Pile up cash, or stay the course

[Zaphod]

I am a reformed market timer and it took into my late 30s and an expensive mistake to realize that I'm not as smart as I thought I was. Putting most of my money into AAPL since college when I saw the ipod everywhere gave me some pretty solid returns and some overconfidence. I thought I saw COVID coming and sold most of my pre tax accounts. I missed most of the drop and had an amazing opportunity to buy back in but didn't, figuring that the real COVID wave over winter 2020 would be brutal. Medically speaking it was, but the market pushed higher and I was really bummed, checking the news all the time and perseverating on the mistake. I ended up 2020 at around -5% and got back in to index funds. I'm never doing that again. Don't be me.

Good news, at least I learned and was all invested since Christmas or so, and am up 14% or so year to date and still on track for an early retirement. I'm also super glad that my fear of capital gains taxes kept me from selling in the taxable account.

You def need rules to get back in. It will always appear to be getting worse or yet to come. If you havent studied bear markets you absolutely must if you even want to try a hand at that kind of thing. Most secular/cyclical bears are over long before even the worst of the economic news, this is a normal feature. The market will be recovering in anticipation. You should also be paying attention to policy announcements as they can have an overwhelming effect on the markets forward guidance.

The fed policies (huge and instantaneous) coupled with the fast and massive fiscal set a back drop where you had to be invested lest you miss it, it was literally more money than ever in the system, it has to go somewhere. Believe me, i felt similarly to you and did not catch the full upswing, but I think that was more to do with how fast my account was growing and newfound loss anxiety building up.

Anyways most bear markets stop around low -20%s, some hit -30%s, very rarely do they go further. Therefore the only logical position is that if it hits -20% you have to start finding actionable reasons to not be in the market but probably should start deploying, at -30%+ you need to ignore everything and start pushing your chips in, levered if you can. Its just almost a guarantee that you will have outsized returns at this point. Put it in, lock the key and move on. Worst case you go down a bit more, but you still missed 20-30% and caught a good level, the "best days" stuff will come to your aid in volatility clustering.

If you check the forum you'll see I was also out, but also got back in, it turned out to be the exact bottom of the market, which was simply luck, the market had gone down enough, closed shorts and got in. Dont over think it.

[auggie1983]

Time diversification is the only market timing I feel is really needed. Market drops, future contributions make a higher % of value, lever up. Market rises, future contributions matter less, lever down.

[Tim]

You def need rules to get back in. It will always appear to be getting worse or yet to come. If you havent studied bear markets you absolutely must if you even want to try a hand at that kind of thing. Most secular/cyclical bears are over long before even the worst of the economic news, this is a normal feature. The market will be recovering in anticipation. You should also be paying attention to policy announcements as they can have an overwhelming effect on the markets forward guidance.

The fed policies (huge and instantaneous) coupled with the fast and massive fiscal set a back drop where you had to be invested lest you miss it, it was literally more money than ever in the system, it has to go somewhere. Believe me, i felt similarly to you and did not catch the full upswing, but I think that was more to do with how fast my account was growing and newfound loss anxiety building up.

Anyways most bear markets stop around low -20%s, some hit -30%s, very rarely do they go further. Therefore the only logical position is that if it hits -20% you have to start finding actionable reasons to not be in the market but probably should start deploying, at -30%+ you need to ignore everything and start pushing your chips in, levered if you can. Its just almost a guarantee that you will have outsized returns at this point. Put it in, lock the key and move on. Worst case you go down a bit more, but you still missed 20-30% and caught a good level, the "best days" stuff will come to your aid in volatility clustering.

If you check the forum you'll see I was also out, but also got back in, it turned out to be the exact bottom of the market, which was simply luck, the market had gone down enough, closed shorts and got in. Dont over think it.

Healthcare
Economic
Market
Politics

Yes the Fed immediate all in was a huge positive for the market. However, any of the others could have turned the rebound into a deadcat bounce. Don’t think anyone saw vaccines and the effectiveness. Not political, I only saw one person boldly predicting it. What would be happening without the vaccines? Interesting screenplay.

[Zaphod]

Healthcare
Economic
Market
Politics

Yes the Fed immediate all in was a huge positive for the market. However, any of the others could have turned the rebound into a deadcat bounce. Don’t think anyone saw vaccines and the effectiveness. Not political, I only saw one person boldly predicting it. What would be happening without the vaccines? Interesting screenplay.

right but that is all assessable in real time, you knew by late fall vaccines would be a shocking super success, and in summer they already looked very promising. I was longer term on the idea of a vax initially but you just update your priors with the new info. Most people never change their minds thats the issue.

[StateOfMyHead]

That is a valid idea, but I can not let anyone else be responsible for my capital allocation decisions. The responsibility is mine alone, so I'll just learn and adapt. I think it was Seneca who said It takes the whole of life to learn how to live.

I also prefer to make my own mistakes and hopefully learn from them. I find it curious that so many seem rather smug about the money they have made in the market over the past year. You haven't really made any money until you sell, right? So there is still time for those who were more conservative. In fact while I'm all for continuing to DCA there is no way I'd throw a chunk of cash into the current market. Despite it "being different this time" ha, I can't shake the feeling that things are inflated and will not be able to sustain current levels without a significant correction on the horizon.

[Zaphod]

I also prefer to make my own mistakes and hopefully learn from them. I find it curious that so many seem rather smug about the money they have made in the market over the past year. You haven't really made any money until you sell, right? So there is still time for those who were more conservative. In fact while I'm all for continuing to DCA there is no way I'd throw a chunk of cash into the current market. Despite it "being different this time" ha, I can't shake the feeling that things are inflated and will not be able to sustain current levels without a significant correction on the horizon.

The point is that these kinds of things are actually behavioral issues, and they invariably fail to take advantage and find reasons they shouldnt invest even when these opportunities present themselves.

Has nothing to do with timing the market, rather the opposite, just leave the money in and do nothing. Its better than almost any other plan out there, almost all the time.

I agree about the feeling in this current market, however I also know that while sometimes its right, its usually wrong or not something thats capitalized on and you're still better off with that money in the market.

Unless you have a framework that basically removes your opinion from it it just shouldnt be done. I dont even believe the "you have to make 2 right timing calls" its bs, you only have to get back in lower than when you got out. But you need a plan. Otherwise just dont look.

[Hatton]

I am a reformed market timer and it took into my late 30s and an expensive mistake to realize that I'm not as smart as I thought I was. Putting most of my money into AAPL since college when I saw the ipod everywhere gave me some pretty solid returns and some overconfidence. I thought I saw COVID coming and sold most of my pre tax accounts. I missed most of the drop and had an amazing opportunity to buy back in but didn't, figuring that the real COVID wave over winter 2020 would be brutal. Medically speaking it was, but the market pushed higher and I was really bummed, checking the news all the time and perseverating on the mistake. I ended up 2020 at around -5% and got back in to index funds. I'm never doing that again. Don't be me.

Good news, at least I learned and was all invested since Christmas or so, and am up 14% or so year to date and still on track for an early retirement. I'm also super glad that my fear of capital gains taxes kept me from selling in the taxable account.

Interesting story. Sounds like 1999. I always say that you never know your risk tolerance until a bear bites you. Not everyone can handle 100% stocks especially individual stocks. When I decided to become primarily an indexer the only individual stock that I kept was APPLE. Basis $65K now valued at over 1 million. Purchased in 2008. Dividends not re- invested. I sold in the dot.com implosion. I bought in the 2008 bear. In the Covid bear I tax loss harvested when possible. I think some stocks you just hang onto. APPLE is one. Amazon and tesla also come to mind. You need to remember why you bought the stock in the first place.

[Tim]

CSCO and INTC were others! Oops. Individual stocks are easy to read, until they aren’t. Sound familiar? FAANG has done great.

[Hatton]

CSCO and INTC were others! Oops. Individual stocks are easy to read, until they aren’t. Sound familiar? FAANG has done great.

Yeah Tim I used to own CSCO and INTEL in the 90s. Individual stocks are harder to own than indexes. Only 10% of my portfolio is individual stocks. On the flip side I own to crypto or real estate. Something needs to keep you interested.

[Tim]

Yeah Tim I used to own CSCO and INTEL in the 90s. Individual stocks are harder to own than indexes. Only 10% of my portfolio is individual stocks. On the flip side I own to crypto or real estate. Something needs to keep you interested.

I got three lovely ladies on the back patio. Three generations. Well full disclosure: spouse, kid, MIL Well, “kid” is a relative term. Food, drink, pool and 100% of my energy and interest. Life is good. I am content being in the background. Interesting how the dog keeps things interesting.
I don’t pick stocks anymore, let alone crypto.

[White.Beard.Doc]

If you feel the need to hoard cash, then you likely need to update your IPS to be more conservative. You want your IPS to help you grow during good times, and help you sleep during bad times. If the asset allocation does not allow you to meet both of those needs, you need to revise your IPS.

I hold plenty of cash, but I also hold plenty of stock, bonds, real estate, and business assets. I can sleep at night in a down market, yet my net worth is growing faster and farther than ever before. Life is good.

[Random1]

Most of the time I dollar cost average, when I have "new: money I buy something regardless of the market forecasts for that day or week. Though, psychologically it is a lot easier to buy when the market is on the way up, not the way down. I usually buy in lots of 100 either etfs, mutual funds, or individual stocks. When I read people selling their entire position , thinking the sky is falling , it seems crazy. When the market goes haywire, and I feel the urge to use my financial wizardy skills , I learned to unplug from the markets for a while and reread a Boggle or Berstein book. Some of my worst stock and etf trades where during these times. I would have been much better off leaving it on autopilot.

[LabralTerror]

Actually, investing done right is boring. There are many ways to get your pulse up in investing. Watching the market crash in 2000 really got my heart rate up! Not as much in 2008, but it did for a lot of ppl!

My favorite part about auto-investing and never watching the news is that - once in a while - I will open Personal Capital after a few months and think "Holy ****, where did all this come from?!"

[jfoxcpacfp]

My favorite part about auto-investing and never watching the news is that - once in a while - I will open Personal Capital after a few months and think "Holy ****, where did all this come from?!"

If you can keep that same sense of humor in the next bear, you’ll be a man, my son. Or a woman, no idea🤣. (I just watched The Crying Game last night with my sis and can’t get the singular shocking scene out of my mind.)