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I can't win for losing
Old 09-17-2009, 07:19 AM   #1
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I can't win for losing

I've been following the market now for several years and my neighbour keeps telling me "if you want to make good returns you have to be willing to accept more risk". Well, this week I decided to switch two mutual fund into a money market account since it has always gone up and down like a roller coaster for the last year, it's like clock work. This time when I did it, the TSX just kept going up......and up........and up. What gives? I betcha it wouldn't have done this if I didn't switch those fund to money market. Mind you the rest of the portfolio is recovering due to the TSX moving up but would it be just my luck. The amounts I switched were around $70K which is less then 10% of the total portfolio but still. Now I betcha if I bought back in today the TSX would drop like a rock.

I just can't win!
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Old 09-17-2009, 07:32 AM   #2
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Risk tolerance. That's what it's all about. I sold a good chunk around DOW 9500. But that's OK, I'm sleeping much better. I'm just happy I stuck it out from the lows to this point.
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Old 09-17-2009, 07:42 AM   #3
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It's hard to read a money book these days without being warned about the risk (and lack of longterm benefits) of market timing. Consider it tuition for lessons learned.

It came to me as a great relief to accept that all I need is "my fair share."
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Old 09-17-2009, 07:48 AM   #4
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My Dream--all I can say is that you have to have a plan and stick to it. Jumping in and out of stuff is for the pros, and even they (mostly) suck at it. Buy some funds that makes sense to you and keep them.

Here's my entire take on what to do when I'm FIREd: I'll need a couple of years' worth of cash, another 3-5 years' worth of income-oriented stuff, and then the balance in funds that are more aggressive.

Tinkering is the path to madness IMHO.
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Old 09-17-2009, 08:47 AM   #5
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Originally Posted by Sarah in SC View Post
Here's my entire take on what to do when I'm FIREd: I'll need a couple of years' worth of cash, another 3-5 years' worth of income-oriented stuff, and then the balance in funds that are more aggressive.

Tinkering is the path to madness IMHO.
Some version of the above seems to work reasonably well for me - at least it has for the past 4+ years. That said, I will confess to having done a little tinkering around the edges - a la UncleMick's testosterone strategy.
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Old 09-17-2009, 09:01 AM   #6
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So you took profits on 10% of your portfolio after a large market run. That doesn't sound so bad.

You do have to be careful with tinkering. All I can do is stick to my plan, otherwise I would definitely go insane. And that is how, in fact, I developed my plan, by figuring out what would let me stay sane over widely varying market conditions.

My plan allows me to take some profits (i.e. rebalance) when the market makes big moves. But I am also always invested and not switching around funds. Rather, I making small trims or adding small bits to existing funds based on how far my asset allocation drifts over time. Being diversified means that something is often going down, but something else is usually going up, so that's OK! It's called "hedging your bets".

And, like other folks, I have a well-funded short-term cash account that covers me for a year or two (or three sometimes). This definitely helps with the short-term anxiety. But this is for retirees. If you have a job and a good emergency fund, you should be able to stick to your plan during extreme market conditions.

Developing an "all-weather" plan that you can stick to is the key to successful investing IMO. That way you can avoid knee-jerk actions that you later regret. Don't ever expect to be perfect or optimal. Be willing to be "good enough". Have a simple plan that diversifies across most major asset classes - that way you usually own some winners even if other things go down temporarily.

Audrey
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Old 09-17-2009, 09:08 AM   #7
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I think the most important thing is to decide how much risk you can stomach and set your stock allocation at that level, give or take a little. I don't think it's a terrible thing to take a little off the table when things look frothy or buy a little more when stocks look dirt cheap, but for me that valuation and momentum-based "fudge factor" is less than 10% of my portfolio.
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Old 09-17-2009, 09:12 AM   #8
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Yes, if you trade around some core positions rather than jumping all in or all out based on future expectations, it's much less crazy-making when things turn out different from what you expected.

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Old 09-17-2009, 09:48 AM   #9
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Originally Posted by My Dream View Post
I've been following the market now for several years and my neighbour keeps telling me "if you want to make good returns you have to be willing to accept more risk". Well, this week I decided to switch two mutual fund into a money market account since it has always gone up and down like a roller coaster for the last year, it's like clock work. This time when I did it, the TSX just kept going up......and up........and up. What gives? I betcha it wouldn't have done this if I didn't switch those fund to money market. Mind you the rest of the portfolio is recovering due to the TSX moving up but would it be just my luck. The amounts I switched were around $70K which is less then 10% of the total portfolio but still. Now I betcha if I bought back in today the TSX would drop like a rock.

I just can't win!
Well, think of the enormous power you have demonstrated in controlling what markets do by virtue of your buying/selling action. As a next step, the assignment is to work on the reverse/reverse methodology

By the way, I've always been convinced that I possess similar powers i.e. whatever I buy goes down, whatever I sell goes up. Weighty reasons I don't do it very often at all. In fact I'm convinced that the lack of frantic buying/selling is to a large extent what finally allowed me to ER
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Old 09-17-2009, 10:55 AM   #10
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So true, ejman--I can do this by changing lines at the grocery store! Mine is always the slowest one!
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Old 09-17-2009, 11:06 AM   #11
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So true, ejman--I can do this by changing lines at the grocery store! Mine is always the slowest one!
I was at the post office this morning to buy some stamps. Two people ahead of me but the one at the counter had everything all balled up. I waited at least 10 minutes and no progress made. Stormed out of there with no stamps. Went to the grocery store with plans to buy some there. Bought my groceries and forgot the stamps.

I agree with Ziggy. Must find your risk level and go with that. I found my risk level was too high a few months ago. So that is the reason for my selling recently, to bring it in line with what I can stomach.
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Old 09-17-2009, 11:11 AM   #12
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Maybe you should order your stamps on the USPS website.
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Old 09-17-2009, 11:16 AM   #13
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I found my risk level was too high a few months ago. So that is the reason for my selling recently, to bring it in line with what I can stomach.
It's funny how we all tick differently. On one hand, I think a lot of people realized their risk tolerance wasn't as high as they thought it was when they lived through the market crash. On the other hand, a lot of people have seen the market's recovery over the last six months and had their idea reinforced that a market crash is a great time to buy even more stocks.

But ultimately, we each know ourselves best and what allows us to sleep at night.
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Old 09-17-2009, 11:24 AM   #14
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On the other hand, a lot of people have seen the market's recovery over the last six months and had their idea reinforced that a market crash is a great time to buy even more stocks.

But ultimately, we each know ourselves best and what allows us to sleep at night.
I looked on the rebound as a gift from the equity gods which gave me an opportunity to abort.
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Old 09-17-2009, 12:03 PM   #15
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I've been following the market now for several years and my neighbour keeps telling me "if you want to make good returns you have to be willing to accept more risk". Well, this week I decided to switch two mutual fund into a money market account since it has always gone up and down like a roller coaster for the last year, it's like clock work. This time when I did it, the TSX just kept going up......and up........and up. What gives? I betcha it wouldn't have done this if I didn't switch those fund to money market. Mind you the rest of the portfolio is recovering due to the TSX moving up but would it be just my luck. The amounts I switched were around $70K which is less then 10% of the total portfolio but still. Now I betcha if I bought back in today the TSX would drop like a rock.

I just can't win!
You can't beat yourself up like that. If your investment plan called for selling equities, then you did the right thing, no matter what the market does subsequently. Trading on gut feelings, fears and emotions, that's what gets you in trouble.
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Old 09-17-2009, 12:05 PM   #16
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During the recent market crash, I did find myself briefly (very briefly) wishing I was back w*rking. Not to w*rk, but to have some income to put in such a down market.
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Old 09-17-2009, 12:24 PM   #17
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I found my risk level was too high a few months ago. So that is the reason for my selling recently, to bring it in line with what I can stomach.
Wonderful!!

If the market does a repeat of Sept '08 - April -09 (and let's hope not, but who knows), you'll have a smile on your face and somebody else will be
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Old 09-17-2009, 12:33 PM   #18
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You can't beat yourself up like that. If your investment plan called for selling equities, then you did the right thing, no matter what the market does subsequently. Trading on gut feelings, fears and emotions, that's what gets you in trouble.
This is so true! I rebalanced on 8/4, taking my equity allocation back to 55% when it had exceeded 60%. The market has continued to advance since then - quite a bit in fact!

Does this bother me? No. I reduced my volatility potential back down to my target allocation which makes me feel a little safer. I got back quite a bit of what I invested in equities from bonds (through rebalancing also) when the market was much lower. I still have my 55% equities working for me (up to 56.25% already). And if the market keeps advancing strongly like this, I will get to rebalance AGAIN. Rinse and repeat.

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Old 09-17-2009, 12:57 PM   #19
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“Bernard Baruch once said, “I got rich by taking profits too early.”

Buffett has said the same thing time and time again, but I can't find the exact quotes.

Basically, it's better to sell too early than too late.
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Old 09-17-2009, 03:32 PM   #20
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Originally Posted by My Dream View Post
I've been following the market now for several years and my neighbour keeps telling me "if you want to make good returns you have to be willing to accept more risk". Well, this week I decided to switch two mutual fund into a money market account since it has always gone up and down like a roller coaster for the last year, it's like clock work. This time when I did it, the TSX just kept going up......and up........and up. What gives? I betcha it wouldn't have done this if I didn't switch those fund to money market. Mind you the rest of the portfolio is recovering due to the TSX moving up but would it be just my luck. The amounts I switched were around $70K which is less then 10% of the total portfolio but still. Now I betcha if I bought back in today the TSX would drop like a rock.

I just can't win!
So that was you that caused the market to go up. I thought it was me when I did my reallocation.
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