Any change in plans with current economy?

[52andout]

So far we have done well with Asset Allocation and diversification. We put our money into our various savings, pretax and after tax through dollar cost averaging, and shifted money around as the stock market went up and down about every six months. So far so good.
My concern is the stock market is at record highs, the housing market is having problems and not only are we waging an expensive war in Iraq, there is a lot of grumbling about Iran now. Medical costs are an ongoing problem in the US. Occasionally I hear about the threat of a recession. And the stock market is very volatile if you pay any attention to the daily news.

I want to stay the course, but am having a little bit of a problem not responding to the current environment.

So my question is, has anyone changed how they do things in response to the current economy/politics/housing/healthcare etc. We have not so far, but I wonder if we'll come out the other side in good shape.

 

[W2R]

So far we have done well with Asset Allocation and diversification. We put our money into our various savings, pretax and after tax through dollar cost averaging, and shifted money around as the stock market went up and down about every six months. So far so good.
My concern is the stock market is at record highs, the housing market is having problems and not only are we waging an expensive war in Iraq, there is a lot of grumbling about Iran now. Medical costs are an ongoing problem in the US. Occasionally I hear about the threat of a recession. And the stock market is very volatile if you pay any attention to the daily news.

I want to stay the course, but am having a little bit of a problem not responding to the current environment.

So my question is, has anyone changed how they do things in response to the current economy/politics/housing/healthcare etc. We have not so far, but I wonder if we'll come out the other side in good shape.

I'm not going to change anything, personally. A few years ago I did get a little worried and reduced my equities to 60%. At that rate, I have been able to tough it out and stay the course (at least, so far).

After all, aren't the ups and downs of various segments of the market, and of the market as a whole, the reason why we diversify in our asset allocation? Market timing just doesn't work for me.

 

[LOL!]

The economy doesn't seem any different than the economies for the last 50 years. Some things to read: Looking Back, Persistence Is the Lesson - WSJ.com
For Long-Term Investors, Don't Sweat the Volatility - WSJ.com

 

[toofrugalformycat]

Twice now I've hit my target for "too much stock" according to my asset allocation (I was 5% over my target in stocks vs fixed), and it was time to sell foreign stock (they were the most out of whack). But my foreign stock is doing so well, and I have so little faith in the way this country is being run, that I haven't sold any. I may decide I want more foreign vs domestic. My stock percentage never got MORE than 5% over, though, so I haven't had to officially decide yet. Alarm bells go off in my head when I hear myself thinking "things are different now..."

 

[Helen]

I basically wrote the post you did, OP, only it was three years ago. I moved all my investments into MM and short term securities then sat on the sidelines and watched the run up. Finally last January I moved back to a 60/40 stock/bond mix.

I would have lost less money in a correction than I did by sitting on the sidelines. What made the decision even dumber is that I won't be touching the 401k or Roth for 10 years, I have a secure job and I have plenty of cash in an emergency fund.

I'm sticking to my asset allocation plan.

-helen

 

[tightasadrum]

The trouble with trying to time the market is that you have to flip a coin twice, getting out and getting back in. If my memory of my probability training is correct, and it has been a l-o-n-g time ago, the chances of getting it right is around .25, or 1-in-4. My plans are to allocate to whatever formula you subscribe to, which is another issue all by itself, and keep enough in cash/government bonds etc., to sleep at night. Then, buy on the dips if AA says to buy.

 

[maddythebeagle]

I suspect that some do fine being contrarians and things get out of whack occasionally....but these “timing the market” threads seem to be usually about folks listening to noise...There always be issues with the economy....

 

[Goonie]

I want to stay the course, but am having a little bit of a problem not responding to the current environment.

So my question is, has anyone changed how they do things in response to the current economy/politics/housing/healthcare etc. We have not so far, but I wonder if we'll come out the other side in good shape.

I haven't changed anything, because except for a moderate amount of cash stashed in a savings account and a MM account, everything else is invested for the long-haul. That being the case, I'm not overly concerned what happens today or tomorrow....the short-haul. Fluctuations happen.....that's life.

Since my primary income is from a COLA'd pension, that certainly relieves most, if not all, of the anxiety normally associated with an economic roller-coaster. However, even though I don't depend on my investments for current living expenses, I also don't like to lose any of my money. But looking at the big picture and investing for the long-haul, IMHO, lessens the chance of me losing my money. So I just continue to DCA and auto-deposit as I have for years......and chances are good that I'll keep doing so for many years to come!

 

[52andout]

Thanks for the replies. I know in my heart to stay the course, and I don't pay much attention the news or watch the Sunday AM news shows. When I do I find that I doubt what I am doing. We are already a little conservative in our asset allocation for our age, but I have to be able to sleep at night.

 

[Gearhead Jim]

Whenever I get tempted to start timing the market, I run my numbers through Advanced Firecalc and experiment with changing the allocations. To be really conservative, I'll set the success rate at 100%, so I am looking at conditions equal to the worst that have ever happened in our country. There will be a fairly broad range of aa that produce similar results for me at 100% success, ranging about from 60/40 to 40/60. So a significant equity portion is always important for me. If I look at lower success rates, say 80%, then the desired equity portion goes up even more.

 

[FIREd]

I used to think that timing the market made a lot of sense. But then almost everytime I tried I ended up losing money because I was reacting to the news rather then anticipating it. So since I don't have the ability to see the future in a crystal ball, I am now sticking to a Boglehead approach to investing. Only worry about what you can control and let the market do its thing...

 

[megacorp-firee]

I used to think that timing the market made a lot of sense. But then almost everytime I tried I ended up losing money because I was reacting to the news rather then anticipating it. So since I don't have the ability to see the future in a crystal ball, I am now sticking to a Boglehead approach to investing. Only worry about what you can control and let the market do its thing...

AMEN. I think that you have done a nice job of synopsizing this thread.
I share your experiences and have long ago abandoned my errant market timing ways. ... stick a fork in this thread .. .it's done.

 

[Helen]

I think it is harder to ignore the noise in the information age. It's so easy to access the information and bad news tends to float to the top more than good news.

A sell order can now be placed by a few strokes of the keyboard.

I think back to the days when my Father was my age. He went to the library to read annual reports or requested them by mail. He didn't have a tax sheltered account so any sale had a potential for a high capital gains tax.

 

[kcowan]

We are considering the purchase of a snowbird property while their values are depressed. Not Florida but Mexico. If we are successful, it will require changes to our asset allocation and liquidation of some equities. OTOH a prolonged stay there will reduce our cost-of-living by more than 30% creating a nice SWR buffer.

 

[RunningBum]

My concern is the stock market is at record highs

That one never bothers me too much because most price-related things are at record highs at any given point in time because of inflation. Bubbles concern me, but not normal growth.