All Gains in 2018 Are Officially Gone As Of Wed. 11/22/18

well we call things sales but stocks have no memory of what they once were . we like to think that because we buy something cheaper that the market is discounting it wrong but the reality is at any given point that is all the markets see it is worth .

it took us 13 years to recover adjusted for inflation in 2000 . . nothing was on sale , it was only worth what it was worth for many years .

i just call it rebalancing . that is when an allocation gets either lower or higher then you want it to be . so you adjust . since i am usually about 50% equities and now i am in the lower 40% range i will rebalance buying more stock. but not because i think it is some sale .
 

mathjak107 said:
well we call things sales but stocks have no memory of what they once were . we like to think that because we buy something cheaper that the market is discounting it wrong but the reality is at any given point that is all the markets see it is worth .

it took 200 13 years to recover adjusted for inflation . nothing was on sale , it was only worth what it was worth for many years .

i just call it rebalancing . that is when an allocation gets either lower or higher then you want it to be . so you adjust . since i am usually about 50% equities and now i am in the lower 40% range i will rebalance buying more stock. but not because i think it is some sale .
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Apparently, I've been doing it wrong for 45 years but I have no complaints about my financial situation.

I guess we each need to follow our own path.
 
i am not saying anyone is doing things wrong . i have been an investor for more than 35 years too . but we sometimes have a skewed way of looking at things .

markets never have a memory . ge was on sale at one time , gm was on sale , the failed stock graveyard is filled with those so called stocks we thought were " on sale " .

heck , people thought stocks were "on sale " in 2008 when we fell 2000 points . who know we had 4000 more to go ...

so deciding what is a "sale " is not judged by the fact prices are lower- UNLESS YOU ARE A DIRTY LIL MARKET TIMER .

. the money we make is just sticking to the plan , not thinking we are timing something .

money is made by time in the markets for most of us , NOT TIMING THE MARKETS . when you think it is a sale you are trying to time the markets .

so what do we do ????????????

when you rebalance according to plan or you add money according to plan and not based on what you consider a sale point or what is going to happen tomorrow , you are not attempting to identify what is on sale or time things , that rarely works and that is timing . you are just following the mechanics of your plan without trying to guess at the timing .

if you rebalance once a year , your doing it regardless of timing things , if you contribute money all year , you are doing it without trying to time things .

so we don't know if this is a sale or a start of 20 years of flat markets like we had in the 1960's or the 13 years in 2000 . but if our mechanics of our plan say add equities , well that is not market timing .

see the difference ?
 

mathjak107 said:
i am not saying anyone is doing things wrong . i have been an investor for more than 35 years too . but we sometimes have a skewed way of looking at things .

markets never have a memory . ge was on sale at one time , gm was on sale , the failed stock graveyard is filled with those so called " on sale " .

heck , people thought stocks were "on sale " in 2008 when we fell 2000 points . who know we had 4000 more to go ...

so deciding what is a "sale " is not judged by the fact prices are lower . the money we make is just sticking to the plan , not thinking we are timing something .

money is made by time in the markets for most of us , NOT TIMING THE MARKETS . when you think it is a sale you are trying to time the markets .

when you rebalance according to plan or you add money according to plan you are not attempting to identify what is on sale , that rarely works and that is timing .

see the difference ?
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I understand what you are saying about being a good stock picker/analyst.

But I also believe that when you rebalance you are also buying stocks/bonds on sale or buying the market at a discount.

I'll keep plodding along until my simpleminded way of doing things stops working for me.
 
Aunt Bea said:
I understand what you are saying about being a good stock picker/analyst.

But I also believe that when you rebalance you are also buying stocks/bonds on sale or buying the market at a discount.

I'll keep plodding along until my simpleminded way of doing things stops working for me.
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well lets not call it a sale . if markets are down and by the mechanics of what we do it is time to add money because you are rebalancing by date , then great if you picked up some shares cheaper then you had . but once you get in to doing this not by the mechanics of our plan but trying to time the buy , well now we are reverting to market timing and that rarely goes well nor are our guess of what a sale is are usually correct ..

why ? you need cash to buy when markets are down . that means you may have lost lots of upside in that cash that you were holding just as easily . so just following our strategy and plan works best over time . not trying to decide if markets are high , low or fairly valued .

also markets are up 2/3's of the time and down only 1/3 . so even dollar cost averaging in rarely works well because the lower prices are just not enough to amount to much compared to the higher priced shares we have .



i know people like to call stocks when they are down a sale , but that is how they end up panicking or losing money like when 2008 low ended up being 4000 points lower then we thought low was .
 
one thing i want to add is we all hear the mantra buy low and sell high . no other mantra has lost more money for investors than trying to follow that silly rule and TIME THINGS .

like i said we thought down 2000 points was low in 2008 . so you had those scrambling to get in , and then we headed down another 4000 points . trillions were lost as many hit stop losses , or got scared and panicked and sold out when markets went the other way .

an object in motion stays in motion -until it hits something -so odds are pretty good trying to catch that falling knife has the next stop lower and lower .

so what has made more money for investors then any other mantra ?

buy high -sell higher .

the trend is your friend and a market going up tends to stay going up until it hits something .

odds are after you buy , you are headed up , not down . you would have to be that unlucky guy at the end of the line the day markets hit something and reversed .

this is a concept few actually realize . more money is made by buying high and selling higher then most ever make trying to buy low and selling higher just because fighting the trend can be so hard and painful mentally .

think about the fact that if someone is going to time those buys , they need to get out of equities or some equities when things are still up .. that usually takes a nervous nellie type .

to buy back in when markets are plunging with no bottom in site takes balls of steel .

rarely does one person possess both qualities .
 
i thought this pretty interesting , it shows how going through all the gyrations to try to duck the down draft will likely just shoot you in the foot or have you miss the biggest most influential gain days because they happen very early on , long before you see anything changed .

University of Michigan Professor H. Nejat Seyhun analyzed 7,802 trading days for the 31 years from 1963 to 1993 and concluded that just 90 days generated 95% of all the years’ market gains — an average of just three days per year .

 https://www.ifa.com/12steps/step4/missing_the_best_and_worst_days/
 
What are investing goals? Is buying and selling for capital gain the objective or long term dividend reinvesting the goal. There is the very real tolerance for risk, not investing and buying safe works for many. It comes down to different strokes for different folks. No matter the goal open discussion can help.
 
bottom line to it all is total return . how the money gets distributed out to us is irrelevant . we need enough appreciation so that we can keep selling some shares in our portfolio to keep the income stream going . if it is coming from dividends we need the same appreciation to offset the set back with every dividend.

i have a mix of both . some funds spin off dividends and gain distributions while others just have gain distributions .

tax wise i prefer my income from appreciation since unlike the dividend which is taxed on 100% the non dividend payer is only taxed on the gain portion .

but it really does not not matter because to generate the same income you need the same total return either way
 
.

As I posted here months ago, the stock market is a risky game of chance.

I'm retired and can't afford to play risky games with my money. So, all my investment money is in bank CDs. Slow but steady and dependable increases. And since I have no debt and want no debt... interest rates going up to historic norms benefits me.

.
 
down turns are always part of your gain cycle and always will be .

no money should ever be in equities you need the shorter term . it should only be the long term money for use many years out .

a 50/50 mix can go more than a decade without selling any equities to raise cash .

a 50/50 mix has never , did i say never , lost money over any 10 or 20 year period . that is no game of chance. odds are pretty good an investor will be very happy with their balance , downturns included as always .
 
mathjak107 said:
down turns are always part of your gin cycle and always will be .

no money should ever be in equities you need the shorter term . it should only be the long term money in decades .

a 50/50 mix can go more than a decade without selling any equities to raise cash .

a 50/50 mix has never , did i say never , lost money over any 10 or 20 year period . that is no game of chance. odds are pretty good an investor will be very happy with their balance , downturns included as always .
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I agree that's why I always keep a little cash on hand to smooth out the bumps in the market.

“When the well is dry, we know the worth of water.” - Benjamin Franklin


cashflow_cartoon.jpg
 
it is not just about cash , it is also about laddering bonds or bond funds to meet your needs . 50% of our portfolio is assorted duration bond funds that run from ultra short to 7 or 8 years out .
 
mathjak107 said:
it is not just about cash , it is also about laddering bonds or bond funds to meet your needs . 50% of our portfolio is assorted duration bond funds that run from ultra short to 7 or 8 years out .
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I understand the concept and I use balanced funds, bond funds, etc... although I don't hold any individual bonds.

I just don't understand the aversion to cash/liquidity in turbulent markets.

IMO you need to keep an eye on the accelerator and an eye on the gas gauge in order to get where you are going. For me, cash is the gas that keeps me going and I don't ever want to end up sitting on the side of the road with an empty tank.

We each need to find a way that works best for our own situation/circumstances.
 
Aunt Bea said:
I understand the concept and I use balanced funds, bond funds, etc... although I don't hold any individual bonds.

I just don't understand the aversion to cash/liquidity in turbulent markets.

IMO you need to keep an eye on the accelerator and an eye on the gas gauge in order to get where you are going. For me, cash is the gas that keeps me going and I don't ever want to end up sitting on the side of the road with an empty tank.

We each need to find a way that works best for our own situation/circumstances.
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you should just have an allocation that works and stay with it . trying to tme things to move to cash is a losing game

markets turn on a dime ... the biggest gains in a recovery happen when everyone thinks it is a suckers rally .. there are no signs anything changed .

so what typically ends up happening trying to avoid simply riding the cycle ends up hurting you even more . the most successful way to deal with down turns is just rebalance , buying equities not running away from them trying to hide in cash .
University of Michigan Professor H. Nejat Seyhun analyzed 7,802 trading days for the 31 years from 1963 to 1993 and concluded that just 90 days generated 95% of all the years’ market gains — an average of just three days per year.
 
mathjak107 said:
you should just have an allocation that works and stay with it . trying to tme things to move to cash is a losing game

markets turn on a dime ... the biggest gains in a recovery happen when everyone thinks it is a suckers rally .. there are no signs anything changed .

so what typically ends up happening trying to avoid simply riding the cycle ends up hurting you even more . the most successful way to deal with down turns is just rebalance , buying equities not running away from them trying to hide in cash .
University of Michigan Professor H. Nejat Seyhun analyzed 7,802 trading days for the 31 years from 1963 to 1993 and concluded that just 90 days generated 95% of all the years’ market gains — an average of just three days per year.
Click to expand...

I agree and I do, I stick with a middle of the road 50/50 - 60/40 mix of bonds and stocks mainly in the form of mutual funds but I also maintain a cash reserve/cushion.

I understand that keeping a cash cushion has a real cost but I'm willing to bear that cost for my own peace of mind.

At this point in my life, I'm not worried about maximizing my returns my only concerns are my personal comfort and not becoming a financial burden to anyone on my way to the cemetery.
 
i keep about 6% cash which dwindles down through the year to about 2% then gets refilled on jan2 .

since it is my ultra short term bond funds that stood up the best followed by some floating rate bond funds they will create next years cash and also i have to buy about 150k in equities to get them back to 50% .

so i don't find we need cash as cash , but we do need money laddered to meet our needs . you can do that with bond funds and bonds by matching a funds duration to your needs
 

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