elusive 5% drop

[RobbieB]

Cash is to spend, bonds are a drag.

And CD's...why bother?

 

[mrfeh]

I stopped trying to figure it out when things started popping in April of 2020. There is little rhyme or reason to the market and guessing is a fool's game. If I have excess cash, I immediately invest it, no matter what the market is doing.

Obviously, this is the correct course of action.

I am surprised at how many people here try to time the market.

 

[pb4uski]

Cash is to spend, bonds are a drag.

And CD's...why bother?

CDs are a really hard space right now. I had some 1.35% 12-mo CDs mature in May, and have some 2.25% 17-mo CDs that matured last month and the prospects for redeployment at anything over 1% is very thin.

Luckily, I have a lot of 3.0% and 3.5% 5-yr CDs that I bought in 2019 and a 3.0% 37-mo CD that I bought in 2020 that I have a few years to think about where those proceeds will go... hopefully CD rates will increase bewteen now and then.

 

[Rocky mtn high]

In 2008 I was so close to selling everything. My FA talked me off the cliff. Then another FA at a employee meeting gave a message that really rang through with me. “If tuna was 50% off my wife would fill up the trunk.” That turned out to be the low in 2008 and now I am rich. One reason I, to this day, use the same FA he saved/made me a lot of money I wouldn’t have had in my own.

 

[TheWizard]

I invest money into my taxable account once or twice monthly. I typically move the money into my settlement account and then set up a limit order for an ETF.

My stated AA for my taxable account is 95% stock funds, 5% cash.
So when new money puts me over 5% cash, I set a limit order's price "just below" the current trading price so that it might execute "soon".

Additionally, I typically have another limit order on an ETF set "well below" the current trading price.
Right now, for example, VXF closed around $187 and I have an order for it set at $178.80.
If that were to execute, then I would be 99% stocks for a while until October's new money comes into my settlement fund.

It's all good...

 

[audreyh1]

Cash is to spend, bonds are a drag.

And CD's...why bother?

+1

 

[Koolau]

Cash is to spend, bonds are a drag.

And CD's...why bother?

Right on!

When my bank sees my check book balance following an RMD, they always put the rush on me to open a CD. Practically, I'll use that RMD through the year, so a big CD wouldn't work anyway. BUT, primarily, I just won't give them the satisfaction of tying up my money for such a pittance. I'll let my money "rot" in the checking account before I'll open a CD at current rates. YMMV

 

[38Chevy454]

Time in the market beats timing the market

 

[2cheap2eat]

+1

I stopped guessing in 1993, and just stay in.

Agreed, waiting on a dip ends up costing more! I keep a little bit in cash but nowadays I just stay fully invested.

 

[RxMan]

Time in the market is much more important and effective than trying to time the market. Having said that it is difficult to find anything with a decent yield if you want to take some profits off the table.

Years ago I was a believer of I-bonds but buying into those requires honest inflation calculations. Good luck getting honest anything these days. CDs will just lose buying power over time verses inflation (I mean real inflation not we’ll take everything that’s expensive out of the equation to make things look better inflation).

I’ve never pulled out of the markets during corrections. I was tempted to go to cash in February 2020 because I feared the worst for COVID. Even if I had made that well timed cash out I most definitely wouldn’t have predicted such a quick bounce back in stocks so I would have missed out on a lot of gains anyway.

I’m doing what I always do- continue to buy and hold and hope for the best. I’m betting on overall growth going forward.

 

[eytonxav]

The thing I find amusing is the whenever there is a big drop the market timers come out of the closet and say I got out at just the right time.

 

[chassis]

SP500 is down 1% in the past recent period of time. Jump in now with your divvie money.

 

[Scratchy]

The thing I find amusing is the whenever there is a big drop the market timers come out of the closet and say I got out at just the right time.

The thing is we never hear from them when their guesses don't go well!

 

[Dtail]

The thing is we never hear from them when their guesses don't go well!

Just another not so humble brag.

 

[Andre1969]

Well, if anyone's interested, in my spreadsheet where I track my investment progress, I've kept track of notable dips in the market...at least ones that caught my interest. My spreadsheet starts at 12/31/1997, but I didn't keep a lot of data points from back then.

3/23/2000-4/13/2000: -10.6%
11/2/2000-3/16/2001: -21.6%
5/21/2001-9/21/2001: -28.4%
3/6/2002-7/22/2002: -24.3%
6/30/2004-8/9/2004: -9.3%
5/9/2006-6/14/2006: -11.0%
2/20/2007-3/5/2007: -6.7%
7/19/2007-8/16/2007: -9.7%
10/31/2007-11/21/2007-8.4%
12/31/2007-1/22/2008: -11.8%
2/27/2008-3/17/2008: -8.0%
5/16/2008-11/20/2008: -49.4%
1/6/2009-3/9/2009: -19.6%
1/11/2010-2/12/2010: -5.5%
4/23/2010-7/2/2010: -14.6%
2/17/2010-3/16/2011: -6.2%
7/7/2011-8/8/2011: -14.2%

Note: I had been pretty much charting peaks and valleys with my earlier numbers. But starting in September of 2011, I simply kept the values on the last day of the month, which smooths out the gains and losses somewhat.

5/31/2013-6/28/2013: -3.6%
5/29/2015-9/30/2015: -7.5%
11/30/2015-1/29/2016: -6.0%
9/28/2018-12/31/2018: -13.0%
4/30/2019-5/31/2019: -4.1%
1/31/2020-3/31/2020: -21.6%
8/31/2020-10/30/2020: -4.9%

Now, there have probably been a lot of dips I've missed, where there might be a quick dip but then it bounces back in a few days.

Starting in 2020, around the time COVID hit, I began a second tab in the spreadsheet, and started saving the data from a lot more dates, if I found that particular day interesting, for whatever reason. It's a lot more data to go through, and probably more than most people would be interested in, but giving it a quick glance, it looks like about the only items of note for 2021 so far are:

2/12 - 3/8: -4.2% (recovered by 4/5)
4/29 - 5/13: -4.3% (recovered by 6/24)

I didn't bother to enter any data for 9/16 or 9/17, but as of 9/15, I was only down about 1.5% from a new peak I had hit on 9/3. I know the two days after that were not kind to the market, but I don't think they were substantial enough to sink me that much further.

Anyway, I'm sure these 5% or more dips come along pretty often, probably more than my data suggests. Just be patient...they're like buses. Miss one, and another will come along soon enough (barring budget cuts, of course)

 

[chassis]

Jurrien Timmer from Fidelity (Fidelity.com, LinkedIn, Twitter) has a good insight he recycles now and then - most of the time the market is in a "correction" of one type or another.

The market goes down, then up, then down, then up again. Over the medium and long term, the market goes up. Who cares if it drops 5%?

 

[winyaz]

Maybe you should try buying at all time highs, rather than waiting for the dip;-) Here's a quick study of a strategy that buys/holds at all time highs and otherwise moves to bonds.

https://mebfaber.com/2019/11/04/is-buying-stocks-at-an-all-time-high-a-good-idea/

"I don’t think the takeaway is really that this is a system anyone would want to implement, but rather, an acknowledgement that all-time highs are nothing to be afraid of"

 

[teejayevans]

Don’t fight the Fed….we’ll get a correction when they announce tapering.

 

[aja8888]

Don’t fight the Fed….we’ll get a correction when they announce tapering.

Exactly, and also just after all the member bank FED chairs announce they have sold their personal equities.

 

[teejayevans]

Exactly, and also just after all the member bank FED chairs announce they have sold their personal equities.

We have the best government money can buy.

 

[Markola]

Shouldn’t we all love all time highs? Isn’t that why we invest?

 

[chassis]

Market open today will be bumpy. Get your buy orders ready.

 

[Dtail]

Another couple of days and the elusive 5% drop should be here.

 

[ShokWaveRider]

Cash is to spend, bonds are a drag.

And CD's...why bother?

We were able to pay off our mortgage and retire early because in the mid 90's I socked away cash in CD's that were paying ~8%.

Maybe your CD theory holds today, but if the return is ~4% - 5% it is good safe predictable money. MMDV

 

[MRG]

Another couple of days and the elusive 5% drop should be here.

Looking like it.