Deleted
Deleted Member
Posts: 0
|
Post by Deleted on Mar 23, 2024 2:52:40 GMT
As price is going up we are buying in buckets. If I have cash coming in, do I keep doing pyr up if price keeps going up or based on expensive valuations do I stop doing pyr up in that investment.
Are there any rules?
|
|
|
Post by chang on Mar 23, 2024 7:32:54 GMT
As price is going up we are buying in buckets. If I have cash coming in, do I keep doing pyr up if price keeps going up or based on expensive valuations do I stop doing pyr up in that investment. Are there any rules? retiredat48 has long been an advocate and explicator of the method. If he chimes in, I’ll add a question: if there a PyrDown strategy that goes with it? Suppose you have made 3-4 buys in a rising NAV trend, and then the trend reverses. I know that R48 would stop buying, but what triggers would he use to sell and keep a profit? I’m currently accumulating LMT using this strategy, with 4-5% increments between buys. The NAV has been wobbly but slowly rising since my first buy; if it takes off I might reduce the increment to 3%.
|
|
|
Post by oldskeet on Mar 23, 2024 7:39:50 GMT
Hi waffle2. For me, I use a sleeve investment system and should I want to increase my weighting in a sleeve then I can add to existing positions or open a new position (spiff).
I will use this as an example and discuss my plans for my smidcap sleeve. Currently, it has four investment positions and combined they create a weighting in growth area of 30%. My desire is to increase the sleeve's weighting to 35% and I select a fifth fund (spiff). I open the position with a small sum usually no more than one fourth I my set amount to own. As the fund gains traction and grows in value by about 7%, I will buy the second step. Then when this grows to about a 12% gain I will buy the third step and at a gain of 15% I will buy the final step. Some refer this average up process as pyramid up.
In this way, should the spiff position not advance and grow as perceived you do not wind up with a bulk buy with dead money.
When I decide to trim the weighting of a sleeve I select a fund held within the sleeve and just reverse the process and average out.
The pyramid up process is much like an average in process except rather than the step buys beging done at predetermind times (ie. monthly) they are determined by price gain intervibles.
I hope this helps explain my interpretation of the pyramid up buying process and how I use it.
|
|
|
Post by chang on Mar 23, 2024 9:16:59 GMT
"When I decide to trim the weighting of a sleeve I select a fund held within the sleeve and just reverse the process and average out." This goes to my question below to retiredat48. Averaging OUT makes sense in a rising NAV environment (aka “selling into strength”), but does it make sense in a falling NAV environment? I would be more inclined to make a bulk sell and preserve some profit. If you average-buy on the way up, and average-sell on the way down, you may end up where you started — with no loss, but no gain.
|
|
|
Post by oldskeet on Mar 23, 2024 9:36:07 GMT
Hi@admin, Yes, in a falling market I have cut and run (so to speak) and when I have decided to trim a sleeve's weighting in a rising market I, most times, average out.
|
|
|
Post by racqueteer on Mar 23, 2024 10:12:16 GMT
I know that there were supposed to be a fixed number of buys involved; I think the number which came up a lot was five buys. I don't think valuation was involved once the decision to buy was made. Iow, I think you deal with the valuation before you initiate buying.
With the selling, I seem to remember the 200-dma being involved. Maybe sell 50% on a strong downward cross?
|
|
|
Post by yogibearbull on Mar 23, 2024 11:11:40 GMT
A I understand PyrUp, there is NO PyrDown. There are triggers for getting out, and also rare rules for exceptional oversold buys.
There is a version of DCA that buys more as prices go down, Value-DCA. Never try these for individual stocks, only with funds. A trader would never use these strategies.
|
|
|
Post by retiredat48 on Mar 23, 2024 15:22:46 GMT
@waffle2, chang, oldskeet, racqueteer, yogibearbull,....OK, while I have stopped posting a few years ago much about Pyr Up buying (as SOME posters could not discuss but rather attacked) I will post sometime this weekend an intro post to Pyr Up investing. I will include my SELL strategy as well. R48
|
|
|
Post by chang on Mar 23, 2024 16:20:31 GMT
No attacks here. I think everyone accepts that there are many roads to Dublin; hence, not everyone will choose the same approach. (There is a nice expression in Russian: “one person likes watermelon, while another likes pork cartilage.”)
I don’t think PyrUp is that complicated: it’s just a way to avoid losing money, which can happen when averaging down. It might result in lower profits in certain situations, but it offers a certain degree of protection…… which is why I am interested to hear what kind of selling strategy you pair with it. Without some selling strategy, you could lose the “profit protection” feature. (Of course, this presupposes the investor is risk averse and wants to limit/avoid loss of principal … if your time frame is 30-50 years, and as long as you avoid fatal value traps, then the investment will be profitable.)
|
|
|
Post by Norbert on Mar 23, 2024 16:59:32 GMT
I recall that R48 doesn't just use "Pyramid Up" to build positions, but also something called "Compelling Value".
At moments when it seems the bottom has fallen out of the market and valuations are super attractive, say like after the 2020 Covid Crash, we can forget about PUP and just go all in.
At other times we use PUP, which means we only buy on positive momentum.
I'll wait to attack R48 until after he posts the details this weekend. (Just kidding.)
Am also interested in the PUP selling rules; assuming PUP is basically a trading strategy, what are the guidelines for profit taking? I recall something about the 200-day moving average rule, but lots of profits can evaporate if we wait for that signal.
|
|
|
Post by retiredat48 on Mar 23, 2024 17:18:54 GMT
I recall that R48 doesn't just use "Pyramid Up" to build positions, but also something called "Compelling Value". At moments when it seems the bottom has fallen out of the market and valuations are super attractive, say like after the 2020 Covid Crash, we can forget about PUP and just go all in. At other times we use PUP, which means we only buy on positive momentum. I'll wait to attack R48 until after he posts the details this weekend. (Just kidding.) Am also interested in the PUP selling rules; assuming PUP is basically a trading strategy, what are the guidelines for profit taking? I recall something about the 200-day moving average rule, but lots of profits can evaporate if we wait for that signal. Norbert ,...a quick reply. You are close, Norbert. Pyrup starts after the investor decides to make a first buy of anything. Compelling value is an example of when to make a first buy. Like if the market is in bear-market free fall, appears to be bottoming, and you see a fund divy yield that is very attractive to you, you may consider a "compelling value" exists. But you don't go all in...just a bucket's worth. And insist on pyr up buying from there. No averaging down. R48
|
|
|
Post by chang on Mar 23, 2024 18:08:34 GMT
“No averaging down.”
I allow myself ONE average down after the first buy. Case in point: I bought LMT at $435. Bought again at $427 — but that was it. Third buy was at $444. Next buys will be at 3-5% higher.
|
|
|
Post by mnfish on Mar 24, 2024 13:18:32 GMT
“No averaging down.”
I don't get it. If something is a "compelling value" then why wouldn't one buy it again at a lower price? Don't get me wrong, I've been clipped more than once with a few stocks, but I've made a lot more than I've lost buying good companies at lower, sometimes much lower, prices than my earlier purchases.
Case in point: I bought AAPL 3 times from 9/2012- 4/2013 in the middle of a 33% decline. In that same span SPY was up 15%. As of today, AAPL is up 1002% and SPY is up 363%.
Maybe PyrUp applies more to managed funds that holds a lot of stocks than to individual stocks.
|
|
|
Post by yogibearbull on Mar 24, 2024 13:38:18 GMT
Turnaround stories are great - those lived to tell them (AAPL, Chrysler, etc).
But many in the graveyard of bankrupt companies were forgotten (Enron, Polaroid, etc) or are shadows of former self (Kodak, etc).
I have had my share of "bright" ideas that went to 0.
So, it is safer to do DCA or value-averaging with funds. YMMY.
|
|
|
Post by racqueteer on Mar 24, 2024 16:15:38 GMT
Frankly, the only rule is that there is no one rule which always works for everyone. A guideline is to invest broadly and leave things alone thereafter; hence the indexing and Boglehead approach to things. The market has rewarded that approach. PU is a way of getting investors into the market and keeping them there (no organized selling process). Maybe the tinkerers among us would have difficulty/concern with the approach. Nothing is going to be optimal all the time. I daresay that most of the posters here are not going to religiously adhere to a PU approach; or a Boglehead approach; or pure buy-and-hold; or indexing; or even diversification. Fun to discuss, though...
|
|
|
Post by chang on Mar 24, 2024 18:28:17 GMT
“No averaging down.” I don't get it. If something is a "compelling value" then why wouldn't one buy it again at a lower price? Don't get me wrong, I've been clipped more than once with a few stocks, but I've made a lot more than I've lost buying good companies at lower, sometimes much lower, prices than my earlier purchases. Case in point: I bought AAPL 3 times from 9/2012- 4/2013 in the middle of a 33% decline. In that same span SPY was up 15%. As of today, AAPL is up 1002% and SPY is up 363%. Maybe PyrUp applies more to managed funds that holds a lot of stocks than to individual stocks. It’s simple. You took more risk and experienced a temporary loss of principal. You ended up in good shape, but that wasn’t guaranteed. PU limits risk — and might increase or decrease overall profitability and success, depending upon how things play out. Again — many roads to Dublin.
|
|
|
Post by Mustang on Mar 24, 2024 19:21:07 GMT
So, it is safer to do DCA or value-averaging with funds. YMMY.
According to Investopedia both methods are buy and hold and unsuitable for those who time the market. Dollar Cost Averaging (DCA) is easier. It only requires the same dollar investment every time. Value Averaging requires the investor to estimate what the value of his portfolio should be and alter the purchase amount to get it there. In the table it shows that at the end of the period the DCA investor spent $1,000 each quarter ($4,000 total) to buy 405 shares. The VA investor wanted his portfolio to grow by $1,000 per quarter to $4,000. At the end of the period he owned 400 shares but they cost a bit less.
The DCA investor knew how much money he needed to have to make the purchase each quarter. The VA investor didn't with quarterly purchases ranging from $250-1,720. As the article stated, for VA the investor must have access to enough money to make the large buy. The example showed that overall VA had a lower average cost per share and higher unrealized gain.
DCA is easier to manage and afford. It is a completely passive investment method. VA requires minimal work (looking at balance before making the buy), a greater access to cash for large purchases and a willingness to let cash sit when the market is good.
.
I had always thought that I did DCA. But my investment strategy has a bit of VA in it. I am a buy and hold investor and invest monthly in two funds: Wellington and Wellesley. The goal is to keep them equal in value. I invest the same each month but I invest in the fund with the lowest value. Since the market has been really good one would think Wellington would have consistently outperformed Wellesley. But that isn't what has happened. In 2022 and 2024 (24 monthly buys) 6 were 100% to Wellesley, 5 were 100% to Wellington and the rest were divided between the two.
Interesting comparison. Which is better depends on the investor's desire to be actively involved, his access to a pool of cash and his willingness to occasional make big buys and/or sit on the sidelines. Safer depends on the investor's point of view. I'm not sure making larger buys as the market is falling is safer.
|
|
|
Post by Norbert on Mar 24, 2024 19:37:25 GMT
Turnaround stories are great - those lived to tell them (AAPL, Chrysler, etc). But many in the graveyard of bankrupt companies were forgotten (Enron, Polaroid, etc) or are shadows of former self (Kodak, etc). I have had my share of "bright" ideas that went to 0. So, it is safer to do DCA or value-averaging with funds. YMMY. I think what you write is true for investing in individual stocks or thematic plays. We can do our due diligence, consult professional opinion, and still be wrong. So, best to stay diversified and commit money to our convictions over time (DCA, PUP, or whatever). My question above concerned the "compelling value" argument for taking large positions. R48 replied, "No. Just buy a first bucket." But, I was thinking of overall market exposure, not stock or sector plays. I think "compelling value" is indeed reason to increase market exposure immediately (within personal risk tolerance boundaries). Think COVID Crash, 2020. Waiting for the market to rise just means higher costs. Of course, it's true that "compelling value" can morph into "even more compelling value", as I discovered during Fall 2008. R48 and I were having a friendly contest; he didn't buy during the Fall, instead waiting for upward momentum, which came in 2009. R48 won the contest. N.
|
|
|
Post by retiredat48 on Mar 25, 2024 13:13:22 GMT
I am still quite busy and plan to post pyr up method this evening, or tomorrow latest. Meanwhile, here is some food re averaging down, from another post I made: -----------------------
Well, surely then you could take it up with poster Capecod, who uses the same mantra. He doesn't average-down, and he strongly suggests others don't either. Here is Capecod in his own words:
----------------------------------------------------
--I will add FI CEFs when stuff has bottomed and is starting up. Regards, Dick
--Phrog, you're a good guy. Don't fall into the feelgood "unrealized loss isn't a loss" nonsense. It's killed even more nice young traders than averaging down! Regards, Dick
-- Capecod, in his own words: 1/8/2013: Dollar cost averaging is the advice provided to retail investors by institutional traders whose First Iron Law of Survival is: NEVER ADD TO LOSERS.
Post #3151468 With global swap spreads blowing out a bit, I'm not buying anything back until it is going up. More fine young traders died averaging down than ......(pick your own rude close!).
Regards, Dick
Post #3689344 ...Agree....too many friends suffering with MLPs to be humorous, but these need to stop going down first, bounce then retest lows, and finally start up in earnest before I'll play (if then).
Regards, Dick
--------------------------------------------------------
And you would be completely ignoring the vast majority of active mutual fund managers, who average-up into their winning stocks...and curtail losers.
Good day.
R48
|
|
|
Post by retiredat48 on Mar 25, 2024 13:25:15 GMT
Some more re pyr up and not averaging down.
First the Pyr Up words came from a book by a 1950's acknowledged BEST individual stock picker. they had no mutual funds then. To my knowledge, I am earliest to apply and adapt it/label it to mutual fund investing. It is especially applicable to individual stock investing where single company stock risk compounds investing greatly.
The reason not to buy more in a falling fund price is both defensive, and the investor needs to call a huge timeout. Like, what went wrong; why did you think a compelling value existed for your start; what news are you missing, are negative asset fund flows out of a fund? Why? the list is long. Best is to admit you errored and either hold off any more buyng until an uptrend confirmed by new highs, or go elsewhere.
Lastly, read buffetts two rules of investing. Essentially do not lose capital. How do you plan to do this? From Pyrup only two times in 55 years of investing have I lost capital. First, don't lose and the rest takes care of itself.
R48
|
|
|
Post by chang on Mar 27, 2024 19:49:33 GMT
Reminder retiredat48 - would you care to comment on: 1) Is there a PyrDown strategy? If the trend reverses, will you initiate selling in reverse? When the price drops by X%, or lump-sum sell when your profit has shrunk by X%? 2) Buying on the way up - what’s your increment? 2-3%, or 5%?
|
|
|
Post by retiredat48 on Mar 28, 2024 1:24:15 GMT
Been terribly busy on some things...Freed up for tomorrow night posting...
BTW no one should be pyramiding down lately!!
R48
|
|
|
Post by retiredat48 on Mar 29, 2024 22:04:20 GMT
Debating with myself whether or not to start a first on this BB forum...a new thread titled: Pyramid Up Investing Explained...and When to Sell
Concern is I have experienced some other-forum threads many years ago that post hundreds of replies on Pyr Up , many just negative people posting to harass. One gets burned-out. I can't spend my remaining few years explaining to deep naysayers.
------------------------------------------------ With this in mind, let me try this from a previous post reply:
A poster who actually posts here on BB once challenged my to describe Pyr Up investing in one sentence. I replied as follows:
You divide your purchase dollar amount into five buckets to invest, and after you make your first bucket buy, you buy subsequent buckets only if the mutual fund ( or stock) has gone up by a pre-set percentage you selected, such as 3%, for each follow buy.
For a little more detail, here is a Summary Description of Pyramid Up investing:
Pyramid Up is not a term in the general financial literature. Rather it is a name I gave to an investing method I adapted for buying mutual funds...a name I brought to the forums. And the technique has been adapted by some, and sure gaining wider usage. Mostly for my own use, and partly in response to Buffett's Rule #1 (Not lose money), I adapted a technique popular among certain guru stock buyers in the 1950's called Pyramid Up. The mantra was to always average up...never down, to mitigate the single stock risk (think Enron). In its simplest form, you buy a small amount into a mutual fund, and do not buy more unless it goes up. Then buy more...and more, repeating the process only if the fund goes up. An investor selects a percent increase upwards, to making new buys, ranging from 3% to a very conservative 10%. An investor also selects the amount of each purchase, in terms of "buckets" of the targeted amount designated towards a fund. For example, a five bucket approach and $15,000 to invest in a fund means $3000 per purchase. By the mathematics, Pyramiding Up generally keeps one in a positive gain position, enabling one to think properly. It primarily limits one's actual money losses to very small amounts. And the amounts lost on any given fund are usually offset by gains in another, so that the portfolio is not losing. Pyramid Up can be employed in both accumulator and retiree portfolios, and indeed was fully employed in the two model portfolios seen by clicking on the suitcase icon next to my name. Of importance is that both portfolios were started in 2008 before the brunt of the bear market, each only had a marginal drawdown (due to M* inability to handle MM funds/cash in sample portfolios) and are now up handsomely, and well positioned.
Here's an example of Pyramid Up buying, real time, backed by postings:
Early Retiree $400,000 Portfolio, Vanguard's VUG Growth ETF: Bought in 2009 as follows:
7/15 $43.66/share 7/23 45.87 7/30 46.71 8/03 47.04 9/15 49.11 11/16 $52.29/share
Today $120.69/share(Back when first posted) (plus cap gain distributions), 13% of portfolio by weight.
If that initial buy had gone down, no more buying would have followed. Now I have a very comfortable cushion that a decline could ensue before I would experience an actual loss.
I further complement Pyr Up buying with what I call 200 day Moving Average controls. This forces me to take some monies off the table if the trends reverse to downward, and eroding gains could approach losses. The threshold value must prevail. Further drops continuing below 200 day MAs require further selling. I would call this tactical asset reallocating.
---------------------------------------------------------------------
Remember, Pyramid Up is a BUY-IN technique. It doesn't shield you from your bad fund purchases, or bad timing. But the primary behavioral component to me is: Pyr Up enables me to buy any fund, at any time, under any market conditions, and feel comfortable doing so.
My most recent use. Establishing a position in AVUV USA Small Cap Value Fund...so far, so good (all buys posted). I see some other posters also pyramiding up AVUV.
I'll try to answer all good-faith questions and clarifications...and also post my selling strategy in subsequent posts.
Good luck all.
R48
|
|
|
Post by Norbert on Mar 30, 2024 7:21:40 GMT
R48,
I agree that PUP makes sense for single stock investing, particularly for Start-ups; maybe also for sector plays like AI or Alt Energy. We start with a hunch or narrative about a stock or sector, but wait for the tape to confirm our thinking.
During my corporate days, I was 100% invested in a single stock in the oil & gas sector. It was an old, established company. When the price fell, I could buy more shares for less money. My convictions about the firm were not affected by market price volatility. PUP would have cost me dearly.
I'm less enthusiastic about PUP for portfolio management as a retiree. If I want exposure to the S&P 500 (for example), I'm mainly constrained by my risk tolerance. However, I have and will increase exposure if the price is cheap. The Covid crash was an example. Using PUP would have meant paying more per share, thus cutting returns. I will tilt back to normal or under exposure if the price gets high, not continue adding.
The 200-day MA sometimes works and sometimes doesn't. My backtests show that it's about even over the long term. The problem is that it's just too slow, so we often get whipsawed. Am looking forward to your future posts about selling rules.
Thanks, N.
|
|
|
Post by chang on Mar 30, 2024 8:16:44 GMT
retiredat48 “I'll try to ...and also post my selling strategy in subsequent posts.” You did address selling strategy with the 200dma, thanks. If you have more to say in selling, please do elaborate. You also answered my question on the buying increment (3-10%). That’s exactly the range I’ve been using. (Re the 200dma for buying - I also find it to be very slow. I am too impatient and will often buy closer to a perceived bottom.)
|
|
|
Post by oldskeet on Mar 30, 2024 12:10:10 GMT
Thanks retiredat48, for posting your PUp buying strategy. What I have done in past years is much the same as I moved away from bulk buys many, many years ago and went to a step buy process much like what you have described. Like some others, I am interested in learning more about your sell down strategy. Take care. OS
|
|
|
Post by racqueteer on Mar 30, 2024 13:25:39 GMT
I'm just going to note that aside from some kind of pure selling strategy, there is also the option of paring down 'risky' assets as opposed to 'steadier' ones. Keeps you in, but mitigates potential losses. My personal feeling is that taking risks should only be happening if you're being rewarded for it. When the reward disappears, so should those risky holdings. You can just switch to the steadier holdings (or the ones which are performing; maybe 'bonds') rather than going to cash (which wasn't paying much at one point). I'd rather protect the downside; as opposed to squeezing out every penny of upside.
|
|
|
Post by uncleharley on Mar 30, 2024 16:01:52 GMT
Fwiw; I do not execute a buy unless I have an upside target for the applicable index as well as the security. That target is based on chart patterns as well as potential support/resistance bands and other technical tools such as the FIBO retracement tools. When the security begins to approach the target, I set a new target. The new target tells me if I should buy, sell, or hold.
|
|
|
Post by archer on Mar 30, 2024 17:25:12 GMT
The reasoning behind PU seems sound. My only qualm is that as a retiree with no additional income for buying, I am averse (impatient) holding cash when the markets are favorable for investing. In the future if I start going to cash (when the market motivates me to), I could PU when I start buying again, providing I have the patience to not go all in at once.
Perhaps one way for retirees with no outside income would be to divert div income using PU.
|
|
|
Post by anitya on Mar 30, 2024 18:08:53 GMT
Fwiw; I do not execute a buy unless I have an upside target for the applicable index as well as the security. That target is based on chart patterns as well as potential support/resistance bands and other technical tools such as the FIBO retracement tools. When the security begins to approach the target, I set a new target. The new target tells me if I should buy, sell, or hold. I think this UH post deserves a bump up. All the great buys I made but not fully benefitted from them is a result of not having an upside target and the time frame for reaching the target. A good or bad purchase and how you manage your position is a result of the price you pay, your price target and time frame when you expect the price target to reach. This is more fundamental than Pyrup or Pydown. Along the lines of Norbert said, for single stocks and themes, Once you have an upside price target, as your downside gets proportionally very low, you should load up as not having the position size right is detrimental to your investing endeavor. Price can run away from you and you will be sitting and watching a lost opportunity. Norbert and Raq (good sell strategy) also had good points in their posts. I did not pay attention to this thread until I saw Norbert post today; so, there may have been good points from others too. we have tried before to have discussions about sell strategies and nothing ever came of it. Let us see if it is different this time!
|
|