Going to 100% cash

[W2R]

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Originally Posted by dex I think I will sleep very well once I'm in cash.

A diversified portfolio helps me to sleep well. And on that note, good night!

[runchman]

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Originally Posted by dex Why are there no questions on why people are staying in the market? What do the people staying in the market see that those getting out do not?

The minute I get out, I have to start losing sleep over when to get back in. Years ago I decided:
- pick asset allocation
- set it
- forget it
- rebalance occasionally
- ignore all financial news and stay the course

I'm either a genius or an idiot. Only time will tell.

[CyclingInvestor]

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Originally Posted by dex Why are there no questions on why people are staying in the market? What do the people staying in the market see that those getting out do not?.

I have been 100% in individual stocks since 1993 and see no reason to change that. I have absolutely no idea what market prices will be in the future, but feel confident that in 1 - 5 - 10 - 20 years from now [ PG / JNJ / ADP / ABT / KO / SYY etc] will have higher earnings and dividends than today, probably by a significant margin over inflation, resulting in a continuation and enhancement of a comfortable dividend-based retirement. The last market collapse caused my portfolio market value to drop significantly for a while, but resulted in no lost sleep as earnings and dividends kept right on rising.

[chinaco]

Honestly... I think all of us have those feelings and thoughts sometimes.

No one really knows what is going to happen short-term or mid-term.


Preservation of capital is important... especially if you need to spend it near-term.


At our age (DW and I), I intend to stay diversified and hold some stock. The stock represents money that we do not need to access for over a decade (upper end spending) or 15 years of mid (planned spending).

I do not try to time, because I believe it is futile.

IMO lightening up on stocks a little to lock-in some gains can be a prudent move. But it would be more of a permanent move than a timing move if I did it.

The bucket approach (BOM)... provides short-term, mid-term, and long-term investments to insulate you from near-term market shocks.


Some investors take this approach - "One way to have it both ways" (a yogi berra-ish statement) is to split the difference and reduce equity exposure. (e.g, move from 50/50 to 25/75). Some do this by averaging out in several steps over time and stop if things look better.


DW and I will eventually get out of stock (or hold very little) at some age (perhaps mid 70's)... I am working out the plan now. It will be an opportunistic move (when the market is riding high... but I will not wait on the peak) That will be a permanent move.

[cardude]

This may or may not make folks who are super jittery about the market feel a little better, but here is what Buffett said after 2008 in his shareholder letter:

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Amid this bad news, however, never forget that our country has faced far worse travails in the past. In the 20 th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 21 1⁄2% prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15% and 25% for many years. America has had no shortage of challenges. Without fail, however, we’ve overcome them. In the face of those obstacles – and many others – the real standard of living for Americans improved nearly seven-fold during the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived. Though the path has not been smooth, our economic system has worked extraordinarily well over time

Another one.........

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Clinging to cash equivalents or long-term government bonds at present yields is almost certainly a terrible policy if continued for long. Holders of these instruments, of course, have felt increasingly comfortable –in fact, almost smug – in following this policy as financial turmoil has mounted. They regard their judgment confirmed when they hear commentators proclaim “cash is king,” even though that wonderful cash is earning close to nothing and will surely find its purchasing power eroded over time. Approval, though, is not the goal of investing. In fact, approval is often counter-productive because it sedates the brain and makes it less receptive to new facts or a re-examination of conclusions formed earlier. Beware the investment activity that produces applause; the great moves are usually greeted by yawns.

[brewer12345]

Dex, thanks for the explanation. I guess I have always had a hard time giving much credence to technical analysis, but different strokes. I don't like the mad rush into bonds that is happening, but I also know we are in late august and have thin, directionless markets as people are on vacation. That being the case, I find it hard to draw any real firm conclusions from anything happening at the moment.

[Dawg52]

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Originally Posted by W2R A diversified portfolio helps me to sleep well. And on that note, good night!

Did you sleep well a couple of years ago when the DOW was around 6,700? Congrats to those that did. My portfolio took a major step backward and I had an AA allocation of something like 45/55. When the DOW recovered close to 10k, I rebalanced and now have less than 25% in equities. Now I sleep much better. But, everyone has a different comfort level.

[donheff]

This sleep thing is interesting. Dex reads about a DOW 3,000 by year's end and can't sleep until he moves to cash. I think about the possibility of slow erosion of my life style (through inflation and depletion) and know I would lose sleep in all cash. I guess I would rather take a chance at a sudden disaster than a slow water torture.

[W2R]

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Originally Posted by Dawg52 Did you sleep well a couple of years ago when the DOW was around 6,700? Congrats to those that did. My portfolio took a major step backward and I had an AA allocation of something like 45/55. When the DOW recovered close to 10k, I rebalanced and now have less than 25% in equities. Now I sleep much better. But, everyone has a different comfort level.

Right, and as you point out having a diversified portfolio with the AA that corresponds to your comfort level can make all the difference in the world. I didn't *like* the crash, but I didn't suffer with it to the extent that you did. It certainly did test the appropriateness of our AA's with respect to our individual comfort levels though, I do believe.

Got a great night's sleep and I'm up early, ready for a pleasant Tuesday.

[ERD50]

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Originally Posted by W2R A diversified portfolio helps me to sleep well.

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Originally Posted by donheff This sleep thing is interesting. ....and know I would lose sleep in all cash.

I'm in the above camp. I would lose sleep with 100% cash. Would I be able to get back in at a good level? Who knows?

The only market timing that FIRECALC uses for its historical review is AA re-balance. And success rates are relatively insensitive to the AA you pick (similar form 35% Eq to 100% Eq).

PS - it would be interesting if FC allowed one to choose a variable AA, say 80/20 to start, 20/80 at end of the period (or vice versa), adjust linearly each year (2%/year for 30 years in this case, or X%/year until target is reached).

-ERD50

[lowflyer]

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Originally Posted by runchman The minute I get out, I have to start losing sleep over when to get back in. Years ago I decided: - pick asset allocation - set it - forget it - rebalance occasionally - ignore all financial news and stay the course I'm either a genius or an idiot. Only time will tell.

I usually spend much more time monitoring the market AFTER I sell out of something than I did when I owned it, because I'm looking for a time to get back in. I like to stay invested if I can. On the other hand, the market has been very odd lately, so I can understand wanting to hold more cash.

[dex]

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Originally Posted by donheff This sleep thing is interesting. Dex reads about a DOW 3,000 by year's end and can't sleep until he moves to cash. I think about the possibility of slow erosion of my life style (through inflation and depletion) and know I would lose sleep in all cash. I guess I would rather take a chance at a sudden disaster than a slow water torture.

I thought I should have put a note in about the #7. The point is that the USA stock market has had such large declines in the past. The Decisionpoint.com comments do not mean it is a target.
Also, my going to 100% cash does not mean I will be in it for a long time; such that it would erode a life style.

It might be easier to understand, if I were to say I'm going to 100% cash and then re-balance after that.

http://www.hussmanfunds.com/html/7374.htm

[tryan]

Stocks are only ~20% of the wad for us. I went cash in May. The trigger for me was the belief that the rally we saw was funded mostly by tax payers (stimulus and excess liquidity). And there is no such thing as a "jobless recovery". This was compounded by a 1000 point drop in 20 minutes ... I was out a few days later.

FWIW I've never been completely out of stocks - before May. Rode it all the way up and all the way down .....

[73ss454]

Well Dex, you're looking pretty smart this morning anyway.

[dex]

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Originally Posted by 73ss454 Well Dex, you're looking pretty smart this morning anyway.

Maybe smart would have been to sell it all yesterday. I'm at 51% cash with about 50% of mutual funds in stocks and 50% in bonds.

[Moemg]

I did not sleep well at all during the last melt down so I now have a portfolio point where I will get out or mostly out . Since half my stash is in taxable that's the only reason I did not cash out before . Dex ,you may be right .It's certaintly the right choice for you .

[Carnage]

Could someone explain to me why you wouldn't stick it all in either bonds or CD's in the short-term? I've never quite understood why you concede even the low interest you would get there versus nothing with cash.

[easysurfer]

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Originally Posted by dex I started selling my remaining mutual funds and will probably be in 100% cash by Thurs. or Fri. Bottom line - the downside risk out weights the upside potential. I'll post more after I'm finished selling.

Are you saying that you've had it with mutual funds and won't get back in funds again? Or is it that you don't think the time is right to be in funds?

If you have plenty money to easily last you the rest of your life and don't care about not keeping up with inflation, then 100% in cash would work. Otherwise, IMO, I'd prefer to do the asset allocation thing instead of waiting to the right time to jump in and out.

[audreyh1]

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Originally Posted by REWahoo I can't speak for others who are staying in the market, but I don't see anything clearly enough to make any moves at all at the moment. But then I've never been able to see the future of the market and stopped trying to time it a couple of decades ago.

I am also one who is neutral in terms of future outcomes - I have no idea what might happen in my own life, or on a global scale, let alone the various asset classes.

The way I see it, is that most of the money in my portfolio I don't need for the next 5 years, a lot I won't need for the next 10, some for the next 20, etc. So I have plenty of time for my the bulk of my portfolio to recover. I prefer to ride out the waves and rebalance when indicated, than to try to time exits and re-entries.

In the meantime, I have plenty of cash equivalents to cover the next several years expenses.

I do think it very likely that we have a strong market selloff over the next few months (it already started as foretold by astrology just after the 8-10 Bradley Turn Date - it seems like everyone read the same script and decided to sell off big on 8-11). We are back below the bearish 50/200dma cross, the dreaded "Hindenburg Omen" has raised it's ugly head (last seen in 2008), it's the 2nd year of a Presidential cycle, which usually have horrible Sept/Oct periods - so all my technical analysis buddies are on bearish red alert.

But - I'll ride it out. That's what I designed my portfolio to do.

I expect more rollercoasters between now and 2017 or thereabouts. But as you can see from the past, we have had some pretty strong bull runs within our current "secular bear market" since 2000, so far rebalancing has been pretty effective (knock on wood) in spite of some brief periods of significantly reduced net worth.

Audrey

[dex]

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Originally Posted by easysurfer Are you saying that you've had it with mutual funds and won't get back in funds again? Or is it that you don't think the time is right to be in funds? If you have plenty money to easily last you the rest of your life and don't care about not keeping up with inflation, then 100% in cash would work. Otherwise, IMO, I'd prefer to do the asset allocation thing instead of waiting to the right time to jump in and out.

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Originally Posted by dex Also, my going to 100% cash does not mean I will be in it for a long time; such that it would erode a life style. It might be easier to understand, if I were to say I'm going to 100% cash and then re-balance after that.

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