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Post by oldskeet on Oct 2, 2021 9:09:07 GMT
When Stock Markets Start Falling What’s the Best Investment Strategy? Covered in the article (linked below) are some of the things you can do when volatility hits Wall Street. 1) Buy When Everyone Else is Selling 2) Sell and Limit Your Risks 3) Hold and Stick to Your Game Plan investorjunkie.com/investing/best-investment-strategy/For me, I'm invested in an all weather asset allocation of 20% cash, 40% bonds and 40% stocks that affords me the opportunity to buy during market pullbacks and to also use a seasonal investment strategy where I load equities come fall and then trim equities come spring. For me, option numer one is my plan A. Old_Skeet |
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Post by uncleharley on Oct 2, 2021 11:59:30 GMT
Using seasonal factors to time ones buying and selling is very useful and can add value to a portfolio. I like to refine the seasonal factors by using technical indicators. The fundamentals are also very important to me.
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Post by Fearchar on Oct 2, 2021 16:37:58 GMT
Really, it's best to sell before the Market starts to fall; or at least raise cash levels with the hubris is high.
That's the time when one needs to pair back and reduce risk.
Buying in though is even trickier. The strongest signal seems to be when their is obvious fear as was the case in March of last year. The general population was panicking and it was the best time to load up/ leverage up.
Most pull backs though are not that extreme. The current one comes to mind.
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Post by steelpony10 on Oct 2, 2021 16:55:19 GMT
I followed choice #1 for 40 years now I only follow choice #3 unless an unknown opportunity materializes. Then I sift through the rubble looking for any pieces that fit our plan. It has to be factually better then the rubble I’m holding though. 🤑
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Post by roi2020 on Oct 2, 2021 21:46:22 GMT
I prefer the third strategy - Hold and Stick to Your Game Plan.
An investor could create a portfolio with an appropriate asset allocation (accounting for risk tolerance and risk capacity) and then rebalance the portfolio periodically.
The second strategy, Sell and Limit Your Risks, sounds good in theory but may be very difficult to execute.
There can be huge opportunity costs when investors "stay on the sidelines" while stock markets are rising.
For example, some investors liquidated most or all of their equity positions in 2008/2009 and avoided stocks for years afterward.
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galeno
Commander
KISS & STC
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Post by galeno on Oct 3, 2021 13:30:09 GMT
KISS & STC.
ANNUALLY rebalance if and when equities and FI get out of balance by more than 5%.
In our 50/50 port that's a 10% equity decline. AKA a "correction".
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Post by Deleted on Oct 3, 2021 15:30:12 GMT
I just read Kiplinger's commentary. They see more volatility and more 3 day 10% corrections but still a good 2022. They favor US over international. Rising US rates would be bad for EM. Recommends to stay the course.
One viewpoint among many.
I have probably asked this before - why is rising US rates bad for EM?
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Post by steelpony10 on Oct 3, 2021 15:47:21 GMT
@waffle , www.federalreserve.gov/econres/notes/feds-notes/are-rising-u-s-interest-rates-destabilizing-for-emerging-market-economies-20210623.htm This is my opinion and a good example why developing markets always lag returns, the financial state compared to the developed countries. Why invest there after adding yet another unknown? Always invest in the best (financially) managed positions which attract other investors especially professionals. The Fed reports (notes), although not flashy, are as close as you’re ever going to come to predicting the future. Their opinion is based on their professional interpretation of the present facts not what “they think” while eating breakfast. |
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Post by Deleted on Oct 3, 2021 16:59:54 GMT
from that fed link - "That said, were future increases in interest rates to reflect heightened concerns about inflation, vulnerable EMEs would likely come under pressure."
That seems very likely to me.
'
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Post by Fearchar on Oct 3, 2021 19:37:49 GMT
Rising U.S. interest rates are often considered to be bad news for emerging market economies as they increase debt burdens, trigger capital outflows, and generally cause a tightening of financial conditions that can lead to financial crises.
In other words, capital will flow toward the higher rates.
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Post by xray on Oct 3, 2021 20:42:37 GMT
oldskeet, Your: When Stock Markets Start Falling What’s the Best Investment Strategy? 1) Buy When Everyone Else is Selling 2) Sell and Limit Your Risks 3) Hold and Stick to Your Game Plan 4) For me, I'm invested in an all weather asset allocation of 20% cash, 40% bonds and 40% stocks that affords me the opportunity to buy during market pullbacks and to also use a seasonal investment strategy where I load equities come fall and then trim equities come spring. For me, option numer one is my plan A. ---------- 1... Not very acceptable if we are not watching our portfolio and watch list. Normally, if/when panic strikes, we should be reviewing and analyzing our portfolio and "watch List" for the best bargains [if any] and buy accordingly [like many of us are currently doing].... 2... Selling a good security in our portfolio's is normally a very bad idea. Selling reduces your previous attained CapGains while traders are playing with us.... 3... This is where "dollar cost averaging", wash-sales, and "out/in" [rebuilding] can be very effective in maintaining a quality portfolio [of value securities].... 4... For some of us, we are reducing our cash position to 10% and have bought [and will be buying tomorrow] some quality undervalued securities. Some of us don't differentiate between bonds/stocks/etc as we go where our technical analysis takes us.... One single opinion of the many I am sure.... Live Long and Prosper....
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Post by richardsok on Oct 4, 2021 17:27:51 GMT
There's where we differ, X.
With the better analytical skills & data you've developed, you have more confidence in picking individual equities and funds than I do.
With some exceptions, I try to work within my limitations and take my cues from technical trends of the least volatile ETFs I can find. While you seem able to effectively search out opportunities, I monitor QQH, VOOG, etc and see market risk -- putting me at about 40% cash and 8% bearish hedging.... more cautious (and fewer position, I believe) than you.
I refuse to accept claims that timing the market is impossible.... and cannot imagine holding onto a large position that's dropping, dropping merely to "stay the course." I agree market timing is not ALWAYS successful, but "FREQUENTLY" is plenty good enough in our business.
I tend to be in broader ETFs and CEFs than you, I think, but we seem to agree there's present opportunity in energy and MLPs. I would never had considered SRLP if you hadn't mentioned it. My gut instinct is, rather than buy a new position in SRLP, I might simply add to my present position in CAPL -- with the notion of, again, monitoring fewer positions more closely. Am inclined to think if broader market continues propitious, they should both prosper, if not, will probably both languish.
But the jury's still out on that.
MorganStanley is out with a new article suggesting "buy the dips" tactic may be losing efficacy. But, of course, I'm "Mr. Confirmation Bias" so rate that viewpoint how you will.
Good luck out there.
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Post by xray on Oct 4, 2021 21:39:15 GMT
richardsok, Your: 1... There's where we differ, X. With the better analytical skills & data you've developed, you have more confidence in picking individual equities and funds than I do. With some exceptions, I try to work within my limitations and take my cues from technical trends of the least volatile ETFs I can find. While you seem able to effectively search out opportunities, I monitor QQH, VOOG, etc and see market risk -- putting me at about 40% cash and 8% bearish hedging.... more cautious (and fewer position, I believe) than you. 2... I refuse to accept claims that timing the market is impossible.... and cannot imagine holding onto a large position that's dropping, dropping merely to "stay the course." I agree market timing is not ALWAYS successful, but "FREQUENTLY" is plenty good enough in our business. 3... I tend to be in broader ETFs and CEFs than you, I think, but we seem to agree there's present opportunity in energy and MLPs. I would never had considered SRLP if you hadn't mentioned it. My gut instinct is, rather than buy a new position in SRLP, I might simply add to my present position in CAPL -- with the notion of, again, monitoring fewer positions more closely. Am inclined to think if broader market continues propitious, they should both prosper, if not, will probably both languish. But the jury's still out on that. 4... MorganStanley is out with a new article suggesting "buy the dips" tactic may be losing efficacy. But, of course, I'm "Mr. Confirmation Bias" so rate that viewpoint how you will. Good luck out there. ---------- 1... Some of us were in ETF's but found they were too volatile and hard to analyze for both dividends and CapGain [income oriented investors]. We only look at "outside" data [charts/graph's, etc] after we find something that looks promising through our analysis. Some of us have selectively continued buying the dip with additional shares [undervalued investments]. Currently, looking at closing MktPrc's, over 50% of our portfolio was up [using value investing techniques and 16 securities in our current portfolio [currently generating 9.91% dividends and distributions] w/15% cash]. 2... Timing the market is very difficult with "Hedge" funds and "Daily/Weekly" traders in the picture. CEF's shares trade with very light volume and any big buy/sell can put a difficult decision making roadblock in our path. Staying the course can result in major Caplosses and offset any previous gains we might have achieved. Using some "guide" built into your excel worksheets might help. I use the "sell code", and "report card" methodology to tell me what is going on [or not].... 3... Energy is a good sector of the market to start investing in if/when in the 3rd/4th Qtr's. There are a few other good performing energy securities out there [like the one I just posted to you (SPH)]. Having a very diversified portfolio keeps us out of trouble and any big losses are prevented as we don't have too many shares to worry about [sleep well]. Any sudden really bad news [like a dividend cut, earnings down, etc], causing a crash in the security will not be the end of the world and possibly a continued Hold. Normally, >75% of a well diversified portfolio, doesn't need much watching because of the amount of shares that you technically found acceptable [for each security] to our individual "RISK TOLERANCE". The jury as you mentioned is out "every day" with a overheated market. CAPL, by the way, remains at 10Star [9.83star for 13-wk average star rating] with a report card of 98 and a power rating of 100 [Dividend 10.54% COB Friday with a -1.08 very positive discount]. The trend going forward remains at 100. Weekly analysis score for last week was +375 [needed 278 minimum]. CAPL is one that I don't have to watch carefully as my analysis shows that 17.94 is its "Crash" MktPrc for worrying.... 4... Morgan Stanley made a "Blanket" statement to cover what they probably wanted to say. Buy the dips is very true when you buy a undervalued security [that has forward momentum projected], but not for overvalued securities that have no where to go but down.... Live Long and Prosper....
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Post by chapulin on Jan 13, 2022 23:00:35 GMT
A multiyear graph of the S&P500 shows almost regular quarterly dips. I keep a few limit orders in over 3% deep from the day I set it for incremental purchases for a quarter of my investable cash. Once I get this year's targets set I'm considering taking 10% off when prices go up 6% from the day I set it.
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Post by fred495 on Jan 14, 2022 1:51:21 GMT
When Stock Markets Start Falling What’s the Best Investment Strategy? 1) Buy When Everyone Else is Selling 2) Sell and Limit Your Risks 3) Hold and Stick to Your Game Plan As a retired investor, I tend to follow chang's motto: "I don't really need a lot more money - but I certainly don't want to loose a lot. I need to remind myself to err on the side of caution." Obviously, I am in the second category, i.e., when stock markets start falling, I sell and limit my losses. Fred |
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Post by steadyeddy on Jan 14, 2022 2:41:33 GMT
When Stock Markets Start Falling What’s the Best Investment Strategy? 1) Buy When Everyone Else is Selling 2) Sell and Limit Your Risks 3) Hold and Stick to Your Game Plan As a retired investor, I tend to follow chang's motto: "I don't really need a lot more money - but I certainly don't want to loose a lot. I need to remind myself to err on the side of caution." Obviously, I am in the second category, i.e., when stock markets start falling, I sell and limit my losses. Fred , is there a % loss you use to decide when to sell? |
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Post by retiredat48 on Jan 14, 2022 3:42:20 GMT
This is a very big question, but ah, what the heck, I will make a reply post.
First, I consider both the market and my individual funds as separate, stand-alone things to deal with.
I consider there are three phases of the market that require some different operating schemes. These are: Dips from a peak, to down 10% (correction level). The second is from down 10% to down 20%, the definition of a bear market start. The third phase...down 20% or more...an official bear market.
During the first early phase, I am assessing each fund I hold as to its fit, strategic need to be in my portfolio, and performance compared to other similar funds. I also monitor 200 day moving averages, as funds break down through them at different times. I don't make many changes. But an example is in 2021 I made a strategic decision to exit my China related investments. Long story why. But this resulted in sales of certain funds, many of which were going down, when markets were going up. China stocks are in their own bear market, many down 40-50% now.
In the second phase, down from 10 to 20%, I try to take actions that seem warranted to protect from a potential major bear market. Selling some things; moving average controls applied; reducing equity exposure; selling worse performers. I will generally NOT take my asset allocation to below 50% equities.
Third phase, a bear market down 20% or more. Investing is easiest for me. I simply hunker down and use the following three mantras:
--Do Not Sell.
--DO NOT SELL
--DO NOT SELL!
I let the market find a bottom and only plan to reinvest when things begin to trend upward again. An exception is that if I consider any fund has reached a "COMPELLING VALUE", I will take a position...buy a bucket. But in all cases I will Pyramid Up invest from there. No averaging down.
Lastly, I have been using a hedge type, inverse short fund, PSTIX, that goes in the opposite direction of the market. It is a way to neutralize some more equity allocation without selling anything. So if I sell any portion of a fund, and use the proceeds to buy PSTIX, it doubles the amount of equity exposure removed from risk.
Good luck all in next bear market.
R48
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Post by Mustang on Jan 14, 2022 4:00:29 GMT
The best strategy depends upon your current market position. If you are heavy in stocks then you might want to pare back a bit.
I don't intend to do much but then I have been slowly moving to less volatile funds for several years. In 2008 when the S&P 500 lost 37% my moderate-allocation funds lost 22% and my conservative-allocation funds lost 9.8%.
I am unable to predict the future. I do not know if the correction will be 5%, 10% or 30%. I do not know if it will occur this year or next. I have no idea when, if any, the bottom will occur. But, I have no intention of selling. If it is a 5% or 10% correction I will continue to do what I am doing now and buy a little every month using dollar cost averaging. If it reaches 25% or 30% then I will jump in a little more using my cash reserves and wait for the recovery. I don't need to buy at the bottom. I don't care if I buy when the S&P 500 is down 25% and it drops another 5%. I don't intend to sell and there is no loss if you don't sell.
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Post by fred495 on Jan 14, 2022 4:59:26 GMT
As a retired investor, I tend to follow chang's motto: "I don't really need a lot more money - but I certainly don't want to loose a lot. I need to remind myself to err on the side of caution." Obviously, I am in the second category, i.e., when stock markets start falling, I sell and limit my losses. Fred , is there a % loss you use to decide when to sell? No, I don't have a specific number in mind before I sell. But, I can't imagine letting my portfolio lose more than 5%. In general, I tend to look at the larger factors at work, currently interest rates, valuations and the pandemic, for example, that may affect the markets negatively and precipitate a significant sell-off. In other words, if possible, I try to understand and make some sense of why there is a sell-off before I sell. Since, as I said, I am retired and don't need a lot more money, I am not too concerned about picking the exact re-entry point. At this stage of my life, preservation of capital and sleeping well at night are among my highest priority. Good luck, Fred |
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Post by retiredat48 on Jan 14, 2022 6:13:02 GMT
fred495 stated: "No, I don't have a specific number in mind before I sell. But, I can't imagine letting my portfolio lose more than 5%."
Fred, I am curious. What does this mean? Is it 5% in value from a high point? Or a loss from your purchase prices?
If your allocation is 50/50 bonds, does this mean an equity fall of 10%, resulting in a 5% portfolio value fall, is what you refer to?
What does "not letting" portfolio fall more than 5% mean in terms of action--sell all stocks/stock funds??
So for instance if we have a stock melt-up of 12%, followed by an immediate drop back down, mean you will sell out? Such melt-ups have been occurring. Will you sell all equities with a 10% market correction?
Thanks in advance.
R48
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Post by Deleted on Jan 14, 2022 11:13:10 GMT
I don't have hard and fast rules. I've tried, but with mixed success. But, I do have a game plan to generate so much income from dividend stocks/funds and to gradually sell growth through the next several decades to supplement.
I am ready for the market to fall apart. I also have no idea if it will, and if so when. But, I do know rates are going up, barring catastrophe. I got rid of some high multiple stocks. They might do great, but I can't accept the risk. I have bought more 3% dividend yielders with solid financial footing.
I have a buy list. I like R48's guidance on waiting for uptrends to buy if there is a correction/crash.
Not selling will be the key. Sounds good until it happens. That's where the game plan is key. Example - I hold big amounts of AAPL, AMZN, and FB. AMZN is the only really high multiple. I have a great low basis. What to do? I could see it getting cut in half. AAPL could take a tumble too looking at its p/e. Will they be bigger and stronger in 10 years? I think so., so will hold, but I could be wrong. Being honest here. One of the main reasons I read and post here is for reminders such as stick to the game plan and don't sell.
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Post by Chahta on Jan 14, 2022 14:09:25 GMT
@sara, you are a smart person to do stock picking. Not everyone wants to take that on. Surely you know market timing is a hard thing to master. If nothing changes fundamentally in your selections why would you sell, unless you are harvesting income? Investments go up and down all the time. Most mistakes I have made is selling too soon. Even during the last black swan. Cheers.
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Post by win1177 on Jan 14, 2022 15:57:24 GMT
I don't have hard and fast rules. I've tried, but with mixed success. But, I do have a game plan to generate so much income from dividend stocks/funds and to gradually sell growth through the next several decades to supplement. I am ready for the market to fall apart. I also have no idea if it will, and if so when. But, I do know rates are going up, barring catastrophe. I got rid of some high multiple stocks. They might do great, but I can't accept the risk. I have bought more 3% dividend yielders with solid financial footing. I have a buy list. I like R48's guidance on waiting for uptrends to buy if there is a correction/crash. Not selling will be the key. Sounds good until it happens. That's where the game plan is key. Example - I hold big amounts of AAPL, AMZN, and FB. AMZN is the only really high multiple. I have a great low basis. What to do? I could see it getting cut in half. AAPL could take a tumble too looking at its p/e. Will they be bigger and stronger in 10 years? I think so., so will hold, but I could be wrong. Being honest here. One of the main reasons I read and post here is for reminders such as stick to the game plan and don't sell. Interesting thread! I tend to always have a “buy list” of a few individual stocks, and a buy price for them. So if the market sells off, I will add to those positions IF the company drops enough. Right now, NONE of my individual stocks are near their buy price, and the overall market still looks “expensive”. R48 broke down his strategy by differentiating how to handle different market situations- brief selloff vs. correction vs. bear market. My concern here is we ONLY know which situation we are in, in hindsight! I always keep “enough” in “safe assets” (cash, ST- IT higher quality bonds, etc.) so we will be “fine” financially if the market CLOSED for 7 years. My goal was to retire with enough income from all sources (pension, dividend/ interest, etc.) that we would be financially “secure”. We are there now, so I have NO DESIRE to sell my higher quality companies at (temporarily) depressed prices. Retired in December 2021, so we’re fine. Still have a pretty “aggressive allocation” at 84% equity, 5% bonds, 11% cash. Looking to deploy some cash slowly into bonds, but doing it very slowly now as yields continue to back up. More for safety”, no real “returns” in higher quality bonds. Win |
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Post by ignatz on Jan 14, 2022 23:32:07 GMT
More Than One-Third of Nasdaq Stocks Have Slumped 50% from their 52 week highs. Devastation masked by the very biggest stocks that dominate the indexes. |
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Post by fred495 on Jan 15, 2022 3:13:44 GMT
fred495 stated: "No, I don't have a specific number in mind before I sell. But, I can't imagine letting my portfolio lose more than 5%."Fred, I am curious. What does this mean? Is it 5% in value from a high point? Or a loss from your purchase prices? If your allocation is 50/50 bonds, does this mean an equity fall of 10%, resulting in a 5% portfolio value fall, is what you refer to? What does "not letting" portfolio fall more than 5% mean in terms of action--sell all stocks/stock funds?? So for instance if we have a stock melt-up of 12%, followed by an immediate drop back down, mean you will sell out? Such melt-ups have been occurring. Will you sell all equities with a 10% market correction? Thanks in advance. R48
Sorry, R48, my answer may be disappointing, but I don't have any specific plans or numerical goals that may trigger a sell decision. Selling is also not necessarily an all-in or an all-out proposition. The only time I sold all the positions in my portfolio was in September 2007. I maintained a 100% Treasury portfolio until April of 2009 when I fully entered the market again.
As I said, in general, I tend to look at the larger factors at work that may have a significant impact on the future direction of the market. I may, in a frothy market, sell my overvalued holdings before there is a sell-off. However, if there is a sell-off, I try to understand and make some sense of it before I sell. Currently, I am dancing near the exit with my equity holdings because I am quite concerned about rising interest rates, high valuations and the impact of the pandemic on the economy. Not necessarily a brilliant or always successful strategy, perhaps, but one that meets my comfort level as a conservative investor.
Good luck,
Fred
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Post by Chahta on Jan 15, 2022 13:23:57 GMT
Using seasonal factors to time ones buying and selling is very useful and can add value to a portfolio. I like to refine the seasonal factors by using technical indicators. The fundamentals are also very important to me. Seasonal works until it doesn't. HY munis are "seasonal". Except this this season interest rate risk took over. |
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Post by steadyeddy on Jan 15, 2022 13:25:34 GMT
More Than One-Third of Nasdaq Stocks Have Slumped 50% from their 52 week highs. Devastation masked by the very biggest stocks that dominate the indexes. Which means that the equity market could quickly correct... |
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Post by Chahta on Jan 15, 2022 13:31:01 GMT
Read that article and it was eye-opening. Here is another. These data driven "opinions" are confusing. Forecasts are not. |
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Post by uncleharley on Jan 15, 2022 14:26:37 GMT
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Post by chang on Jan 15, 2022 23:31:38 GMT
As a retired investor, I tend to follow chang's motto: "I don't really need a lot more money - but I certainly don't want to loose a lot. I need to remind myself to err on the side of caution." Obviously, I am in the second category, i.e., when stock markets start falling, I sell and limit my losses. Fred I'm fairly sure that I wrote "lose" and not "loose". One of my pet peeves is mixing up lose/loose, principal/principle, etc. (I also loathe the misuse of words like "unique" and "peruse", but that's another matter.) Otherwise the citation looks like what I said. Incidentally, in a similar vein, I came across this Warren Buffet quote: "Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don't need."
I don't have a date for it, but it's possible that Warren stole it from me. Or perhaps not. |
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