Not a market timer but!!??

[longranger]

I have never purposely timed the market in anticipation of major market swings. That strategy has served me well. With FIRE on the near horizon and a growing number of "experts" predicting an major and sustained correction I am questioning the wisdom. what do you all think??

 

[diehard1997]

IMHO there are always "experts" predicting market movements in one way or another. Look at bond prices since 2010 when all the "experts" said they had nowhere to go but down. I keep my AA within an appropriate range and the rest of the time be just plain lazy.


Sent from my iPhone using Early Retirement Forum

 

[calmloki]

After selling everything at a super low a few years ago, waiting out the run up in the market, and then buying back in early this year just in time to make bupkis - I'd say the odds of a major and sustained correction are pretty good.

 

[longranger]

Yeah we can always find "an expert" or two predicting a crash or a major ally on any given day. A small majority of the prognostications I have read over the last 6 months are pretty gloomy. It was much easier to take those with a grain of salt when RE was a long ways off.

 

[Sunset]

When working I always wanted a long and deep drop in the market so I could get everything on sale.

Now I'd prefer it to always rise a bit, but I'll keep some cash or bonds so that if there is a deep drop, I can buy groceries or re-allocate.

That's the plan.....

 

[Senator]

The market wil go up, down, or sideways. If you pull out, you are likely to be 33% correct.

Over the long term, the S&P will be the best investment out there. Of course, it may be different this time...

 

[travelover]

Unless the expert if filthy rich and long retired, they have no credibility, by default.


Sent from my iPad using Early Retirement Forum

 

[panacea]

I think you should choose an asset allocation that makes sense for your time horizon and ignore the "experts."

 

[REWahoo]

. With FIRE on the near horizon and a growing number of "experts" predicting an major and sustained correction I am questioning the wisdom. what do you all think??

I think you need to question the wisdom of the "experts". This link shows they are lousy at accurately predicting the market so what makes you think they are right this time?

Stock Market Guru Grades - CXO Advisory

 

[longranger]

My current AA is pretty average for someone approaching 60 at 55/45 equities to bonds. After doing well by trusting AA for the past 30 years or so one would think I would feel more secure staying this way indefinitely. Even though my numbers are reasonably well padded the thought of a major sustained downturn after the paychecks from w*rk stop coming gives me the cold sweats. Didn't understand this feeling completely until very recently even though I have heard it expressed in many other threads.

 

[easysurfer]

Now when is the low again? I want to mark my calendar in preparation?

 

[rayinpenn]

I guess by now you've read/heard that managed funds don't beat the market 95% of the time. Aren't they run by those same experts? I just get too tired trying yo time the market.

Your thinking too much- so if you get out will a bell gong when it is time to get in? I've yet to hear one.


Sent from my iPad using Early Retirement Forum.

 

[Walt34]

If you haven't read it, read this book.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Eleventh Edition): Burton G. Malkiel: 9780393352245: Amazon.com: Books

 

[W2R]

My current AA is pretty average for someone approaching 60 at 55/45 equities to bonds. After doing well by trusting AA for the past 30 years or so one would think I would feel more secure staying this way indefinitely. Even though my numbers are reasonably well padded the thought of a major sustained downturn after the paychecks from w*rk stop coming gives me the cold sweats. Didn't understand this feeling completely until very recently even though I have heard it expressed in many other threads.

Wanting to permanently change your asset allocation to something more conservative as one nears retirement, is not like market timing really. Maybe you need a more conservative AA in order to not get cold sweats when thinking of a market turndown. Some here have 50/50, and then some really chicken-hearted members like me settle on 45/55 (equities/fixed) in retirement.

A 2-5 year cash buffer can be calming during a market turndown as well, although these are not so popular right now due to relatively low interest rates.

 

[longranger]

Thanks for all of the perspectives.There is so much experience and wisdom shared on this forum. I appreciate it more and more over time. Hopefully my perspectives will help others down the line as I learn and experience more.

 

[karen1972]

I don't consider myself a market timer but I also always have an exit strategy. I did move to all cash during the 2008 downturn because my 15% trigger I put in place was hit. The 10-12% pullbacks are not panic mode, they are just ways to buy some cheap stock... Its the 15+% pullback that one needs to keep an eye on and take action on in my opinion... however, you need to have gotten to the 15% pullback before one should ever really take action on it in my opinion... else its just basic pullback and stay the status quo... but that means you need to be ok with losing 15% as else your just playing a game that I don't think can be won... ie I don't expect to know the top or bottom, but I know when we are too far from the top or bottom to be comfortable.

 

[REWahoo]

...I know when we are too far from the top or bottom...

How? Are you willing to share the metric you use to measure this?

 

[Midpack]

I don't consider myself a market timer but I also always have an exit strategy. I did move to all cash during the 2008 downturn because my 15% trigger I put in place was hit. The 10-12% pullbacks are not panic mode, they are just ways to buy some cheap stock... Its the 15+% pullback that one needs to keep an eye on and take action on in my opinion... however, you need to have gotten to the 15% pullback before one should ever really take action on it in my opinion... else its just basic pullback and stay the status quo... but that means you need to be ok with losing 15% as else your just playing a game that I don't think can be won... ie I don't expect to know the top or bottom, but I know when we are too far from the top or bottom to be comfortable.

Great, how do you know exactly when/how to buy back in? I stayed in throughout the meltdown and just kept DCA'ing new $ in and reached new portfolio highs in a few years, but I assume you did better.

Ever back tested your IP?

 

[unclemick]

1966 - 2006. Hit some pullbacks, missed more than few. Read a lot of books. Watched Mr Market a lot.

Luckily always had some in balanced index funds which after 40 yrs turned out to be the big dog on the porch.

2006 went pretty much full auto - Vanguard Target Retirement.

heh heh heh - ok ok male hormones and all - have few good stocks(less than 2%) and would like Michigan State to upset Alabama and Carolina the Pats BUT it's is just football. Right?

After 22 years of ER trying to chill a little.

 

[NW-Bound]

... Some here have 50/50, and then some really chicken-hearted members like me settle on 45/55 (equities/fixed) in retirement...

Does it make that much difference?

From Oct 2007 to Mar 2009, the S&P dropped more than 55% (down to 45 cents on the dollar), while BND (VG total bond index) was roughly flat. A 50/50 portfolio would be down to 72.5 cents on the dollar, while the 45/55 portfolio was 75.3 cents.

 

[steelyman]

Advocates of market timing will always attract a flock of winged monkeys. That's what they want.

 

[rayinpenn]

Does it make that much difference?

From Oct 2007 to Mar 2009, the S&P dropped more than 55% (down to 45 cents on the dollar), while BND (VG total bond index) was roughly flat. A 50/50 portfolio would be down to 72.5 cents on the dollar, while the 45/55 portfolio was 75.3 cents.

If we look at one of the worse corrections of all time it is bound to be scary.

What is the likelihood that you'd exit the market on time and get back in before the run up?
Is your retirement income limited to a portfolio that doesn't have dividends and interest?
Did they stop SS and pensions during that time?

Dow October 2007 1500
Dow today. 2100
Diff 600 or 40% gain in 9 years

Of course that's just based on price but, what about those dividends? Did you know dividends make up roughly 42 % of market returns. Now for a dividend centric guy like me it is probably 60%... My steady Eddies paid them just fine thank you. People still used electric and talked on the phone (probably calling me complaining about the market). Not as exciting as genetic engineering mind you but wonderful in their consistent dividends.

The total return s&p
2008 -36%
2009 +25%
2010 +15%
2011 + 2%
2012 +16%
2013. +32%
2014 +13%

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

I remember a phone call back then I received from a recently retired colleague in a panic over the market. Despite my suggestion to stay the course She undoubtably sold everything post dip. I don't keep my head in the sand but I don't pretend know when the next credit crisis will occur.
My plan is too live on my SS and portfolio income. The buying opportunity of the credit crisis made it possible.

The geometric average (calculates impact of big losses on capital better then a simple average) for the s&p total returns is roughly 7.5% for the last ten years. I think that's amazing given 2008. What it says also is if portfolio valuation is your concern AA is critical but if income and Long Term sustainability of same it appears equities and the market are better.

Sent from my iPad using Early Retirement Forum.

 

[papadad111]

Good link above with data.

I recall seeing it was approx 6 -7 percent per year nominal including dividends or around 4 percent real return after subtracting for inflation

Fairly close ?

 

[rayinpenn]

Good link above with data.

I recall seeing it was approx 6 -7 percent per year nominal including dividends or around 4 percent real return after subtracting for inflation

Fairly close ?

Spot on.


Sent from my iPad using Early Retirement Forum.

 

[NW-Bound]

My point was that if one is scared of market volatility, a 5% tweak in AA does not do much even when the market drops as much as it did in 2008. A much larger change in AA is needed, such as 20-30%.

By the way, a $10K invested in VG S&P Index fund on Oct 2007, a market top, grows to $16K now with reinvested dividends, 8 years later. That indeed works out to 6.0%/yr over that period. Inflation runs 13.8% cumulative over that time, or 1.6%/yr, leaving one with 4.4% real return.