Worry market crush, selling 50%, but increase buying 100%

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HomerJ
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by HomerJ » Mon Oct 23, 2017 1:24 pm

WhiteMaxima wrote:
Mon Oct 23, 2017 1:11 pm
We are late economy cycle. interest is creeping up, balance book is going to shrink, CAPE is high, aging population (people will buy less when they getting older), also babyboomer is going to take the profit to finance retirement. All these factor tells that for equity market to move ahead, it has to be priced at more reasonable level.
You are market timing. Period. Which is fine. That's your choice. But own your choice. Don't pretend you are not market timing.

WhiteMaxima
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by WhiteMaxima » Mon Oct 23, 2017 1:32 pm

HomerJ wrote:
Mon Oct 23, 2017 1:24 pm
WhiteMaxima wrote:
Mon Oct 23, 2017 1:11 pm
We are late economy cycle. interest is creeping up, balance book is going to shrink, CAPE is high, aging population (people will buy less when they getting older), also babyboomer is going to take the profit to finance retirement. All these factor tells that for equity market to move ahead, it has to be priced at more reasonable level.
You are market timing. Period. Which is fine. That's your choice. But own your choice. Don't pretend you are not market timing.
We are all market timing. The AA thing is market timing. If people have infinite life, then you don't need timing. But ordinary people life span is 80, so the investment decision and whole AA is market timing. What Jack Bogle theory is market is random and sometime is inrational. People can average risk by index fund and lower then investment cost. Timing the market adjusting AA by your age and risk tolerance.

ThriftyPhD
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by ThriftyPhD » Mon Oct 23, 2017 1:48 pm

WhiteMaxima wrote:
Mon Oct 23, 2017 1:32 pm
HomerJ wrote:
Mon Oct 23, 2017 1:24 pm
WhiteMaxima wrote:
Mon Oct 23, 2017 1:11 pm
We are late economy cycle. interest is creeping up, balance book is going to shrink, CAPE is high, aging population (people will buy less when they getting older), also babyboomer is going to take the profit to finance retirement. All these factor tells that for equity market to move ahead, it has to be priced at more reasonable level.
You are market timing. Period. Which is fine. That's your choice. But own your choice. Don't pretend you are not market timing.
We are all market timing. The AA thing is market timing. If people have infinite life, then you don't need timing. But ordinary people life span is 80, so the investment decision and whole AA is market timing. What Jack Bogle theory is market is random and sometime is inrational. People can average risk by index fund and lower then investment cost. Timing the market adjusting AA by your age and risk tolerance.
Adjusting AA by age isn't market timing. Adjusting AA by PE, interest rates, news coverage, etc is market timing.

If you feel comfortable with 50/50 going forward, that's fine. If you've reached a number where you no longer need to take as much risk, good. Changing your AA based on changes in your need, willingness, or ability to take risk is fine. Many people who have a glidepath towards retirement do so because as they get closer, their need, willingness, and ability for risk decreases, and so they've planned that out not by what's happening in the market, but by their age and retirement plans. But you saying you'll jump back in to 100/0 means you think you can time the market. If you want to try and time the market, it's your money, but don't be surprised when people point out that you're timing the market.

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HomerJ
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by HomerJ » Mon Oct 23, 2017 2:26 pm

ThriftyPhD wrote:
Mon Oct 23, 2017 1:48 pm
Adjusting AA by age isn't market timing. Adjusting AA by PE, interest rates, news coverage, etc is market timing.
This.

It's real simple. If you change your AA because you think the market is going to crash soon, that is attempting to "time the market".

"Stay the course" means ignoring market and news events. It means sticking with your AA even if PE ratios are high or news coverage is proclaiming doom. It's knowing that we don't know enough to make good predictions.

Now, the market WILL crash again. It's not an "if". But no one knows when. I say always have an AA assuming the market could crash tomorrow and stay down for 5 years. Because it could.

The risk is never zero. It doesn't matter if "metrics" and "triggers" and "models" state that the chance is higher today than yesterday. Because it's never zero, and I already was prepared for market crash yesterday, so I don't have to make any changes today.

Why do you think you should change your AA today, by the way? Everything you state as a reason to go 50/50 today existed a year ago, or two years ago, or even five years ago. CAPE has been high for years. Interest rates have predicted to rise for years. Stock market has been hitting new highs for years.

What's special about today?
If you feel comfortable with 50/50 going forward, that's fine. If you've reached a number where you no longer need to take as much risk, good. Changing your AA based on changes in your need, willingness, or ability to take risk is fine. Many people who have a glidepath towards retirement do so because as they get closer, their need, willingness, and ability for risk decreases, and so they've planned that out not by what's happening in the market, but by their age and retirement plans. But you saying you'll jump back in to 100/0 means you think you can time the market. If you want to try and time the market, it's your money, but don't be surprised when people point out that you're timing the market.
Great post. Don't get me wrong, OP. I think 50/50 is a great plan. Sounds like you've been saving for a while, and your portfolio has grown tremendously the last 8 years. That's great news! I think your need to take risk has gone way down, and switching to a 50/50 portfolio is a very good move.

But understand you cannot predict the future. Don't change your AA based on what you think the market will do.

WhiteMaxima
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by WhiteMaxima » Mon Oct 23, 2017 4:02 pm

I am not saying market is going to crash soon. I just worry the valuation become too high so that reward and risk is out of balance. It might going much hight. That's good for me too. I will get 50% of the market gain. Nobody will know what's next.

WhiteMaxima
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by WhiteMaxima » Mon Oct 23, 2017 4:04 pm

WhiteMaxima wrote:
Mon Oct 23, 2017 4:02 pm
I am not saying market is going to crash soon. I just worry the valuation become too high so that reward and risk is out of balance. It might going much hight. That's good for me too. I will get 50% of the market gain. Nobody will know what's next. All the evil lay in over greed.

KlangFool
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by KlangFool » Mon Oct 23, 2017 4:05 pm

HomerJ wrote:
Mon Oct 23, 2017 2:26 pm
ThriftyPhD wrote:
Mon Oct 23, 2017 1:48 pm
Adjusting AA by age isn't market timing. Adjusting AA by PE, interest rates, news coverage, etc is market timing.
This.

It's real simple. If you change your AA because you think the market is going to crash soon, that is attempting to "time the market".

"Stay the course" means ignoring market and news events. It means sticking with your AA even if PE ratios are high or news coverage is proclaiming doom. It's knowing that we don't know enough to make good predictions.

Now, the market WILL crash again. It's not an "if". But no one knows when. I say always have an AA assuming the market could crash tomorrow and stay down for 5 years. Because it could.

The risk is never zero. It doesn't matter if "metrics" and "triggers" and "models" state that the chance is higher today than yesterday. Because it's never zero, and I already was prepared for market crash yesterday, so I don't have to make any changes today.

Why do you think you should change your AA today, by the way? Everything you state as a reason to go 50/50 today existed a year ago, or two years ago, or even five years ago. CAPE has been high for years. Interest rates have predicted to rise for years. Stock market has been hitting new highs for years.

What's special about today?
HomerJ,

+1.

OP believes that he knows something and he can predict the future. So, there is no convincing him that he know nothing.

KlangFool

WhiteMaxima
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by WhiteMaxima » Mon Oct 23, 2017 4:24 pm

KlangFool wrote:
Mon Oct 23, 2017 4:05 pm
HomerJ wrote:
Mon Oct 23, 2017 2:26 pm
ThriftyPhD wrote:
Mon Oct 23, 2017 1:48 pm
Adjusting AA by age isn't market timing. Adjusting AA by PE, interest rates, news coverage, etc is market timing.
This.

It's real simple. If you change your AA because you think the market is going to crash soon, that is attempting to "time the market".

"Stay the course" means ignoring market and news events. It means sticking with your AA even if PE ratios are high or news coverage is proclaiming doom. It's knowing that we don't know enough to make good predictions.

Now, the market WILL crash again. It's not an "if". But no one knows when. I say always have an AA assuming the market could crash tomorrow and stay down for 5 years. Because it could.

The risk is never zero. It doesn't matter if "metrics" and "triggers" and "models" state that the chance is higher today than yesterday. Because it's never zero, and I already was prepared for market crash yesterday, so I don't have to make any changes today.

Why do you think you should change your AA today, by the way? Everything you state as a reason to go 50/50 today existed a year ago, or two years ago, or even five years ago. CAPE has been high for years. Interest rates have predicted to rise for years. Stock market has been hitting new highs for years.

What's special about today?
HomerJ,

+1.

OP believes that he knows something and he can predict the future. So, there is no convincing him that he know nothing.

KlangFool
I never pretend I knew anything. But I observed people behaviors during the dot.com years and housing bubble years. Now is very similar so those time so I go neutral 50/50.

KlangFool
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by KlangFool » Mon Oct 23, 2017 4:28 pm

WhiteMaxima wrote:
Mon Oct 23, 2017 4:24 pm
KlangFool wrote:
Mon Oct 23, 2017 4:05 pm
HomerJ wrote:
Mon Oct 23, 2017 2:26 pm
ThriftyPhD wrote:
Mon Oct 23, 2017 1:48 pm
Adjusting AA by age isn't market timing. Adjusting AA by PE, interest rates, news coverage, etc is market timing.
This.

It's real simple. If you change your AA because you think the market is going to crash soon, that is attempting to "time the market".

"Stay the course" means ignoring market and news events. It means sticking with your AA even if PE ratios are high or news coverage is proclaiming doom. It's knowing that we don't know enough to make good predictions.

Now, the market WILL crash again. It's not an "if". But no one knows when. I say always have an AA assuming the market could crash tomorrow and stay down for 5 years. Because it could.

The risk is never zero. It doesn't matter if "metrics" and "triggers" and "models" state that the chance is higher today than yesterday. Because it's never zero, and I already was prepared for market crash yesterday, so I don't have to make any changes today.

Why do you think you should change your AA today, by the way? Everything you state as a reason to go 50/50 today existed a year ago, or two years ago, or even five years ago. CAPE has been high for years. Interest rates have predicted to rise for years. Stock market has been hitting new highs for years.

What's special about today?
HomerJ,

+1.

OP believes that he knows something and he can predict the future. So, there is no convincing him that he know nothing.

KlangFool
I never pretend I knew anything. But I observed people behaviors during the dot.com years and housing bubble years. Now is very similar so those time so I go neutral 50/50.
WhiteMaxima,

<< But I observed people behaviors during the dot.com years and housing bubble years. Now is very similar so those time so I go neutral 50/50.>>

1) This is market timing. You change your AA based on the external factor.

2) You assume those people behaviors will affect the market. Aka, you can predict the market direction.

KlangFool

WhiteMaxima
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by WhiteMaxima » Mon Oct 23, 2017 6:29 pm

Sure you all read the Arabian Night Alibaba and Kassim brother stories. Alibaba found the treasure, took just enough home. Under pressure from his brother, Ali Baba is forced to reveal the secret of the cave. Kassim goes to the cave, taking a donkey with him to take as much treasure as possible. He enters the cave with the magic words. But in his greed and excitement over the treasure, he forgets the words to get out again. The thieves find him there and kill him. The rest is another story.....

JBTX
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by JBTX » Mon Oct 23, 2017 7:28 pm

There are different forms of "market timing".

What I do, and some others here may, is occasionally and modestly adjust my asset allocation if valuations are high by historic measure. By doing so I am assessing there is relatively greater risk in the market, and I am hedging a bit. But I am not predicting if and when there will be a crash. I tend to think there will be a major correction in the coming years, but I don't know when, and I don't know that for certain.

If you drop your asset allocation of what you own, but increase your allocation of what you are buying, that means you are predicting a significant downturn SOON, Technically within a month, because if you thought the market was going to crash sometime greater than 1 month, but within the next year, then why would you be buying stocks at what you believe to be inflated prices when you feel confident there will be a crash soon?

Seems like if you really were certain there is a crash coming soon, you'd lower your purchase allocation too, and wait for the crash before increasing it.

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Re: Worry market crush, selling 50%, but increase buying 100%

Post by pkcrafter » Mon Oct 23, 2017 7:42 pm

Well, WhiteMaxima, you are correct, the market is going to go down. Then it will go back up again. When will you return to 80/20?

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

VaR
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by VaR » Mon Oct 23, 2017 9:59 pm

JBTX wrote:
Mon Oct 23, 2017 7:28 pm
There are different forms of "market timing".

What I do, and some others here may, is occasionally and modestly adjust my asset allocation if valuations are high by historic measure. By doing so I am assessing there is relatively greater risk in the market, and I am hedging a bit. But I am not predicting if and when there will be a crash. I tend to think there will be a major correction in the coming years, but I don't know when, and I don't know that for certain.
Are you saying that you practice a form of mild market timing? :)

OP, are you looking for affirmation by coming here? It's going to be tough at the moment because you're arguing both a course of action that is against the best practice espoused by this forum and you're dictating a definition of market timing that is contrary to what this forum has historically used.

JBTX
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by JBTX » Mon Oct 23, 2017 10:38 pm

VaR wrote:
Mon Oct 23, 2017 9:59 pm
JBTX wrote:
Mon Oct 23, 2017 7:28 pm
There are different forms of "market timing".

What I do, and some others here may, is occasionally and modestly adjust my asset allocation if valuations are high by historic measure. By doing so I am assessing there is relatively greater risk in the market, and I am hedging a bit. But I am not predicting if and when there will be a crash. I tend to think there will be a major correction in the coming years, but I don't know when, and I don't know that for certain.
Are you saying that you practice a form of mild market timing? :)

OP, are you looking for affirmation by coming here? It's going to be tough at the moment because you're arguing both a course of action that is against the best practice espoused by this forum and you're dictating a definition of market timing that is contrary to what this forum has historically used.
Absolutely, that was my point. However, I fully understand I don't have any special knowledge, and odds are it probably won't really help. And effectively it is very modest - I'm at 60% stocks at 54 which is well within generally accepted asset allocations.

Often what I will do is a take a fairly small slice of my portfolio, and then take the risk down, say go from a total stock market fund to a 60/40 fund. The net result is pretty insignificant to the fund, and for the most part it just serves as a rebalance and normal AA adjustment as you age. So my motivation is a bit of market timing, but it almost effectively isn't.

The approach allows me to think I am proactively doing something, but for looking at the net result it effectively is not market timing.

victw
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by victw » Mon Oct 23, 2017 11:15 pm

Wow - I just realized this thread has been going since Friday - and I keep reading "crash" in the title. Not crush.

smitcat
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by smitcat » Tue Oct 24, 2017 11:42 am

WhiteMaxima wrote:
Mon Oct 23, 2017 6:29 pm
Sure you all read the Arabian Night Alibaba and Kassim brother stories. Alibaba found the treasure, took just enough home. Under pressure from his brother, Ali Baba is forced to reveal the secret of the cave. Kassim goes to the cave, taking a donkey with him to take as much treasure as possible. He enters the cave with the magic words. But in his greed and excitement over the treasure, he forgets the words to get out again. The thieves find him there and kill him. The rest is another story.....

Yes - perhaps one of the first bogle stories as well.
It is too bad that neither brother just saved each year and lived below their means. Planning on receiving any type of 'treasure' whether that be gold, inheritance or a killing by playing the market if often fraught with a very low % of success and may lead to an early death.
Perhaps don't look for treasure - determine the AA that is right for you and resist the low percentage chances that you can game the entire system better than anyone else.

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TheTimeLord
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by TheTimeLord » Sat Oct 28, 2017 8:04 am

ThriftyPhD wrote:
Mon Oct 23, 2017 12:17 pm
TheTimeLord wrote:
Sat Oct 21, 2017 7:22 pm
WhiteMaxima wrote:
Fri Oct 20, 2017 1:15 pm
I did some AA this month, move AA to 50/50. However, I did 401k purchase allocation to 100% into equity. US/Intl 50/50. Yes, I am more comfortable. I will capture 50% of market gain but limit 50% loss. In case of crash, I will be all in again. This year is good for me. I am up 18.8%.
Apparently one man's market timing is another man's risk management. Sounds like you are realizing you don't need to be taking the same level of risk you have in the past due to the growth of your portfolio.

He went from a AA of 100/0 to 50/50, but plans on buying only equities going forward until his AA is 80/20
, or if there is a crash he will be 'all in' (switch back to 100/0?). This isn't a matter of reaching a number where the need for risk is lower, and therefore a planned adjustment to a less aggressive AA. The OP is changing his AA and making purchase decisions based on assumptions of near-future changes in market prices and short term speculation. Hence, market timing.
Actually depends imo on how he plans to work from 50/50 to 80/20. There are people who once they have enough feel based on historical returns that the best use for excess contributions is 100% equities which gives them a rising glide path. I have made similar decisions in my portfolio by setting aside enough in Fixed Income to cover my expenses from this point to FRA where SS and a small pension will kick in. I did this for what you might consider short term speculation by I consider long term planning, protecting against a crash. That is I place a much higher value the years between now and FRA than the years after plus I will be more protected against volatility once SS and the pension kick in so I have chosen to protect these pre-FRA years from sequence of return risk by my shift into Fixed Income assets. Since I am still working I am using new contributions to increase my equity exposure rather than maintaining my current AA or taking a traditional declining guide path approach. It seems to me like people often mistake risk management for market timing when looking at people who have enough because they themselves are trying to maximize returns or are tied to abstracted percentages for evaluating their portfolios instead of the actual dollar amounts from which those percentages derive. But that is my own personal bias.
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ThriftyPhD
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by ThriftyPhD » Mon Oct 30, 2017 10:26 am

TheTimeLord wrote:
Sat Oct 28, 2017 8:04 am
ThriftyPhD wrote:
Mon Oct 23, 2017 12:17 pm
TheTimeLord wrote:
Sat Oct 21, 2017 7:22 pm
WhiteMaxima wrote:
Fri Oct 20, 2017 1:15 pm
I did some AA this month, move AA to 50/50. However, I did 401k purchase allocation to 100% into equity. US/Intl 50/50. Yes, I am more comfortable. I will capture 50% of market gain but limit 50% loss. In case of crash, I will be all in again. This year is good for me. I am up 18.8%.
Apparently one man's market timing is another man's risk management. Sounds like you are realizing you don't need to be taking the same level of risk you have in the past due to the growth of your portfolio.

He went from a AA of 100/0 to 50/50, but plans on buying only equities going forward until his AA is 80/20
, or if there is a crash he will be 'all in' (switch back to 100/0?). This isn't a matter of reaching a number where the need for risk is lower, and therefore a planned adjustment to a less aggressive AA. The OP is changing his AA and making purchase decisions based on assumptions of near-future changes in market prices and short term speculation. Hence, market timing.
Actually depends imo on how he plans to work from 50/50 to 80/20. There are people who once they have enough feel based on historical returns that the best use for excess contributions is 100% equities which gives them a rising glide path. I have made similar decisions in my portfolio by setting aside enough in Fixed Income to cover my expenses from this point to FRA where SS and a small pension will kick in. I did this for what you might consider short term speculation by I consider long term planning, protecting against a crash. That is I place a much higher value the years between now and FRA than the years after plus I will be more protected against volatility once SS and the pension kick in so I have chosen to protect these pre-FRA years from sequence of return risk by my shift into Fixed Income assets. Since I am still working I am using new contributions to increase my equity exposure rather than maintaining my current AA or taking a traditional declining guide path approach. It seems to me like people often mistake risk management for market timing when looking at people who have enough because they themselves are trying to maximize returns or are tied to abstracted percentages for evaluating their portfolios instead of the actual dollar amounts from which those percentages derive. But that is my own personal bias.
You're describing a different situation than the OP. I completely agree that if you have 'enough', changes to AA may make sense. For example, if you have enough in fixed income to get you to SS/pension, which will then cover your needs, putting everything else in equities is not a bad option. You really don't NEED anything more in fixed income, so any future contributions or growth can go into equities for gravy spending or inheritance. Since by definition you have enough in fixed/SS/pension to cover any necessary spending, you will never need to sell stocks during a low market and therefore can have 100% of the rest of your portfolio in equities.

But see that is based on your portfolio balance. The OP is changing his AA not because he hit a certain portfolio balance, but because he thinks the market is overpriced. That is what makes it market timing. The OP's changes to AA are based on market prices, not on his age or portfolio balance.

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oldcomputerguy
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Re: Worry market crush, selling 50%, but increase buying 100%

Post by oldcomputerguy » Mon Oct 30, 2017 12:00 pm

WhiteMaxima wrote:
Fri Oct 20, 2017 3:45 pm
I was 100% until last couple of month. I was 100% during 2008 because I have no time to escape then. This time I am leaving the theater earlier. Don't want to wait for exit.

By definition, this is indeed market timing, literally. There’s absolutely no other way to read the words “no time to escape”, “leaving the theater earlier”, “wait for exit”. What on earth leads you to believe that this is not market timing?
Anybody know why there's a 20-pound frozen turkey up in the light grid?

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Re: Worry market crush, selling 50%, but increase buying 100%

Post by Hyperborea » Mon Oct 30, 2017 12:07 pm

oldcomputerguy wrote:
Mon Oct 30, 2017 12:00 pm
What on earth leads you to believe that this is not market timing?
Cognitive dissonance. If you call it something else and persuade yourself that it is something else then you can fool yourself into believing that you're not one of those bad market timers.

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