Originally Posted by inquisitive
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?
There is nothing wrong with having cash, particularly if it is part of your allocation strategy. One reason my basic allocation is 55% stock is that I'm willing to hold up to 15% cash.
Finally, while I agree with the critique of market timing, I took gains in Fidelity Contra in 2000 (or was it 2001?) when the S&P was climbing to above 30 P/E levels. Crazy, I know. Also started harvesting gains below my stock allocation in '06 and '07. Crazy and I gave up some gains in '07 and '08, until they all got puked up.
I give my self a 5% margin + or - around 55% stocks based on P/E and other factors and the cash either gets used, slowly, or gains get harvested. If I'm wrong, I'm wrong. Generally I stay around the allocation level, although it was 80% back in 2000 and 65% in 2006.
Markettiming, but to me the issue is whether I'm likely to sell when the market crashes. Didn't do it in the early oughts or 2008-'09, although I did harvest a few gains in late '09 and '10.
I've let stock creep up to 63% in early January and was getting ready to sell about 2% to reduce to 60%, then the market did the adjusting for me.