Well-disciplined, but...

[redduck]

It appears that people who contribute to this board are well-disciplined regarding their investment strategies. But, the question is: what kind of news event might cause you to pull out 25-50% (or more) of your investment in the market? Second part: what sort of news event might cause you to add much more to the market than you had planned?

 

[d]

if we had a dramatic run-up, i'd rebalance. if we had a dramatic run-down, i'd rebalance. (actually, either wouldn't have to be very dramatic, as i tend to rebalance often, in small doses.)

 

[SecondCor521]

I put money in when I have it.

I take money out when I need it.

The news doesn't affect my investment actions at all.

2Cor521

 

[bssc]

If I saw that I won the lottery on the news, I would be adding to my portfolio but the only news that I make investment decisions on is individual company news such as a buyout or bankruptcy.

 

[wabmester]

It appears that people who contribute to this board are well-disciplined regarding their investment strategies. But, the question is: what kind of news event might cause you to pull out 25-50% (or more) of your investment in the market? Second part: what sort of news event might cause you to add much more to the market than you had planned?

Good question. (There's a similar thread at the diehard's forum.) People here often talk about buying stocks when they're "on sale."

A couple examples of historical stock "sales:"

If bond yields went up to, say, 15% (a la 1979) and corporate earnings were in the toilet, what would you do?

If the gov't was making bold socialistic moves and talking about taking over public companies for the good of the people (a la 1930's), what would you do?

I'm not sure I'd have the discipline to stay in stocks or the cojones to buy on dips.

 

[LOL!]

Let's see, stayed invested in 1987. Stayed fully invested since, including 2000, 2001, 2002.

But, how about this news item:

"FDA approves new NIH drug that makes you instantly 20 years younger, prevents cancer and heart disease, costs $500,000"

 

[rockyj]

But, the question is: what kind of news event might cause you to pull out 25-50% (or more) of your investment in the market? Second part: what sort of news event might cause you to add much more to the market than you had planned?

If you're suggesting that one could hear a news report of a catastrophe (or upcoming unfavorable market conditions) and then pull out in time avoid big losses from the resulting market response, or similarly to react to a news report of favorable market conditions in time to benefit from the subsequent runup, neither seems very realistic.
Both presuppose that you can act quickly enough to beneifit from a subsequent and predictable market reaction. By the time such things were reported, you'd be too late; the market would have reacted.

The questions also presuppose a rational market.

if we had a dramatic run-up, i'd rebalance. if we had a dramatic run-down, i'd rebalance.

Exactly. It's not so much reacting to news events in anticpation of market reaction, but rather having a plan (asset allocation) and reacting to market changes that have already occured, for whatever reason. So if the market reacts dramatically to a specific event about the same time you were poised to do some rebalancing or new accumlation anyway, there may be an immediate buying opportunity. I wouldn't keep money intended for the market out while waiting for such an opportunity, however.

I'm talking here about mutual funds, long term, and the market in general. Obvoiusly individual stocks may be a different game, one that I gave up on a while ago.

 

[redduck]

Well, let's say it's that time of year-- actually the very day-- that you had planned to put your lump-sum amount into your retirement plan...and you hear that North Korea just nuked South Korea or that the world learns the avian flu is now rampant in some part of the world. Do you hold off or do you just put your money into the market as per always?

 

[rockyj]

Well, let's say it's that time of year-- actually the very day-- that you had planned to put your lump-sum amount into your retirement plan...and you hear that North Korea just nuked South Korea or that the world learns the avian flu is now rampant in some part of the world. Do you hold off or do you just put your money into the market as per always?

If I had long term money waitng to go into the market, and the market tanks due to the nuke. Yes, I'd put it in as always and be thankful for the dip. The kind of news that might make me change my asset allocation would be the kind that would lead me to shift into weapons, canned goods and bottled water. But by the time I heard that news, Wal-mart would be out of all of all that stuff anyway.

 

[wabmester]

Well, let's say it's that time of year-- actually the very day-- that you had planned to put your lump-sum amount into your retirement plan...and you hear that North Korea just nuked South Korea or that the world learns the avian flu is now rampant in some part of the world. Do you hold off or do you just put your money into the market as per always?

I live for the kind of dramatic events that have no real lasting economic impact. The market always overreacts, and I always buy on those dips.

 

[lowflyer]

Well, let's say it's that time of year-- actually the very day-- that you had planned to put your lump-sum amount into your retirement plan...and you hear that North Korea just nuked South Korea or that the world learns the avian flu is now rampant in some part of the world. Do you hold off or do you just put your money into the market as per always?

Since 9/11, we've seen any number of these events and they will certainly take the market down. It (so far) always comes back and more. The market seems to be getting even more imune to these events, but when it goes down, if you are watching, it's a great time to jump in. Of course, this is more of a short-term trading opportunity and difficult for most "investors" to do. Look at what happened when the Cirrus aircraft rammed into the building in NY a couple months ago. The market took a quick dip and then went right back up. I'm sure traders made alot of money.

 

[brewer12345]

I live for the kind of dramatic events that have no real lasting economic impact. The market always overreacts, and I always buy on those dips.

Ditto. Plus as I get older and more experienced, I inceasingly have more confidence in my convictions.

 

[REWahoo]

Ditto. Plus as I get older and more experienced, I inceasingly have more confidence in my convictions.

Better than growing more confident you will be convicted...

 

[REWahoo]

Ditto. Plus as I get older and more experienced, I inceasingly have more confidence in my convictions.

One more point. Your above statement is the precursor to what you will become as you continue to age. Today's "courage of your convictions" is tomorrow's "obstinate old f@rt".

(Let me save you a response: Yes, I am speaking from experience. )

 

[unclemick]

Today's "courage of your convictions" is tomorrow's "obstinate old f@rt".

WITH a Curmudgeon Certificate AND you get to remember it your way.

heh heh heh heh heh heh heh heh heh heh heh heh - no coffee yet.

 

[Jarhead*]

Good question. (There's a similar thread at the diehard's forum.) People here often talk about buying stocks when they're "on sale."

A couple examples of historical stock "sales:"

If bond yields went up to, say, 15% (a la 1979) and corporate earnings were in the toilet, what would you do?

If the gov't was making bold socialistic moves and talking about taking over public companies for the good of the people (a la 1930's), what would you do?

I'm not sure I'd have the discipline to stay in stocks or the cojones to buy on dips.

Wab: I had two children and a homemaker wife in 1966.
By the time 1979 rolled around, nothing surprised me.

Stagflation produced high unemployment rates, and run-away inflation.

If you were able to hold a job and somehow keep up with inflation you were "successful". Stocks and Bonds were mostly off the radar screen
for all but the individuals that had an inheritence, or other special circumstances.

Early Retirement Boards would have been a blank page.

Hope you guys don't have to experience a period like this, because my children are about the same age bracket as most of the posters on this board (Age 40 and 37).

Meanwhile, enjoy the blessings of the the last 25 years, but be careful out there.

 

[WanderALot]

Wab: I had two children and a homemaker wife in 1966.

Hope you guys don't have to experience a period like this, because my children are about the same age bracket as most of the posters on this board (Age 40 and 37).

Hmm, If you had 2 children in 1966, wouldn't they BOTH be at least 40 by now?

 

[Jarhead*]

Hmm, If you had 2 children in 1966, wouldn't they BOTH be at least 40 by now?

My Wife reads this board occasionally when I post something. She already beat you to it. We were married in 1963, and our children came along a few years after 1966.

Give me a break, that was a long time ago.

 

[cute fuzzy bunny]

"FDA approves new NIH drug that makes you instantly 20 years younger, prevents cancer and heart disease, costs $500,000"

Wait until Costco sells it for $75,000 with a free sample on a toothpick at lunchtime.

Hey Jarhead...as the 18 year old from missoula says, you get to remember it any way you want to. As long as I get to make you feel like an old fart by pointing out that I was two when you got married and just graduating high school in '79.

And are you enjoying this minnesota-like weather we're having?

 

[WanderALot]

Hey Jarhead...as the 18 year old from missoula says, you get to remember it any way you want to. As long as I get to make you feel like an old fart by pointing out that I was two when you got married and just graduating high school in '79.

Well, I think Justin, soupxcan and CoolDude weren't even born when you were graduating high school and I wasn't even 5.

 

[cute fuzzy bunny]

Then you missed a lot of really cool ****.

 

[REWahoo]

Give me a break, that was a long time ago.

Hey folks, cut Jarhead some slack. He's used all his fingers and toes twice to compute up to 40. He's very close to running out of things to count!!

My Wife reads this board occasionally when I post something.

Uh oh...

Mrs. Jarhead, you are the object of my deepest respect and admiration. I am in awe of your ability to persevere even when faced with the daily burden you have lived with for these past 44 years. You must be a saint...or you're on some serious medication.

 

[Nords]

It appears that people who contribute to this board are well-disciplined regarding their investment strategies.

Right now we're all looking over our shoulders and trying to figure out who the heck you're talking about.

But, the question is: what kind of news event might cause you to pull out 25-50% (or more) of your investment in the market?

I can't think of one, and that's the whole idea behind rebalancing. If our asset allocation got out of whack by more than 5% (e.g., small caps rose from 25% to 31% of the
total) then we'd sell/buy to get things more in line. Maybe a big drop would cause us to sell off a bloated asset and take our time getting back into another asset, but that type of dirty market timing has been fraught with disappointment. In a sharp drop (bad news, a terrorist attack, whatever) we'd probably jump too quickly, and in a slow hemorrhage we probalby wouldn't notice the problem in time.

Second part: what sort of news event might cause you to add much more to the market than you had planned?

Hey, we can answer that one. We keep an eye on our ETFs and a few stocks we wouldn't mind owning. When the prices drop at least 10% into bargain territory then we start getting alerts from Fidelity's website and we can watch the numbers.

We bought Apple at $11/share when they had $5/share cash, we bought Disney at $17.69/share after 9/11, we bought Berkshire Hathaway several times on sale between $2050-$2200/share, and we bought a small-cap value ETF several times during the 2003-2004 recovery. Of course we sold the Apple stock at $16/share when we felt we'd made an obscene profit, and we've bought a few other stocks well before we should have. But we've learned a lot (including patience) and our trading activity has slowed considerably.

As for the rest of you guys, I'm surprised you didn't hand Jarhead a load of crap for giving birth to a fully-grown homemaker wife in 1966 at the same time he was having those two kids. That must've been a series of serious medical miracles!

 

[cute fuzzy bunny]

It appears that people who contribute to this board are well-disciplined regarding their investment strategies. But, the question is: what kind of news event might cause you to pull out 25-50% (or more) of your investment in the market? Second part: what sort of news event might cause you to add much more to the market than you had planned?

Shoot, I forgot the OP.

1 - What would cause me to pull 25-50% out of the market? A 25-50% runup over what I thought was fair value. I think we're about 10-12% overvalued right now, so i'll stick with the bull.

2 - What would cause me to add much more? A 25-50% drop under what I think is fair value.

 

[Jarhead*]

Wait until Costco sells it for $75,000 with a free sample on a toothpick at lunchtime.

Hey Jarhead...as the 18 year old from missoula says, you get to remember it any way you want to. As long as I get to make you feel like an old fart by pointing out that I was two when you got married and just graduating high school in '79.

And are you enjoying this minnesota-like weather we're having?

TH: Yep, there's a lot of eye-rolling on my wife's part when I get involved with recalling dates.

We had plenty of warning ahead of time re: the weather, but I decided to
call the course this A.M. to see if we could get out. Good conditions if you were planning on Ice Skating, but they have a hold on the frozen greens until "possibly" this afternoon. Put another log on the fire.

Anyway, I see you're back to posting again. (You're far too young to be
retired).

Take Care, Jarhead