Investment Strategies / Mechanical Investing
No. of Recommendations: 4
No. of Recommendations: 5
I'm still in the market and things appear bullish.
However I'm really fighting the urge to just go to cash and sit on the sidelines until the next downturn.
We've been meeting with a financial advisor (since we get one for free through my wife's job) and he does not really see the concern.
"just be diversified ..."
No. of Recommendations: 4
It always depend on your horizon when you will need to use the money, and your risk-tolerance. I lost 70% in the tech crash, and 50% twice more, and 30% a few times, but never wavered; I am not most people. I also didn't need to use all the money right away.
If you don't need the money for 10 years being fully invested is more logical than if you need it in 3 (but it still will test your patience as soon as the next crash).
So check your other sources of income and when you will need the money, in addition to your wife's and your risk-tolerance for crashes; I had a partner whom was only invested during crashes since he would sell as soon as there was a crash, then stay out of the market for the next 3 years, be lured back in by good years the market had had, then lose again in the next crash.
This is a different type of "market timing"!
No. of Recommendations: 7
I'm still in the market and things appear bullish.
However I'm really fighting the urge to just go to cash and sit on the sidelines until the next downturn.
Meh, don't sweat it. Both approaches can work. The only thing to remember about moving to cash is that it works extremely well, if and only if you have the nerve to deploy it when there is a rich opportunity set.
Imagine someone who bailed and went to cash the day of Mr Greenspan's "Irrational Exuberance" speech in December 1996. That was a full 3.3 years before the index peaked (in real total return terms), a lot of FOMO. That's justifiably a market call about which some would say "being too early is the same as being wrong".
Yet the market was back at the December 1996 level again in 2002 after 5.8 years, and 14.5% lower than the December 1996 level as late as the 2009 bottom after 12.3 years, again in real total return terms. Lots of opportunities to get in at a better level, if you are the sort to avail yourself of them. And that's just the broad index: if you consider all the myriad individual good opportunities you might reasonably pick along the way, there's nothing wrong with cash. Provided, of course, you can spot and act on some of those opportunities.
Jim
No. of Recommendations: 1
The only thing to remember about moving to cash is that it works extremely well, if and only if you have the nerve to deploy it when there is a rich opportunity set.
The people who go to cash when they get scared, and then sit out the crash .... also stay scared at the bottom and don't get back in for the boom.
In a long ago thread on an old TMF board, somebody said "Nobody will stay invested during a 50% downturn." That was in a debate/discussion about Indexed Universal Life insurance.
About a dozen people commented back "No, I sat tight through two 50% loss bear markets."
No. of Recommendations: 0
The only thing to remember about moving to cash is that it works extremely well, if and only if you have the nerve to deploy it when there is a rich opportunity set.
Yep I get it. This is how I imagine it would work.
- go to cash whenever, like now
- wait for the next crash or significant downturn
- re-enter when there is blood in the streets, defined by very poor breadth and posts here about either short or long-term bottom detectors signaling.
In my own case, I'm sitting in a decent spot regarding "retirement" which is coming up, I suppose.
Just have this nagging feeling that there is likely to be some significant downturn in the next year or three given the macro factors at play.
How nice it would be, for once, to have significant dry powder to deploy.
