchase of more bonds. I can do this without making a single prediction or worrying about lower than average future returns. My plan is to take whatever the market gives without worry about the outcome. I will adjust to that result rather than trying to use the portfolio to prevent some predicted result. It is very I likely I will get twice the lifetime spending out of this approach as compared to those predicting low future returns.
For a lot of BH it's always 1965 or 1928, and The Next Big Crash is just around the corner.
I think it is even worse than that.

Take Japan as a typical example of a bad sequence. With a 15-20% savings rate and a 30 year career you would be sitting at 200x expenses before the crash and back to 200x expenses today. You probably could have managed 30 years of fixed income and comfortably rode that decline with even an ounce of risk management skills.

To call Japan a bad sequence defies common sense.

1929 had a big run up and once again with even a hint of risk management you would have faired much better than what is shown.

I'm not sure why inflation is a retirement concern for those in or near retirement in 2024 after the last 10-15 years of returns. Anyone that was able to stick to a reasonable plan is far enough past their goal that they can deal with inflation through portfolio size. We even have TIPS and I-bonds to guarantee that result.

Long term accumulators should ignore the noise and continue to invest in stocks. You do not care about what happens in the next 10 years. You should have an appropriate emergency fund to deal with job loss or likely events. This should not be handled through the AA of your investment assets. You should de-risk once the portfolio is big enough. As a generic rule I recommend reaching 15x expenses with stocks and then accumulating all fixed income up to 25x expenses (15x stocks and 10x fixed income).
rockstar
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Re: Are you a closet market-timer?

Post by rockstar »

abc132 wrote: Mon Jun 10, 2024 2:40 pm
AlwaysLearningMore wrote: Mon Jun 10, 2024 2:28 pm
abc132 wrote: Mon Jun 10, 2024 1:29 pm My entire investing career Boglehead's have predicted low returns and we have instead gotten completely normal investing returns. I think Boglehead's tend towards not market timing but they do tend towards unrealistic planning based on their belief the mark is going to fail in a non-historical manner. As one example I can't find even a 30 year career where investing in more stocks was not helpful. Boglehead's ignore accumulation and accumulate based on unrealistic decumulation studies. I come here and people only post worst stock sequences while ignoring the run-ups before the big declines. It is such an unrealistic analysis that it can only be justified by behavioral preference for stocks to be considered risky despite what they actually have done for a portfolio. It is possible to talk about stock risk in a more representative manner. Anyone that understands risk would have had a good amount of fixed income in those worst sequences simply because of the run-up before the big declines. Discussing risk fairly also emphasizes the importance of the addition of fixed income. We can't do this when we are posting worst sequences with equal starting portfolios. It is equivalent to cherry picking starting dates when comparing funds.

I make my changes in AA based on my current portfolio relative to my goals. That means a market run up will naturally put me in a better position and justify the purchase of more bonds. I can do this without making a single prediction or worrying about lower than average future returns. My plan is to take whatever the market gives without worry about the outcome. I will adjust to that result rather than trying to use the portfolio to prevent some predicted result. It is very I likely I will get twice the lifetime spending out of this approach as compared to those predicting low future returns.
For a lot of BH it's always 1965 or 1928, and The Next Big Crash is just around the corner.
I think it is even worse than that.

Take Japan as a typical example of a bad sequence. With a 15-20% savings rate and a 30 year career you would be sitting at 200x expenses before the crash and back to 200x expenses today. You probably could have managed 30 years of fixed income and comfortably rode that decline with even an ounce of risk management skills.

To call Japan a bad sequence defies common sense.

1929 had a big run up and once again with even a hint of risk management you would have faired much better than what is shown.

I'm not sure why inflation is a retirement concern for those in or near retirement in 2024 after the last 10-15 years of returns. Anyone that was able to stick to a reasonable plan is far enough past their goal that they can deal with inflation through portfolio size. We even have TIPS and I-bonds to guarantee that result.

Long term accumulators should ignore the noise and continue to invest in stocks. You do not care about what happens in the next 10 years. You should have an appropriate emergency fund to deal with job loss or likely events. This should not be handled through the AA of your investment assets. You should de-risk once the portfolio is big enough. As a generic rule I recommend reaching 15x expenses with stocks and then accumulating all fixed income up to 25x expenses (15x stocks and 10x fixed income).
This is super conservative.
abc132
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Re: Are you a closet market-timer?

Post by abc132 »

rockstar wrote: Mon Jun 10, 2024 3:28 pm
abc132 wrote: Mon Jun 10, 2024 2:40 pm
AlwaysLearningMore wrote: Mon Jun 10, 2024 2:28 pm
abc132 wrote: Mon Jun 10, 2024 1:29 pm My entire investing career Boglehead's have predicted low returns and we have instead gotten completely normal investing returns. I think Boglehead's tend towards not market timing but they do tend towards unrealistic planning based on their belief the mark is going to fail in a non-historical manner. As one example I can't find even a 30 year career where investing in more stocks was not helpful. Boglehead's ignore accumulation and accumulate based on unrealistic decumulation studies. I come here and people only post worst stock sequences while ignoring the run-ups before the big declines. It is such an unrealistic analysis that it can only be justified by behavioral preference for stocks to be considered risky despite what they actually have done for a portfolio. It is possible to talk about stock risk in a more representative manner. Anyone that understands risk would have had a good amount of fixed income in those worst sequences simply because of the run-up before the big declines. Discussing risk fairly also emphasizes the importance of the addition of fixed income. We can't do this when we are posting worst sequences with equal starting portfolios. It is equivalent to cherry picking starting dates when comparing funds.

I make my changes in AA based on my current portfolio relative to my goals. That means a market run up will naturally put me in a better position and justify the purchase of more bonds. I can do this without making a single prediction or worrying about lower than average future returns. My plan is to take whatever the market gives without worry about the outcome. I will adjust to that result rather than trying to use the portfolio to prevent some predicted result. It is very I likely I will get twice the lifetime spending out of this approach as compared to those predicting low future returns.
For a lot of BH it's always 1965 or 1928, and The Next Big Crash is just around the corner.
I think it is even worse than that.

Take Japan as a typical example of a bad sequence. With a 15-20% savings rate and a 30 year career you would be sitting at 200x expenses before the crash and back to 200x expenses today. You probably could have managed 30 years of fixed income and comfortably rode that decline with even an ounce of risk management skills.

To call Japan a bad sequence defies common sense.

1929 had a big run up and once again with even a hint of risk management you would have faired much better than what is shown.

I'm not sure why inflation is a retirement concern for those in or near retirement in 2024 after the last 10-15 years of returns. Anyone that was able to stick to a reasonable plan is far enough past their goal that they can deal with inflation through portfolio size. We even have TIPS and I-bonds to guarantee that result.

Long term accumulators should ignore the noise and continue to invest in stocks. You do not care about what happens in the next 10 years. You should have an appropriate emergency fund to deal with job loss or likely events. This should not be handled through the AA of your investment assets. You should de-risk once the portfolio is big enough. As a generic rule I recommend reaching 15x expenses with stocks and then accumulating all fixed income up to 25x expenses (15x stocks and 10x fixed income).
This is super conservative.
It gives the lowest risk at each stage of accumulation. At 15x our biggest risk is still not having a big enough portfolio. At 25x we have a big enough portfolio but the bigger risk is a sharp downturn in stocks.

If you are going to work another 10 years after reaching 25x then yes this recommendation is too conservative on a risk basis. If you are going to retire at 25x with a 30 year retirement sequence then it balances expected risks correctly.

You can continue accumulating more stocks or more bonds past that 25x depending on your preferences so the takeaway is that 10 years of fixed income really reduces stock risk regardless of how much stock you have. Future additions will negate some of this stock risk and you may correctly balance risks with less than 10 years of fixed income at 25x expenses.

In the case where you have 25x expenses in stocks and work 10 more years it is true you may end up with a portfolio that never needs much fixed income.
rockstar
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Re: Are you a closet market-timer?

Post by rockstar »

abc132 wrote: Mon Jun 10, 2024 3:37 pm
rockstar wrote: Mon Jun 10, 2024 3:28 pm
abc132 wrote: Mon Jun 10, 2024 2:40 pm
AlwaysLearningMore wrote: Mon Jun 10, 2024 2:28 pm
abc132 wrote: Mon Jun 10, 2024 1:29 pm My entire investing career Boglehead's have predicted low returns and we have instead gotten completely normal investing returns. I think Boglehead's tend towards not market timing but they do tend towards unrealistic planning based on their belief the mark is going to fail in a non-historical manner. As one example I can't find even a 30 year career where investing in more stocks was not helpful. Boglehead's ignore accumulation and accumulate based on unrealistic decumulation studies. I come here and people only post worst stock sequences while ignoring the run-ups before the big declines. It is such an unrealistic analysis that it can only be justified by behavioral preference for stocks to be considered risky despite what they actually have done for a portfolio. It is possible to talk about stock risk in a more representative manner. Anyone that understands risk would have had a good amount of fixed income in those worst sequences simply because of the run-up before the big declines. Discussing risk fairly also emphasizes the importance of the addition of fixed income. We can't do this when we are posting worst sequences with equal starting portfolios. It is equivalent to cherry picking starting dates when comparing funds.

I make my changes in AA based on my current portfolio relative to my goals. That means a market run up will naturally put me in a better position and justify the purchase of more bonds. I can do this without making a single prediction or worrying about lower than average future returns. My plan is to take whatever the market gives without worry about the outcome. I will adjust to that result rather than trying to use the portfolio to prevent some predicted result. It is very I likely I will get twice the lifetime spending out of this approach as compared to those predicting low future returns.
For a lot of BH it's always 1965 or 1928, and The Next Big Crash is just around the corner.
I think it is even worse than that.

Take Japan as a typical example of a bad sequence. With a 15-20% savings rate and a 30 year career you would be sitting at 200x expenses before the crash and back to 200x expenses today. You probably could have managed 30 years of fixed income and comfortably rode that decline with even an ounce of risk management skills.

To call Japan a bad sequence defies common sense.

1929 had a big run up and once again with even a hint of risk management you would have faired much better than what is shown.

I'm not sure why inflation is a retirement concern for those in or near retirement in 2024 after the last 10-15 years of returns. Anyone that was able to stick to a reasonable plan is far enough past their goal that they can deal with inflation through portfolio size. We even have TIPS and I-bonds to guarantee that result.

Long term accumulators should ignore the noise and continue to invest in stocks. You do not care about what happens in the next 10 years. You should have an appropriate emergency fund to deal with job loss or likely events. This should not be handled through the AA of your investment assets. You should de-risk once the portfolio is big enough. As a generic rule I recommend reaching 15x expenses with stocks and then accumulating all fixed income up to 25x expenses (15x stocks and 10x fixed income).
This is super conservative.
It gives the lowest risk at each stage of accumulation. At 15x our biggest risk is still not having a big enough portfolio. At 25x we have a big enough portfolio but the bigger risk is a sharp downturn in stocks.

If you are going to work another 10 years after reaching 25x then yes this recommendation is too conservative on a risk basis. If you are going to retire at 25x with a 30 year retirement sequence then it balances expected risks correctly.

You can continue accumulating more stocks or more bonds past that 25x depending on your preferences so the takeaway is that 10 years of fixed income really reduces stock risk regardless of how much stock you have. Future additions will negate some of this stock risk and you may correctly balance risks with less than 10 years of fixed income at 25x expenses.
I doubt most people will have 25x.
abc132
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Re: Are you a closet market-timer?

Post by abc132 »

rockstar wrote: Mon Jun 10, 2024 3:45 pm
abc132 wrote: Mon Jun 10, 2024 3:37 pm
rockstar wrote: Mon Jun 10, 2024 3:28 pm
abc132 wrote: Mon Jun 10, 2024 2:40 pm
AlwaysLearningMore wrote: Mon Jun 10, 2024 2:28 pm

For a lot of BH it's always 1965 or 1928, and The Next Big Crash is just around the corner.
I think it is even worse than that.

Take Japan as a typical example of a bad sequence. With a 15-20% savings rate and a 30 year career you would be sitting at 200x expenses before the crash and back to 200x expenses today. You probably could have managed 30 years of fixed income and comfortably rode that decline with even an ounce of risk management skills.

To call Japan a bad sequence defies common sense.

1929 had a big run up and once again with even a hint of risk management you would have faired much better than what is shown.

I'm not sure why inflation is a retirement concern for those in or near retirement in 2024 after the last 10-15 years of returns. Anyone that was able to stick to a reasonable plan is far enough past their goal that they can deal with inflation through portfolio size. We even have TIPS and I-bonds to guarantee that result.

Long term accumulators should ignore the noise and continue to invest in stocks. You do not care about what happens in the next 10 years. You should have an appropriate emergency fund to deal with job loss or likely events. This should not be handled through the AA of your investment assets. You should de-risk once the portfolio is big enough. As a generic rule I recommend reaching 15x expenses with stocks and then accumulating all fixed income up to 25x expenses (15x stocks and 10x fixed income).
This is super conservative.
It gives the lowest risk at each stage of accumulation. At 15x our biggest risk is still not having a big enough portfolio. At 25x we have a big enough portfolio but the bigger risk is a sharp downturn in stocks.

If you are going to work another 10 years after reaching 25x then yes this recommendation is too conservative on a risk basis. If you are going to retire at 25x with a 30 year retirement sequence then it balances expected risks correctly.

You can continue accumulating more stocks or more bonds past that 25x depending on your preferences so the takeaway is that 10 years of fixed income really reduces stock risk regardless of how much stock you have. Future additions will negate some of this stock risk and you may correctly balance risks with less than 10 years of fixed income at 25x expenses.
I doubt most people will have 25x.
15% savings rate over a career puts you today in this situation before age 50. It's true most people do not have a good plan over their career but there should be lots of people in this situation or better. It was a simple as accumulating stocks while young and ignoring the predictions of 0% real returns in your youth.
sambb
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Re: Are you a closet market-timer?

Post by sambb »

a few good posts above - yes BH tend to focus so much on bad returns, and also other illogical things - like tinyu differences on expense ratios, but not too much on savings rates. I think there is some underlying pessimisim or uncertainty about future returns, but maybe that is expected in a long term plan
BirdFood
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Re: Are you a closet market-timer?

Post by BirdFood »

sambb wrote: Mon Jun 10, 2024 4:39 pmbut not too much on savings rates.
Have you been reading a different forum?
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vnatale
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Re: Are you a closet market-timer?

Post by vnatale »

I would have to be completely opposite.

After reading Bernstein's Four Pillars of Investing book in 2002 I made my investments / allocations in January 2003. All those investments have remained as is with all dividends being reinvested. Any new money since then has gone into cash. Currently my holdings are about 50% equity / 50% cash (VUSXX) and Vanguard's short-term bond fund.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
doobiedoo
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Re: Are you a closet market-timer?

Post by doobiedoo »

rockstar wrote: Mon Jun 10, 2024 10:44 am
doobiedoo wrote: Sun Jun 09, 2024 3:16 pm
rockstar wrote: Fri Feb 07, 2020 8:23 am I think, that when investors are willing to spending ridiculous sums for a stock, index, bond, etc., that it’s time to sell. That’s my ceiling. Tesla is a great recent example. The market cap is ridiculous. If I owned it, I would sell it.

Likewise, investors will also panic for no rational reason too, or they will reach a conclusion that valuations matter and sell. I set a floor at the 300 day ma.

Both my ceiling and floor is wide enough that I’m not constantly trading. I believe investors aren’t always rational as a crowd. It doesn’t happen all of the time. But it does happen.

My longest held position is AMEX. I’ve held it since 2003.
TSLA close on Feb 7, 2020: $49.87
TSLA close on Jun 8, 2024: $177.48

"It's hard to make predictions, especially about the future." --Yogi Berra
Thanks for keeping me honest.

And this is why I’m pretty much almost all index funds and have given up timing. Every time I try to buy an individual stock it results in pain.

Of course, you left out the part about it going to $400ish before coming back down.
Yes, TSLA peaked at $382 in Nov 2021. It's a bit of a rollercoaster. [I don't own TSLA.]
retireIn2020
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Re: Are you a closet market-timer?

Post by retireIn2020 »

grabiner wrote: Mon Jun 10, 2024 8:09 am
retireIn2020 wrote: Mon Jun 10, 2024 2:14 am
Financologist wrote: Wed Jan 15, 2020 10:53 pm Are you a closet market-timer?

Something's been eating away at me...

For all the talk about staying the course, investment policies, automated rebalancing etc.. an awful lot of folks seem to adjust their desired asset allocations at "compelling market moments."
I suppose I am, I've heavily rebalanced at some market lows. For instance, early 2001, early 2009, early 2019, and March 2020.

To this day I tell myself that I was just taking advantage of opportunity. I suppose that is a benefit of a balanced portfolio.
Rebalancing to your original allocation is not market timing. If 60% stock is the right risk level for you, and a stock-market crash or boom leaves you at 50% or 70%, going back to 60% is not a market-timing move. When your portfolio is $500K, you want to have $300K in stock and $200K in bonds, and if that isn't what you have now, you should go back there regardless of where you currently are. (If you held a balanced fund instead of separate stock and bond funds, you would stay 60% stock whatever the market does.)

Over-rebalancing, in which you increase your stock allocation when rebalancing in a crash, or decrease it in a boom, is market timing.

As an example of the difference, suppose that you currently have $225K in stock and $150K in bonds, which is an allocation of 60% stock. If you receive a $125K inheritance, you will probably keep the same allocation, holding $300K in stock and $200K in bonds. If instead the stock market booms and the $225K becomes $350K, moving you to 70% stock, neutral rebalancing is selling $50K of stock to get back to 60% stock, while under-rebalancing is selling $25K of stock to drop to 65% stock, over-rebalancing is selling 75% of stock to drop to 55% stock. Over-rebalancing is a market timing move. Under-rebalancing is a market-timing move unless you are doing it to minimize taxes in a taxable account. (That is, if you have stock only in a taxable account, you might prefer $300K/200K to $325K/175K, but selling another $25K in stock would leave you at $300K/197K after capital-gains tax, and the difference isn't worth the $3k tax cost. In this situation, you intend to rebalance towards bonds in the future with dividends and new money, and will not buy any more stock.)
My comment was directed to the OP.

I stated I did take advantage opportunity. that is all.

BTW, it did pay off!
https://www.merriam-webster.com/dictionary/abide
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Financologist
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Re: Are you a closet market-timer?

Post by Financologist »

grabiner wrote: Sun Jun 09, 2024 3:11 pm Now that this thread has come back, I can follow up to my own post:
grabiner wrote: Sun Feb 09, 2020 9:55 pm
Financologist wrote: Thu Jan 16, 2020 2:09 pm A policy statement is based on the point in time at which it was created. I am coming to the belief that people tinker with their policy statements and their plans at an increased rate during compelling market moments. It's fascinating to see how people offer rationalizations at an increased frequency during this time also. I include myself in that group.
And mine has a specific rule to prevent that:
This statement will be reviewed whenever there is a substantial change in my financial situation, and annually when I rebalance. If there is no substantial change in my financial situation, I will wait at least three months between changing the asset allocation in my statement and changing the asset allocation of my investments, and review the change
in the statement at that time.
I have had this paragraph ever since I first wrote the IPS; here are examples of how it applied to my last three changes.

In 2013, I bought a condo and took out a mortgage. This was a substantial change in my finances, so I updated the IPS with a new appropriate allocation, and with guidance for whether to pay down the mortgage or invest more. This was cause for an immediate change in my asset allocation.
And in March 2020 (the previous post was made in February 2020), I used what was already written in my IPS to make a change. I had decided in 2013 what conditions would cause to me to pay off my mortgage, and when those happened in March 2020, I paid it off.

What happened is that muni yields had fallen to less than my after-tax mortgage rate, and I had enough stock with capital losses that i could pay off almost the entire mortgage without taking any capital gains. So I sold stock for a capital loss, paid off almost all of the mortgage, and moved an equal amount from bonds to stock in my employer plan in order to keep the same stock-market exposure. That last part is also important, as this was not a market-timing move: I kept the same amount in stock both before and after paying off the mortgage, so I got the same benefit from the stock market recovery. (And, also as documented in my IPS, I rebalanced into stock a few weeks later because my bond allocation had gotten too high.)
Thanks for the update. Does this mean in 2020 you effectively sold munis to pay off the mortgage and around the same time tax loss harvested?
Financologist
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Re: Are you a closet market-timer?

Post by Financologist »

Update, I did some rebalancing as follows:
1. Sold some large cap stock and purchased
A. Bonds ~75%
B. Midcaps ~25% (large caps are top heavy)
Financologist
nassau34
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Re: Are you a closet market-timer?

Post by nassau34 »

I have mostly unsuccessfully tried to time the market in the past. Probably the worst thing that happened to me in hindsight is I got it totally correct the first time. What I've found is the hardest thing is trying to figure out when to get back in.
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Re: Are you a closet market-timer?

Post by grabiner »

Financologist wrote: Wed Jun 12, 2024 2:59 am
grabiner wrote: Sun Jun 09, 2024 3:11 pm And in March 2020 (the previous post was made in February 2020), I used what was already written in my IPS to make a change. I had decided in 2013 what conditions would cause to me to pay off my mortgage, and when those happened in March 2020, I paid it off.

What happened is that muni yields had fallen to less than my after-tax mortgage rate, and I had enough stock with capital losses that i could pay off almost the entire mortgage without taking any capital gains. So I sold stock for a capital loss, paid off almost all of the mortgage, and moved an equal amount from bonds to stock in my employer plan in order to keep the same stock-market exposure. That last part is also important, as this was not a market-timing move: I kept the same amount in stock both before and after paying off the mortgage, so I got the same benefit from the stock market recovery. (And, also as documented in my IPS, I rebalanced into stock a few weeks later because my bond allocation had gotten too high.)
Thanks for the update. Does this mean in 2020 you effectively sold munis to pay off the mortgage and around the same time tax loss harvested?
I would say that I effectively sold taxable bonds (since those are the bonds I held), but I used the muni yield for comparison in the decision of when to pay it off.

The reason to use the muni yield is to make the comparison simpler. If taxable bonds yield 5%, then the after-tax yield is 3.80% in a 24% bracket and 3.40% in a 32% bracket (reduce both by 0.19% if you pat Net Investment Income Tax), but that doesn't make it less attractive to pay off a loan in a 24% bracket than in a 32% bracket if you hold your bonds in an tax-sheltered account. The bonds you sell yield 5% regardless of your tax bracket, but making a move like mine doesn't cost you the full 5% return; it costs you a 5% return on bonds, while gaining you the difference between tax-sheltered and taxable stock returns, The muni yield is the same regardless of your tax bracket; selling munis yielding 3.75% and paying off a 4% loan is a 0.25% benefit.
Wiki David Grabiner
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