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Market Timing Schmarket Timing
Old 07-30-2014, 05:15 PM   #1
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Market Timing Schmarket Timing

As an aspiring Boglehead I'm a little ashamed to admit I went 100% into cash and short term bond funds today. I retired 37 months ago and am three years into a five year pension payout. I've always maintained a pretty conservative 40/60 portfolio, but with my current nestegg a modest correction could still cost me six figures.

Right after I retired I took a $50k hit in the August 2011 correction, but I only had my 401k on the table then. My last irrational play was going to cash in Jan 2008 when I thought I sniffed trouble. I lucked out for once and got back in at the end of 2009. I kind of have the same feeling now.

Anyway we're already up YTD more than our annual living expenses, so I'm taking the poorly-reasoned luxury of sitting on the sidelines and observing for a few months. In the best case I get back in after a correction. In the worst case I've wasted some time during which my money could have been working for me.
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Old 07-30-2014, 05:27 PM   #2
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It's all good if it's tax deferred accounts. I worry that I will lose more to Uncle Sam in way of cap gains taxes than I can save and make by navigating mid term trade timing.
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Old 07-30-2014, 05:34 PM   #3
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Thanks for the heads-up on capitulation. It takes some guts to do that AND to post about it.

I calculate that even if my equities lost 50% of their value, that I would still be a multimillionaire, so I am just maintaining my asset allocation. Steady as she goes.

P.S. Your post is a buy signal for the rest of us.
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Old 07-30-2014, 05:35 PM   #4
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It sounds like youve got a gut instinct that you are acting on, and if it doesnt come true, you will get back in the market? So lets say the market goes sideways a few months. What would be different then than now? From a market valuation perspective (related to the chance of a correction). I wonder if you are not just trying to be lucky twice, hehe! Then you WOULD have something to brag about!
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Old 07-30-2014, 05:50 PM   #5
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Originally Posted by bob boag View Post
As an aspiring Boglehead I'm a little ashamed to admit I went 100% into cash and short term bond funds today.
Confession is good for the soul. Market timing is hazardous to the nest egg.
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Old 07-30-2014, 05:59 PM   #6
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Wow. Good luck.

Market timing is habit forming, and closer to gambling than investing. You may win once or twice but in the long run, you will lose. Then again, this board is full of people who made lots of money in many different ways.

BTW, how does one move everything to cash? One of my brokerages only let me move $100k per day per fund. It'd take me a few days to transfer everything to cash.
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Old 07-30-2014, 06:06 PM   #7
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Heck, if I moved everything to cash I would owe Uncle Sam some dough!!!

Nope, I stuck it out last time and plan to stick it out again...


BTW, my old boss did move everything to cash before the last crash... but them move it all to silver and gold just waiting for the next one... he never felt good enough to move back in...

IMO, the best bet is to have enough cash to muddle your way through the next crash (whenever it happens) and hope that it recovers before you need more... but, even if you have to sell when things are down... it usually is still better than just sitting on the sidelines with cash the whole time... YMMV...
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Old 07-30-2014, 06:29 PM   #8
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Anyway we're already up YTD more than our annual living expenses, so I'm taking the poorly-reasoned luxury of sitting on the sidelines and observing for a few months. In the best case I get back in after a correction. In the worst case I've wasted some time during which my money could have been working for me.
I can't say I wish you luck because I am taking the opposite stance and hanging in there and continue to DCA a little more this last year of work.

You realize you are in fact taking a risk and loosing money in a cash position. I believe the current inflation rate is around 2.1% so your burning money just sitting there timing schmiming.
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Old 07-30-2014, 06:33 PM   #9
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bob bog,

Did you realize (huge) gains and have to pay capital gain tax?
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Old 07-31-2014, 12:18 PM   #10
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I did the same bob boag in 2008 before the most drastic dips. Got back in as well. However, not sure I'd do it this time. I have more cash and cash equivalents to ride it out should capitulation happen. Plus while out, kind of hard to give up dividends and interest which help mitigate some of it.
Don't get me wrong. I won't like it and will have to shut down going to my brokerage site as I will not want to watch it.
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Old 07-31-2014, 12:31 PM   #11
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Thanks for the heads-up on capitulation. It takes some guts to do that AND to post about it.

I calculate that even if my equities lost 50% of their value, that I would still be a multimillionaire, so I am just maintaining my asset allocation. Steady as she goes.

P.S. Your post is a buy signal for the rest of us.
+1
Market timing is an old discussion, has never worked, and isn't about to start working now.
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Old 07-31-2014, 01:05 PM   #12
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I'll admit that I radically reduced my equity exposure in mid-2008, and was all-in by mid-2009. At the time, I knew I was nearing retirement and couldn't afford another dot-com disaster. It was a defensive move that turned out quite nice. My situation today is very different, but also this market and economy don't exude a similar sense of doom and gloom that those did (at least, not right now). More importantly, I'm not consuming any of the portfolio at present, so not much risk of a sequence-of-returns disaster at the outset. Spending is 100% supported by DW still working, a nice pension annuity, rental income, and dividends from the taxable account. The last thing I want to do is turn off the dividend stream, pay CG tax, and lose purchasing power by holding cash. So I'll stay the course. Although highly unlikely, I would never completely rule out a timing move in the future if the tea leaves look fundamentally different.
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Old 07-31-2014, 01:20 PM   #13
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I guess I most also admit to the market timing disease. When equities get to be 55% of my liquid NW I'll sell down to 50%, midpoint of my nominal 45-55% equities range. I'm currently at 54% so it's getting close although the market in the last few days may solve the allocation problem for me.
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Old 07-31-2014, 01:24 PM   #14
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bob bog,

Did you realize (huge) gains and have to pay capital gain tax?
It would have been a brutal hit but my assets are indeed nearly 100% in IRAs.
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Old 07-31-2014, 01:25 PM   #15
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Hmmm, I am buying today not selling. It helps I was in cash from a recent sale.

I would be a seller of Argentina bonds though...
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Old 07-31-2014, 01:40 PM   #16
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Originally Posted by bob boag View Post
As an aspiring Boglehead I'm a little ashamed to admit I went 100% into cash and short term bond funds today. I retired 37 months ago and am three years into a five year pension payout. I've always maintained a pretty conservative 40/60 portfolio, but with my current nestegg a modest correction could still cost me six figures.

Right after I retired I took a $50k hit in the August 2011 correction, but I only had my 401k on the table then. My last irrational play was going to cash in Jan 2008 when I thought I sniffed trouble. I lucked out for once and got back in at the end of 2009. I kind of have the same feeling now.

Anyway we're already up YTD more than our annual living expenses, so I'm taking the poorly-reasoned luxury of sitting on the sidelines and observing for a few months. In the best case I get back in after a correction. In the worst case I've wasted some time during which my money could have been working for me.
Well, you picked a good day to get out......S and P down 30pts. as I type.
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Old 07-31-2014, 01:46 PM   #17
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It would have been a brutal hit but my assets are indeed nearly 100% in IRAs.
Makes sense. B/c mine are not in IRAs, converting to cash becomes a huge tax hit even if I were to time the market. Good luck to you though.
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Old 07-31-2014, 01:46 PM   #18
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This year is much different than 2008. In 2008, virtually every analyst was warning about the upcoming defaulting mortgages. All the leverage mortgage bonds, layoff, unemployment claims, etc.

While we may be overvalued, the economy is in generally great shape. We may be headed for a correction as all the buyers are getting exhausted and some wages are headed up (inflation?), there is not a major financial crisis headed our way.

Having said that, a financial advisor would say “The reason you are paying me is so you do not do anything, not so that I can do something”

Summer markets are sloppy. You can't bail everytime we get a 2% hiccup. I am not sure what volume is, but that's something else to look at.
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Old 07-31-2014, 02:33 PM   #19
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Well, I am still in accumulation phase, and I am excited that I'll be buying low(er) tomorrow when my automatic 401(k) contribution gets made. I also have some cash in my taxable account....I think I have to figure out where my AA is a little out of whack and buy something there too!
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Old 07-31-2014, 02:59 PM   #20
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My rule of being 100% in equities all the time prevents me from any market timing.

Frankly 10%-20% drop would be healthy thing for a market
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