FOMO is hitting the streets...

[moneymaker]

I’m super bullish for a few reasons: more money into the economy than 2008 and another stimulus on the way, lowest interest rates in history, just had a “recession” from mar to whenever but now have new highs, vaccine rolling out, and corporate profits are breaking records, and trading/investing is easier than ever with zero trading fees in most firms...

However, I fear this can only go on so long, maybe up to 24 months, and then it could end badly or be rough for a long time for future generations.

My question is what do you smart folks use as a measure to either scale back investments, get out all together based on any quantifiable data or statistics, do you all just have a set allocation and not worry about that type of stuff?

I’ve made a lot this year and have taken some risks but nothing that would have changed retirement plans but the risks have def enhanced my retirement plans, so I am one of those guys that thinks taking some of your portfolio and going after true high growth stocks is worth the reward.

Thanks!!!

 

[SALTedOut]

Been invested for 30+ years and never scaled back (or scaled up for that matter). I've stayed fully invested except for short term cash needs or mid term (1-2 years) such as known car purchase. Also any money that was for home down payments did not get invested back in those days.

IMO, trying to decide when to scale back and then when to scale back up is wasted energy and likely to be wrong.

"I fear this can only go on so long, maybe up to 24 months, and then it could end badly or be rough for a long time for future generations."

People have been guessing that for the past 6-8 years. One day they will be right.

 

[tulak]

Yep, can’t time the market. You might be able to do something around PE, but that’s a crapshoot. Best to stay invested and ride out the market swings.

 

[NW-Bound]

Market timing is indeed very hard. Bail out too early, and you lose out.

I would watch the growth stocks, particularly the ones with high P/E, and particularly the ones with no E, not even any sales because they still don't yet have any products. Those guys would topple first. Then, it will spread like dominoes falling.

I can still remember the 2000 market as yesterday. Also, the housing bubble of 2008. The 2000 market rout eventually spread from the dot-coms to other legitimate tech stocks, and then to old-fashioned brick-and-mortar businesses too. In 2008, the culprit banks with phony mortgages fell first, then it spread everywhere.

This time, it's the EV and the renewable energy sectors that are the hottest. I will be watching them, even though I have no money there. Let's not forget bit coins either.

 

[njhowie]

... and corporate profits are breaking records, ...

Not quite. Maybe certain sectors, but not overall.

S&P 500 earnings for 2020 is expected to come in between $135 and $140, which is down about 15% from 2019.

 

[G8tr]

Market timing is indeed hard, but strategic investment is not timing the market. It's looking at undervalued sectors when other sectors appear overvalued. Now, one doesn't know when those undervalued sectors will reach fair value or overvalue, but the point is to target potential growth at some reasonable point in the future.

 

[moneymaker]

Market timing is indeed very hard. Bail out too early, and you lose out.

I would watch the growth stocks, particularly the ones with high P/E, and particularly the ones with no E, not even any sales because they still don't yet have any products. Those guys would topple first. Then, it will spread like dominoes falling.

I can still remember the 2000 market as yesterday. Also, the housing bubble of 2008. The 2000 market rout eventually spread from the dot-coms to other legitimate tech stocks, and then to old-fashioned brick-and-mortar businesses too. In 2008, the culprit banks with phony mortgages fell first, then it spread everywhere.

This time, it's the EV and the renewable energy sectors that are the hottest. I will be watching them, even though I have no money there. Let's not forget bit coins either.

Great insight and I appreciate it very much.

EV and 5G or those that support are def hot sectors. I’m invested with both and have made a lot of money but was curious as to how do you know or what triggers are there that make someone get out.

You def gave me some things to think about. Thx

 

[Exchme]

If you are super bullish, what's the problem if others agree with you? You might try making an Investment Policy Statement for yourself (see Bogleheads.org) and document for your future self what your goals, plans, contingencies, desired asset allocation, etc. should be. If you find your fears are threatening to have you make a rash decision, then you have learned that you should have a lower equity allocation, so adjust but make sure you can stick to it when stocks are up and when they are down.

Remember your portfolio is like a bar of soap, the more you handle it, the smaller it gets.

 

[NW-Bound]

I forgot to say that in the 2000 rout, I did not have any money in the dot-coms, but was way overweigh in tech stocks. They made me mucho money, which I gave back quite a bit later. In the 2008 market, I had none of the high-flyer banking stocks who were paying dividend galore, but I was overweigh in material stocks.

Both cases, I thought I was not at the epicenter, so would be safe. Wrong! I lost mucho money in my tech stocks in 2002-2003, because I hung onto them for too long.

In the 2008 market, I did better by bailing out of even "innocent stocks" to raise cash to be ready to buy back in. I did a lot better in 2009 than in 2003, at the respective market bottoms.

I am hoping that I will do better next time. I should see at least another market cycle before I croak. I want to see if I can practice what I say I will do.

 

[Markola]

“The stock market climbs a wall of worry.”

I’ve been investing for about 27 years and it has ALWAYS felt like we’re possibly in another blind 1928 or that it will forever be 1932. Worry comes with the territory and, for Bogleheads like me, hard-earned experiences, read “mistakes”, have taught that the best thing to do is simply learn what asset allocation allows one to sleep at night (50/50 for me) and then leave it alone and ride it all out. In hindsight, those terrifying stock drops, which NO ONE predicts, nevertheless, seem like blips. In those times, I’m so grateful for my bonds and home equity, which typically become the lead portfolio draft horses.

 

[DrRoy]

My question is what do you smart folks use as a measure to either scale back investments, get out all together based on any quantifiable data or statistics, do you all just have a set allocation and not worry about that type of stuff?

I absolutely avoid any attempt to time the market. Last year is the best example I can think of. If I had taken any action in response to the March market or Covid in general, it would have been to back out of the market, and I would have lost out on considerable gains.

It is my personal policy though, to gradually reduce my equity AA as my NW rises. I have reduced it from 63% to 57% over the last 4 years.

 

[Ronstar]

I tried to time the market in 2000. I got out at the right time. But missed part of a run-up before I got back in. Missed out on about $100k. I'll never try to time the market again.

That said, I may lessen my exposure to equities at some point. I'm 52/39/9 and had a WR around 2.4 before I started ss. I feel that I can make my portfolio more safe by reducing equities and still keep AA low even though I won't be generating as much income.

Preservation of portfolio is becoming more important than generating more income from it.

 

[athena53]

It is my personal policy though, to gradually reduce my equity AA as my NW rises. I have reduced it from 63% to 57% over the last 4 years.

I'm also doing that as I get older. I was about 70% equities a year ago but have put more into fixed income and now I'm at about 65%. I'm almost 68 so even that's a bit aggressive, but I have all I need for 2021 in cash.

The only thing I do to chase hot sectors is a professionally-managed "sector rotation" of ETFs. Typically every 6 months or so they decide to get out of a couple and substitute a couple of others. I finally got around to doing an IRR calculation by individual investment and the sector rotations ended 2020 with an IRR of 29%.

Other than that, I periodically weed out under-performers and stay the course when things get bad. I just put in a request to transfer a chunk of BRK.B to my donor-advised fund; giant capital gain, of course, which won't be taxed this way, and Berkshire isn't preforming very well.

 

[target2019]

I’m super bullish for a few reasons: more money into the economy than 2008 and another stimulus on the way, lowest interest rates in history, just had a “recession” from mar to whenever but now have new highs, vaccine rolling out, and corporate profits are breaking records, and trading/investing is easier than ever with zero trading fees in most firms...

However, I fear this can only go on so long, maybe up to 24 months, and then it could end badly or be rough for a long time for future generations.

My question is what do you smart folks use as a measure to either scale back investments, get out all together based on any quantifiable data or statistics, do you all just have a set allocation and not worry about that type of stuff?

I’ve made a lot this year and have taken some risks but nothing that would have changed retirement plans but the risks have def enhanced my retirement plans, so I am one of those guys that thinks taking some of your portfolio and going after true high growth stocks is worth the reward.

Thanks!!!

I'm not really smart, just following Bogleheads-type guidance.

What we did is establish an asset allocation (AA) percentage target for retirement, say 50% equity. Since I was 10 years out from the magical event of retirement, each year we subtracted one or two from the initial allocation (about 65%) and I measured the difference between actual and target each month. Re-balancing usually occured in January, but we did have stricter bands in some accounts, and I made additional infrequent adjustments in those accounts.

You are correct that the future may be worse, but that is what AA is all about. The idea is that you're protected to a greater degree by the ballast (bonds and cash) allocation when SHTF.

 

[Fermion]

With several things hitting levels I thought crazy (Tesla soon will be worth more than all other auto companies combined if they are not there already! and bitcoin $40,000?) I am now wondering if maybe gold might go to $10,000 or $20,000 an ounce like some predict.

It seems like everything is on the table these days...

 

[dunkelblau]

Market timing is indeed very hard. Bail out too early, and you lose out.

I would watch the growth stocks, particularly the ones with high P/E, and particularly the ones with no E, not even any sales because they still don't yet have any products. Those guys would topple first. Then, it will spread like dominoes falling.

I can still remember the 2000 market as yesterday. Also, the housing bubble of 2008. The 2000 market rout eventually spread from the dot-coms to other legitimate tech stocks, and then to old-fashioned brick-and-mortar businesses too. In 2008, the culprit banks with phony mortgages fell first, then it spread everywhere.

This time, it's the EV and the renewable energy sectors that are the hottest. I will be watching them, even though I have no money there. Let's not forget bit coins either.

My only winning stock sale in 2020 was PLUG about a month ago at $26, 70% of which I bought in 2013 at $0.15 (cuz I like falling knives). That price surge early last month seemed too good to pass up so I didn't. As I should have expected that was nothing compared to the past few days. Talk me out of buying $1000 calls.

I still hold on to a lot of dead shares accumulated over decades, and it's amazing how many of them appear to be coming back to life now. It's not just the alternative energy names that have been doubling every few weeks. I feel like I'm at the edge of the harbor wondering where did all the water go?

 

[NW-Bound]

My only winning stock sale in 2020 was PLUG about a month ago at $26, 70% of which I bought in 2013 at $0.15 (cuz I like falling knives). That price surge early last month seemed too good to pass up so I didn't. As I should have expected that was nothing compared to the past few days. Talk me out of buying $1000 calls.

I still hold on to a lot of dead shares accumulated over decades, and it's amazing how many of them appear to be coming back to life now. It's not just the alternative energy names that have been doubling every few weeks. I feel like I'm at the edge of the harbor wondering where did all the water go?

PLUG jumps 10% today to $52 at this moment. Market cap of $21 billion on annual sales of $230 million, and a loss of $85 million. Nice!

Does it not feel like the late 90s all over again? These companies make much more money by selling their stocks than by selling their products. But I guess that's still more real than "making" bits to sell, i.e. bit coins.

 

[HawaiiShrimp]

Been invested for 30+ years and never scaled back (or scaled up for that matter). I've stayed fully invested except for short term cash needs or mid term (1-2 years) such as known car purchase. Also any money that was for home down payments did not get invested back in those days.

IMO, trying to decide when to scale back and then when to scale back up is wasted energy and likely to be wrong.

"I fear this can only go on so long, maybe up to 24 months, and then it could end badly or be rough for a long time for future generations."

People have been guessing that for the past 6-8 years. One day they will be right.

This is a wise approach. I am doing the same.

 

[deserat]

No FOMO for me. I keep to my AA nowadays.

As I get closer to actually retiring and after using the different calculators for retirement projections, I've come to the realization that it would take a much more significant chunk of change in my accounts or a *drastic* equities performance hit to cause a lifestyle change for me. The VPW exercise has been interesting for me as it calculates a suggested withdrawal amount of your portfolio based on portfolio amount, your age, pension amounts and AA. It also calculates that withdrawal with a 50% drop in your equities. I am amazed at how much I could withdraw even with a big portfolio hit.

I calculated my expenses this year and last....quite low and could be lower in retirement even with renting and/or hit to portfolio with buying house with cash.

Moral of story for me: the items I had control over had more weight in my current financial position than missing any run up in market. Those items of control: initially my college major allowing me to have a profession that pays well (engineering), staying in military through Reserves, keeping my consumption and desired consumption below my means, finding frugal alternatives for material goods/experience, saving a certain percentage of my income over a long period, investing in low cost stock vehicles (mutual funds and index funds), minimizing debt through lower interest rates and shorter debt loan time-frames.

 

[RunningBum]

I'm sticking with my AA. If I was to market time, I'd be inclined to sell, not buy, as I see an overpriced market. But I haven't spent much time looking at that since I have no plans to take action.

 

[jollystomper]

My question is what do you smart folks use as a measure to either scale back investments, get out all together based on any quantifiable data or statistics, do you all just have a set allocation and not worry about that type of stuff?

Having been invested since 1984, I have learned to be patient and, as others have said, have an AA that lets me sleep at night. My AA changes based on my situation and not the market. During my working years when I needed growth and had the income to risk it, my AA peaked at 85% stocks. In retirement I am at 35% stocks. I do not need big gains anymore, and that is the level of risk I desire to take at this stage, through whatever the market chooses to do.

AA should be considered not just in terms of stock allocation, but also how much money is actually at risk. It is one thing to say "I have 80% of my AA in stocks". It is another to say "a 50% downturn in the market with my AA means I will have a (paper) loss of $500,000". Many seem blindsided by the latter view when the market does go down.

 

[OldShooter]

... My question is what do you smart folks use as a measure to either scale back investments, get out all together based on any quantifiable data or statistics, do you all just have a set allocation and not worry about that type of stuff?

I don't claim "smart," but I do claim "smart enough" to study and take advice from true experts. Maybe a half-dozen Nobel Prize winners and a similar number of wise old bears. WRT to market timing the consensus, unanimous actually, is that it is impossible. More than you want to read is here: Taylor Larimore's market timing quotes https://www.bogleheads.org/wiki/Taylor_Larimore's_market_timing_quotes

I tell my Adult-Ed investing class that Rip Van Winkle would have made a good investor. Another interesting data point mentioned by a poster here is that a Fidelity study of mutual fund owners' performance found that accounts of dead people as achieving the best results. IOW no trading.

... I am one of those guys that thinks taking some of your portfolio and going after true high growth stocks is worth the reward.

That is an excellent strategy as long as you adhere faithfully to Will Rogers' advice: " Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."

Seriously, there is no way to identify "true high growth" stocks prospectively rather than retrospectively. Also, there is serious risk that any popular growth stocks will be overpriced. Indeed, the definition of a growth stock is that its price is not based on its historical financial performance. Picking winning sectors ahead of time is essentially impossible. Fama (Nobel) and French thought they had it nailed with their "three factor model," identifying value and small cap as factors with a slight tendency to win. The last decade has raised a lot of questions about their model but nevertheless there is now a hucksters' horse race to design "factor" funds. Five or ten years from now will tell the tale on whether any of these are winners, but at least a half century of research has consistently shown that stock picking is a losing strategy no matter how it is done. For example, Michael Jensen's (Nobel) 1967 paper: "The evidence on mutual fund performance indicates not only that these 115 mutual funds were on average not able to predict security prices well enough to outperform a buy-the-market-and-hold policy, but also that there is very little evidence that any individual fund was able to do significantly better than that which we expected from mere random chance." (S&P has been publishing the same conclusion semiannually for a couple of decades based on a sample of many thousands of funds.)

... Remember your portfolio is like a bar of soap, the more you handle it, the smaller it gets.

I like it! I have been saying that the more I play with my food the less I seem to have, but your aphorism is better.

 

[dunkelblau]

PLUG jumps 10% today to $52 at this moment. Market cap of $21 billion on annual sales of $230 million, and a loss of $85 million. Nice!

Does it not feel like the late 90s all over again? These companies make much more money by selling their stocks than by selling their products. But I guess that's still more real than "making" bits to sell, i.e. bit coins.

Yeah, gonna PRTY like it's 1999, but have to hold onto it for another three months so wish me luck.

Now definitely feels late 1990s to me-- the spread of Covid-19 rhymed with the 1997-1998 financial crises in Asia and Russia, and afterwards I recall how lots of penny stocks started to hockey stick. I remember buying shares in one of these back in late 98 and was happy to sell it for a triple in November 1999. Visited parents for Thanksgiving and glanced at the stock price table in the local newspaper -- sucker rose another tenfold in the space of just a week. Anyway when guys like me are telling war stories it's probably time to brace for impact.