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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 11:16 AM   #41
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

I'm so confused! I know that the most popular, widely accepted advice is ut it it now, and wait!

BUT, considering I strongly feel that we are entering a true recession, I don't think that's the best plan of attack. I know, I know, you can't time the market, but I can try to limit losses when it's in a downward trend.

This is what I'm thinking: I have to leave my 401k money as-is, and it will stay in mostly agressive and growth funds (about 3k balance). BUT, my Roth is another story, it has a balance of about 3k....in the target 2045 fund with Vanguard. I'm considering moving that 3k to the VMMXX fund, which is currently yielding 4.29%...and slowly rising. I can leave it there for 6 or more months while I see what the overall market is going to do. If it goes down as I suspect it will, I'll be much better off (considering the market is neg 4 or 5%, and I'd be + 4.3%, that'd be almost a 10% difference)

What am I missing here, other than the fact that I can't accurately time the market? This would put me at about 50/50 stocks/bonds for the time being.


Thanks
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 11:22 AM   #42
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

You're getting "too technical" with an amount invested (as I understand) of 6/hundreth of 1% of $1M.

Relax
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 11:24 AM   #43
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

Quote:
Originally Posted by thefed
I'm so confused! I know that the most popular, widely accepted advice is ut it it now, and wait!

BUT, considering I strongly feel that we are entering a true recession, I don't think that's the best plan of attack.* I know, I know, you can't time the market, but I can try to limit losses when it's in a downward trend.

This is what I'm thinking:* I have to leave my 401k money as-is, and it will stay in mostly agressive and growth funds (about 3k balance).* BUT, my Roth is another story, it has a balance of about 3k....in the target 2045 fund with Vanguard.* I'm considering moving that 3k to the VMMXX fund, which is currently yielding 4.29%...and slowly rising.* I can leave it there for 6 or more months while I see what the overall market is going to do. If it goes down as I suspect it will, I'll be much better off (considering the market is neg 4 or 5%, and I'd be + 4.3%, that'd be almost a 10% difference)

What am I missing here, other than the fact that I can't accurately time the market? This would put me at about 50/50 stocks/bonds for the time being.


Thanks
Here is a chance to make a very fundamental decision about how you invest. *Either you understand that you, personally, cannot time the marrket and act accordingly, or you decide you want to be a market-timer and act accordingly. *If you choose door#1, stick to your chosen allocation and stop looking at the indexes every day. *If you choose door #2, congratulations, you just got yourself a second (third?) job: now get to work!
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 11:37 AM   #44
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

If you're worried about a recession coming on, then one way to hedge against it a bit, or at least fool yourself into thinking you are, would be to just set up an automatic monthly investment into a fund. For example, if you had $1200 to invest now, instead of doing that, put in $100 per month. That way, if the market continues to trend downward month after month, each $100 will buy you subsequently more shares of stock/mutual fund/whatever. And if the market does hit the bottom at the end of the 12 months, you'll have more shares than if you had sunk that $1200 in all at once, in the first month.

But then on the flip side, if the market trends upward, each $100 will buy subsequently fewer shares, and you would not be as well off if you had sunk that $1200 in all at once. But most likely, the market will trend up and down from month to month, and unless you got lucky and timed it just right, either way probably wouldn't make much difference.
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 11:39 AM   #45
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

Quote:
Originally Posted by thefed
I'm so confused! I know that the most popular, widely accepted advice is ut it it now, and wait!

BUT, considering I strongly feel that we are entering a true recession, I don't think that's the best plan of attack.* I know, I know, you can't time the market, but I can try to limit losses when it's in a downward trend.

This is what I'm thinking:* I have to leave my 401k money as-is, and it will stay in mostly agressive and growth funds (about 3k balance).* BUT, my Roth is another story, it has a balance of about 3k....in the target 2045 fund with Vanguard.* I'm considering moving that 3k to the VMMXX fund, which is currently yielding 4.29%...and slowly rising.* I can leave it there for 6 or more months while I see what the overall market is going to do. If it goes down as I suspect it will, I'll be much better off (considering the market is neg 4 or 5%, and I'd be + 4.3%, that'd be almost a 10% difference)

What am I missing here, other than the fact that I can't accurately time the market? This would put me at about 50/50 stocks/bonds for the time being.


Thanks
If you really believe we are headed for a long term stay in the crapper, then you should go with your plan. *If you believe we will be looking better at the end of the year as I do, then I'd leave it alone (once again check your birthdate)* and put any "new" funds in the MM until you feel we are at a bottom- -then invest. *A downturn in March was almost a no brainer- -and here it is. *The markets always pass out enough pain to keep you from getting to used to the periods of joy.* Disclosure- - -I'm one of the few people that believes the average investor can actually time the market to their benefit over the long run * Remember, market timing does not solely relate to the constant churning of ones portfolio, it also means that you can recognize an overbought/oversold market on the macro sense thus giving you another tool as to when to make regular investments within, say a 60 day window.
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 11:40 AM   #46
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

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Originally Posted by thefed
Thanks all of you for your wisdom and support.

Maybe I said it wrong, but I understand at my age TIME and waiting is what I need to worry about....nothing else.*

To calm myself down though, I'd like a chunk of change earning about 5% that is NOT very volitile...bonds maybe?* How do I go about buying bonds, or what funds offer a good stable yield around 5%?

Thanks!
You might consider I bonds from TreasuryDirect. *I bonds can be purchased in $25 increments up to $30,000 per year electronically plus another $30,000 per year for paper bonds. *You can set up an account online and transfer money directly from any of your other accounts. *I bonds have a built in inflation hedge. *They can be held for any length of time between 1 *and 30 years. *If you hold them for less than 5 years you do lose 3 months interest. *They can be used as an emergency fund after the first year, *or you can keep them for their inflation hedge for 30 years.
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 11:52 AM   #47
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

If you are averse to volatility, why not set your portfolio allocation to fixed income (cash or bonds) at 40-50% and stick with it. Put the other 50-60% in stocks and fuggedaboudit. Adjust annually and you're an "investor". Keep the monthly purchases going, and set it on autopilot.

The money you are investing is something you plan on needing in 20 years or so? Do you think the stock market will outperform CD's or cash over the next 20 years? I make my decision to be heavy on stocks on that basis. The most important thing is to set a portfolio allocation that is not too risky. But that is a personal decision that no one else can set for you. You don't want to bail as soon as you see a 10% dip. Having some money NOT in stocks will reduce your volatility so you can stay the course. After you have experience losing a lot in the market (then gaining it back), maybe increase your allocation to stocks.

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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 12:12 PM   #48
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

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I I can leave it there for 6 or more months while I see what the overall market is going to do.

Thanks
thefed,

Suppose you do as you stated above, and after six months the market is below where it is now. Now what do you do? Will the market continue down or will it start to go back upward? Is that the start of a trend or just a head fake? Will it go up so fast that by the time you pull the trigger to get back in, the market is at a higher level than today? Or will it rise a little only to fall even lower? The trouble with market timing is that you constantly have to make decisions with no more information than you have now about the future, and those decisions have to be right every time or you probably will end up worse off in the long run than with buy and hold. I personally think that market timing is a fools game. But its your decision. Good luck.

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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 12:49 PM   #49
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

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yesterday was a 10.000 dollar drop for me with a 9,000 the day before...
I was thinking of reporting my valuation changes as well, but that probably would have really scared the pants off of him!

I would be very cautious of putting my money into any 5-7 year cd's given that the fed looks to continue to raise rates and intermediate/long bonds got pounded last week.
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 02:08 PM   #50
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

I say if you think you can time the market go for it. Learning from experience that you can't is something that's better done when you are young with a relatively low account balance than when you have a bigger egg to break. The biggest benefit of investing with four figure balances is your education. Don't let this educational opportunity go to waste... Just make sure that you track your returns carefully so you can compare with how you would have done if you stayed in the market the whole time.

But understand this about market timing: It's not just about getting an accurate idea of where things are going in the near future. It's also about knowing the exact moment that things have changed and when you need to change your plan. And knowing how to change your plan at that moment. It's also about making sure you are not trading emotionally. There are lots of very smart people doing technical analysis to detect and take advantage of markets movements caused by emotional decisions. I don't want my money to be transferred over to them, not even a little.
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 02:12 PM   #51
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

I'm willing to go as far as saying that market timing for really macroscopic events can be a good idea. The bull market in the late 90's. 9/11. The 1987 crash. I think its intrinsically obvious when things are really, really, really expensive or cheap.

Things arent particularly expensive OR cheap right now. Playing in that gray area can be very dangerous and probably cost you more than you save.

Given that these macroscopic events might happen once...maybe twice in a lifetime...and we've had a couple recently...I wouldnt count on seeing any more of them real soon now.
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 02:37 PM   #52
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

After much thought, I'm gonna let it ride! After remembering my initial plan 2 years ago (invest monthly and fugeddaboutit for at least 20 yrs), I've gotten the cobwebs out of my head...for now at least.

I MAY buy into a fund like VMMXX with my next 1,000 bucks, but that's the extent of it.

Thanks for talking me out of it guys! While reading your replies, I guess I was reminded of my days 'daytrading' with about $5k. I was down as low at $600 one time, and up to $10k just a short time later. That was TOO much for me, I hated following the trends, and charting, and being emotional, and screwing up the timing. NO MAS!


Thanks again

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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-08-2006, 02:43 PM   #53
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

Congrats thefed. You passed the test. Now you'll be rich. In 20 years.

One note: I think vmmxx has a $3k minimum buy-in. But it's a good place to keep emergency cash or a rainy day fund.
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-09-2006, 12:21 AM   #54
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

TheFed, at the risk of belabouring the obvious, you have stated that you have about $6500 invested, and are putting in around $500 per month, which amounts to about $6000 per year.

The best thing that can happen for you at this point is for the market to tank and for your $6500 to be worth only $3250 over the next couple of years. Why? Because you will be putting much more than $6500 in over the next few years, and you would be buying cheaper shares with that money. If the market tanked, then came back, you would end up with more than if it just went up to that same point. You don't have enough money in there at the moment to be worrying excessively about preserving it yet.

In other words, I think you made the right decision. I also think you made the right decision to look to this board for support.

What makes you so sure the market is heading down? If all the experts are saying it is, then this only makes it likely that it is not the case. Market sentiment is a powerful contrary indicator. It must be so, or the markets would not work. If everyone thinks the market will go up, then they are already in and where does the new money come from? Similarly in the other direction.

As for the market timing issue, I disagree with many on this board. It doesn't have to be practiced as a way to try to beat market returns. It can be a very useful way to minimize volatility and to preserve capital, and it comes in many different forms. Although I don't think most of them are worth the bother at the point that you are at.

However, the rebalancing, and fiddling with allocations that everyone discusses is in many ways a form of closet market timing. I also fail to understand why it seems to be perfectly acceptable to discuss real estate bubbles and whether to sell, rent, leverage etc. with property, but frowned upon with equities. Why is timing ok for one market but not another? I have dabbled with market timing in the past, and have concluded that it is too much work, and I don't trust other people's "signals."

Ultimately, you have to find a methodolgy that work for your emotional temprement. Any rational plan that is stuck to is likely to be superior to one that is abandoned due to fear, greed, or impulsiveness.
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-09-2006, 04:06 AM   #55
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

I tend to agree that limited market timing can be used to reduce volatility. Decide to contribute more money to your investments during downturns. Decide when the market is high to spend money out of your investments. Good decisions because they were things you were going to do anyway but you get a little extra bang by doing them at the right time. If you end up doing them at the wrong time you're not too badly hurt either.

This is why talking about the housing bubble is useful... people can make intelligent decisions to exit or enter the housing market based on valuations.

But market timing to improve long term returns over buy and hold is not something the average investor can do. It requires integrating basically all the publicly available data all the time and having a clear mind and deep skills to make sense of it all. A very few professionals can and want to do that, but certainly not me and not anyone who gets spooked by volatility. And even the professionals that get it right for a while almost always eventually get it wrong because it's such a demanding task.
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-09-2006, 09:37 AM   #56
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

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But market timing to improve long term returns over buy and hold is not something the average investor can do.
It's called "rebalancing".
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-09-2006, 10:49 AM   #57
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

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Originally Posted by Nords
It's called "rebalancing".
And re-balance I did. I rebalanced my 401k to about 20% guaranteed retrun funds (about 4.1%). That's add some stability and peace of mind for me.

I understand everyone's point that my 6500 bucks isn't much....but do realize that the first few years are THE years to get a good return, thanks to compounding. Every little bit now turns into 3 or 4 times as much down the road.

And as far as WHY I think we are going down...I just do. There's a lot of indicator's showing that at least for the near term we may. Of course, we may not. Duh! But it's just a gut feeling...I study the markets daily on a macro and micro level (some specific sectors and stocks)....mainly when I'm bored @ work.

Time will tell!
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-09-2006, 10:52 AM   #58
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

Theres a lot of indicators saying we may not.

Most indicators dont indicate anything useful.

But it could happen.

Look out! Rock!
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-09-2006, 11:16 AM   #59
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

Most indicators show me that it's always a GUESS. but an educated guess is better than none.

Again, jmho.
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!
Old 03-09-2006, 11:54 AM   #60
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Re: How do you tolerate the Peaks and Vallies? I'm having a hard time!

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but an educated guess is better than none.
You'll learn.

If that were true, there'd be a lot of actively managed funds beating the indexes. At least the actively managed funds with well educated guessers.

Monkeys throwing doodie at a dart board would have had better results based on the numbers.

But maybe it'll be different now.

What indicators are you looking at? Looked at P/E, morningstar fair value and whatnot, I'm seeing something between neutral/fair price and maybe a 5-10% overvaluation of the broad market indexes. The nasdaq is pretty peaky, but the s&p and dow arent really. On the average right about where we've been for the last 3 years. It'd make sense to me that theres going to be a breakout to the upside or downside eventually. I just cant for the life of me tell which way.
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