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Old 01-10-2010, 11:06 AM   #81
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I'm not surprised that people who rebalance formulaically beat the market. The losers would have been those poor folks who got scared last winter and sold to 'stop the losses'.
I think that says it all. To listen to people now, one would think that nobody got scared and sold when the market was down. Sadly, that wasn't the case, at all.

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Originally Posted by audreyh1
Brewer, it took every last drop of courage I had to rebalance (again) into stocks on 1/15/09 - especially since I had caught a falling knife (rebalanced to buy stocks) twice during 2008.
I know what you mean! I was still in balance in January, but I was scared to death when I bought substantial quantities of stocks three times during October, 2008, right after a plunge. Luckily my portfolio responds to what I do, not what I feel.
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Old 01-10-2010, 11:43 AM   #82
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Most money managers use the S&P500 as the benchmark, and for a good reason. If a dollar bill is like a vote, these 500 companies have gathered the most votes from investors. Trying to beat the index is like to beat the majority. That was the argument of the market efficiency theorists.

Now, do you believe in Wisdom of the Crowd or Folly of the Crowd? I think both are true, but in different time frames. In the long run, the truth will out. But see how long it took for Communism to die.

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Agreed. The S&P500, being defined on market capitalization, is biased towards large corporations, which are less likely to be growth stocks. Some of them, like GM, are shrinkage stocks.
Yes, the next Microsoft, Cisco, Walmart have to come from small-cap stocks.

But sadly, for one of the above, there are 100s more that are snuffed out like a striked match held out in the wind. I do not have statistics, but suspect that the percentage of "shrinkage" stocks is higher in the small-cap and micro-cap worlds than the large caps. But as an aggregate, they do provide higher rewards for higher risks, read higher volatilities, as we all know.

Take the extreme case of microcaps. One of my friends likes to scour the penny-stock world, looking for bargains. I tried to tell him that these stocks trade for pennies for a reason. I'd rather look for bargains in the larger established companies that are out of favor, temporarily as I hope.

As many here, I would be more interested in hearing about successful investors with a broader AA than those who got rich based on just one or two stocks. The latter cannot be emulated. How do I turn the clock back to put it all on Intel or Walmart in the 80s?

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But in general I do think rebalancing is a huge factor. The 08-09 market proved its wisdom as far as I'm concerned, it actually forced me to buy low.

So I'm not surprised that people who rebalance formulaically beat the market. The losers would have been those poor folks who got scared last winter and sold to 'stop the losses'.
Yes, that is the biggest factor that dwarves everything else. Even so, people execute their trade rebalance in so many different ways. A bit of differences in AA, in timing, sector allocation can yield a return difference of a few percent easily. Those few percents, we can live on for a year! We can all claim to do the same thing, but luck chance has a factor there.

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Originally Posted by audreyh1 View Post
Yes, that's true too. You can own plenty of the stocks in the S&P500, but if you have a different weighting/allocation of them and/or you buy some and sell others you will have a different performance during any given year.

Lots of mutual funds behave differently than the S&P500.
Yes. And market efficiency theorists say that no one will consistently outperform S&P500 over the long run. Hence, Bogle invented the S&P500 index fund. In an interview a couple of years ago, when asked about various sector funds that Vanguard provided, Bogle said that it was done to appease its investors, but he himself did not believe in them.

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I don't know what believing in market efficiency theory or not has to do with anything. Different asset classes go through different cycles and you can't predict which asset class will outperform in any given year which is why people who use AA usually rebalance versus using some market timing method.
About different asset classes performing differently, yes that is always true. And as Bernstein points out in his Intelligent Asset Allocator, some asset classes have underperformed for two decades straight in the past. How many of us have the patience to wait that long? I may not be alive in 20 years.

"In theory, there is no difference between theory and practice. But, in practice, there is."- Yogi Berra


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BTW, the S&P bottomed (closed) on March 9 2009 at 677.
Thanks for correcting my error. I was just throwing out a strawman investor to see how we fare against an absolute buy-and-hold investor.

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Originally Posted by brewer12345 View Post
The question was have you recovered. Nothing was asked about the depth of one's plunge and the level of risk one took...
Just answering the OP's question would not let us have this more interesting talk. It's not just the destination, but the journey too. No?

Your journey is an interesting one. I had mine with tech stocks in 2000, and yes, never again.

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Originally Posted by LOL! View Post
On the topic of S&P500: A Fama & French / Merriman / DFA style slice & dice portfolio would have only 25% of equities in US large cap funds such as those in the S&P 500. 75% of the equities in such a portfolio would not be in the S&P500.

Instead the equity portion of the portfolio would be filled out with 25% US small cap, 25% large cap foreign and 25% small cap foreign.

While I do not think everyone on this forum is a slice-and-dicer, I think many more people tilt towards that way than they do towards total-market-index+little-foreign.
Yes, I suspected the same, although so many claim to be Bogleheads. I have come to the conclusion that similarities between them is like that between the Greek Orthodox and the Mormon; they are both Christian.

By the way, though I am not a believer in the market efficiency theory, I read all their arguments. They do have some compelling data to back it up. Sure, you can beat the market as I have done in some recent years, but they say it is all luck. Of course, I should pay attention. The market god hates arrogance.

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Originally Posted by Dawg52 View Post
He has to be wearing a XXL.
His would be so large, I do not see how he can walk.
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Near Retirement and Fearful of the Markets
Old 01-10-2010, 12:19 PM   #83
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Near Retirement and Fearful of the Markets

After years of putting money into my 401k and trying to learn the game. I`ve come to the conclusion that the game is rigged.High power players create bubbles,driving a segment or the whole market up getting many small investors on board and then bringing it down.Leaving small investors holding the bag while they make money shorting the market.I see this as a technique used over and over again.

Because of this I`ve been in a money market type fund in my 401k for two years.My fears here are that the american dollar keeps dropping in value and that this isn`t a safe haven either.

When I retire within in a year and move my 401k to a IRA I will move some of my money into precious metals.Other than that I`m not sure what to do.Commodities or currencies may be the way to go but my knowledge of that is next to nothing.

Anyone out there have similar feelings?
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Old 01-10-2010, 12:24 PM   #84
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The question was have you recovered. Nothing was asked about the depth of one's plunge and the level of risk one took. I believe that at the depths I was down in the region of 60% (did not look too closely, but it was pretty far down). When I was down there I took extremely aggressive actions (how many of you borrowed money to invest? how many doubled and tripled and quadrupled down on stocks that had lost 70 to 90%?). Fortunately I was rewarded for these actions, but they were very risky. Would I have been happier to still be down mid to high single digits if my bottom had been down 25%? Absolutely.

The lessons for me of this mess have been very clear, and I am taking the appropriate actions based on lessons learned. Sure, I am back to my peak, but it was not a fun ride by any stretch of the imagination. Never again.


Hair-raising experience!!!
Leveraging in the crash: nm
Let's face it guys: Brewer's got balls!
And he's a professional!
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Old 01-10-2010, 12:24 PM   #85
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Anyone out there have similar feelings?
Not me. There is no game to learn. You have to take this seriously and learn about asset allocation. It is not a game. 100% money market is not an asset allocation that I need in my 401(k). I have been 100% fixed income in my 401(k), but I have rebalanced as warranted by my written asset allocation.

What is your asset allocation that you have written down and been following for several years now?
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Old 01-10-2010, 12:26 PM   #86
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Originally Posted by robjr100 View Post
After years of putting money into my 401k and trying to learn the game. I`ve come to the conclusion that the game is rigged.High power players create bubbles,driving a segment or the whole market up getting many small investors on board and then bringing it down.Leaving small investors holding the bag while they make money shorting the market.I see this as a technique used over and over again.

Because of this I`ve been in a money market type fund in my 401k for two years.My fears here are that the american dollar keeps dropping in value and that this isn`t a safe haven either.

When I retire within in a year and move my 401k to a IRA I will move some of my money into precious metals.Other than that I`m not sure what to do.Commodities or currencies may be the way to go but my knowledge of that is next to nothing.

Anyone out there have similar feelings?
Maybe your theory is correct. Another theory to consider is that the government periodically generates huge deficits, then lets inflation rage for a while which takes care of the debt, with no tax increases. People invested in money market funds get killed. Will gold save you? Perhaps it will if you are clever enough to jump in and out at the right times, though why wouldn't this fit into the manipulated bubble theory as well?.
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Old 01-10-2010, 12:38 PM   #87
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Originally Posted by robjr100 View Post
After years of putting money into my 401k and trying to learn the game. I`ve come to the conclusion that the game is rigged.High power players create bubbles,driving a segment or the whole market up getting many small investors on board and then bringing it down.Leaving small investors holding the bag while they make money shorting the market.I see this as a technique used over and over again.

Because of this I`ve been in a money market type fund in my 401k for two years.My fears here are that the american dollar keeps dropping in value and that this isn`t a safe haven either.

When I retire within in a year and move my 401k to a IRA I will move some of my money into precious metals.Other than that I`m not sure what to do.Commodities or currencies may be the way to go but my knowledge of that is next to nothing.

Anyone out there have similar feelings?
Based on the large number of big money players that supposedly should be in on the game, I would say your hypothesis has some pretty big holes.

I think you would be a lot better served to spend time learning about investing than indulging in conspiracy theories.
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Old 01-10-2010, 12:42 PM   #88
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Maybe your theory is correct. Another theory to consider is that the government periodically generates huge deficits, then lets inflation rage for a while which takes care of the debt, with no tax increases. People invested in money market funds get killed. Will gold save you? Perhaps it will if you are clever enough to jump in and out at the right times, though why wouldn't this fit into the manipulated bubble theory as well?.
The money market was meant to be a temporary place to park my money since my 401k is limited in choices.

Precious metals is a hedge against the falling dollar.

Do any of you really trust wall street or the bankers after all that`s gone on? Or the politicians that deregulated the laws to make the whole ponzi scheme happen? If you look past what the mainstream media tells you what happened you will find the whole thing is a gigantic smoke and mirrors heist.
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Old 01-10-2010, 12:47 PM   #89
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The money market was meant to be a temporary place to park my money since my 401k is limited in choices.

Precious metals is a hedge against the falling dollar.

Do any of you really trust wall street or the bankers after all that`s gone on? Or the politicians that deregulated the laws to make the whole ponzi scheme happen? If you look past what the mainstream media tells you what happened you will find the whole thing is a gigantic smoke and mirrors heist.

Why is it I am starting to get the itching fists that signal either a political diatribe or a sales pitch?
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Old 01-10-2010, 12:50 PM   #90
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I was thinking of Brewer more as a guy and a Van der Graaf generator.

By the way, I have not heard of a fatal accident with this kind of experiment. Have you?




Come on, it is FUN!

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Old 01-10-2010, 12:50 PM   #91
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Based on the large number of big money players that supposedly should be in on the game, I would say your hypothesis has some pretty big holes.

I think you would be a lot better served to spend time learning about investing than indulging in conspiracy theories.
Conspiracy FACTS is the correct term.

Watch former bank regulator William Black (Author of the The Best Way To Rob a Bank is to Own One) explain.

Bill Moyers Journal . Watch & Listen | PBS
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Old 01-10-2010, 12:54 PM   #92
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Why is it I am starting to get the itching fists that signal either a political diatribe or a sales pitch?
I`m off topic I apologize.
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