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Post by fishingrod on Apr 8, 2024 9:05:32 GMT
"I’ve been staying short while the yield curve is inverted. Why? Because 1) I’m getting paid the most by owning the top of the yield curve (6-12 months), and there’s no need to hurry to buy longer durations; 2) if LT yields rise, then prices will fall. I think you’ve got it backwards (or do I?)."
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#2 is where I have questions. What if LT yields don't rise when FED lowers rates? Why would LT rates rise when the FED is lowering? I would see
the opposite happening. I would see people gravitating towards Longer term bonds with yields that are close to the FED rate, which would be
being lowered, locking in a rate for longer. If/when the FED lowers rates, very short bonds will no longer provide that yield, people will go
somewhere else for that yield, pushing LT yields even lower and prices higher. If one waits until the yields cross each other, then the LT yield will
have a much higher price on it then. That is what makes it an investing call and more difficult, at least for me. One never knows when/what yields
and rates will do until after they have done them. And after they have made those moves, the windows of opportunity are already closed, or at
least are an expensive trade.
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Post by Chahta on Apr 8, 2024 12:10:53 GMT
"I’ve been staying short while the yield curve is inverted. Why? Because 1) I’m getting paid the most by owning the top of the yield curve (6-12 months), and there’s no need to hurry to buy longer durations; 2) if LT yields rise, then prices will fall. I think you’ve got it backwards (or do I?)."
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#2 is where I have questions. What if LT yields don't rise when FED lowers rates? Why would LT rates rise when the FED is lowering? I would see the opposite happening. I would see people gravitating towards Longer term bonds with yields that are close to the FED rate, which would be being lowered, locking in a rate for longer. If/when the FED lowers rates, very short bonds will no longer provide that yield, people will go somewhere else for that yield, pushing LT yields even lower and prices higher. If one waits until the yields cross each other, then the LT yield will have a much higher price on it then. That is what makes it an investing call and more difficult, at least for me. One never knows when/what yields and rates will do until after they have done them. And after they have made those moves, the windows of opportunity are already closed, or at least are an expensive trade.
I think Chang was just saying IF LT rates rise, for whatever reason you lose principal. Definitely yields will fall when the Fed lowers. No one pays more interest than necessary. The sweet spot for buying LT bonds was last year with the 10-year paying 5%. The time to buy DODIX (for example) was 2022/2023. The NAV is up over 5% from the lows. I am talking about establishing a position, not a trade. With the first rate cut these funds will zoom up and most likely well before the cut. But our crystal balls will warn us it's time to buiy. With MM still paying 5%, the temptation is great.What all this has to do with Pyr Up I don't know.
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Post by Chahta on Apr 8, 2024 12:19:51 GMT
richardsok , I think the data proves it's best to be greedy when others are also. The annualized returns during periods of low VIX are much greater than when the VIX is high. But, no worries. I will not repeat this ever again :-) Except you must be greedy at the correct time. You must be greedy at the beginning not the end.
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Post by mnfish on Apr 8, 2024 12:43:32 GMT
"I’ve been staying short while the yield curve is inverted. Why? Because 1) I’m getting paid the most by owning the top of the yield curve (6-12 months), and there’s no need to hurry to buy longer durations; 2) if LT yields rise, then prices will fall. I think you’ve got it backwards (or do I?)."
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#2 is where I have questions. What if LT yields don't rise when FED lowers rates? Why would LT rates rise when the FED is lowering? I would see the opposite happening. I would see people gravitating towards Longer term bonds with yields that are close to the FED rate, which would be being lowered, locking in a rate for longer. If/when the FED lowers rates, very short bonds will no longer provide that yield, people will go somewhere else for that yield, pushing LT yields even lower and prices higher. If one waits until the yields cross each other, then the LT yield will have a much higher price on it then. That is what makes it an investing call and more difficult, at least for me. One never knows when/what yields and rates will do until after they have done them. And after they have made those moves, the windows of opportunity are already closed, or at least are an expensive trade.
I think Chang was just saying IF LT rates rise, for whatever reason you lose principal. Definitely yields will fall when the Fed lowers. No one pays more interest than necessary. The sweet spot for buying LT bonds was last year with the 10-year paying 5%. The time to buy DODIX (for example) was 2022/2023. The NAV is up over 5% from the lows. I am talking about establishing a position, not a trade. With the first rate cut these funds will zoom up and most likely well before the cut. But our crystal balls will warn us it's time to buiy. With MM still paying 5%, the temptation is great. What all this has to do with Pyr Up I don't know. @chang - Is there any possibility of moving some of these posts to the Bond forum? I've been interested in this as I am no bond expert.
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Post by racqueteer on Apr 8, 2024 12:53:16 GMT
@chang - Is there any possibility of moving some of these posts to the Bond forum? I've been interested in this as I am no bond expert. That might also help resolve the tendency to lump all this together with PUP. None of the current discussion, including the proposed selling rules, actually falls under PUP conventions. Or, more broadly, we're talking about R48's trading methodologies; of which PUP is only one of at least three separate facets. The terms are getting conflated and shouldn't be.
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Post by Chahta on Apr 8, 2024 14:11:14 GMT
I think Chang was just saying IF LT rates rise, for whatever reason you lose principal. Definitely yields will fall when the Fed lowers. No one pays more interest than necessary. The sweet spot for buying LT bonds was last year with the 10-year paying 5%. The time to buy DODIX (for example) was 2022/2023. The NAV is up over 5% from the lows. I am talking about establishing a position, not a trade. With the first rate cut these funds will zoom up and most likely well before the cut. But our crystal balls will warn us it's time to buiy. With MM still paying 5%, the temptation is great. What all this has to do with Pyr Up I don't know. @chang - Is there any possibility of moving some of these posts to the Bond forum? I've been interested in this as I am no bond expert. You know what I have learned? Buying bond funds at elevated prices is no fun. That is why buying now while prices are low is a smart thing. If the yield is not needed for income now then reinvest at low prices and build income streams for when it is needed with the added benefit of price appreciation down the road. Something I see here and other forums is trying to outsmart the markets. Basic finance says when rates high bonds are cheap. Rates will never stay high forever. Since I start RMDs next year I want my portfolio to do something for me. I don't want me to do something for it.
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Post by rhythmmethod on Apr 8, 2024 14:26:26 GMT
@chang - Is there any possibility of moving some of these posts to the Bond forum? I've been interested in this as I am no bond expert. You know what I have learned? Buying bond funds at elevated prices is no fun. That is why buying now while prices are low is a smart thing. If the yield is not needed for income now then reinvest at low prices and build income streams for when it is needed with the added benefit of price appreciation down the road. Something I see here and other forums is trying to outsmart the markets. Basic finance says when rates high bonds are cheap. Rates will never stay high forever. Since I start RMDs next year I want my portfolio to do something for me. I don't want me to do something for it. I agree with this. I have been buying EDV (in very small amounts) below 73. One day I may be glad, but in the meantime I'm just tollerating it.
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Post by archer on Apr 8, 2024 14:49:28 GMT
richardsok , I think the data proves it's best to be greedy when others are also. The annualized returns during periods of low VIX are much greater than when the VIX is high. But, no worries. I will not repeat this ever again :-) Except you must be greedy at the correct time. You must be greedy at the beginning not the end. True about not being greedy at the end. In my first post about buying when the vix is low I was going by the chart below which I found on Stockcharts.com showing increased annualized returns the lower the vix goes. Investing when the vix goes above 20 coincides with falling prices. I agree higher vix would be good for long term buys, assuming the market will not be down long term. For PU it would be very discouraging to buy during elevated vix levels.
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Post by Norbert on Apr 8, 2024 15:30:28 GMT
Except you must be greedy at the correct time. You must be greedy at the beginning not the end. True about not being greedy at the end. In my first post about buying when the vix is low I was going by the chart below which I found on Stockcharts.com showing increased annualized returns the lower the vix goes. Investing when the vix goes above 20 coincides with falling prices. I agree higher vix would be good for long term buys, assuming the market will not be down long term. For PU it would be very discouraging to buy during elevated vix levels. View AttachmentThat's a misleading chart. It's measuring returns for entire periods; not measuring returns assuming an investor bought stocks after the Vix soared. Anyone who bought the early 2020 Covid crash (high Vix) doubled their money from then to now. Be greedy when others are fearful ...
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Post by archer on Apr 8, 2024 16:01:43 GMT
True about not being greedy at the end. In my first post about buying when the vix is low I was going by the chart below which I found on Stockcharts.com showing increased annualized returns the lower the vix goes. Investing when the vix goes above 20 coincides with falling prices. I agree higher vix would be good for long term buys, assuming the market will not be down long term. For PU it would be very discouraging to buy during elevated vix levels. View AttachmentThat's a misleading chart. It's measuring returns for entire periods; not measuring returns assuming an investor bought stocks after the Vix soared. Anyone who bought the early 2020 Covid crash (high Vix) doubled their money from then to now. Be greedy when others are fearful ... I can see your point Norbert. So for PU would it have been best to start adding buckets in late Feb when the vix started going up, or in late march when the vix started going down? I'm excluding tops and bottoms since they are unknown beforehand.
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Post by retiredat48 on Apr 8, 2024 16:09:23 GMT
Norbert, richardsok,et al...I agree with Norbert's use of the VIX. VIX down to around ten is sell zones; VIXs above 20 are buy zones to watch for. Best is have vix peak in either direction, begin a turnaround, then action. BTW I had difficulty presenting my SELL CRITERIA. Turns out my links to Morningstar posts were no longer active or usable. I have saved piecemeal copies of my strategy, but have to rewrite and post it. New thread targeted for tomorrow. R48
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Post by Norbert on Apr 8, 2024 16:11:04 GMT
That's a misleading chart. It's measuring returns for entire periods; not measuring returns assuming an investor bought stocks after the Vix soared. Anyone who bought the early 2020 Covid crash (high Vix) doubled their money from then to now. Be greedy when others are fearful ... I can see your point Norbert. So for PU would it have been best to start adding buckets in late Feb when the vix started going up, or in late march when the vix started going down? I'm excluding tops and bottoms since they are unknown beforehand. I don't think the Vix offers a tradable signal. It's not a leading indicator, though it definitely confirmed the market's panic. I think a PU investor might have bought a bucket in March or April 2020 based on "compelling value" (cheap price); then added buckets as the market went up. Once it became obvious that the government was going to throw money at the economy as if it were confetti, even a PU investor might have taken a full position. My 2 cents ...
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Post by retiredat48 on Apr 8, 2024 16:39:41 GMT
Chahta ,...who posted: " think Chang was just saying IF LT rates rise, for whatever reason you lose principal. Definitely yields will fall when the Fed lowers. No one pays more interest than necessary. The sweet spot for buying LT bonds was last year with the 10-year paying 5%. The time to buy DODIX (for example) was 2022/2023. The NAV is up over 5% from the lows. I am talking about establishing a position, not a trade. With the first rate cut these funds will zoom up and most likely well before the cut. But our crystal balls will warn us it's time to buiy. With MM still paying 5%, the temptation is great. What all this has to do with Pyr Up I don't know."R48 reply...Chata is correct. Pyramid Up buying does not apply to bond funds...primarily because they are contractual instruments and not growth ownerships. OK to average down bond funds.
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Post by retiredat48 on Apr 8, 2024 16:48:53 GMT
I can see your point Norbert. So for PU would it have been best to start adding buckets in late Feb when the vix started going up, or in late march when the vix started going down? I'm excluding tops and bottoms since they are unknown beforehand. I don't think the Vix offers a tradable signal. It's not a leading indicator, though it definitely confirmed the market's panic. I think a PU investor might have bought a bucket in March or April 2020 based on "compelling value" (cheap price); then added buckets as the market went up. Once it became obvious that the government was going to throw money at the economy as if it were confetti, even a PU investor might have taken a full position. My 2 cents ... While the VIX may not be a leading indicator, or not that tradeable, when extremes happen, they happen. One can observe then act. Any VIX above 30 will be a buy zone soon for me. When will this happen in future?...don't know. But if/when it does it will be Max Fear Gauge Buy Time. R48
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bruce
Lieutenant
Posts: 56
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Post by bruce on Apr 8, 2024 20:07:13 GMT
As I read through this thread, I can't help but recall pkcrafter's mid-2000s advice after he read through 56 questions on another forum from members asking for more straightforward explanations of Pyramiding Up's strategy.
"I don't think the vast majority of newer readers on this forum should consider pyramiding at all. Why? Witness this thread with 56 posts trying to understand the strategy." pkcrafter
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Post by racqueteer on Apr 8, 2024 20:29:39 GMT
As I read through this thread, I can't help but recall pkcrafter's mid-2000s advice after he read through 56 questions on another forum from members asking for more straightforward explanations of Pyramiding Up's strategy. "I don't think the vast majority of newer readers on this forum should consider pyramiding at all. Why? Witness this thread with 56 posts trying to understand the strategy." pkcrafter I suspect, however, the same issue being the problem, and my (admittedly faulty) recollection is that this was the case. PUP itself is simple; as is its application. The issue always raised is on its production in relation to other approaches; its efficacy for all investors. For the investors for whom and for whose purpose it is intended: someone reluctant to invest or who will engage in imprudent behaviors if left to their own devices, PUP is an excellent approach. One can make the same argument for indexing or for passive investing. For the audience for whom it is intended, it's fine.
Now, if you're soliciting additional advice about maximizing profits, picking an entry point, developing a selling methodology, etc, those are separate issues entirely. Dragging them into every PUP conversation is where the dissension comes in.
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Post by retiredat48 on Apr 8, 2024 21:38:35 GMT
As I read through this thread, I can't help but recall pkcrafter's mid-2000s advice after he read through 56 questions on another forum from members asking for more straightforward explanations of Pyramiding Up's strategy. "I don't think the vast majority of newer readers on this forum should consider pyramiding at all. Why? Witness this thread with 56 posts trying to understand the strategy." pkcrafter bruce,...it's OK bruce, for you seem to be the only one posting that Pyr Up is complicated. Even after I boiled it down and described it in one sentence; even though I cited many, many investors who stated they were doing Pyr Up buying. Even though I posted where a newbie DIY investor found it easy to use. But let the facts show this: --The vast majority of mutual fund managers pyramid up buying their underlying holdings. As new money comes into the successful funds, they buy more and more of winners...at higher prices. Fidelity's guru fund manager Peter Lynch stated it was about four individual stocks, the big winners that he kept accumulating at higher prices, that enabled him to be top fund manager among peers.(Magellan Fund). --Warren Buffett wrote that his best and worst investments were in one company, IBM. He kept buying more and more on the upside (PyrUp) for many years into one of his largest holdings (the success). But inexplicably he started averaging down buying IBM...down...down...down, for many years (the failure). He lamented it was his worst mistake ever! He went against his rule. R48
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bruce
Lieutenant
Posts: 56
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Post by bruce on Apr 8, 2024 23:06:29 GMT
FYI, I have never said nor implied that Pyramid Up is complicated. My degree, as old as it is, is in Finance. There is no need to say I do not understand the strategy. The one question I did ask you is if you or anyone else had any empirical performance data as opposed to the purely anecdotal stories on how so many members have benefitted from its use. I remember reading your initial post on the Boglehead site years after I began posting. In it, you claimed you were using Boglehead Philosophy yet "promoting" Pyramid up, which stood out amongst other postings. Since you posted more on that strategy than anyone else, I thought you may have come across hard data supporting the technique. While it may provide for interesting theoretical discussion, I do not recommend it for novice or experienced investors, but to each their own. There are many roads to Dublin. Cheers
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Post by Norbert on Apr 9, 2024 6:11:38 GMT
bruceAs others have stated, I don't think PUP's advantage can be measured. It's just a buy-in technique like DCA. There are no guidelines about when to start buying, what to buy, and when to sell. For example, R48 has posted that he wouldn't hesitate to buy something now (a first bucket). We all love R48's colorful posting style, but he might be overselling PUP by claiming that it works all the time or that you can't lose money using it. To put it mildly. That's misleading and has generated confusion. It just "works" in the sense that you only buy a full position of a fund or stock if the price has risen after buying the first four (?) buckets. Actually making money depends solely on what the market does during and after the bucket accumulation process. It's impossible to measure PUP's advantage (if any) on this basis, as there many variables at play. Yes, it will help if the fund or stock crashes during the bucket accumulation process (we didn't buy a full position); otherwise not. Time to move on, I'd say ...
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Post by chang on Apr 9, 2024 7:26:45 GMT
There are many roads to Dublin. Not only among two different investors, but even by a single investor. I'll use PUP when I want to own a stock but have no idea whether it's overvalued or undervalued. It's a very cautious strategy. But I'll also lump sum when I have a strong conviction that something is highly oversold. And I will blindly DCA, for example, in a 401k with a very long time-horizon. One person -- three different strategies -- why not.
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Post by Mustang on Apr 9, 2024 7:41:21 GMT
As a buy and hold investor I've always used DCA. I have re-balanced my portfolio moving to a more conservative position as I transitioned to retirement. Other than that my only sell strategy has been monthly RMDs. As the market goes up and down my portfolio has lost value but I have never lost money. I have never sold below my average cost. Should a disaster happen RMDs may force that in the future but that seems unlikely. It really doesn't matter if I bought at $17 on the way down or bought at $17 on the way up if I sell at $34 I've doubled my money..
If, as this thread points out, pyramid up is a buy only strategy then it is literally impossible to say it never loses money. The gain or loss only occurs with a sale. It is the sales strategy that would determine that.
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Post by Norbert on Apr 9, 2024 8:27:42 GMT
There are many roads to Dublin. Not only among two different investors, but even by a single investor. I'll use PUP when I want to own a stock but have no idea whether it's overvalued or undervalued. It's a very cautious strategy. But I'll also lump sum when I have a strong conviction that something is highly oversold. And I will blindly DCA, for example, in a 401k with a very long time-horizon. One person -- three different strategies -- why not. This post is far too logical and reasonable. Different strategies for different situations? Do whatever works, regardless of ideology? You've starting to sound like Lee Kuan Yew. Actually, it's interesting how Singapore positions itself between right and left. Yew created a meritocracy, while also seeing that many people would never be able to take care of themselves. Hence, a large amount of socialized housing and cheap, high-quality transport. He always had concerns about a "one man, one vote" system; and made it clear to trade unions that they wouldn't be allowed to compromise the progress and competitiveness of the country. So, a fascinating mix of "ideologies". that actually works. Like your mix of investing concepts. Sorry for the digression. Am in the middle of reading Yew's books.
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Post by mnfish on Apr 9, 2024 11:07:13 GMT
Just a quote from Bogle before I stop posting on this thread -
“The one piece of advice I would categorically give everybody is: For God’s sake, don’t stop a program of regular investing because the market goes down. You’re killing the whole value of dollar-cost averaging.”
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Post by Chahta on Apr 9, 2024 12:06:31 GMT
As I read through this thread, I can't help but recall pkcrafter's mid-2000s advice after he read through 56 questions on another forum from members asking for more straightforward explanations of Pyramiding Up's strategy. "I don't think the vast majority of newer readers on this forum should consider pyramiding at all. Why? Witness this thread with 56 posts trying to understand the strategy." pkcrafter bruce,...it's OK bruce, for you seem to be the only one posting that Pyr Up is complicated. Even after I boiled it down and described it in one sentence; even though I cited many, many investors who stated they were doing Pyr Up buying. Even though I posted where a newbie DIY investor found it easy to use. But let the facts show this: --The vast majority of mutual fund managers pyramid up buying their underlying holdings. As new money comes into the successful funds, they buy more and more of winners...at higher prices. Fidelity's guru fund manager Peter Lynch stated it was about four individual stocks, the big winners that he kept accumulating at higher prices, that enabled him to be top fund manager among peers.(Magellan Fund). --Warren Buffett wrote that his best and worst investments were in one company, IBM. He kept buying more and more on the upside (PyrUp) for many years into one of his largest holdings (the success). But inexplicably he started averaging down buying IBM...down...down...down, for many years (the failure). He lamented it was his worst mistake ever! He went against his rule. R48 Pyr up is a non thinking strategy. You buy by the rules. Buffet let his brain override buying IBM on the way down. Why? Because he had so much success with IBM making money he knew it would go back up and make more money. Sound like how us common folk think?
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Post by Norbert on Apr 9, 2024 12:43:16 GMT
bruce ,...it's OK bruce, for you seem to be the only one posting that Pyr Up is complicated. Even after I boiled it down and described it in one sentence; even though I cited many, many investors who stated they were doing Pyr Up buying. Even though I posted where a newbie DIY investor found it easy to use. But let the facts show this: --The vast majority of mutual fund managers pyramid up buying their underlying holdings. As new money comes into the successful funds, they buy more and more of winners...at higher prices. Fidelity's guru fund manager Peter Lynch stated it was about four individual stocks, the big winners that he kept accumulating at higher prices, that enabled him to be top fund manager among peers.(Magellan Fund). --Warren Buffett wrote that his best and worst investments were in one company, IBM. He kept buying more and more on the upside (PyrUp) for many years into one of his largest holdings (the success). But inexplicably he started averaging down buying IBM...down...down...down, for many years (the failure). He lamented it was his worst mistake ever! He went against his rule. R48 Pyr up is a non thinking strategy. You buy by the rules. Buffet let his brain override buying IBM on the way down. Why? Because he had so much success with IBM making money he knew it would go back up and make more money. Sound like how us common folk think? Buffett made his IBM buy in 2011, after a big run-up; then he sold the dip seven years later for a 50% loss. Bad timing! He chased a rising price and sold right before the bounce. (Click to enlarge.) It can be said that PUP would have helped in this situation. Or, not chasing a rising price! 🙄
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Post by retiredat48 on Apr 9, 2024 14:39:15 GMT
Just a quote from Bogle before I stop posting on this thread - “The one piece of advice I would categorically give everybody is: For God’s sake, don’t stop a program of regular investing because the market goes down. You’re killing the whole value of dollar-cost averaging.” mnfish,...Fair enough. But I posted above that most people save via their 401.K plans, which is Dollar Cost Averaging in biweekly, smaller amounts. Absolutely you buy in falling markets and market bottoms. I went with a Dow average 1000 to dow average 1000 16 years later (1966 to 1981) (no change) yet my 401.K was way ahead due DCA. And M* published an article of mine on Five Creative Ways to Enhance Your 401.K Investing; none of the five involve Pyramid Up. R48
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Post by anitya on Apr 9, 2024 16:53:31 GMT
Some of Buffett’s sell decisions were intriguing to me. He held a multi billion position in TSMC for a few minutes.
He showed a lot of patience with OXY, pays meaningless amount of div. He kept buying more and more as prices dropped. Seems like the conviction is finally paying off. I would have sold a long time ago. That is why I am not Buffett.
Edit:
If anyone is interested in following BRK into their current trades, they have been averaging down on LSXMK / LSXMA. Not sure if it is Buffett or his deputies making these buys.
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Post by mozart522 on Apr 13, 2024 17:21:15 GMT
I see PU as a "comfort food" idea. As an indexer primarily, I wouldn't use it. For stocks OK, For active mf ok. For ETF and index funds no. The idea of catching a falling knife doesn't really apply to index funds as long as you have enough out of the market to sustain yourself during long market downturns. Holding and buying more index funds as the market falls and even on the way back up will make for more $ than buying a portion and sitting on it during downturns perhaps for a long time. Worse would be PU to your 3rd or 4th bucket and then have a long, deep downturn. PU can certainly lose money. Unless one believes that there may come a time when the market never comes back, then you have to believe that index funds will always come back. Not so with stocks or any active investment. Many certainly will, but there are a lot of examples of those that don't. PU is a buy higher strategy that shuns buying low. It isn't complicated as R48 says, but I don't see it as optimal for most investors.
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