That’s a very interesting topic. The Polish investing blog that I follow keeps quoting bad indicators, the most recent being the PMI. I was afraid of investing for quite some time, so cash is already 40% of my portfolio. In order to at least invest in something, I put 10’000 EUR in BTC and ETH. Sadly, I didn’t do it a few months ago, but only after recent price hike.
If you’re holding off your investment, but want to buy eventually, then the question is, if the total return index will ever drop below the current level. If we see a classic deflationary crash then probably yes. But it could be a stagflation: the prices of the stock market oscillate around the same level, but consumer goods and everything else gets more expensive.
I hold 3-4% of my portfolio in BTC (hard to say how much exactly beacuse it’s so damn volatile ) and I’ve noticed it works as a very nice hedge on market down days and since BTC has no fundamental valuation, it tends to follow technical analysis criteria to the dot.
The times feel uncertain indeed for stocks, and since no one knows which countries will be Tariff-bombed next, I’m tilting my portfolio towards All Country Equal Weighted allocation to avoid too much concentration in any single country. I did some research how to do it efficiently and with minimal cost, so if there’s interest I’ll make a separate thread about this.
This is similar to an analysis of cryptocurrencies I once saw. If you invested $100 in each of top 50 cryptos, the return was the greatest.
And I was wondering for a moment why that is. And my conclusion is that you get higher return because of higher risk and higher volatility. If you weigh each constituent or country equally, you are favouring small caps or emerging markets. So there is no magic there. Bigger ups, but bigger downs.
The PDF you quoted has shown a 9.5% annual return over 50 years from market cap weighted index and 10.6% from equally weighted. Yes, that difference will be big after 50 years, but you commit to a higher risk.
I’d also be very interested. Have been toying with a similar idea for a while. Even though the U.S. has overperformed, I don’t feel very comfortable with allocating 50+ percent to it with any “World” index.
«The Market» talks about recession, the indicators pointing towards a crash and how to get your portfolio ready. You can get a 10 day trial to read it.
I feel like I should sell 20% of my ETFs and hold cash for a while. Not that this would change a lot in a hefty crash but I am sure I would feel better if it would happen.
My S&P 500 put is currently -40% (base is 1600 points). I bought some VXX but managed to make only 5% … despite buying right before the recent spike (tldr: I sold into a pullback).
Could be. But be careful, some White House official could soften the trade war speak, or a dovish Fed official could allude to a big rate cut or some quantitative easing, and then the euphoria will suddenly be back. We’ve seen similar situations quite often in the recent months and sometimes in the past years…
Yup, me too. Timing is not only irrational (as much of history and academic research proves), but it’s also - at least to me - psychologically uncomfortable. I’d much prefer keep things on auto pilot, and focus on other stuff. There’s already enough stress to handle outside of stock market in my life.
Really interesting and encouraging discussion there, especially the stuff about people putting extra money into the market during that time - you’d need to have had either lots of cash aside or some very good job security to have done that without sweating…
My strategy since the beginning of the year is regular monthly purchases of VWRL, allowing myself to dip into my cash and buy more VWRL if it drops more than 6% from peak in a month. This, in addition to 6826/12 CHF/month in the VIAC Pillar 3a 97% World portfolio. Yes, 6% is a bit arbitrary… not sure I’d have enough cash aside to keep up with the dip in a big crash.
The current market jitters are good at making sure people are actually OK with their cash/bonds/stock balance… I like to think of them as regular mini stress tests.
Yes, if I had the balls. Otherwise I’d dollar cost avarage, with maybe some variations regarding amounts invested (more on downs like now, less on ups like last few months).
Slightly off-topic, but I highly recommend section 4 of “Thinking Fast and Slow” by Daniel Kahneman. It discusses the premiums people are willing to way to manage risk (like dollar-cost averaging vs. lump sums), as well as how humans treat losses and gains (spoiler alert: the pain of a loss of an amount is always stronger than the pleasure of a gain of that same amount). Humans are very imperfect machines, but you all knew that
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) and I’ve noticed it works as a very nice hedge on market down days and since BTC has no fundamental valuation, it tends to follow technical analysis criteria to the dot.
