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Very true. One thing each of us can do to help us act more rationally is to have a written investment plan and then try to stick to it.
Now that the economy is doing well and we are at full employment and most people have lots of stock market gains baked into their personal portfolios & 401K plans and low inflation and very low real interest rates -- Now is the time to write down a plan for what you will do when inevitably things change for the worse. I'm not predicting things go south; I'm saying when they do go south, most of us would benefit from having a written plan and try to follow it.
the time to make that plan and act is before things fall . after things are down enough where you are asking what to do it is to late . by then the only question should be what to buy .
Last edited by mathjak107; 01-10-2018 at 09:24 AM..
Volatility—low or high; up or down—is incapable of foretelling the future.
Volatility will probably return one day. But when it does, it could easily be upside volatility that brings bigger returns. Some of our biggest bull market years have featured much higher volatility.
In terms of euphoria in bitcoin sure that is true, but bitcoin isn't the stock market....euphoria in stocks is what we experienced in 1999-2000....I adamantly disagree sentiment is similar today.....I think we are in the optimism phase and that can go on for awhile...and when we do hit euphoria it can last a while as well...think about it---Alan Greenspans "irrational exuberance" comment was made in 1996 a few years before we topped out in 2000.....
and yes, we haven't had a pullback or a correction in awhile...5-10-15% correction is always possible and my sense is we will see one or two of those this year, but thats not a bear market...bear market is 20% decline.....to attempt to move around ones assets allocation or trade around corrections is a very very hard thing to do....mentally and financially!
So you were talking about WHY people were getting nervous. The lack of volatility why having a continued upward market that has not had a pull back of any real significance was what I was talking about, not that it will predict the future. Historically volatility has been higher during bull markets, but that is because they have been marked with pull backs in the S&P of...5-10%. Volatility is never high in a marginal upward or sideways consolidating market. And thus that was the point.
Bitcoin was just an example. You can pick ANY security, and I will agree that even if we are in a euphoria market stage that it could last for quite a while, but again...your posit was why are people nervous. Because they are attempting to "not miss out on the market" and views that with tax reform/cuts this will give an unlimited upside and will be piling in cash reserves that they've been "waiting on" to not miss the ride.
All it takes is China as they did this morning to remind us that we just borrowed an additional 1.5T dollars, and while they hold only a comparatively small amount of treasuries, that their ATM may not be accessible or unlimited forever. And the good aside to this is, the market showed it's hand yesterday with the $VIX climbing right before the close to a 10+ number signaling a lower open.
i don't stay at 40% though , i increase up to 50% as prices fall and more value is out there ..
You are making my head spin. You always advise against timing the markets, but now you are saying you adjust your allocation based on your assessment of the market. And I thought you were on a glide path with increasing allocations set by a formula. On top of that when was the last time prices fell creating value? Aside from minor changes that was 2008?
So the market has gone up and the increases are making you nervous. Fine cut back your allocation but do not claim this is based on the investment strategies you have promoted.
You are making my head spin. You always advise against timing the markets, but now you are saying you adjust your allocation based on your assessment of the market. And I thought you were on a glide path with increasing allocations set by a formula. On top of that when was the last time prices fell creating value? Aside from minor changes that was 2008?
So the market has gone up and the increases are making you nervous. Fine cut back your allocation but do not claim this is based on the investment strategies you have promoted.
You are making my head spin. You always advise against timing the markets, but now you are saying you adjust your allocation based on your assessment of the market. And I thought you were on a glide path with increasing allocations set by a formula. On top of that when was the last time prices fell creating value? Aside from minor changes that was 2008?
So the market has gone up and the increases are making you nervous. Fine cut back your allocation but do not claim this is based on the investment strategies you have promoted.
sometimes it is hard to take your own advice. the important thing is being able to compare your results with what would have happened if you didnt try to make adjustments based on your assessment of the current market conditions.
Volatility—low or high; up or down—is incapable of foretelling the future.
Volatility will probably return one day. But when it does, it could easily be upside volatility that brings bigger returns. Some of our biggest bull market years have featured much higher volatility.
In terms of euphoria in bitcoin sure that is true, but bitcoin isn't the stock market....euphoria in stocks is what we experienced in 1999-2000....I adamantly disagree sentiment is similar today.....I think we are in the optimism phase and that can go on for awhile...and when we do hit euphoria it can last a while as well...think about it---Alan Greenspans "irrational exuberance" comment was made in 1996 a few years before we topped out in 2000.....
The historic volatility as well as the VIX tends to stay down in a bull market since there is trending. The market index will oscillate about the 20-day moving average which is also trending higher. What you describe is a market where an index will swing wildly and deviate to a larger degree from the 20-day moving average. That is something you mostly see in sideways markets or in bear markets.
The current rally from 2016 is comparable to rally off the LTCM low in 1998 to the final peak in 2000. They're both roughly 60 percent in 18-24 months.
Greenspan's comment has no bearing on timing except for the short-term. His remark led to a short-term market decline as the market correctly predicted the remarks were a warning of an impending interest rate increase. By 1999, Greenspan was widely viewed as a cheerleader for the "New Economy" and the "Productivity Miracle".
However, it would seem strange to me if we're already rapidly approaching a market top given that the stock market went virtually nowhere from March 2000 all the way to March 2013.
2000-2013 .INX returned +63%, what do you mean it went virtually nowhere?
Granted that was a 3.6% annualized rate of return but interest rates on fixed income was mostly zero during this time and inflation was very low so relatively it did somewhat OK.
Reducing exposure, taking money out, and anticipating stocks will go lower so they'll be on sale later ("more value") is the very definition of timing the market. That's exactly what it is and this is a perfect example demonstrating "investor behavior," "emotions," and "pucker factor" at play.
You are making my head spin. You always advise against timing the markets, but now you are saying you adjust your allocation based on your assessment of the market. And I thought you were on a glide path with increasing allocations set by a formula. On top of that when was the last time prices fell creating value? Aside from minor changes that was 2008?
So the market has gone up and the increases are making you nervous. Fine cut back your allocation but do not claim this is based on the investment strategies you have promoted.
a rising glide path increasing equities to what 70-80-100% equities ?????
noooooo , you set a target range as you always would and REBALANCE WHEN YOU GET HIGHER THAN YOU WANT .
my target was 50% equities and I surpassed that .
but my target range is 45-50% when I rebalance . I see no value out there and no reason to go as high as that at this stage so my comfort range is 40-45% for now . when we retreat a bit and I can pick up an extra 50k or so in more stock I will raise the allocation otherwise I am fine right here . I have no intention regardless of what I think of leaving the 40-50% target range even if I think we will soar .
nothing is written in stone as fixed . there are times of better value and worse value. right now I see no reason to raise my allocation back up to max . but it is still a rising glide path .
the idea of a rising glide path is to avoid getting hammered before a decent up cycle . the gains were very good early on and we cleared that hurdle . we went over our target allocation 3 years in from gains . . could I have rebalanced down and left it at 50% ? sure I could . but I see no reason to at this stage and 40% is still in my target range . my opinion is I will make better use of that money later at this stage and if not 40% works just fine for us .
so it is a win win . if I get to commit it near term , great . if not , no problem I can stay at 40% forever and be comfortable . I only need a 40-50% allovation to make goal . in fact the recent gains and social security kicking in have us doing all the things we want and not even needing to draw close to 4% .
we will likely even make a distribution to our kids this year .
Last edited by mathjak107; 01-10-2018 at 11:30 AM..
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