S&P down about 3.5% so far, time to buy yet?

[dirtbiker]

Every part of me knows there has to be a market correction coming. I wouldn't be surprised at all to see a major longterm sell-off. And part of me wants to sell some equities and stay cash-heavy right now... But then again, I try to listen to greats like Warren Buffett that warn against timing the markets. In the end, what I'll probably do is to just stay with my current investments and keep my recurring contributions cash for the time being and then invest when it feels right.

 

[ERD50]

Every part of me knows there has to be a market correction coming. I wouldn't be surprised at all to see a major longterm sell-off. And part of me wants to sell some equities and stay cash-heavy right now... But then again, I try to listen to greats like Warren Buffett that warn against timing the markets. In the end, what I'll probably do is to just stay with my current investments and keep my recurring contributions cash for the time being and then invest when it feels right.

There's a few experienced investors on this forum that have been saying that for years (I can't recall just how many years, must be at least 3?), quoting the CAPE 10 or other stats. And claiming that it was time to take some money off the table.

They could have been right, the signs were there, but the market can hold on longer than we think reasonable. I'm OK with just hanging in there, and not tripping my self up by overthinking it.

A crash will come. Most likely will go too.

-ERD50

 

[Dtail]

There's a few experienced investors on this forum that have been saying that for years (I can't recall just how many years, must be at least 3?), quoting the CAPE 10 or other stats. And claiming that it was time to take some money off the table.

They could have been right, the signs were there, but the market can hold on longer than we think reasonable. I'm OK with just hanging in there, and not tripping my self up by overthinking it.

A crash will come. Most likely will go too.

-ERD50

Indeed.
Hasn't the Cape 10 stats indicate the market has been overvalued since 2009?

 

[dirtbiker]

There's a few experienced investors on this forum that have been saying that for years (I can't recall just how many years, must be at least 3?), quoting the CAPE 10 or other stats. And claiming that it was time to take some money off the table.

They could have been right, the signs were there, but the market can hold on longer than we think reasonable. I'm OK with just hanging in there, and not tripping my self up by overthinking it.

A crash will come. Most likely will go too.

-ERD50

And I keep reminding myself of that as well, that lots of talking heads have been talking about the coming stock market crash that hasn't happened. If I had sold my investments and stayed in cash, I would have a lot of money left on the table, which is why I don't time the market... Well kind of, but only by keeping my newly contributed money in cash until the right buying opportunity pops up.

 

[copyright1997reloaded]

And I keep reminding myself of that as well, that lots of talking heads have been talking about the coming stock market crash that hasn't happened. If I had sold my investments and stayed in cash, I would have a lot of money left on the table, which is why I don't time the market... Well kind of, but only by keeping my newly contributed money in cash until the right buying opportunity pops up.

One approach is to give in, but just by a little bit.

These are not all or none decisions. When I am buying (or selling), I typically do it a bit at a time.

In 2006 I was selling more than buying, a little at a time. When the SHTF in 2008, I was still hurt, but not as much as I would have been had I not taken some chips off the table.

In early 2009 bought (some), and also in 2010, 2011, etc. Could I have made more money by going all in during 1Q 2009. Sure. But my ability to predict the future is impaired.

That's why it is important to know your comfort zone in terms of asset allocations and to trim when things start to get out of wack, or when your life circumstances change. To see this in the extreme....I've cut back on my asset allocation while at the same time investing more in equities in my child's account! Why? Because I am on the down slope but he (at 16) has a (hopefully) long long run ahead...and because of that needs to stay invested.

 

[ERD50]

One approach is to give in, but just by a little bit.

These are not all or none decisions. When I am buying (or selling), I typically do it a bit at a time.

In 2006 I was selling more than buying, a little at a time. When the SHTF in 2008, I was still hurt, but not as much as I would have been had I not taken some chips off the table. ...

This sounds reasonable on the surface, but when I think a bit deeper, I really can't agree with it.

Over the course of decades of investing, we can either count on market timing working, or not. If we accept the data we see, and say it is unlikely to work, then why devote a % of our portfolio to the idea? I can't make sense of it. If it doesn't work with all your portfolio, it won't work with 10% of your portfolio either. Is my thinking off-base?

I'm not 100% equities, but that's because in an extended downturn, the fixed gives you a buffer in a downturn, so you are extremely unlikely to ever need to sell equities when they are down. If I only looked at performance, I'd go with 100% equities (and I have no arguement if someone consciously makes that choice).

And I think this is a bit different from someone who decides to put a small % of their portfolio on a stock they think may go to the moon, but won't go all in, to protect against a big loss. They are just feeding a gambling desire, and that's also fine if it keeps them from doing something crazy, or they get some entertainment value from it.


-ERD50

 

[copyright1997reloaded]

This sounds reasonable on the surface, but when I think a bit deeper, I really can't agree with it.

Over the course of decades of investing, we can either count on market timing working, or not. If we accept the data we see, and say it is unlikely to work, then why devote a % of our portfolio to the idea? I can't make sense of it. If it doesn't work with all your portfolio, it won't work with 10% of your portfolio either. Is my thinking off-base?

I'm not 100% equities, but that's because in an extended downturn, the fixed gives you a buffer in a downturn, so you are extremely unlikely to ever need to sell equities when they are down. If I only looked at performance, I'd go with 100% equities (and I have no arguement if someone consciously makes that choice).

And I think this is a bit different from someone who decides to put a small % of their portfolio on a stock they think may go to the moon, but won't go all in, to protect against a big loss. They are just feeding a gambling desire, and that's also fine if it keeps them from doing something crazy, or they get some entertainment value from it.


-ERD50

It is market timing, but also hedges the bet. Imagine you are a card counter playing single or double deck blackjack. The deck is fairly positive - do you bet all of your capital knowing the odds are in your favor? For the best expected value, the answer is yes. However, you could still lose that next bet, wiping out your capital.

I don't know when/where the market top is, nor the market bottom. In late 2006 and into 2007, I felt market conditions were deteriorating...even though I was hitting new lifetime highs...so I took some chips off the table. But I also recognized that I could be WRONG, so wanted to have some capital still in the game.

To each their own. That's what I like about being an individual investor, running MY money (as compared to OPM). I make my decisions and live with them.

 

[ERD50]

... To each their own. That's what I like about being an individual investor, running MY money (as compared to OPM). I make my decisions and live with them.

Agreed. However, I still feel your analogy/reasoning is flawed, so let me try to explain that.

It is market timing, but also hedges the bet. Imagine you are a card counter playing single or double deck blackjack. The deck is fairly positive - do you bet all of your capital knowing the odds are in your favor? For the best expected value, the answer is yes. However, you could still lose that next bet, wiping out your capital. ...

Exactly. However, where your analogy falls apart is that we know a good card counter actually does have a statistical advantage. And what you say is correct, that advantage applies on average, so it isn't reasonable to bet it all on a single opportunity.

But we don't know that market timing provides an advantage, even on average over several opportunities. And there really aren't that many opportunities in a lifetime, maybe roughly one cycle every 5 years or so?

With market timing, you lose some gains on the way up, sometimes a lot. And then when do you get back in? You might miss it entirely.

So no, I don't think there is any rationale to making a partial bet on market timing. If you believe it works on average, then I can see why you might choose to make a partial bet. I don't see any evidence to back that up though.


As a side note, James the Jeopardy champ did make large bets, often betting it all. But his success rates were around 97%, and he had a few dozen opportunities. And I think he also got a little more conservative as the game went on, which he could afford to do by gaining a big advantage early. He really knew what he was doing, I'm a little surprised other top notch players had not done more of that. But you need that high success rate.


-ERD50