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Post by retiredat48 on Mar 30, 2024 18:25:14 GMT
R48, ...... 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. R48 reply in bold...So am I. Portfolio allocation and risk tolerance are separate questions, whether or not one Pyr Up buys. In fact, I too have several core holdings, funds owned since inception, such as FSPTX fido tech sector fund. I too make decisions on when to add more. But I use PyrUp and don't add more unless next buys are higher. Usually I am adding more to core holdings at higher share prices than previous buys.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. How did you determine when the "price is cheap" and your buy, in a falling market, was a good one"? Catching falling knives...I may make a first buy in a bear market as a compelling value buy. But no more if market keeps going lower. Like, COVID bear was approx down 33% to bottom; my likely scenario was down 50-60% easily. Once actual bottom made however, I started buying again. IOW I want to be late, not early...waiting for uptrends. As capecod pointed out similarly. You made such buys in the years-ago contest you cited, that resulted in your entered portfolio going much lower, which you posted about. That is an example. I do not want to lose capital...Buffett's rule. I will tilt back to normal or under exposure if the price gets high, not continue adding. If the price gets "high" this is normally way past PyrUp buying time periods. PyrUP may typically last 4-6 months.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. I have other typical buy points...such as fund price going to new highs; the SLOPE of the MAs turning upward; I often use faster MAs myself such as 50 day; and the percentage new buy rule for each bucket..no questions asked. These were used in latest AVUV accumulation.
I will post a separate thread on SELLING later.
R48 in bold.Thanks, N.
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Post by retiredat48 on Mar 30, 2024 18:38:11 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. ... 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. ?? This is Pyramid Up buying. As prices go higher you buy more. Sometimes when I have solid gains and good conviction, I may throw in the last couple buckets and buy those simultaneously. But I acknowledge I am perhaps more experienced that some. BTW Pyr Up can be used by "traders." Here is what one such poster said re pyr up improving his game. Some of you may remember poster/trader "bubbygator": "As a trader, I don't usually engage in this type of discussion - but R48 has made a good point about adjusting your own "rules" to the situation being played... whether market or horses.
The overall macro-economic environment will determine what types of items will generally rise or fall in market price... and what type of items give an extra percentage of possible profit through dividends or distributions.
If, as R48 illustrated, one adjusts buying to only the price momentum "leaders" and higher % profit items, the odds of making continuing profits is obviously higher.
The problem lies in establishing one's own "rules" and then following those rules with actual buys and sells. This can be a personally demanding task of research and timely action.
And..... when the macro-environment changes, one has to dump the old rules and figure out how to make money on declining prices. The macro-environment depends on the overall balance of human greed versus fear. As long as one has control over one's own greed/fear, one can take advantage of any market environment.
(For background, many years ago [2007] I suffered a really bad REIT loss. As a come-back, I used R48's Pyramid Up method to help me gain control of my fear. It only took me about a year of Pyramid Up until I realized I could safely move on without it.)
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R48
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Post by Norbert on Apr 1, 2024 9:22:59 GMT
R48, ...... 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. R48 reply in bold...So am I. Portfolio allocation and risk tolerance are separate questions, whether or not one Pyr Up buys. In fact, I too have several core holdings, funds owned since inception, such as FSPTX fido tech sector fund. I too make decisions on when to add more. But I use PyrUp and don't add more unless next buys are higher. Usually I am adding more to core holdings at higher share prices than previous buys.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. How did you determine when the "price is cheap" and your buy, in a falling market, was a good one"? Catching falling knives...I may make a first buy in a bear market as a compelling value buy. But no more if market keeps going lower. Like, COVID bear was approx down 33% to bottom; my likely scenario was down 50-60% easily. Once actual bottom made however, I started buying again. IOW I want to be late, not early...waiting for uptrends. As capecod pointed out similarly. You made such buys in the years-ago contest you cited, that resulted in your entered portfolio going much lower, which you posted about. That is an example. I do not want to lose capital...Buffett's rule. I will tilt back to normal or under exposure if the price gets high, not continue adding. If the price gets "high" this is normally way past PyrUp buying time periods. PyrUP may typically last 4-6 months.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. I have other typical buy points...such as fund price going to new highs; the SLOPE of the MAs turning upward; I often use faster MAs myself such as 50 day; and the percentage new buy rule for each bucket..no questions asked. These were used in latest AVUV accumulation.
I will post a separate thread on SELLING later.
R48 in bold.Thanks, N. I am assuming that your rule (only buying when the price is higher) does not mean only buying at new highs? Is that right? For example, a core holding might be the S&P 500. It hit a new high in 2000, but didn't pass that level for over a decade. There were many opportunities to buy cheaply during that decade. You're suggesting to wait for an uptrend before buying (like in late 2003 or in 2009), not wait for new all-time highs to be reached ... even though this can mean averaging down? As for buying dips, you're right that we can't know in advance how far the knife will fall, I was wrong in Fall 2008, right in 2020. It can make sense to buy a single bucket based in "compelling value", and wait for price confirmation before buying more. However, it also makes sense to buy a second bucket at an even lower "compelling value" level for a core holding like the S&P 500. I like buying low for obvious reasons. If we always wait for trend confirmation, that means paying more for the same shares. I certainly agree that it's risky to chase a single stock at lower prices; it could go to zero. But it also makes sense to buy the market as cheaply as possible, at least if you're an accumulator. For retirees the SOR risk is an issue. N.
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Post by mnfish on Apr 1, 2024 11:07:23 GMT
retiredat48, "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 If one reversed those buys and made his first purchase @ $52.29 (09/2008) and averaged down to the last one @ $43.66 (07/2009) wouldn't the end result be the same when the price reached $120, assuming equal purchases? Granted, he would have had a temporary loss of capital for 6-8 months but a seasoned buy and hold investor (see Bogle) should be able to handle that. No? Or, someone who averaged down would have possibly continued to buy from 09/2008 to 03/2009, picking up more shares with a cost basis in the $30s.
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Post by racqueteer on Apr 1, 2024 13:21:24 GMT
Imo, the key is: who is the target audience for PUP? I would posit that said audience would be unlikely to buy as prices fall; nor would they recognize a "compelling value"; nor accurately identify something which was in a death spiral. In short, the vast majority of posters here are probably not the target audience. It appears primarily to be a methodology to get people into the market, limit 'losses', and keep them there. The nuances of identifying likely candidates for investment and determining what would be a "compelling value" go beyond the basic methodology. Arguably (maybe) what constitutes compelling is far more important than PUP itself! So, yes, PUP may not be optimal if your goal is maximum performance under some conditions, but you always have to consider the target audience and not the experienced (and presumably), more accomplished investor who perhaps does not need PUP. My opinion and probably worth what you're paying for it....
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bruce
Lieutenant
Posts: 56
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Post by bruce on Apr 1, 2024 13:41:02 GMT
Unless and until it is shown that "pyramiding up" adds value to an investment portfolio, I would not consider it worthwhile. Is anyone aware of any data showing the value added using this method? Not anecdotal but independent data.
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Post by Norbert on Apr 1, 2024 14:09:16 GMT
Imo, the key is: who is the target audience for PUP? I would posit that said audience would be unlikely to buy as prices fall; nor would they recognize a "compelling value"; nor accurately identify something which was in a death spiral. In short, the vast majority of posters here are probably not the target audience. It appears primarily to be a methodology to get people into the market, avoid 'losses', and keep them there. The nuances of identifying likely candidates for investment and determining what would be a "compelling value" go beyond the basic methodology. Arguably (maybe) what constitutes compelling is far more important than PUP itself! So, yes, PUP may not be optimal if your goal is maximum performance under some conditions, but you always have to consider the target audience and not the experienced (and presumably), more accomplished investor who perhaps does not need PUP. My opinion and probably worth what you're paying for it.... I don't see that PUP avoids "losses". Imagine using PUP to enter the market in the years before 2000 (start of tech correction) or 2008 (subprime crash). You will still find yourself underwater once the correction or crash occurs (with higher average costs), unless you sell early. I also don't like recommending this to a certain "inexperienced" target audience, as it involves market timing and trading. Simple strategies like balanced funds or the Bogleheads stuff seem more attractive here. And you're right that recognizing "compelling value" is more easily said than done. Again, I do like using PUP for speculative trading. I may have a brilliant idea that a certain company is going to me very successful. But, I just buy one bucket, waiting for the price action to confirm my theory. Am not trying to attack R48 by playing the "naysayer", but this is an investment discussion board. So, we discuss.
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Post by racqueteer on Apr 1, 2024 14:41:31 GMT
Poor choice of words; thank you for pointing that out, Norbert. Agreed; does not avoid losses; limits losses is a better characterization. Substituted in my original post.
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Post by racqueteer on Apr 1, 2024 14:55:26 GMT
I also don't like recommending this to a certain "inexperienced" target audience, as it involves market timing and trading. Simple strategies like balanced funds or the Bogleheads stuff seem more attractive here. And you're right that recognizing "compelling value" is more easily said than done. Again, I do like using PUP for speculative trading. I may have a brilliant idea that a certain company is going to me very successful. But, I just buy one bucket, waiting for the price action to confirm my theory. Am not trying to attack R48 by playing the "naysayer", but this is an investment discussion board. So, we discuss. Not sure I completely agree with the market timing comment. I believe R48 specifically talks about buying the first bucket whenever you choose to and doesn't talk about selling the asset automatically if it falls. That certainly isn't market timing. I get that subsequent buys could be seen as timing, however.
PUP definitely isn't for speculative trading, however, so I certainly wouldn't (and don't) use it for that purpose.
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Post by Norbert on Apr 1, 2024 15:50:05 GMT
I also don't like recommending this to a certain "inexperienced" target audience, as it involves market timing and trading. Simple strategies like balanced funds or the Bogleheads stuff seem more attractive here. And you're right that recognizing "compelling value" is more easily said than done. Again, I do like using PUP for speculative trading. I may have a brilliant idea that a certain company is going to me very successful. But, I just buy one bucket, waiting for the price action to confirm my theory. Am not trying to attack R48 by playing the "naysayer", but this is an investment discussion board. So, we discuss. Not sure I completely agree with the market timing comment. I believe R48 specifically talks about buying the first bucket whenever you choose to and doesn't talk about selling the asset automatically if it falls. That certainly isn't market timing. I get that subsequent buys could be seen as timing, however.
PUP definitely isn't for speculative trading, however, so I certainly wouldn't (and don't) use it for that purpose.
I thought that buying the first bucket involved some type of market analysis, such as "compelling value" or "rising trend", but could be wrong. As you argue, identifying "compelling value" is not an easy thing to know. R48 repeatedly states that Rule 1 is to not lose capital. I don't see any way to do that excepting with market timing. He writes about "moving average controls", for example, on the sell side. Ultimately, I do see value in PUP for trading: to ride the momentum. Yes, that's pure market timing. I have no issue with that, but it's not easy to get right. What I don't see is recommending a momentum trading strategy for novice investors. Yes, PUP gets you into the market and provides a degree of psychological comfort. The price for that is a tendency to buy and higher, which can bite you later on. If I really don't have a clue about investing, I'd go with a DCA strategy, which also gets you into the market a little at a time. My 2 cents ...
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Post by junkster on Apr 1, 2024 17:12:04 GMT
FWIW. Pyramid up trading aka as scale up Is as old as the hills. It was first popularized in Edwin Lefevre trading classic Reminiscences of a Stock Operator 1923. It hit mainstream in the early sixties with Nicolas Darvas best selling book How I Made $2,000,000 in the Stock Market. It has been written about extensively and the Benton Davis gem Dow 1000 comes to mind from 1964. Adapted by equity and bond mutual fund traders in the 90s there were a few books written on its implementation there. The thinking being that mutual funds are more trend persistent than individual equities and hence more amenable to scale up trading. Albeit often ridiculed, bond mutual funds being even more trend persistent than equity mutual funds a small subset of traders have adopted it there.
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Post by oldskeet on Apr 1, 2024 19:32:36 GMT
Hi junkster. It nice to see you posting on the BBB. I have always enjoyed reading your post and hope you will continue to post more often. Old_Skeet
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Post by retiredat48 on Apr 2, 2024 23:39:34 GMT
retiredat48 , "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 If one reversed those buys and made his first purchase @ $52.29 (09/2008) and averaged down to the last one @ $43.66 (07/2009) wouldn't the end result be the same when the price reached $120, assuming equal purchases? Granted, he would have had a temporary loss of capital for 6-8 months but a seasoned buy and hold investor (see Bogle) should be able to handle that. No? Or, someone who averaged down would have possibly continued to buy from 09/2008 to 03/2009, picking up more shares with a cost basis in the $30s. You're mathematically correct. But you ignore the fund the person may have bought that wasn't in such a decline. How much did it gain? IOW there is always an alternate opportunity. Second...investors do not do this often. The "behavioral part" takes over and they start selling down near those low points, thinking it is going to zero. It's where the term buy high/sell low comes from in describing the average retail investor. IMO most investing result are determined by "behavior"...that is what needs to be self-controlled. And many such sellers who get burnt simply hold dogs forever...and many investors who do sell, never returning to the market again. R48
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Post by retiredat48 on Apr 2, 2024 23:49:33 GMT
Imo, the key is: who is the target audience for PUP? I would posit that said audience would be unlikely to buy as prices fall; nor would they recognize a "compelling value"; nor accurately identify something which was in a death spiral. In short, the vast majority of posters here are probably not the target audience. It appears primarily to be a methodology to get people into the market, limit 'losses', and keep them there. ... Really, our posters are that great and don't have behavioral issues, and always do well? OK, here is a one month sample of people posting of using Pyramid Up in their investing style, when I posted often about PyrUp on Morningstar. Perhaps many remember some names: ------------------------------------ POSTERS USING PYRAMID UP/1st Qtr 2011 The 62 Dog...Py Up Hospitalities Properties (HPT), a second bucket addition to my dividend payers...Will Pyramid Up, or exit as the market dictates... YinYang...Bought: VDE---VUG---VYM. Reason: Bucket purchases on all three funds pyramiding UP R48 :-) elder...Bought second bucket of USCI. Pyramid up. Bill/ Added to DGS - pyramid up. bythenbrs...Added another bucket of VVR yesterday, the third of four planned. Pyramid up on the third bucket on good price momentum.... Purchased final buckets of GDO and AWF. Added additional buckets of GIM and PFN. bubbygator...Bought last bucket of MWHYX @ 8.5% yield and HIO @ 8.95% yield - continuing to put free cash to work. Each was PyUp; dale11...Purchased another bucket of VUG, following the momentum of large cap growth...I, too, added to my small cap Brazil (BRF) holdings. Emerging markets do seem to be coming back (fingers crossed), and BRF is one of those leading the pack. This is not a strict "pyr up" bucket though. floete...Bought second bucket of WSCVX. SileneUK...Picked up a small position in KRE based on R48 recommendation for banks in this thread nybrian... I made a 2nd bucket of vix and a initial bucket in my 401k consisting of small, mid, international and index 500...Because of learning more about the 200dma, I bought my first bucket of VTI...bought 3rd buckets of Small Cap and Mid Cap funds in my 401k. Pyramid up. plainolbill...Bought a second bucket of BRKS - Brooks Automation which has been moving up nicely. rickrmf...Action: Sold, a first bucket of BRF, Brazil Small Cap ETF Why: NAV crossed below 200MA... reducing risk, following plan for incremental selling w/ continued down trend...on buckets: I use a modified bucket approach when pyr-up. GtrHtr...Why? I re-read R48s introductory post on bogleheads over the weekend and decided it was time to get off my backside and put more of my cash to work. Vagabond...Sold VDE as R48 explained, it was high above 200dma and started sloping down. Got some profits there. awstauffer...Bought my first buckets in each of the following ETF's...Reason- Starting the program. Rosemarie...Bought 100 shares of GE at $20.86 on 2/7/11. Why? I already had 200 shares of GE at $16.98. Thought I was pyramiding up. --------------------------------- R48
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Post by oldskeet on Apr 3, 2024 14:22:46 GMT
Hi guys. Now that we have had a couple of down days in the market and the outlook by some for more to follow I am wondering what the PUpers might have plans to trim, or sell off, trading positions? I am thinking that if you have a buying strategy then what is your exit strategy. For me, when small caps peaked at the end of the 4th quarter I began to trim back my spiff position and then exit after I felt the spiff had pretty much exhausted it's near term upward run. For me, the smids are going to be interest rate sensitive and with the rising near term rates caused by a possibly FOMC pivot in holding rates steady for longer. How are you handling this in your PUp positions?
For me, I have a history to buy and add to my long term buy and hold positions in down markets. I'd need to see S&P500 pullback to somewhere around 4990 before I'd start to buy around the edges.
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Post by uncleharley on Apr 3, 2024 16:03:46 GMT
I am not sure I am a Pyr Upper, but I share the notion that we might be starting correction in the broader stock market. At this point I am more inclined to expect a period of consolidation rather than a correction, with further advances in the future. Given that opinion, if the S&P 500 drops below 5150 I will become more serious about where the support may be. Meanwhile, yesterday I sold my leveraged position in the Q's and opened a position that can be leveraged in the Agricultural Commodities. The Q's have not been working for me for some time and I think the prices for food will continue to go up for some time to come. I think the new position may become a long-term position.
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Post by retiredat48 on Apr 3, 2024 22:58:01 GMT
Hi guys. Now that we have had a couple of down days in the market and the outlook by some for more to follow I am wondering what the PUpers might have plans to trim, or sell off, trading positions? I am thinking that if you have a buying strategy then what is your exit strategy. For me, when small caps peaked at the end of the 4th quarter I began to trim back my spiff position and then exit after I felt the spiff had pretty much exhausted it's near term upward run. For me, the smids are going to be interest rate sensitive and with the rising near term rates caused by a possibly FOMC pivot in holding rates steady for longer. How are you handling this in your PUp positions? For me, I have a history to buy and add to my long term buy and hold positions in down markets. I'd need to see S&P500 pullback to somewhere around 4990 before I'd start to buy around the edges. A couple of down days seldom results in a conclusion to sell something. And the things I may sell are NOT the things I have been pyramid up buying, as by definition these Pyrups have been doing well. Example...I have not added to a large core holding in healthcare in a couple years at least. I am unsure of HC going forward. If I lighten the load in this bull market it will be in healthcare first...because of "all things considered." And maybe...maybe...also a slight rebalancing out of high tech. BTW I said I would post my selling strategy...its coming soon. Want to give pyr up a few days as selling is separate from Pyr Up Buyin technique. R48
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Post by retiredat48 on Apr 3, 2024 23:02:07 GMT
FWIW. Pyramid up trading aka as scale up Is as old as the hills. It was first popularized in Edwin Lefevre trading classic Reminiscences of a Stock Operator 1923. It hit mainstream in the early sixties with Nicolas Darvas best selling book How I Made $2,000,000 in the Stock Market. It has been written about extensively and the Benton Davis gem Dow 1000 comes to mind from 1964. Adapted by equity and bond mutual fund traders in the 90s there were a few books written on its implementation there. The thinking being that mutual funds are more trend persistent than individual equities and hence more amenable to scale up trading. Albeit often ridiculed, bond mutual funds being even more trend persistent than equity mutual funds a small subset of traders have adopted it there. Sure. I don't doubt many investors of past years did similar buyin methods. I even posted how Capecod "never averages down." But I have been using the term Pyramid Up since the 1970's; I don't see this specific word used in much literature back then. I credited the source from where I got it...a 1950's stock picking champion. Lastly...those people you cite were mostly individual stock pickers; I adopted it to mutual fund investing. I stand with Al Gore R48
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Post by retiredat48 on Apr 3, 2024 23:14:53 GMT
Unless and until it is shown that "pyramiding up" adds value to an investment portfolio, I would not consider it worthwhile. Is anyone aware of any data showing the value added using this method? Not anecdotal but independent data. Sorry but this is an area I will not tread over again. Spent much of last 18 years, especially on boglehead.org providing data. Reams of backtesting including backtesting by many others. But the problem is backtesting assumes for instance common buy dates...like lump sum vs pyr up. But that misses the point. PyrUp ALLOWS one to buy...always. LS is feared by many especially in markets hitting new highs...like NOW. I see the buys/sells/why thread void of many posters saying they aren't buying anything now. Too afraid to pull the trigger with lump sum. Consequently if market goes up, they miss out for years. Here is a summary of relative performance of Pyramid Up versus Lump Sum versus Dollar Cost Averaging: Stock Market Immediate Rises and keeps goingLump sum....performs best. DCA and PyrUP...lesser gain, both return about the same. Performance difference a "blip" over long term gains. Stocks immediately fall, into bear market down 33%Lump sum.....worst...terrible performance DCA......not as bad, but terrible performance when fully in. PyrUP....slight loss. Avoided the entire bear market losses (Norbert acknowledged this is how I won the market contest two decades ago) ---------------------------------------------------------- PyrUp is like an insurance policy...you give up some of the gains if huge gains ensue; but you greatly mitigate huge loss potential. Seems this is the desire of most retirees. R48
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Post by archer on Apr 3, 2024 23:43:36 GMT
There has been much admonition to keep emotions out of investing, but unless we are without emotion, we are likely to be influenced in how we invest. Conservative investing to control risk is an example of a cautious approach, and caution is emotionally based. So, whether to use DCA or PU is likely a choice made which feels like the best approach. PU can provide encouragement to those who otherwise would not invest at all. I've met a few people who were afraid to invest for years after '08, and I remember one of my employees who would not invest in anything other than cash even before 2000, thinking that it was no different than taking his money to a casino. I recommended PU to him, thinking that he could actually see some growth before investing his money while still knowing the market goes up and down. I don't think he ever invested outside of what I was contributing to his IRA, but he did agree that he would be more comfortable with that than investing without regard to past performance.
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Post by mozart522 on Apr 4, 2024 15:10:24 GMT
A couple of points. One, all investing results are based on luck (or bad luck). Statistically, DCA and PU are suboptimal from a pure investment standpoint to "all in". However, at any given time, DCA, PU, or VA can be better over some periods and possibly even over long periods. That part is just luck. Number two, the only method that will be successful is the one you choose and are willing to stick to. Someone with the psychological ability to go all in and never rebalance or change anything will generally have the highest return for the same allocation. This may be much easier in one's 30s but it gets a lot harder in one's mid-70s. I know I can't.
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Post by retiredat48 on Apr 4, 2024 22:07:49 GMT
A couple of points. One, all investing results are based on luck (or bad luck). Statistically, DCA and PU are suboptimal from a pure investment standpoint to "all in". However, at any given time, DCA, PU, or VA can be better over some periods and possibly even over long periods. That part is just luck. Number two, the only method that will be successful is the one you choose and are willing to stick to. Someone with the psychological ability to go all in and never rebalance or change anything will generally have the highest return for the same allocation. This may be much easier in one's 30s but it gets a lot harder in one's mid-70s. I know I can't. Indeed. Sure...much easier for one in their age thirties. I have promoted for two decades that for young people, they should have a 100/0 allocation up to $150,000 size portfolio. That is, no bonds; all stock funds, and keep invested. Further, most young people do their company 401.Ks as their main source of savings. This type of investing is classic Dollar Cost Averaging. You take some from each biweekly paycheck, and invest it simultaneously--DCA. And if you SEEK VOLATILITY you can add up to 2% CAGR a year in additional alpha performance. If you make a major switch among funds or stock allocations, you can do Pyramid Up to sequence out of a fund, and into another...in buckets. BTW M* published one of my articles titled: "Five Creative Ways to Enhance Your 401.K Investing."BTW #2...I have five pillars of my investing strategy. Pyramiding Up is only one of them...a buy-in technique. R48
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Post by Norbert on Apr 5, 2024 13:50:54 GMT
Unless and until it is shown that "pyramiding up" adds value to an investment portfolio, I would not consider it worthwhile. Is anyone aware of any data showing the value added using this method? Not anecdotal but independent data. Sorry but this is an area I will not tread over again. Spent much of last 18 years, especially on boglehead.org providing data. Reams of backtesting including backtesting by many others. But the problem is backtesting assumes for instance common buy dates...like lump sum vs pyr up. But that misses the point. PyrUp ALLOWS one to buy...always. LS is feared by many especially in markets hitting new highs...like NOW. I see the buys/sells/why thread void of many posters saying they aren't buying anything now. Too afraid to pull the trigger with lump sum. Consequently if market goes up, they miss out for years. Here is a summary of relative performance of Pyramid Up versus Lump Sum versus Dollar Cost Averaging: Stock Market Immediate Rises and keeps goingLump sum....performs best. DCA and PyrUP...lesser gain, both return about the same. Performance difference a "blip" over long term gains. Stocks immediately fall, into bear market down 33%Lump sum.....worst...terrible performance DCA......not as bad, but terrible performance when fully in. PyrUP....slight loss. Avoided the entire bear market losses (Norbert acknowledged this is how I won the market contest two decades ago) ---------------------------------------------------------- PyrUp is like an insurance policy...you give up some of the gains if huge gains ensue; but you greatly mitigate huge loss potential. Seems this is the desire of most retirees. R48 It's definitely true that making a big lump-sum purchase right before a crash would cost us dearly. PUP would contain the damage (DCA also, to a degree). But, there's another scenario: Stock prices keep going up for a while, and then correct / crash later. It's easy to find examples: Tech in the late 1990s or TSLA in recent times. PUP would have us getting in at higher and higher prices, perhaps even right before a peak. So, while psychologically we might feel comfortable only adding when prices rise, we would in fact be reducing our margin of safety by buying at higher and higher prices. It's simply not true that PUP is a strategy to not ever lose money, though it can work at times. My favorite adage also comes from Buffett: "... be fearful when others are greedy and ... be greedy only when others are fearful". My record isn't perfect, but my biggest increases of wealth all came when I bought cheap. No, it didn't feel very good buying a hated, volatile market, but it always paid off over time. Most recently in 2016 (as posted before), I grabbed some property on Crete. There had just been a 50% crash during their financial crisis. The RE market was bleeding. I bought a property that even involved a suicide by a distraught owner; and offered his heir 75% of an already low price. The man just wanted to dump it (we actually became friends later). No way was I going to wait for a market recovery and higher prices! My point is that wise investing probably should involve some fear. We have to get over that; PUP seems to steer us in the opposite direction: following the herd. Better to practice being a contrarian investor. Having said that, I think R48 is right about the power of momentum investing. However, I think that's best done by traders capable of getting out when necessary. It's not easy being a good investor. Probably it makes sense to practice both contrarian and momentum strategies, depending on the situation. Good discussion! Thanks to R48 for a constructive debate. N.
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Post by anitya on Apr 5, 2024 15:16:52 GMT
Hopefully you guys will highlight when you start discussing / laying out sell strategies. I have been anxiously waiting for that for years. My port performance would improve by leaps if only I have good sell strategies. uncleharley contributed to me greatly by making me aware of the importance of having price targets.
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Post by Norbert on Apr 5, 2024 15:45:53 GMT
My favorite "sell" indicator is a blow-off top like we saw with this ETF after the wonderful 2020 COVID "free money" rally. The uptrend was broken with a huge upward surge driven by the green Alt Energy narrative. I refer to this as a parabolic move (Chang objects to the misuse of the term). It's impossible to get the exact top right, but that doesn't matter. Dumb money following a FOMO strategy is a sell signal. Hmmm. The price is back down to good support. Might be a buy now? I suggest using PUP in this situation ... if you see value. 😄 (Click to enlarge.)
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Post by archer on Apr 5, 2024 18:01:25 GMT
Hopefully you guys will highlight when you start discussing / laying out sell strategies. I have been anxiously waiting for that for years. My port performance would improve by leaps if only I have good sell strategies. uncleharley contributed to me greatly by making me aware of the importance of having price targets. I too struggle with selling. For me, selling during a secular bull market seems more often than not a way to miss out on further gains. So, my sells are often the first step in being whipsawed. Adding to the stakes is that often when stocks fall, they seem to fall faster on average than they gain. So on the one hand they go up more often than down, but when they go down they can lose a lot in a shorter time. Some pros have advised not to expect too much of ourselves or the various methods of managing assets. If we are right even 60% of the time, we're doing great. It is easy to let one or a few mishaps lead us to think _____ doesn't work.
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Post by anitya on Apr 5, 2024 18:10:25 GMT
Should we start a new thread for sell strategies so it is easier to make a good summary when we finish discussing? Norbert, Yes, that parabolic move gives one a pause. Now help me with the SMH 5 year chart. I guess we sell at the beginning of 2022 and get back in at the beginning of 2023 when Open AI became a household name. When should we have sold SMH the next time? or should we sell now? I do not own SMH, just using it as an example to understand. archer, In my investing, i have more regrets about selling too soon than from any other action. The lost profits are just huge and overwhelm the lost opportunities and actual losses. I really need to get to the bottom of my behavioral issues likely driving this. E.g., in the last few months, sold UBER at $48, sold DELL at $63, sold AVGO at $950. So, the new cure is to buy back the minute I realize I made a mistake selling too soon. I recently bought back something 8% higher than what I sold at a few weeks ago. But I would rather not have the disease. My goal is to make fewer trades.
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Post by liftlock on Apr 5, 2024 18:37:37 GMT
Hopefully you guys will highlight when you start discussing / laying out sell strategies. I have been anxiously waiting for that for years. My port performance would improve by leaps if only I have good sell strategies. uncleharley contributed to me greatly by making me aware of the importance of having price targets. Stan Weinstein's Secrets for Profiting in Bull and Bear Markets is a worthwhile read on the subject. www.amazon.com/Stan-Weinsteins-Secrets-Profiting-Markets-dp-1556230796/dp/1556230796/ref=dp_ob_title_bkStan doesn't use price targets. He provides a simple chart reading methodology to identify and invest in a favorable price trend while giving it room to run. He shows how to raise selling points as profits grow. Pyramiding up provides a strategy to reduce the risk of loss by not buying more of a security that is moving down in price against the desired direction of the trade. Beyond that, traders are often taught to place tight selling stop loss limits on their trades. The idea is to immediately exit any trade that is not moving in the desired direction so that investing capital is preserved for another trade. Pyramiding up can outperform if it is accompanied by a sensible sell strategy.
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Post by liftlock on Apr 5, 2024 19:03:10 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? Some investors will allocate a % of their investing capital to a single position or place $ limits on how much to invest it it. They might then use pyramiding up to buy into that position in buckets. e.g. Buy 1/3 of a position at a time. One might continue adding to a position where the price trend is strong or if a position corrects to a previous buy point, perhaps to a moving average. Rules are going to vary with the investor.
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bruce
Lieutenant
Posts: 56
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Post by bruce on Apr 5, 2024 19:29:10 GMT
Pyramiding up can outperform if it is accompanied by a sensible sell strategy. Pyramiding can also underperform just as well as other strategies that attempts to outperform.
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