Take some volatility risk off table?

[SVHoper]

Sorry if reviving this thread offends anybody (I came across it searching for VIX).

I was just wondering if a pre-planned variable allocation % might be a compromise... after longish run-up of stocks --> lower stock allocation towards wife, but then have a pre-planned commitment to increase allocation after -x% market pullback?

 

[Lsbcal]

Sorry if reviving this thread offends anybody (I came across it searching for VIX).

I was just wondering if a pre-planned variable allocation % might be a compromise... after longish run-up of stocks --> lower stock allocation towards wife, but then have a pre-planned commitment to increase allocation after -x% market pullback?

What happens if the market doesn't pull back and keeps going up? That has happened very often in the past.

Example, you get out and market goes down -5% but your plan calls for a -10% pullback. You get the pullback but only after the market is up 20% from your sell point. So you don't go back in, and the market goes up another few years.

This is easy to check out if you willing to do the work. Try to come up with an algorithm that has worked over maybe 50 years. Let us know what it is.

 

[racy]

Hi SV,
You are entertaining the thought of market timing. I agree with Rick Ferri, "Market timing is an exercise in futility before costs and a money wasting activity after costs. Whether any market timing strategy works is a coin flip; and what worked this week may not work next week."
Advisers Are Dead Even On Market Timing

 

[SVHoper]

Hi,

I am not entertaining the idea of market timing (in this fashion)... but I think the OP wanted 65% stock and his wife 45% so I was just suggesting that there may be another solution to a single 55% compromise, if he considers a slightly dynamic range depending upon market conditions.

Since he was responding to market conditions in the first place, I didn't think it would be luring him to the dark side to suggest considering a pre-planned version.

Personally, I have never sold anything low so don't really indulge much in market-timing. Although I would bet a LOT of money that there will be a 10% correction - I have no idea when it will be so it is not really actionable (other than to accelerate my move of some new cash into the market if it is not already in).

The way I figure: if he picks 45-50% and market keeps going up without ever having a 10% correction then wife is happy with lower allocation and he is happy and has enough stocks to fund retirement.

Whereas if a correction does occur... he buys low to increase his allocation to 55-60%

 

[RobLJ]

Foreigh bonds tend to have low correlations with US equities and fixed income, which is the reason I like them as a portfolio component. I think highly of the people who manage GIM, so I am happy to buy at a discount to NAV.

I am about 30% in fixed income. Including the foreign bond fund, only half is market sensitive (i.e. mark to market like a bond fund), the rest is in instruments like a CD that accrue interest and can be withdrawn at book value (possibly with a small penalty). Given the chance totake some profits at what I would consider an attractive price, I would further reduce my bond fund exposure.

I have my wife's Roth in GIM and have since 2005. I do "time" it based on yield and price; I'm currently almost all in. (Five year return is 12.79. The 3 years before that was 9.9). I also own some total return (including Pimco Total R in my wife's IRA and Doubline in mine) as well as high yield, short term, and Fidelity New Markets (emerging) and Floating. I've bought some closed end munis, not so successfully last year but more successfully recently. I reduced duration slowly the last 30 months and sold the TIP fund and now am considering dollar cost averaging into intermediate/long term. Now that TIP funds aren't negative yield I'll look at them. It would be simpler just to pile a lot in Total Bond, plus one or two of the Total Return, and a smaller position in the emerging market and floating, which is a goal eventually when I return next year or mid year the year after, when I can consolidate some accounts.