Difference of opinion

[palomalou]

My spouse and I are having a disagreement--never a good thing (but neither blows or harsh words are exchanged). I have believed that buy and hold is the best strategy. We have some going from my check every month into various retirement vehicles (some tax-deferred, some taxable--not really retirement vehicles, except they are for us). Then when ever we accumulate a good amount in our bank account we will put 25K or so into one of them.
Spouse is interested in "sell high, buy low". This to me reeks of market timing and terrifies me.
SOme viewpoints to inform our research? Thanks!

 

[F4mandolin]

Both ideas can be right.

 

[nash031]

Her theory is correct.

Now, go execute both for 25 years and see who comes out on top. (Hint: you'll win.)

Ideas are meaningless unless they're executable.

 

[Katsmeow]

Of course, it would be nice to sell high, buy low. I would absolutely go for that over buy and hold....except for the fact that no one actually announces when it is the "high" versus when it is the "low." I would also point out that many people have a psychological difficulty with buying low. That is, if equities have, say, gone down 40% many people just can't quite manage to go buy then. And, of course, the problem is that they may have decided that down 20% is the low and bought then....

I will say, that the act of rebalancing will to some extent achieve what your DH wants. I rebalance when off 5% either direction so I've rebalanced a few times this year which had the effect of selling my equities which were high-ish and buying bonds that were low-ish.

 

[MichaelB]

Doesn't matter what we think, 'cause we all have our own beds to sleep in. You (plural) need to find the option that lets both sleep comfortably, together.

 

[LOL!]

Yep, it's Buy, Hold, and Rebalance. Many people forget about the Rebalance which basically forces one to sell high and buy low (or at least less high).

So get an asset allocation plan going, so that you know when things are high and when things are low. Simple example: You want 60% equities and 40% fixed income. You invest that way. Then you keep track, so if your investments end up at 65% equities and 35% bonds, you sell 5% of equities to buy bonds. If you end up at 55% equities and 45% bonds, then you sell 5% of bonds and buy equities.

Now the trick is to follow this faithfully. Many people cannot seem to buy equities when they are dropping or tanking, but that is exactly what Buy, Hold, and Rebalance requires.

 

[audreyh1]

Yep, it's Buy, Hold, and Rebalance. Many people forget about the Rebalance which basically forces one to sell high and buy low (or at least less high).

So get an asset allocation plan going, so that you know when things are high and when things are low. Simple example: You want 60% equities and 40% fixed income. You invest that way. Then you keep track, so if your investments end up at 65% equities and 35% bonds, you sell 5% of equities to buy bonds. If you end up at 55% equities and 45% bonds, then you sell 5% of bonds and buy equities.

Now the trick is to follow this faithfully. Many people cannot seem to buy equities when they are dropping or tanking, but that is exactly what Buy, Hold, and Rebalance requires.

+1

 

[donheff]

You can run the experiment by managing your own portfolios.

 

[sunnysideup]

You can run the experiment by managing your own portfolios.

Gee, my DH and I have done that over the years and his trying to time the market has not been as successful and my buy and hold. I agree that both strategies can work but in our reality the timing thing doesn't seem to work nearly as well!! I think there's too much emotion involved in making the decisions that way.

To the OP: I can't change my DH. You can't change your spouse. I recommend having separate accounts to improve your odds!

 

[pb4uski]

My spouse and I are having a disagreement--never a good thing (but neither blows or harsh words are exchanged). I have believed that buy and hold is the best strategy. We have some going from my check every month into various retirement vehicles (some tax-deferred, some taxable--not really retirement vehicles, except they are for us). Then when ever we accumulate a good amount in our bank account we will put 25K or so into one of them.
Spouse is interested in "sell high, buy low". This to me reeks of market timing and terrifies me.
SOme viewpoints to inform our research? Thanks!

Yep, it's Buy, Hold, and Rebalance. Many people forget about the Rebalance which basically forces one to sell high and buy low (or at least less high).....

Now the trick is to follow this faithfully. Many people cannot seem to buy equities when they are dropping or tanking, but that is exactly what Buy, Hold, and Rebalance requires.

+1 IMO you are both right! So now kiss and make up - and buy, hold and rebalance! Rebalancing to a target AA prods you to sell high and buy low and is a disciplined form of market timing.

 

[Amethyst]

Mr. A. absolutely insisted that we buy LU at $60.00.

When I finally got up the courage to take the loss (I think LU was selling for ~$4.00) I got stuck with the cost-basis calculations, since I'm "better at math."

(No, I did not decide to buy more LU simply because it was low).

Since then, there has been no pressure on me to buy any particular equities whatsoever.

Amethyst

 

[galeno]

We are buy and hold investors. We rebalance anytime FI vs stocks get out of whack by 5% or more.

That said, whenever there is a major market drop, I will over-rebalance equities and then throttle back over the next several years.

Normally we sail our boat at 60/40. After the 2008 crash, I over-rebalanced our port to 70/30. We throttled back to 65/35 in 2012 and will most likely throttle back to 60/40 in 2014.

 

[NW-Bound]

... That said, whenever there is a major market drop, I will over-rebalance equities and then throttle back over the next several years...

You're the man! I tried to do that in 2009, but it was tough. Of course when I normally run 70-75% in equities, over-rebalance becomes way too risky if the timing is wrong.

I did unload some in late 2008 to have some cash to buy back so that helped. But then, there was talk of a W-shaped recovery so I sold too soon.

Market timing is tough, else there would be a lot more centimillionaires or decamillionaires.

 

[galeno]

@NW. I feel for you. Before 2006, our port was 80/20. For the 1987 and 2000 crashes I rebalanced back to 80/20.

In 2009 I wanted to over-rebalance to 80/20 but the wife was freaking out. So we settled on 70/30.

 

[Animorph]

I'd go for each managing your own account. Buy high and sell low as a general strategy is too much work. I do it opportunistically, like 2008/2009, but not with small market peaks or drops. I'm lucky when I hit within 10% of a peak or trough.

 

[W2R]

Palomalou, my investing philosophies are more aligned with yours than with your spouse's.

Maybe you could each take half and invest it as you wish -- then there would be no reason to argue about it.

 

[robnplunder]

One more vote for no on marketing timing. If DW must, she can convince you to re-balance your portfolio to maintain specified equity ratio. I.e, move certain amount as profit taking once in a while. With all the finance things (many have been stupid) I've done, the smartest thing I ever did was to keep a set of equity mutual fund for over 10 years. They returned the most through dot.com crash, and 2008 recession.

 

[jIMOh]

Difference of opinion
My spouse and I are having a disagreement--never a good thing (but neither blows or harsh words are exchanged). I have believed that buy and hold is the best strategy. We have some going from my check every month into various retirement vehicles (some tax-deferred, some taxable--not really retirement vehicles, except they are for us). Then when ever we accumulate a good amount in our bank account we will put 25K or so into one of them.
Spouse is interested in "sell high, buy low". This to me reeks of market timing and terrifies me.
SOme viewpoints to inform our research? Thanks!

I think you are both correct- the concepts are not mutually exclusive, the issue is the process at which you make decisions is different.
Your process sounds like typical DCA, and her process sounds like look for opportunity to hopefully buy low.

I might suggest working both into one strategy. For example if the $25k in savings takes 2 years to accumulate, plan to rebalance every 2 years and use this lump sum as part of that transaction. If your investments each month are $500 (so a $6k annual contribution), possibly make the one time contribution when the savings equals your annual contribution (so every $6000 instead of every $25,000).

Doesn't matter what we think, 'cause we all have our own beds to sleep in. You (plural) need to find the option that lets both sleep comfortably, together.

That made me laugh, thank you

 

[NW-Bound]

@NW. I feel for you. Before 2006, our port was 80/20. For the 1987 and 2000 crashes I rebalanced back to 80/20.

In 2009 I wanted to over-rebalance to 80/20 but the wife was freaking out. So we settled on 70/30.

Looking back, I could have made out a lot better if I did not sell some equities too early after buying low at the market bottom. I did not do too bad as I recovered my 2007 high by the end of 2010.

But having the audacity to buy when people around you are running scared like headless chicken is not as easy as one thinks.

 

[pb4uski]

Looking back, I could have made out a lot better if I did not sell some equities too early after buying low at the market bottom. I did not do too bad as I recovered my 2007 high by the end of 2010.

But having the audacity to buy when people around you are running scared like headless chicken is not as easy as one thinks.

+1 When stocks tanked, my AA was screaming at me to rebalance by selling bonds and buying stocks, but I couldn't get up the courage to do so - so I just hung in there. Better than many others I knew who bailed and never got back in for the rally but not near as good as where I would be today if I had "listened" to my AA.

 

[Dawg52]

+1 When stocks tanked, my AA was screaming at me to rebalance by selling bonds and buying stocks, but I couldn't get up the courage to do so - so I just hung in there. Better than many others I knew who bailed and never got back in for the rally but not near as good as where I would be today if I had "listened" to my AA.

True. I was doing good to just hang on with all the talk about another great depression. Took a lot of good meds to do it.

As far as taking some chips off the table when the stock market is at an all time, I see nothing wrong with that. Just call it rebalancing and all is good. But to cash completely out would be painful even if I wanted to. Painful from the tax stand point. Plus most of my stocks spit out dividends which is a component of my home brewed annuity.

 

[NW-Bound]

Cashing all out at what one thinks is a market top is just as bad as going "all in" when one thinks is a market bottom.

One only makes a 100% bet when one is 100% sure (Kelly Criterion again). And since when does one know anything with such certainty?

 

[audreyh1]

Just keeping my fingers crossed that we get a nice Santa Claus rally - or at least stay up here, into early Jan so I can do a withdrawal and rebalance with things still "happy".

That is like "taking some off the table". Especially when you are pulling a set % out of your portfolio each year. You want to take out your "raise" before you get a pay cut which would happen with a market selloff during the next year.