Timing reentry (reposted to the correct forum)

[EvrClrx311]

I know market timing isn't popular here, but I think this might be a good place to get some sound advice on getting cash back into equities with the markets as red as they are. The collective knowledge and experience here is incredibly rich...

In general I don't believe in timing markets (but I did this time). I'm young enough (40) that I figured I'd give it a shot when I saw how outrageous PE numbers were last fall. I pulled my 401k (about half a million) out of the markets last August through Nov in 4 chucks, I'm currently sitting 100% in cash for that account, ignoring all the articles screaming that cash is burning right now from inflation... I've been waiting for re-entry lower. We're much lower now, almost 20%). My average exit price from the markets was with SPY at 437, and today we're coming up on testing new lows, and the economy looks to be headed even further south. Anyone's guess, right?

I am just old enough to have experienced two major downturns (the 2000 and 2008) and from that experience I know that markets tend to get to the point where everyone things "this time it's different, everything is going to stay down or go lower forever"... it doesn't seem like we've seen that yet.

I'm not trying to time a bottom, I'm not wanting to be greedy. As you can see above I have a baked in opinion we're headed lower (a lot lower)... my main question is, what kind of signs do you look for in a recession/bear market for good entries?

 

[Taco]

Anyone's guess, right?

Exactly right - we can guess, but none of us really knows what is coming. Very important to remember that.

While not very likely, you have to consider the possibility that today is the new all time low. What would you do then? Would you ever get back into the market, or would you be 100% cash forever? If you think about that scenario, it might encourage you to start acting now, rather than wait - hoping for an ever lower re-entry.

A few ideas on how to re-enter (and I'm assuming your goal is to get back to 100% in SPY)...

1. Put it all back in SPY now. You got out at 437. You put it back in at 365, call it a win, and move on. You may not have timed the ultimate bottom, but it is still a big win.

2. Ease back in. Say 10% of your cash is $50K. Buy $50K today and continue to do so every month. In 9 months, you'll be back to 100%. You are guaranteed to get back to 100% - it may or may not be better than option #1.

3. If you *really, really* believe we are going lower... Put the $50K back in today, and do another $50K each time SPY drops another X points. You can decide on X - perhaps every 2% further drop. This might get you back to fully invested - but you run the risk of the market heading back up sooner than you expected.

 

[Sojourner]

How about this for a re-entry plan: Set an alert that will notify you when SPY hits $350 (which is 20% below your $437 exit point), then hop back in all the way. If SPY doesn't drop to $350 within X number of days (you decide what X is, based on your tolerance/patience), then go ahead and jump back in fully anyway. Don't let the perfect be the enemy of the good, so they say.

 

[milford]

I know market timing isn't popular here, but I think this might be a good place to get some sound advice on getting cash back into equities with the markets as red as they are. The collective knowledge and experience here is incredibly rich...

In general I don't believe in timing markets (but I did this time). I'm young enough (40) that I figured I'd give it a shot when I saw how outrageous PE numbers were last fall. I pulled my 401k (about half a million) out of the markets last August through Nov in 4 chucks, I'm currently sitting 100% in cash for that account, ignoring all the articles screaming that cash is burning right now from inflation... I've been waiting for re-entry lower. We're much lower now, almost 20%). My average exit price from the markets was with SPY at 437, and today we're coming up on testing new lows, and the economy looks to be headed even further south. Anyone's guess, right?

I am just old enough to have experienced two major downturns (the 2000 and 2008) and from that experience I know that markets tend to get to the point where everyone things "this time it's different, everything is going to stay down or go lower forever"... it doesn't seem like we've seen that yet.

I'm not trying to time a bottom, I'm not wanting to be greedy. As you can see above I have a baked in opinion we're headed lower (a lot lower)... my main question is, what kind of signs do you look for in a recession/bear market for good entries?

If you weren't greedy you would have bought back in already, ps we don't judge

I did something similar as you although not as bold I'm sitting on about 50% cash and started buying already. I'm not trying to perfectly time the market so I buy at intervals of dips between 5-10% depending on the volatility of the security.

My main sign is the Fed... as long as they are hawkish and inflation is still going strong I see the market dropping... to me the Fed has basically taken over the market single handedly, everything else is just noise, I learned from the pandemic never fight the fed.

 

[razztazz]

A pretty good, time-tested general purpose indicator if you don't want to do the DCA along the way approach, is when the S&P gets 1-2% above the 40 week moving average. That's a pretty good "GO" signal.

 

[Closet_Gamer]

Great job getting out...now for the hard part.

Door 1: DCA back into the market having avoid a big drop

Door 2: Get that lucky rabbit's foot back out and try to time the bottom.

Door 3: You might consider using options. LEAP calls. Cash covered puts. Perhaps some combination along with some buying back into the market.

(Note that I'm a buy and hold index person, so I'm not doing the above, but have dabbled in options and find this stuff interesting.)

 

[NW-Bound]

Any time I sell, then buy back at a lower price, I call it a success. It's not possible to get out at the top, then get back at the absolute bottom.

History has shown that over time, buy-and-holders win.

If my trades get me a bit ahead of buy-and-holders, I am happy.

If my trades put me behind do-nothing guys, I have lost.

And of course, I am talking about the overall market, not individual stocks. Many individual stocks go bankrupt. Buy-and-hold does not work with these.

 

[FiveDriver]

What caused the Market to come down ? Rising Interest Rates. Don't fight the FED at this time. Paul Volcker raised rates in 1981, there was a brief Recession in 1982. Then the Market took off on a 5 year Bull Run. The Interest Rate percentages are starting at a lower point now, but the general scenario appears to be similar enough.

You've avoided a major loss as of right now. Don't be in any hurry to jump back in. You don't need to be back in for the first dollar increase. I am waiting for an obvious change in the trend.

There will probably be some turmoil in the Market up to the Mid-Term Elections, maybe lasting until we see the make up of the new Congress.

 

[MichealKnight]

late reply

Just wanted to say - congratulations. Instead of "averaging!" and "tax loss!"......you protected your hard earned money. And as a result - you now have more money to save or spend or invest, than you would've had.

I only sold 30% of my stocks. So glad to see the losses I've not participated ill Of course, 20/20 hindsight I wish I had sold more.

 

[Major Tom]

And of course, I am talking about the overall market, not individual stocks. Many individual stocks go bankrupt. Buy-and-hold does not work with these.

Absolutely. In my opinion, this is an example of how some folk trip up when taking "common wisdom" based on generalities to heart, without understanding the context. For instance, if investing in the stock market as whole - or a fair representation of it, long-term buying and holding is a winning strategy. Some folk seem to apply this piece of "wisdom" to individual stocks, thinking/hoping that if they hold a particular stock for long enough, it will come bouncing back. Anyone who has owned more than a few stocks over a period of time know from hard experience that some stocks can stay down for a very, very long time. Some never come back.

In that sense, it's not that different from other pieces of "common wisdom" such as -

Owning real estate is always good
Renting is throwing your money down the drain
You'll lose your shirt if you invest in real estate
You'll lose your shirt if you invest in stocks

And so on. We could think of many others. Such generalities can be very appealing to those without any knowledge of a subject - and very dangerous too.