How do you invest in a down market?

» Site Navigation
Home Page The Villages Maps The Villages Activities The Villages Clubs The Villages Book Healthcare Rentals Real Estate Section Classified Section The Villages Directory Home Improvement Site Guidelines Advertising Info Register Now Video Tutorials Frequently Asked Questions
» Newsletter Signup
» Premium Tower
» Advertisements
» Trending News
» Tower Sponsors




















» Premium Sponsors
» Banner Sponsors
» Advertisements
Closed Thread
Thread Tools
  #1  
Old 05-05-2021, 09:20 PM
LiverpoolWalrus's Avatar
LiverpoolWalrus LiverpoolWalrus is offline
Veteran member
Join Date: Dec 2019
Location: Village of Country Club Hills
Posts: 737
Thanks: 801
Thanked 542 Times in 258 Posts
Default How do you invest in a down market?

If you were reasonably sure the market would be flat or down in a given year because of inflation, higher interest rates and tax increases, and you don't do options, would you:

---Sell all your stocks
---Reduce your investment in each of your positions
---Buy more stocks
---Do nothing
---Do something else (what?)

Please refrain from political commentary. We play the hand we're dealt.
__________________
...
  #2  
Old 05-05-2021, 10:05 PM
Boffin Boffin is offline
Member
Join Date: Dec 2020
Posts: 88
Thanks: 9
Thanked 118 Times in 41 Posts
Default Stocks

Trim some profits to build a cash position (“dry powder”) and wait for at least a 15% correction (“fire sale”) then buy to cost average down existing holdings/positions and/or establish new holdings/positions.
  #3  
Old 05-05-2021, 10:18 PM
Ecuadog's Avatar
Ecuadog Ecuadog is offline
Platinum member
Join Date: Jul 2011
Location: what3words
Posts: 1,602
Thanks: 0
Thanked 370 Times in 153 Posts
Default

---Do nothing

I stck to my plan.
__________________
.
"What wine goes with Cap'n Crunch?" --George Carlin

///tuneful.medium.briefs
///flirts.bronzed.pinch
  #4  
Old 05-05-2021, 11:15 PM
GrumpyOldMan GrumpyOldMan is offline
Soaring Eagle member
Join Date: Jul 2019
Posts: 2,025
Thanks: 333
Thanked 2,465 Times in 748 Posts
Default

In general, it is a bad idea to try to time the market.

The best time to plan for a downturn is before the downturn.

Have a long-term plan and don't panic - stick to it.
  #5  
Old 05-06-2021, 05:32 AM
l2ridehd's Avatar
l2ridehd l2ridehd is offline
Sage
Join Date: Dec 2007
Location: Bridgeport At Miona Shores
Posts: 3,595
Thanks: 1
Thanked 340 Times in 113 Posts
Send a message via AIM to l2ridehd
Default

For the past 35 years I have used a very simple investment plan. I use index funds, total stock market and total bond market, total international stock and total international bond funds. 60/40 asset allocation. 42% TSM, 18% TIS, 28% TBM, and 12% TIB. I rebalance to those percentages at least once a year or when the markets change a lot. So I am always selling high buying low in any market, up or down. I use Vanguard funds because of the low expense ratios. I have beat the S&P 500 for the 35 year average with significantly lower risk. It’s very close to how the Yale University’s endowment fund is managed. Works very well in up or down markets. Your losses are always less in a down market and you recover faster in an up market.
__________________
Life is to short to drink cheap wine.
  #6  
Old 05-06-2021, 07:00 AM
Stu from NYC Stu from NYC is offline
Sage
Join Date: Feb 2020
Posts: 5,912
Thanks: 639
Thanked 8,238 Times in 2,718 Posts
Default

Anyone who says they can consistently time the market is full of it.

Best to have a plan and make sure your investments are in good quality vehicles making changes to that as necessary.
  #7  
Old 05-06-2021, 08:17 AM
charlieo1126@gmail.com charlieo1126@gmail.com is offline
Platinum member
Join Date: Jun 2019
Posts: 1,794
Thanks: 13
Thanked 1,953 Times in 759 Posts
Default

I have been in vanguard index funds for 30 years , they may not be sexy and wow but they get the job done
  #8  
Old 05-06-2021, 08:25 AM
PugMom's Avatar
PugMom PugMom is offline
Gold member
Join Date: May 2019
Location: Village of McClure
Posts: 1,350
Thanks: 7,333
Thanked 1,126 Times in 534 Posts
Default

just sit tight-things ALWAYS change. (i agree with poster who mentioned vanguard.) what is 2day will probably change by tomorrow-no one can predict, just don't get scared & sell everything off quite yet.
  #9  
Old 05-06-2021, 09:26 AM
Topspinmo's Avatar
Topspinmo Topspinmo is offline
Sage
Join Date: Dec 2012
Location: Oregon Mo. St Joesph mo, ft worth tx, Omaha neb., upper heyford UK, Clovis NM, OKC.
Posts: 8,733
Thanks: 4,152
Thanked 3,054 Times in 1,420 Posts
Default

I sell off when high, and it’s high right now, buy back when it crashes, and it will crash. If you’re day trader the you have to time the little rises and falls. Now if you’re in the 1% that controls stocks you can manipulate the market for you’re satisfaction.
  #10  
Old 05-06-2021, 10:56 AM
CoachKandSportsguy CoachKandSportsguy is offline
Veteran member
Join Date: Jan 2019
Location: Marsh Bend
Posts: 825
Thanks: 367
Thanked 790 Times in 340 Posts
Default

Great question, some good answers, rebalancing is the best answer. Now, the current "risk-parity" model is a split between bonds and stocks. Such that when stocks go down bonds go up in value/price, down in interest rate. The current problem with "risk Parity" at the moment is that stocks are extremely highly valuated, and bonds are as well but bonds don't have much room to go up prior to being bought at negative interest rates. So the bond portion needs to be extremely high to offset the size of the potential equity decline back to long term P/E ratios. So that's the equity / bond asset balancing act

So then between the equity and the bond portions, there is rebalancing possible. For bonds, with falling inflation, the better gains come from longer term bonds, and with rising inflation the better loss is with short term bonds. This concept is called duration of your bond portfolio.

Duration is measured in years. Generally, the higher the duration of a bond or a bond fund (meaning the longer you need to wait for the payment of coupons and return of principal), the more its price will drop as interest rates rise.

In the equity market, you can use different sector ETFs to change into and out of or change weightings. So the binary labels in equity tend to be growth versus value. Its a bit arbitrary, and not worth going down that rat hole. . . (rabbit holes are all furry, warm and full of cuddly nice pets) rat holes, not so much. . . Another arbitrary classification is large, mid and small capitalization stocks. There are ETFs for that. . Another segmentation may be hard versus financial assets, where hard assets are real estate and commodities versus banks and other corporate equity offerings. There are hard asset ETFs with agricultural and mining metals, as well as REITs. These will offset inflation if you want to offset bond losses with inflation sensitive assets.

Another equity segmentation is to look at dividend stocks. There are dividend aristocrat ETFs and S&P500 dividend ETFs, which will not fall as far and provide a small offset with dividends. . .

So with all these options, which would you "predict" or "forecast" will perform better in the future with your current outlook on the economy? no one knows the future definitively, but there are large persistent trends which increase and decrease over time which you should be following to get the equity portion correct.

And given a TV retirement or >55 population, the equity portion should be more weighted on the dividend aristocrat large and mid cap with small portion in hard assets, particularly realestate to offset inflation and a gradual return to a slow growth economy. . . the bond portion should be mid duration, 5-7 years, no more than 10 years, and 3-5 years with the older group. . .

I don't look at intl funds due to fx reasons, but that is for a much more sophisticated global outlook.

However, your personal portfolio needs to be customized to your goals, which are limited in time. ie Yale University does not have a time limit as its life is longer than a human life, so be careful of simple comparisons. . .

finance guy
  #11  
Old 05-06-2021, 10:59 AM
Carla B Carla B is offline
Soaring Eagle member
Join Date: Mar 2008
Posts: 2,455
Thanks: 30
Thanked 483 Times in 244 Posts
Default

Quote:
Originally Posted by l2ridehd View Post
For the past 35 years I have used a very simple investment plan. I use index funds, total stock market and total bond market, total international stock and total international bond funds. 60/40 asset allocation. 42% TSM, 18% TIS, 28% TBM, and 12% TIB. I rebalance to those percentages at least once a year or when the markets change a lot. So I am always selling high buying low in any market, up or down. I use Vanguard funds because of the low expense ratios. I have beat the S&P 500 for the 35 year average with significantly lower risk. It’s very close to how the Yale University’s endowment fund is managed. Works very well in up or down markets. Your losses are always less in a down market and you recover faster in an up market.
You've posted your plan at various times. It sounds like a sound, simple plan, in a Boglehead sort of way. Wish we knew you 35 years ago.

Last edited by Carla B; 05-06-2021 at 11:04 AM.
  #12  
Old 05-06-2021, 11:51 AM
LiverpoolWalrus's Avatar
LiverpoolWalrus LiverpoolWalrus is offline
Veteran member
Join Date: Dec 2019
Location: Village of Country Club Hills
Posts: 737
Thanks: 801
Thanked 542 Times in 258 Posts
Default

Quote:
Originally Posted by CoachKandSportsguy View Post
Great question, some good answers, rebalancing is the best answer.

Another equity segmentation is to look at dividend stocks. There are dividend aristocrat ETFs and S&P500 dividend ETFs, which will not fall as far and provide a small offset with dividends. . .
Yes, I used to have most of the “dividend aristocrats.” I should have kept them. ETFs for the major indexes I agree are a good idea and I do have them.

Then there are the “permanent portfolios” which withstand volatility. Maybe someone can weigh in on those.
__________________
...
  #13  
Old 05-06-2021, 03:06 PM
dewilson58's Avatar
dewilson58 dewilson58 is offline
Sage
Join Date: May 2013
Location: South of 466a, if you don't like me.......I live in Orlando.
Posts: 8,475
Thanks: 579
Thanked 5,932 Times in 2,180 Posts
Default

The same way as in an up market.
__________________
Mr. Wonderful
  #14  
Old 05-06-2021, 05:08 PM
Boffin Boffin is offline
Member
Join Date: Dec 2020
Posts: 88
Thanks: 9
Thanked 118 Times in 41 Posts
Default

Trying to time the market is not the same as timing your actions. For instance, rebalancing allocations or, as I previously stated, intentionally trimming some profits to intentionally build a cash position to wait for (not predict) a market correction. Nobody should complain about selling at a profit. The bulls and bears make money and the hogs get slaughtered. Also, it is not about how much you make; it is about how much you keep.
  #15  
Old 05-06-2021, 07:01 PM
valuemkt valuemkt is offline
Veteran member
Join Date: Oct 2007
Location: The Villages - Formerly Atlanta Endicott and Syracuse NY
Posts: 603
Thanks: 37
Thanked 538 Times in 166 Posts
Default

Depends on your age and your working status. If you are a typical Villager, you are retired, and in the "distribution phase" of your life. That is, you are withdrawing money from your savings every month, and no longer saving a portion of your income for later. Given that assumption, and given your risk tolerance, you should have 2 to 3 years of cash or cash equivalents. That insulates you from the normal highs and lows of the stock market. Next, have a reliable income stream coming from bonds, bond equivalents, ultrashort bond funds, preferred and dividend stocks (or funds / ETFs / CEFs depending on your investment expertise). Again, depending on your risk tolerance, these might comprise 20-60% of your retirement portfolio, The remainder would be equities, anywhere from solid well-known companies to higher flyers. Once you are set on these holdings (or again representative mutual funds / ETfs) you stay the course and don;t touch them during corrections. If you've made solid selections history shows that they will revert to their growth histories. There is no need to continually rebalance. IMO you cut your winners short and invest more in losers that way. Best of luck
Closed Thread

Tags
stocks, market, buy, positions, investment

Thread Tools

You are viewing a new design of the TOTV site. Click here to revert to the old version.

All times are GMT -5. The time now is 03:29 PM.