Trend or just a microcosm of my friends/family....?

[haha]

3 unrelated people have solicited my opinion on whether it's time to pull out of the stock market. All within the last week.

One was a brother in law.
One was a friend,
One was a coworker.

None of them know each other - they live in different cities, etc.

Obviously I gave them the advice to stay the course, selling would lock in their losses, you can't time the market, etc.... Not sure if they agreed.

So... Is it time to throw more money into the market since there appears to be some panic in the general population?

I have no idea what you might be talking about. Both the Dow and S&P are very near all time highs.

Who gets panicked over that? And who has losses to lock in$ Only [people who have been short the last few years.

Also I never recommend throwing money. Hug it, kiss it, then carefully place it knowing you may never see it again.

Ha

 

[haha]

No doubt, that's me. no vice.

Calm Man, I know someone who could help you with this. Contact me with absolute discretion. Smoke signals might be best.

 

[ERD50]

... So... Is it time to throw more money into the market since there appears to be some panic in the general population?

I have no idea what you might be talking about. Both the Dow and S&P are very near all time highs.

Who gets panicked over that? And who has losses to lock in$ Only [people who have been short the last few years.

Also I never recommend throwing money. Hug it, kiss it, then carefully place it knowing you may never see it again.

Ha

Calm Man, I know someone who could help you with this. Contact me with absolute discretion. Smoke signals might be best.

I'm with haha on this one. I don't really do market timing myself, not that I don't believe in it, I just don't trust my abilities in it enough.

But to 'throw money in the market' near all time highs Sounds like a buy high, sell low disaster in the making.

-ERD50

 

[Rustward]

<snip>
. . . selling would lock in their losses, you can't time the market, etc.... Not sure if they agreed.
<snip>

I have to admit I was a little perplexed by this, also.

 

[inquisitive]

3 unrelated people have solicited my opinion on whether it's time to pull out of the stock market. All within the last week.

One was a brother in law.
One was a friend,
One was a coworker.

None of them know each other - they live in different cities, etc.

Obviously I gave them the advice to stay the course, selling would lock in their losses, you can't time the market, etc.... Not sure if they agreed.

So... Is it time to throw more money into the market since there appears to be some panic in the general population?

The OP is talking about a contrarian strategy.

Regarding throwing more money into the market, I've never understood this idea. The same for people who talk about making a large amount of money in 2008 by buying after the decline. Aren't people already fully invested? Where is the money coming from to add additional money? If one has a long-term CD, you can't cash it out. No one should have large amounts of cash sitting around because it should have already been in the stock market. And if one doesn't use market timing then again, the money is invested. Making a change in asset allocation doesn't make sense. So are people selling real estate to put money in the stock market?

 

[aja8888]

The OP is talking about a contrarian strategy.

Regarding throwing more money into the market, I've never understood this idea. The same for people who talk about making a large amount of money in 2008 by buying after the decline. Aren't people already fully invested? Where is the money coming from to add additional money? If one has a long-term CD, you can't cash it out. No one should have large amounts of cash sitting around because it should have already been in the stock market. And if one doesn't use market timing then again, the money is invested. Making a change in asset allocation doesn't make sense. So are people selling real estate to put money in the stock market?

Not everyone is fully invested at all times. As a matter of fact, it makes sense to have available, uncommitted cash to take advantage of buying opportunities. And some people may actually WORK and get PAID routinely for more cash.

 

[calmloki]

The OP is talking about a contrarian strategy.

Regarding throwing more money into the market, I've never understood this idea. The same for people who talk about making a large amount of money in 2008 by buying after the decline. Aren't people already fully invested? Where is the money coming from to add additional money? If one has a long-term CD, you can't cash it out. No one should have large amounts of cash sitting around because it should have already been in the stock market. And if one doesn't use market timing then again, the money is invested. Making a change in asset allocation doesn't make sense. So are people selling real estate to put money in the stock market?

The market is not, contrary to what reading this board might lead you to believe, the only place to generate income. Some might be high stakes poker players. Some might buy and sell real estate. Some might make short term loans to property flippers. In those cases having a damn silly wad of cash is kind of normal.

 

[REWahoo]

As a matter of fact, it makes sense [for those with the market timing itch] to have available, uncommitted cash to take advantage of buying opportunities.

FIFY

 

[Andre1969]

Not everyone is fully invested at all times. As a matter of fact, it makes sense to have available, uncommitted cash to take advantage of buying opportunities. And some people may actually WORK and get PAID routinely for more cash.

Exactly. Plus, even with routine rebalancing, you're going to end up with some money sitting on the sidelines in something conservative like a money market account or cash. Back in 2007 when the market was riding high, I sold off a bit. And when 2008/early 2009 hit, I started buying back in again.

I also lucked out a bit, too. In 2008, as the market was crashing, a lot of banks were freezing HELOC's, not letting their borrowers tap into any more equity even if they were below their limit. I called my bank to see if they were going to do that as well. They said no, but I ended up maxing my HELOC out, just in case. While I was in no danger of losing my job, I wanted easy access to the money in case anything came up. Plus, with the way interest rates were dropping, it wasn't costing much to pull it out.

While prices were cheap, I bought some stocks, padded some mutual fund accounts, etc. Got some pretty good bargains. For example, Nordstrom's for around $10/share. I bought it mainly because it was paying a 6% dividend at the time, something you weren't going to get from any bank. Well, now it's trading for around $58 per share. And the dividend is now $1.20 per year rather than 60 cents. That's only about a 2% yield on the current share price, but about 12% on what I initially paid!

I also bought a bunch of Cedar Fair, around $7-10 per share. And again, initially for the dividend, which was $1/share at the time. Ironically, they cut the dividend soon after I bought, but then the price went up. Currently around $49-50/share, and the dividend is now $2.80 per share.

As for this volatility we've had so far this year? Well, as of last night, my total is down about 0.033%. Pretty negligible. But even there, I've had some stocks/funds that have gained notably, some that have fallen off, so it's been enough to make me rebalance a bit.

 

[aja8888]

FIFY

Thanks...

 

[ERD50]

... As a matter of fact, it makes sense to have available, uncommitted cash to take advantage of buying opportunities. ...

I don't know that we can say that is a fact. Some studies have shown rebalancing hurts overall returns. As REWahoo points out, you are really talking market timing - maybe you can win, maybe you can't, but I don't think it rises to the level of 'fact'. But when you look backwards at a stock chart, it sure seems easy to pick the right times to get in and out!

-ERD50

 

[imoldernu]

Remembering.... Between September 28, 2008, and March 3, 2009.

 

[dtbach]

I'm with haha on this one. I don't really do market timing myself, not that I don't believe in it, I just don't trust my abilities in it enough.

But to 'throw money in the market' near all time highs Sounds like a buy high, sell low disaster in the making.

-ERD50

I beg to disagree. The markets were making "all time highs" throughout the 80's and 90's. You mean you would have stopped investing in 1985 because the markets were at "all time highs". Who knows, in 10 years folks will be wondering why people didn't "throw" money in the market in 2014 since it soared over 10,000 points by 2024. I mean who would have thought in 1987 that in 12 years the market would be up 10,000 points.

The market can always make fools out of the smartest of us.

 

[timo2]

Wish I knew.
We rebalance and tend to do it more during a run up or run down, so we have
sold a lot the last few yrs.
We like to stay between 25%-35% equities and are currently at 25%

I've noticed that there is not a decent consensus on what a 'balanced portfolio' is. Probably because financial advisers often use that to differentiate themselves. For me, I've been out of balance for years, and like it like that

 

[dtbach]

I've noticed that there is not a decent consensus on what a 'balanced portfolio' is. Probably because financial advisers often use that to differentiate themselves. For me, I've been out of balance for years, and like it like that

I've been badly out of balance for decades. Probably for another decade or two. And I'm a pretty fair price ahead of a balanced account.

 

[Andre1969]

I don't know that we can say that is a fact. Some studies have shown rebalancing hurts overall returns. As REWahoo points out, you are really talking market timing - maybe you can win, maybe you can't, but I don't think it rises to the level of 'fact'. But when you look backwards at a stock chart, it sure seems easy to pick the right times to get in and out!

-ERD50

I know I've hurt myself a few times by rebalancing. For example, I sold off some Apple stock once it went over $200 per share, the second time around. I paid about $45/share for it back in early 2005, and by late 2007 it briefly broke $200/sh. And then when the Great Recession hit, it fell to around $90-100 I think. Well, once it got back up to around $200 in late 2009/early 2010, I sold some off, figuring I'd lock in that gain. Well, it kept going back up, I re-thought it, and started buying back in, but at around $250-260/share. It's around $530 now, so it's all well and good. But I would have done better to have just left it alone.

 

[Chuckanut]

I think it is very dangerous to give investment advice to others. Rather I would simply tell them what I am doing: "I'm bailing out entirely and buying CD's from PenFed", or " "I'm borrowing on the house, because I think the market can only go Up, Up, UP!!!", or "I rebalanced to keep my AA where I want it - x% stocks and y% bonds/CDs".

 

[ERD50]

Originally Posted by ERD50 View Post
I'm with haha on this one. I don't really do market timing myself, not that I don't believe in it, I just don't trust my abilities in it enough.

But to 'throw money in the market' near all time highs Sounds like a buy high, sell low disaster in the making.

-ERD50

I beg to disagree.

That's fine - no begging required I appreciate thoughtful feedback.

The markets were making "all time highs" throughout the 80's and 90's. You mean you would have stopped investing in 1985 because the markets were at "all time highs". Who knows, in 10 years folks will be wondering why people didn't "throw" money in the market in 2014 since it soared over 10,000 points by 2024. I mean who would have thought in 1987 that in 12 years the market would be up 10,000 points.

There's a big difference - I would not have been out of balance to begin with, so no, I would not be throwing money in at any point like that, as I would already have a reasonable AA. And new money would go in at that same rate (and in hindsight, I was too conservative for my current tastes back then, ~ 60/40). Your examples point out exactly why I'm really questioning the re-balancing 'mantra'. We can easily get out too early.

I find it difficult to provide useful information to someone who is outside an AA they would have chosen had they thought about it. Sure, we could look back and see this was a good time to go all in, or we could experience the opposite. So what do we do?

The market can always make fools out of the smartest of us.

Exactly. So if I were to offer anything at all to someone outside their AA at this point, it would be DCA slowly to your target AA. After the fact, we can see if they could have done better or worse, but they probably would not have done too bad. That would not have been bad advice in the 80's and 90's. Not optimal, but not bad. Lacking a crystal ball, I think it's a reasonable approach.

OK, so I guess I should soften the statement I made - instead of 'But to 'throw money in the market' near all time highs Sounds like a buy high, sell low disaster in the making.

I probably should have said 'it could well be a disaster....'

-ERD50

 

[rodi]

To clarify - the suggestion was that since the market was dipping in January (compared to December) they wanted to sell.
That's selling on the dip.

And these questions all came last week when we were see more red than green.

Yes, historically we're at highs - but the people asking weren't seeing it that way and wanted to divest entirely.

I still find it odd that 3 unrelated folks asked me if it was time to sell/get out... within a few days.

 

[splitwdw]

The market is not, contrary to what reading this board might lead you to believe, the only place to generate income. Some might be high stakes poker players. Some might buy and sell real estate. Some might make short term loans to property flippers. In those cases having a damn silly wad of cash is kind of normal.

Ohhhhhhhh love "damn silly wad of cash" that's one of my favorite things.

 

[karluk]

I still find it odd that 3 unrelated folks asked me if it was time to sell/get out... within a few days.

I don't think your experience is unusual at all, except maybe for the triple repetition in a short period of time. I have noticed similar jitters every single time there has been even the slightest dip in the stock market ever since the current rally began in March, 2009. There have been rather regular posts in this forum on the same subject throughout 2013 when I first started monitoring this board regularly, even though last year the dips were exceptionally mild compared to the huge uptrend we all enjoyed.

I think this behavior is an inevitable by-product of recency bias. Investors still haven't forgotten 2007, when all time highs were quickly followed by the biggest crash in memory. We are all generals fighting the last war, determined not to let it happen again.

Contrast the current tendency to be nervous in the face of good news with a year like 1999, when investors were in an era when every dip was quickly followed by a new all time high. The recency bias back then was to welcome the dip and respond by putting all your available cash into the latest hot internet stock.

Is today's nervousness any more justified than 1999's complacency? I certainly don't know. It all depends on how the stock market performs going forward. I'm sure of one thing, though. Letting your emotions get the best of you is a terrible way to invest.

 

[Turboslacker]

I beg to disagree. The markets were making "all time highs" throughout the 80's and 90's. You mean you would have stopped investing in 1985 because the markets were at "all time highs". Who knows, in 10 years folks will be wondering why people didn't "throw" money in the market in 2014 since it soared over 10,000 points by 2024. I mean who would have thought in 1987 that in 12 years the market would be up 10,000 points.

The market can always make fools out of the smartest of us.

I agree. This strong three year run of the Stock Market may just be the beginning of a new unprecedented Bull. Can't forecast it.

 

[Turboslacker]

I think it is very dangerous to give investment advice to others. Rather I would simply tell them what I am doing: "I'm bailing out entirely and buying CD's from PenFed", or " "I'm borrowing on the house, because I think the market can only go Up, Up, UP!!!", or "I rebalanced to keep my AA where I want it - x% stocks and y% bonds/CDs".

What the heck is the difference? You are still providing them financial information.

 

[Turboslacker]

To clarify - the suggestion was that since the market was dipping in January (compared to December) they wanted to sell.

That's selling on the dip.



And these questions all came last week when we were see more red than green.



Yes, historically we're at highs - but the people asking weren't seeing it that way and wanted to divest entirely.



I still find it odd that 3 unrelated folks asked me if it was time to sell/get out... within a few days.

I think what other people "feel" regarding the Market is absolutely a key data point to consider. Apply that with other fundamental data and technical indicators to formulate your best decision.

 

[Options]

I think what other people "feel" regarding the Market is absolutely a key data point to consider. Apply that with other fundamental data and technical indicators to formulate your best decision.

Wow, I can't think of a no more dangerous suggestion than to consider what people "feel" and regard it as a key data point. As to "fundamental data" and "technical indicators", several hundred years of investing history demonstrates repeatedly that no such thing exists.