My retirement account has been on sideline for more than 3 years (balanced fund, invest)

[artillery77]

There's timing that comes from simple recalibration of investments, and then there's timing in terms of invested/not invested. It's the latter that you want to avoid. Most people will do the former and let funds do all of the work. The individual themselves does nothing. They hold a fund. The fund stays invested, but changes its various ins/outs on specific issues.

At the end of the day, most equities will run in a correlated manner.

[Wile E. Coyote]

Are you guys saying that any of the technical analysis all these analysts use are complete bunk?

[mathjak107]

Originally Posted by Wile E. Coyote

Are you guys saying that any of the technical analysis all these analysts use are complete bunk?

pretty much.. which is why one year a fund is on top and next year another is

[FREE866]

Originally Posted by Wile E. Coyote

Are you guys saying that any of the technical analysis all these analysts use are complete bunk?

I think it is.



Stocks are what a statistician would call "not serially correlated". Which means when a stock is heading in a particular direction, the odds are 50/50 the stock continues in that direction or reverses course.

The takeaway is that for every chart you show me indicating a pattern leading to an expected result, I can show you many more where the exact same pattern leads to nothing at all.

[ohio_peasant]

Originally Posted by Wile E. Coyote

Are you guys saying that any of the technical analysis all these analysts use are complete bunk?

There is a credible argument to be made, that all analysis is bunk.

[ALackOfCreativity]

Originally Posted by Wile E. Coyote

Are you guys saying that any of the technical analysis all these analysts use are complete bunk?

Some of this stuff works, Renaissance Technologies and other such firms will find it and saturate the trade. It's not that no one can make this work, it's that an amateur staring at a chart can't step up to the premier quantitative trading firms splashing out on fast connections to the exchanges, all the compute they could need, some of the smartest people on earth working there, getting there first and (probably) saturating winning patterns so they aren't visible to others anymore, and years of experience learning the hard way.

[mysticaltyger]

Originally Posted by Baike

Workplace retirement account only, not personal brokerage account.

I admitted that I admired heart very much, and put all my retirement account on fund of Government Securities, when SPX was approaching 3700, that is late 2020.

Now stock market keeps hitting new high, SPX hits 5000 last week, I missed stock market growth.

I have thought about reentering the market many times, but most of time SPX was above 4000. I told myself, maybe stock market crisis would come soon. But it has never come, and keep hitting new high. Now it is too high for me to enter the market.

Edit: If I can catch 3700-4500 range, that is around 22% return, Government Securities fund also give me some return, not as much as stock market growth, but now I don't really feel very bad about exiting at 3700 in 2020.

Put it all in your 401k's Target Date fund appropriate for your age and/or a balanced fund if you don't have a target date fund. And then LEAVE IT ALONE!!!.

I know this is hard, but make it a goal to contribute to your plan but not to look at it FOR 10 YEARS! You know why? It takes most people about 10 years to go up to the next financial level, anyway. Maybe a little sooner for more aggressive savers, maybe longer for those only putting in 6% plus a 3% match (for a total of 9%).

Focus on how much you save, not on day to day or even year to year returns. A Target Date fund is already well diversified and balanced between stocks/bonds/cash. It's not a perfect investment. But that's because there is no such thing. But it is a good enough investment.

I looked at 4 different balanced funds during the "lost decade" for the stock market (Jan 2000 to Dec 2010). If you'd started with $1000 and kept adding $1000 a month during that decade here's what you'd have ended up with in 4 different balanced funds (typically around 60% to 65% stocks, 35% to 40% bonds). I also listed the published annualized returns (returns if you'd put a fixed dollar in at the beginning and added no more $), followed by the 'money weighted' returns (which takes the dollar cost averaging of monthly contributions into account).

EDIT: OOPs, it was actually an 11 year period, not 10, but I looked at the 10 year period for these funds from 2000 through 2009 and returns were 1 to 2 percentage points lower, but all were still positive with dollar cost averaging.

Vanguard STAR: $186,863. 5.69%; 6.04%
Vanguard Wellington: $194,990. 6.57%; 6.78%
T. Rowe Price Balanced: $183,420. 4.36%; 5.71%
Vanguard Balanced Index: $178,247. 3.55%; 5.22%
Vanguard S&P 500 Index: $161,583. .32%; 3.49%

As you can see, if you'd just kept investing money, even during the lost decade for the S&P 500, you'd have made money in all of the above. Since bonds did better during the lost decade, you would have done better, but even in the S&P 500, you would have made 3.49% annualized. Not great, but not the end of the world.

Even during a roaring decade for stocks, balanced funds come pretty close to matching stock market returns. And during bad decades, they beat the S&P 500.

The main thing is to focus on being consistent and saving as much as you can (without jeopardizing dipping into your account early). This is boring stuff.

[mathjak107]

Originally Posted by mysticaltyger

Put it all in your 401k's Target Date fund appropriate for your age and/or a balanced fund if you don't have a target date fund. And then LEAVE IT ALONE!!!.

I know this is hard, but make it a goal to contribute to your plan but not to look at it FOR 10 YEARS! You know why? It takes most people about 10 years to go up to the next financial level, anyway. Maybe a little sooner for more aggressive savers, maybe longer for those only putting in 6% plus a 3% match (for a total of 9%).

Focus on how much you save, not on day to day or even year to year returns. A Target Date fund is already well diversified and balanced between stocks/bonds/cash. It's not a perfect investment. But that's because there is no such thing. But it is a good enough investment.

I looked at 4 different balanced funds during the "lost decade" for the stock market (Jan 2000 to Dec 2010). If you'd started with $1000 and kept adding $1000 a month during that decade here's what you'd have ended up with in 4 different balanced funds (typically around 60% to 65% stocks, 35% to 40% bonds). I also listed the published annualized returns (returns if you'd put a fixed dollar in at the beginning and added no more $), followed by the 'money weighted' returns (which takes the dollar cost averaging of monthly contributions into account).

EDIT: OOPs, it was actually an 11 year period, not 10, but I looked at the 10 year period for these funds from 2000 through 2009 and returns were 1 to 2 percentage points lower, but all were still positive with dollar cost averaging.

Vanguard STAR: $186,863. 5.69%; 6.04%
Vanguard Wellington: $194,990. 6.57%; 6.78%
T. Rowe Price Balanced: $183,420. 4.36%; 5.71%
Vanguard Balanced Index: $178,247. 3.55%; 5.22%
Vanguard S&P 500 Index: $161,583. .32%; 3.49%

As you can see, if you'd just kept investing money, even during the lost decade for the S&P 500, you'd have made money in all of the above. Since bonds did better during the lost decade, you would have done better, but even in the S&P 500, you would have made 3.49% annualized. Not great, but not the end of the world.

Even during a roaring decade for stocks, balanced funds come pretty close to matching stock market returns. And during bad decades, they beat the S&P 500.

The main thing is to focus on being consistent and saving as much as you can (without jeopardizing dipping into your account early). This is boring stuff.

while that is true , it is also true that as a portfolio grows in size added money has less and less of an effect which is why unless one is a good market timer lump sum beats dollar cost averaging.

if dollar cost averaging actually worked better we would hit our desired allocation and sell everything and start from zero again.

you can see that would be a poor idea since markets are up 2/3’s of the time and down only 1/3 as well as up moves over time are higher then the drops are.


most dca because we have no choice or lump sum but dca does stunt growth compared to just lump sum and done or adding a little along the way.

dollar cost averaging reduces risk but hurts gains.

it is also hard to find time frames a balanced fund beat the s&p over typical accumulation stages which span decades not just a decade or so . so sure we can pick out a cherry picked exception over a decade or so but that is the exception and investing based on a rare exceptional time frame is not a good idea

so i just want to make sure everyone knows there is a price to pay in returns by both using a balanced fund instead of diversified 100% equity funds as well as choosing to dollar cost average over lump sum when there is a choice

[mathjak107]

excellent article on the subject

EXECUTIVE SUMMARY

Conventional investment wisdom suggests that dollar cost averaging is a good approach to allocating investment dollars over time. By always investing a constant dollar amount, the strategy ensures that fewer shares will be bought as prices rise, while more shares are purchased if prices decline, bringing down the average cost per share in the long run. The only question is over what time horizon it’s best to average in.

Yet as it turns out, the answer is “none”. In reality, a dollar cost averaging investment strategy doesn’t actually enhance returns in volatile markets that have similar upside gains and downside losses on a percentage basis. And given that on average, markets go up more often than they go down, choosing to dollar cost average is more likely to just leave gains on the table (and the longer the time period, the greater the risk of foregone returns).

However, while dollar cost averaging may not be likely to enhance returns in the long run, it is still a risk management technique. Over the dollar cost averaging time period itself, the diversification of the “new” investment and “old” investment may actually produce superior risk-adjusted returns. And given that the pain of losses is more severe than the joy of gains, risk-averse investors may prefer to dollar cost average simply to minimize the potential regret of not doing so and seeing markets decline shortly thereafter.

Nonetheless, for investors who are comfortable with the risk of their portfolios, and aren’t specifically seeking a “regret aversion” (or at least, regret minimization) strategy, in the long run the best time horizon for dollar cost averaging is simply to invest all the money immediately – at least, presuming the investment was desirable to own in the first place!

https://www.kitces.com/blog/dollar-c...duces-returns/

[mathjak107]

ran some numbers as far back as i could in portfolio visualizer .

even small percentage differences when compounding over time can be like the old penny doubling every day .what appears to be a small difference translated out to huge dollars in difference

100% us stock market vs 60/40 100k invested

1987 to 2024

balanced 2,171,935

100% stock. 3,996,743

jumping to 2000 to 2024 so we capture both the dot com crash , lost decade and 2008

balanced 431,325

100% equities 526,174


2010 to 2024

balanced 328,778

100% equities 541,174

2015 to 2024

balanced 190,256

100% equities 262,645

you would really have to start looking at smaller chunks of time to find some exceptional years to have a balanced fund or portfolio do better .

2000 to 2011 being one of them . in fact you can move a few years up or down and balanced still wins , until once again you hit the year things flip and things don’t look back
if we go from 2000 to 1995 and look to 2011 , then 100 % equities wins .

if we jump from 2000 to 2019 100% equities wins again .

so there are pockets in an accumulation stage where balanced beat or did the same as 100% equities but they are rare over typical accumulation stages spanning decades


but there are times though we don’t want that kind of volatility .

so most of us tone things down a few years before retirement so balanced funds or balanced portfolios are very popular …using buckets in retirement end up creating a balanced portfolio no matter how we divide things up

but if we are talking accumulation stages there is no financial advantage to mitigating temporary short term dips with less capable assets like bonds and permanently reducing long term gains .

there is no evidence that nervous nellie investors tend to stay better in the down turns either as morningstar small investor returns show just as poor behavior in volatile markets .

so if one is going to use balanced funds do so for a reason other then fear ..as it may pay to have someone else manage things as even in a balanced portfolio fear doesn’t leave.

balanced portfolios and the buckets they creat are mentally soothing when we are living off of our portfolios even then offering no financial advantage.

larger portfolios can still see huge daily swings ..my largest one day change with a balanced portfolio was 100k in one day a few years ago when stocks were up 2000 points in a session in 2020 . as well as down 70k in a record fall in a day

the typical day now can be 15-30k swings .

so portfolio size matters down the road and dollar swings can be insane.

which is why i am slowly migrating a little bit more into my experimental leveraged risk parity portfolio the carolina reaper . it started as a 20k experimental model and is now got about 73k in it as i like its behavior more and more

so far it has provided outsize gains of a 60/40 with a fraction of the draw down and worst year .

so no i am not advocating this for everyone but it certainly is something i am looking in to and trying.

i do want to thank mogul dreamer for peaking my curiosity in these kinds of portfolios enough to actually try one , which today thanks to the 3x leveraged funds can be easy as pie to implement.

could it be that elusive portfolio we all dream about with far less risk but little in gains given up ? we will see