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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 12:06 PM   #21
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Re: A serious question (for once), about the theory of buy and hold and down markets

Who are you and what did you do with AirJordan?
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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 12:27 PM   #22
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Re: A serious question (for once), about the theory of buy and hold and down markets

hey wunderkind - if you read so many books and blabbed about what you know and how folks here are lam-o's why do you keep asking questions that are financial planning 101?

us youngsters need not worry about the lows - they are to our advantage - our wise elders here might have other choices to make but if they were smart they already stashed the cash in safe places anyway...

maybe you are soooo smart you missed the forest...ha ha ha HAHAAHAH
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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 12:29 PM   #23
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Re: A serious question (for once), about the theory of buy and hold and down markets

Do you guys think it is better to rebalance (a) every year at the same time or (b) at the end of each significant market fluctuation? (like we just had)


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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 12:32 PM   #24
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Re: A serious question (for once), about the theory of buy and hold and down markets

Leave him alone guys.

Can't you see he's trying

I didn't like my best friend either the first day that I met him. That was 38 years ago.


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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 12:36 PM   #25
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Re: A serious question (for once), about the theory of buy and hold and down markets

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Originally Posted by ScaredtoQuit
Leave him alone guys.

Can't you see he's trying

I didn't like my best friend either the first day that I met him. That was 38 years ago.
But the punk never said sorry! So he is still fair game, though I think I have resisted posting about 10 posts taking pot shots at him. Learning to hold back has been an experience!
-h
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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 12:47 PM   #26
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Re: A serious question (for once), about the theory of buy and hold and down markets

I recommend that you also read Ray Lucia's "Buckets of Money". I follow his approach and it allows me to sleep at night during periods of market volitility.
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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 12:54 PM   #27
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Re: A serious question (for once), about the theory of buy and hold and down markets

The only thing I don't like about the "Buckets" approach is that it is soooo conservative. Lucia advocates a full 50% of your money in cash or bonds. It seems to me that with his approach you take such a big hit on growth.
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Re: A serious question (for once), about the theory of buy and hold and down mar
Old 03-08-2007, 01:59 PM   #28
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Re: A serious question (for once), about the theory of buy and hold and down mar

Quote:
Originally Posted by a
Who are you and what did you do with AirJordan?

Yeah, that was my reaction. First, he was all "you are such dick heads." Then he is all, "Nords you are the man," and "help me please, the market is down."

AJ: the first thing you should do is get some Lithium Carbonate. Then stop worrying about the recession. You are bound to experience a few of them before you ER. Pick your preferred allocation of managed funds or index funds, keep adding to them regularly and forget about the ups and downs. A lot of us watched our portfolios tumble by hundreds of thousands a few years back and we still get by without Ambien.
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Re: A serious question (for once), about the theory of buy and hold and down mar
Old 03-08-2007, 02:12 PM   #29
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Re: A serious question (for once), about the theory of buy and hold and down mar

Quote:
Originally Posted by AirJordan
Greenspan has given us a 1/3 chance, what will you buy and holders do?
Ex-feds use to have a unwritten rule that they kept their mouth shut once
out of office, Alan must be working on a book. If I were Ben I'd tell him to
shut up.
Tom
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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 03:35 PM   #30
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Re: A serious question (for once), about the theory of buy and hold and down markets

Buy and Hold = Buy and Hold.
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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 04:17 PM   #31
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Re: A serious question (for once), about the theory of buy and hold and down markets

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Buy and Hold = Buy and Hold.
Now I'm confused :P
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Re: A serious question (for once), about the theory of buy and hold and down mar
Old 03-08-2007, 04:40 PM   #32
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Re: A serious question (for once), about the theory of buy and hold and down mar

Quote:
Originally Posted by AirJordan
Now I'm confused :P
I agree. That post was confusing. Here, let me try to explain it in simpler terms.

Buy and hold means buy and hold. Hope that helped.
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Re: A serious question (for once), about the theory of buy and hold and down mar
Old 03-08-2007, 08:16 PM   #33
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Re: A serious question (for once), about the theory of buy and hold and down mar

Quote:
Originally Posted by justin
I agree. That post was confusing. Here, let me try to explain it in simpler terms.

Buy and hold means buy and hold. Hope that helped.
Unless you are really smart and you have read all the books we mentioned. Then you place a stop limit - like a drop of 20% and liquidate everything to cash. Then when the market comes back up toward normal - say a 15% rise - you get back into equities.
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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 09:13 PM   #34
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Re: A serious question (for once), about the theory of buy and hold and down markets

Quote:
Originally Posted by donheff

Pick your preferred allocation of managed funds or index funds, keep adding to them regularly and forget about the ups and downs. A lot of us watched our portfolios tumble by hundreds of thousands a few years back.
Treat the stock market like your favorite sports team: it can be entertaining, you may want to know the score each day, but there is nothing you can do if they have a losing streak. They will win again. Thankfully, I believe (don't quote me) that the stock market has on average 7 up years for every 3 down years, so the odds are in your favor. Forget market timing. Before 2 weeks ago, no one knew a downturn was imminent. This is nothing and no one knows how long it will last, nor when it will end and go back up.

I think people who are "successful" market timers are like people who bet on horses. You only hear about the winning moves, not all the rest. With so much evidence out there, I am amazed that so many people try to beat the market. AJ, buy and hold, index funds, you'll sleep out night, pay no taxes, and not waste time figuring what to do with your money.
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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 10:39 PM   #35
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Re: A serious question (for once), about the theory of buy and hold and down markets

Quote:
Originally Posted by AirJordan
Sorry I guess I'll rephrase, watching on the money last night got me a little spooked with all the recession talk. I was just curious about the actual theory of buy and hold. This is just so I can sleep a bit easier, and not worry about having to pull all my money off the table.

Buy and hold, is just as simple as it sounds then, buy and never sell until you're going to retire correct? I've heard differing vantage points, so I just wanted a clarification.
Buy-and-Hold philosophy is really based on the Efficient Market Hypothesis. i.e. No one is smart enough to consistently time the market. This is of course the same logic behind Index Funds.

If you are a "true believer" then you do not sell just because some "expert" on TV thinks that there will be a correction.

The action that you take to address your own uncertainty is to reduce your stock allocation to your own comfort level but maintain it at that level, i.e. reduce stocks and put it in bonds, cash, etc. to the point that you will no longer by "spooked" by a bear market or some guy on TV even if it is Greenspan. "If you can't take the heat stay out of the kitchen."

Some that usually practice slice and dice asset allocation, indexing and buy-and-hold deviate from it on occasion. If you read enough past posts you will find a lot of comments to the effect that "(tech) stocks were just to out of whack with the fundamentals in 2000 so I sold" or more recently "REITs are overpriced so I sold them."

A hybrid approach is to let your AA wander a bit based on your outlook. For example if your're optimistic then increase stocks a bit (maybe 10%) or reduce them a bit if you're pessimistic. I dropped my REIT allocation a couple of percent about six months ago but I still own some and they have gone up since then. I would never be totally out of the market ala Bob Brinker. You lose to much if you're wrong. Many think that any kind of timing is a "loser's game" and you should determine your AA and only change it based on your own financial needs and risk tolerance. You have to make that decision.

MB
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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 11:17 PM   #36
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Re: A serious question (for once), about the theory of buy and hold and down markets

Quote:
Originally Posted by ScaredtoQuit
Do you guys think it is better to rebalance (a) every year at the same time or (b) at the end of each significant market fluctuation? (like we just had)
(c) Neither of the above.

I'd rebalance whenever an asset class got significantly out of whack-- selling when it rises from 10% of the portfolio to 15%... or buying more when it drops from 20% to 15%.

But I don't think we're ever going to sell any Berkshire Hathaway shares. 31% of the ER portfolio yet every time we think about selling some...
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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-08-2007, 11:34 PM   #37
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Re: A serious question (for once), about the theory of buy and hold and down markets

Hey Nords
Sequoia Fund - a long time BRK holder reduced their holdings a little in 2006. Its still their largest but the value guys seem to think 2006 is as good as it gets. But I wouldn't want to underestimate the big man yet and it is only 5% of my portfolio

-h
p.s: http://www.sec.gov/Archives/edgar/da...-07-000002.txt

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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-09-2007, 12:12 AM   #38
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Re: A serious question (for once), about the theory of buy and hold and down markets

Nords,
lswswein,

In the 90s, sorry don't remember the justification, I read that someone determined that BH was 100% over valued based on the intrinsic value of the holdings. i.e. The "Warren Factor" increased the value of BH stock by a factor of two!

So what happens to the stock price if/when Warren is no longer able to run Berkshire Hathaway?

MB
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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-09-2007, 12:16 AM   #39
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Re: A serious question (for once), about the theory of buy and hold and down markets

Thats always been my question.

The unknown factor in equity ownership in the short term is usually psychological. I've seen BRK shareholder meetings, they're like woodstock. IMO its a long term psychosis thats like Ben and Jerrys or Krispy Kreme stockholders...only the company makes good money and has sound financial foundations.

I'm quite sure that the stock takes a healthy drubbing the minute Warren bites the dust. And eventually comes back to 80-85% of the value of the day before.

Theres a Buffet premium though that I dont think you ever get back.

I might be a buyer on that "day after" though. But you might have to hold a few years to get the full effect of the bounce-back.
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Re: A serious question (for once), about the theory of buy and hold and down markets
Old 03-09-2007, 12:19 AM   #40
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Re: A serious question (for once), about the theory of buy and hold and down markets

Quote:
Originally Posted by mb
Nords,
lswswein,

In the 90s, sorry don't remember the justification, I read that someone determined that BH was 100% over valued based on the intrinsic value of the holdings. i.e. The "Warren Factor" increased the value of BH stock by a factor of two!

So what happens to the stock price if/when Warren is no longer able to run Berkshire Hathaway?

MB
The way things have been over the last few yrs BRK is if not anything else, selling at a discount because everyone knows Buffett is going to croak sometime in the next 15 yrs. All the intrinsic value calculations say it is selling at a discount. Also based on who owns the stock a lot of people will never sell their BRK stock - it wil upto the estates or kids to sell them. If there is a big selloff because buffett died, I think a lot of the current owners would swoop in to buy. I know I would be one of them - it just is an amazing collection of companies which just keep generating amazing amounts of cash.

-h
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