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Old 08-21-2011, 03:00 PM   #21
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exactley. thats why if i was an advisor i would start my 20 year old off not at 80% stock but perhaps 30%. let them see how they feel and want to react. then if they can stand it have them increase a little bit at at a time until they hit their pucker factor.
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Old 08-21-2011, 03:45 PM   #22
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The problem with selling all when the market corrects is that you have to know when to get back in. So, that is two calls - one to get out, a second to get in. Given the poor record of most market timers, I doubt if I can do two calls like that, consistently enough, to protect my assets and make money. I guess that is why I am leaning to a simple portfolio and a simple yearly rebalancing. Otherwise, I might outsmart myself.
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Old 08-21-2011, 03:51 PM   #23
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The problem with selling all when the market corrects is that you have to know when to get back in. So, that is two calls - one to get out, a second to get in. Given the poor record of most market timers, I doubt if I can do two calls like that, consistently enough, to protect my assets and make money. I guess that is why I am leaning to a simple portfolio and a simple yearly rebalancing. Otherwise, I might outsmart myself.

Makes total sense to me. Also, what asset allocation you have, when you rebalance, you have control over. When the market corrects and rebounds you do not.
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Old 08-21-2011, 04:16 PM   #24
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if you missed the 10 best days in the last 20 years you gave up 70% of the gains. those days were very close to market bottoms when odds are you would not have gotten back in yet if you bailed out.
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Old 08-21-2011, 04:59 PM   #25
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if you missed the 10 best days in the last 20 years you gave up 70% of the gains. those days were very close to market bottoms when odds are you would not have gotten back in yet if you bailed out.
I'm guessing the majority of people that bailed out would have bailed out long before the market hit bottom. For those that bailed out, taking part in the biggest days don't necessarily help them that much because they didn't lose as much. If you stay in and participate in the big days near the market bottom, the market only gains back part of your losses. So that argument doesn't convince me to stay in the market all of the time.
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Old 08-21-2011, 05:04 PM   #26
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the fact is most folks bail out between the middle and bottom of the downturns with more outflow towards the bottoms according to morningstar who tracks small investor money in and out of the funds. in fact they said long term small investers have gotten only a fraction of the gains the markets saw.

the flow of money shows they get back in more towards the middle and top after a downturn which is typically higher than they bailed.

one interesting study had you miss the 10 best days but also miss the 10 worst days. the markets did pretty much the same as a buy and hold strategy would have done over the same time frame. not sure of the practicality of such a study but interesting anyway..

heres another interesting study

http://moneywatch.bnet.com/investing...hought/499520/
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