For better, or worse, I put all my and my spouse's 401k into stock
funds. I used to have approximately 20% in stocks in my 401k, slightly
varied at times. My spouse had all cash.

I think that at this price of approximately 9-10 times forward
earnings, not too much can go wrong if I hold them for a while. The
effective yield would be better than a bank account.

i

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On Oct 23, 10:14*am, Igor Chudov <ichu...[at]algebra.com> wrote:
- quote -

No, this program only kicks in for a severe emergency, like a 30%
trailing loss (from peak) across a wide range of stocks. I would be
financially dead without this plan, having early retired at a same-as-
today SP500 level so many years ago with no other income. I finished
the selling just before current levels, so am sitting pretty and calm
for a while. Yeah, will eventually have to sweat to avoid missing real
upticks vs sucker rallies in future.

Maybe you need an inborn internal momentum compass to do this, or
follow quality journalism like the very thorough Economist magazine
like I do. The hard part is the timing to sell. Catching the way up is
easier - would you believe I long ago rode crest of the Japanese
market and got out near 40k, which is now at 8k? Lots of similar
experience tells me the hard part is timing the selling, which is
hopefully behind me.

Hanging on to mutual funds won't protect you from tax craziness this
December because there could be massive cap gain distributions due to
their forced liquidation of long term holdings for redemptions. Maybe
switch to etfs now that the trading costs are near zero anyway.
Anyway, the bottom line of this "dufus" approach is to avoid near term
poverty, not to gain a few ticks on long term.

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Dumbstruck, a lot of people do what you are describing, which amounts
to trading a lot based on gut feelings and various recipes like "sell
if the market goes down two days in a row" (just an example).

Numerous studies of, say, clients of brokerages and their trades,
reveals that this approach does not generate any extra returns, but it
does generate extra trading costs.

What this strategy amounts to is being in and out of the market at
essentially random times, and paying for it. The statistical outcome
of it (without looking at trading costs) is not very different from
simply allocating a part of money to cash and not trading.

Therefore, you would expect your returns (without considering costs)
to be somewhat above the market if it goes down for a while, and below
the market if it goes up for a while. Costs make you even less likely
to win.

This approach is also very time consuming and that time could be used
for better pursuits, for example reading financial literature or even
fishing.

i

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On Oct 22, 1:55*pm, Will Trice <n...[at]monitored.net> wrote:
- quote -

I just heard on the news that almost all professional stock traders
are doing something like that; it may take that kind of exasperating
focus to accomplish this approach well. These negatives are the
"insurance cost" for ending up with more wealth to ride out
exceptionally deep or long breakdown in equities.

Who cares that you may lose a few percent when the good times return?
When you are in a big squeeze you will be LOTS better off and able to
handle surprise needs for cash. Not everyone can consider equity
investments as play money after a severe contraction emerges, and
threatens to get worse. And when the market someday rebounds, there
may be different equities you want to get involved with anyway.

It is a false dichotomy to think you can have every contingency
covered by wages/pension/insurance/bonds and can tolerate any change
in equities; if they plummet your safety margin exponentially
contracts. I wish this kind of thing could be done by a mutual fund
manager like TACTX claims to do, but no way - it must be sweated out
by millions of individuals, maybe by taking an approach extending
http://www.etftrends.com/2008/07/an-...l-seasons.html

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dumbstruck wrote:
- quote -

Then what's the point? If you're buying at the same prices as selling,
all you're doing is incurring taxes and trading costs and missing out on
dividends.

-Will

william dot trice at ngc dot com

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On Oct 21, 3:18 pm, Will Trice <n...[at]monitored.net> wrote:
- quote -

No, on the way back up I try to incrementally repurchase them at
similar prices as where I sold. In an ideal process you might not lose
money, but is a very inefficient process where I expect to lose. It
only goes into action when equity levels get critically low with no
sign of recovery.

For example your equities lose 30% so you start the selling program.
For every 5% further fall you sell about 10% of your stock. Pause if
it gets choppy - and reverse on the way back up. Don't get faked out
by choppiness, but infer and stick by your assessment of a macro trend
with one slope down, a bottom phase, and one slope up.

This is an art which you can't automate, and may depend on more daily
homework that most could stomach. But there isn't really a conceptual
flaw, is there? How can it be bad when it feels so good? I have a
pretty good record chasing momentum, but it takes a lot of homework
and maybe this is a step too far.

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On Oct 21, 9:18*pm, Will Trice <n...[at]monitored.net> wrote:
- quote -

No, not if markets trend. Whether trend-following works is an
empirical question. Please see another recent message I posted on
style momentum.

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dumbstruck wrote:

- quote -

Were you joking here, or was this a serious suggestion? It sounds like
you're recommending to buy high and sell low, indeed a dufus strategy.

-Will

william dot trice at ngc dot com

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On Oct 16, 11:03*pm, "Marco Polo" <Ma...[at]Polo.com> wrote:
- quote -

First, a suggestion on HOW to reinvest, regardless of WHEN. At least
in very volatile times like now, try putting out some fishing lines to
see who will bite. Works best with lightly traded ETF's with
inefficient pricing; issue a persistant buy order limited at 5% below
current price, and another one at 10%, and maybe a third at -15%. It's
amazing how often traders will bite, sometimes within hours, even if
the value closes relatively unchanged day after day.

As for WHEN to rebalance, I have graduated to an approach for crashes
which would be generally regarded as a knee-jerk "DUFUS" strategy:
progressively shed stocks on the way down and re-invest only on the
way up. It will miss significant "melt up" rises that happen too fast.
It may lock in large "melt down" losses. It takes exhausting work all
the time to balance, but it recognizes a most important fact that a
large portfolio can tolerate speculative volatility, whereas a
shrunken one may be way too precious for that.

I have done well by more conventional wisdom rebalancing in past mini-
crashes, and that may be best for most. I have toughed some out
without rebalance, and have even turbo-balanced by speculatively
transfering lots into equities near their lows. But after seeing how
deep and long the Japanese and tech crashes were, I now want to focus
on avoiding worst cases and have only cautiously started to nibble now.

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anoop <ghanw...[at]gmail.com> wrote:
- quote -

I think you are overlooking the persistent presence of (1) population
increases and (2) the many ripe parts of the world, with large
populations, for technological advances. Both of these realities tend
to promote earnings increases. Economies may stagnate for the short
term, but in the long term they grow.

The cost
- quote -

What fraction of the population enjoyed so-called boom-time incomes?
Did this trickle down significantly to lower income people? Or did the
gap between rich and poor simply widen? If it widened, then closing
this gap even partly may tend to stimulate the economy. IOW, I suspect
the boom time incomes of which you speak were a bad thing for the
health of the economy, because these incomes did not actually grow (in
Clinton era parlance) much, economically speaking.

- quote -

This remains to be seen.

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On Oct 18, 3:48*pm, Will Trice <n...[at]monitored.net> wrote:

- quote -

Well, it depends on the time line. We could easily see a
slump for 5-10 years. And hopefully the dart doesn't land
on a company going bankrupt during that time. :-)

Unless jobs are created that can
replace and exceed the current incomes of those losing
jobs, there is no way we will see earnings increase. The cost
cutting by sending jobs abroad has already peaked, so there
is no obvious way to create efficiency that way. I see absolutely
nothing on the horizon that can replace the boom-time incomes
(coupled with home equity withdrawals) that people are now
starting to lose.

The tech bust took the Dow down to the mid-7000s.
We have only just started to see the bad news from this bust.
We haven't yet heard of the problems with commercial real
estate, and the current mess still has to work its way through
the system. As the layoffs begin and accelerate in every
sector, earnings will get hit. Unlike the tech bust, companies
cannot go and start selling stuff abroad, because this time around
it's not just Silicon Valley, it's not just the US, but the whole
world
that has been affected. From what I've seen, it takes 6 - 9
months after the stock market moves before employment
starts to reflect what has happen (in either direction). Dow in
the 8K-9K range is definitely going to have an impact on
employment.

Anoop

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anoop wrote:
- quote -

You could of course be right about future earnings. But one of the
things we saw a lot of during the tech boom was companies that had
little or no earnings *before* the crash that had spectacularly
performing stock prices. I was in a an investment club at the time that
was considering Qualcomm at over 400 P/E (we didn't buy). The
correction then was arguably justified and the pickings in 2003 were
excellent. The techs dragged down the rest of the market, just as the
financials are doing today. I'd say you could pretty much throw a dart
today and come out smelling like roses (to mix some metaphors...).

-Will

william dot trice at ngc dot com

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beliavsky[at]aol.com wrote:

- quote -

I can't see why volatility is an interesting measure of risk for long term
investors. I know it is the definition of risk for modern portfolio theory. I
think that is because it is measurable, there is lots of historic data, and you
can make lots of fancy calculations based on it.

To me, risk is the chance of bad things happening. A stock can be volatile on
both the upside (good) and the downside (bad). If a long term investor wishes
to sell a volatile stock, they can simply wait until the upside comes along.

Furthermore, volatility does nothing to tell me what are the chance of earning
declines, bad management, markets disappearing, buying bad CDO's, or any of the
other things I think of as "risk".

But I am willing to be educated. Perhaps you could enlighten me as to why
volatility is important to long term investors.

It is worth noting that high volatility is a good sign of a market bottom.

-- Doug

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FranksPlace2 wrote:

- quote -

One of the books I read, I believe Larry Swedroe's latest, had an
exercise he would use for determining actual risk tolerance (versus
what people report is their tolerance). Basically it was simply taking
their actual portfolio size, and apply a moderately severe mult-year
bear market to it. Show how much it's dropping over the course of
months and see how they'd feel about the numbers. If it made them
uncomfortable, then it wasn't the right allocation, in spite of what
any of the quizzes said.



Brian

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On 2008-10-17, anoop <ghanwani[at]gmail.com> wrote:
- quote -

Another thing to keep in mind is that recessions happen regularly, and
therefore lower earnings during recessions should always be noted by
forward looking investors.

- quote -

I tend to think of non-financial earnings in terms of percentage of
GDP. The businesses that make stuff, would extract a certain
percentage of profit from their transaction.

A lot of financial earnings, as we find out, was indeed fudged due to
valuation issues. But these are now priced very conservatively, if not
more.

i

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On 2008-10-17, beliavsky[at]aol.com <beliavsky[at]aol.com> wrote:
- quote -

I think that a rational investor would recognize that stocks at 60% of
their previous price, are safer than stocks at 100% of that price. A
lot of bad news was not priced in during good times, which was a
mistake, and now the bad news is a factor in the price. In addition, a
lot of market players were forced to liquidate their holdings. All of
that, which was not foreseen before, already happened.

As far as the VIX goes, remember that it reflects the probability that
stocks will go up, as well as down.

In other words, there is a lot more risk in paying full price for
a risky asset, as opposed to paying a fire sale price.
--
Due to extreme spam originating from Google Groups, and their inattention
to spammers, I and many others block all articles originating
from Google Groups. If you want your postings to be seen by
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posting on Usenet.
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On Oct 17, 4:03*am, "Marco Polo" <Ma...[at]Polo.com> wrote:
- quote -

individual stocks or bonds you buy. It is portfolio allocation. There
are theories and empirical rules of thumb that people recommend.

Here is my approach. Decide what your investment goal is. If you
want to have 100% of your pre-tax income after you retire, you will
need a more agressive plan that if your are happy with 60%. Evaluate
your risk tolerance. If you are very stressed right now with the Dow
at 8000, you should not have a large portion of your portfolio in
stocks. Finally any money that you need in five years should not be
in stocks. So if you plan to retire in five years and draw down at
5%, then you need 25% of your portfolio in bonds.

Frank

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On Oct 17, 2:03*am, "Marco Polo" <Ma...[at]Polo.com> wrote:
- quote -


Stocks are compelling. I have been 90% in government funds in my 401
K. I'll be moving into stocks and eventually hit the 80% stocks mark
by next year.

Like Buffett says, when others are fearful, be greedy.

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On Oct 17, 5:03*am, "Marco Polo" <Ma...[at]Polo.com> wrote:
- quote -

I started rebalancing late last week. I didn't completely rebalance
back to my target allocations. Rather, I moved a percentage of the
difference. I plan to move additional money on a monthly basis. I
will also move money into equities if my total portfolio balance falls
5% below what is was last Friday. If that happens (hopefully it
won't), that will become my new target for another "5% drop investment
trigger".

I am not betting the market has hit bottom. I believe in the long
term benefit of asset allocation and I also believe markets will
recover... eventually. It helps me to have a rebalancing plan in this
type of environment.

I have cash to cover all my short-term needs and little debt. The
money I am rebalancing is long-term (> 10-15 years). Even longer if
the market doesn't recover since I won't be able to retire.

I am not recommending the above approach is right for you or anyone
else. Take time to think about your situation and level of comfort.
Ensure you are resolute in your plan. Otherwise, you may regret your
decisions.

Steve

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On Oct 17, 6:28*am, Ignoramus21227 <ignoramus21...[at]NOSPAM.
21227.invalid> wrote:
- quote -

You have to keep in mind that earnings are expected to fall quite
significantly for the foreseeable future, hence the depressed stock
prices. I'm not advising to go one way or another, just pointing out
that owning stocks at these prices is not a "no brainer".

During the tech boom, earnings tech companies were going up
exponentially. Their stocks prices reflected that. After the bust,
the stock prices fell and the earnings followed.

There are some economists that argue we have seen an earnings
bubble across the board due to over consumption and that is
in the process of correcting itself now that excess money is
no longer available to sustain that consumption.

Anoop

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