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Old 09-30-2012, 06:56 AM   #61
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*Ahem.*

Works especially well on a military pension (COLA'd annuity).
I'm sure my objective opinion is entirely unaffected by personal circumstance. Compartmentation. Separate boxes, doncha know . . .

I'd think those without an annuity-like income stream (SS, company pension, govt pension, commercial annuity, etc) that constitutes a large part of their "must have" retirement spending amount would want a high cash allocation to allow them to weather the dips in equity prices.
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Old 09-30-2012, 07:14 AM   #62
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I'm sure
I'd think those without an annuity-like income stream (SS, company pension, govt pension, commercial annuity, etc) that constitutes a large part of their "must have" retirement spending amount would want a high cash allocation to allow them to weather the dips in equity prices.
Right. If dividend and interest income covers a very high % of total budget the need for cash might not be so extreme, but otherswise a large buffer of cash or liquid / low volatility fixed income helps.
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Old 10-03-2012, 04:04 PM   #63
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Oh, please bring on another flash crash. They don't mean anything long term and the last one was a great buying opportunity. I have a chunk of cash lined up and just waiting to go.

+ 2!
In addition, if you have a stock portfolio that has a lot of dividend-paying stocks, the dividend payout in $ is unlikely to be affected by very short-term crashes (in other words, the % yield will go up), so your dividend income will be unaffected.
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Old 10-03-2012, 04:56 PM   #64
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Do I trust the market? NEVER!

If it goes up too much, I will have to sell. And if it goes down a lot, I hope to have the courage to buy.
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Old 10-03-2012, 05:43 PM   #65
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I have never trusted the stock market and will never do.
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Old 10-03-2012, 05:44 PM   #66
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Do I trust the market? NEVER!

If it goes up too much, I will have to sell. And if it goes down a lot, I hope to have the courage to buy.
If you have a target AA and a disciplined approach to rebalancing, that is exactly what you will end up doing.
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Old 10-03-2012, 05:47 PM   #67
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I have attempted to do even more. When I thought the market was cheap, I upped my stock AA. When I thought the market was expensive, I cut back on stock AA.

Only recently that I found they had a name for it: Tactical Asset Allocation. Whatever... It's pretty hard to do though, and my records have been mixed.
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Old 10-03-2012, 05:58 PM   #68
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Works good as long as you are a good guesser. If not, then not so good.
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Old 10-04-2012, 08:07 AM   #69
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I have never trusted the stock market and will never do.
Sure, lots of people see the "market" as a lottery or roulette wheel or some magic black box, but Exxon and Microsoft and P&G etc. are real companies, selling real stuff, and paying real dividends...

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Super. I am glad that you are comforted. The more happy people around the better.

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Old 10-04-2012, 09:23 AM   #70
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I guess the question is trust the market to do what? Provide short term gains? a definite no. Provide long term appreciation? yes.
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Old 10-04-2012, 11:41 AM   #71
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Don't you fix all of these shenanigans by simply declaring that equities are intended to be a long term investment, and require a minimum 30 or 90 day holding period before you can sell them.

I haven't thought through all of the ramifications, but it seems that a simple change could eliminate all trading that isn't really beneficial for the ecosystem.
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Old 10-04-2012, 11:44 AM   #72
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The argument is that all this flash trading etc. provides "liquidity"...
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Old 10-04-2012, 12:55 PM   #73
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The argument is that all this flash trading etc. provides "liquidity"...
... which wet the pants of the faint-hearted.
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Old 10-04-2012, 01:16 PM   #74
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And as for trusting the market, where ELSE are you going to put your $$$ for the long term gains you need to beat inflation?
+1
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Old 10-04-2012, 01:41 PM   #75
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If you look at the stock market as a place to transact business, and not something which is designed to make you rich, or tell you how much you should pay for the securities that are sold there, it is probably the most trustworthy market ever known to man. Or is Ebay better? Or Craig's List, or the local livestock auction, or your local real estate market, or Sotheby's or commodities markets?

A buyer on the NYSE can be a complete ignoramus, and still get a fair deal. Who among us has sold a listed security through a licensed member broker-dealer and not been paid in a timely fashion? Who has bought a stock and not received it?

In most buying and selling, the buyer is at a large disadvantage. He knows somewhere between nothing and very little about the item being sold, even though he may have done a large amount of research on that class of items. His ability to really find out the hidden flaws/problems/title issues/ et cetera, while not zero, is limited. But a used car seller may have put Bondo on a big rust spot and painted over it with cheap paint. I know a guy who when a medical resident did this and sold the VW van to a family. There's some real karma to deal with! I have even read recently about counterfeit Chinese gold coins- some sort of metal painted with very good gold paint. Even dealers have been taken.

People who ask questions like the OP usually have in mind some solution like annuities or unlisted REITs. Well, these markets are a very long step down from US and UK stock markets, and likely Singapore, Hong Kong and Japan also.


OTOH, if you are asking the stock market to take good care of you, and see to it that you make money, that is a lot to ask.


Ha
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Old 10-04-2012, 01:51 PM   #76
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If you look at the stock market as a place to transact business, and not something which is designed to make you rich, or tell you how much you should pay for the securities that are sold there, it is probably the most trustworthy market ever known to man. Or is Ebay better? Or Craig's List, or the local livestock auction, or your local real estate market, or Sotheby's or commodities markets?

A buyer on the NYSE can be a complete ignoramus, and still get a fair deal. Who among us has sold a listed security through a licensed member broker-dealer and not been paid in a timely fashion? Who has bought a stock and not received it?

In most buying and selling, the buyer is at a large disadvantage. He knows somewhere between nothing and very little about the item being sold, even though he may have done a large amount of research on that class of items. His ability to really find out the hidden flaws/problems/title issues/ et cetera while not zero, is limited.

OTOH, if you are asking the stock market to take good care of you, and see to it that you make money, that is a lot to ask.

Ha
+1Million

Some of my friends who had been buying high/selling low complained that the market was rigged. I tried to point out that some big dogs made lots of money, yet equally big guys lost billions too. Who was rigging whom?

No matter. They didn't get it. I then tried to point out to them how MF managers complained that because of their portfolio size, they could not swoop in and scoop up what they found as a good deal. Due to the volume of their trade, the word got out on the street, and the price would move up, then they could not get the good price that they wanted.

I remember reading about the internal working at a medium-sized MF, whose manager got something like $20-50B under management, which was not really huge. He said that when he wanted to build a position in a company, it took him a month or two to nibble here and there to get all the shares he wanted. For a small investor like us, one click of the mouse and we are done.

Small investors have advantages over bigger ones too, mainly the agility, to make up for the lesser inside knowledge that we have.
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Old 10-04-2012, 02:19 PM   #77
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High Frequency Trading is just another source of volatility. At some fundamental level the values of stocks reflects the underlying value of the company who's shares they represent, but there are lots of reasons they track imperfectly. Unknown future developments, fashions in investing, cyclical economic factors, short term trading and HFT all introduce volatility and tracking imperfections. But if you are willing to be patient you can usually wait them out. Of all these HFT is the easiest to wait out, since the influence up or down is usually short lived.

Now, the two most sophisticated investors I personally know. both thought they could execute clever strategies and were essentially wiped out in flash crashes due to HFT. They each lost many millions. The many more people I know who are less sophisticated investors, who just plod along with mutual funds or stock investments and don't try to time or trade, have all barely been impacted by any HFT effects and have always quickly recovered.

If you are asking can you trust the stock market to accurately reflect the true value of securities over the short term, no. That answer has always been no, and HFT just makes it even more clear in very short time frames that it can be emphatically no. If your plan requires predictable price movements, you are going to get burned. If, on the other hand, your plan only requires general trend in your favor that money making companies are gradually worth more, then you can trust the market to do much like it's done before - be a convenient way for investors to participate in that and provide a way to diversify among many such companies.
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