How are you guys handling the recent downs?


#1

Normally people say “buy more when the market goes down”, but as we all know is difficult to time the market and now I am getting low on cash while the market keeping moving downward. Actually I seem to have started (heavily) investing at a bad time, but I am in for the long run and still far from 100% stocks so I still sleep very well at night. What about you? How do you feel/what are you doing at the moment? Buy more? Leverage? Sold everything? :slight_smile:

A little dilemma I have is this one: I have been asked to pay X CHF for taxes for 2018, but I know the actual amount will be Y > X because I have earned more in 2018 than in 2017. So, I was originally planning to pay something close to Y to not get a high tax bill in the future, but given that interest rates are only 0.5%, I am tempted to pay exactly X and throw the rest into the SP500 instead. OTOH, it seems to take years for the to process my tax returns and then 0.5% on a large sum would hurt a bit.
What do you think?


#2

Unlike many here, I have never switched to the regular monthly buying mode. My bad. As a result I have piled up a sum, which is waiting to be invested. And I’m hesitating at the moment. I know, we always say that timing the market is like gambling, but I’ve been reading about quantitative easing coming to an end, about Fed raising the interest rates. And it sounds convincing to me that the market is artificially pumped by central bank money, and relying heavily on debt, and once debt becomes expensive again, it will all come crashing down.

I feel like as long as our economic growth is based on cheap loans, we are due for a crash.

The recent downs have eaten up a large portion of my unrealized gains, but I’m still in the “black”, when considering the whole period since I began with investing. I just make sure not to check too often. Out of sight, out of mind :stuck_out_tongue: .


#3

But even this taken into account won’t help you to time the market. The crash might come tomorrow, in a year or two. Nobody knows where is the point of interest rates that is causing a crash and how fast we will get there. Obviously FED is balancing between slowly normalizing monetary policy and risk of causing a crash, but they don’t intent to cause it.


#4

They say it’s a bad sign when the 2y treasuries get a higher yield than 10y ones. We are getting close to that scenario.

The Fed has been raising the interest rate to get some room for cutting it down again when recession comes, but the market is already having trouble at 2.25%. Are they gonna go below zero when the next recession comes?

Yes, there are two ways they can decide to deal with the current problem.

  1. Deflationary: cheap credit is gone, prices go down, your typical crash scenario. The most unprofitable businesses go bankrupt and we’ve got a clear sky for future growth.
  2. Inflationary: they keep printing money to keep the party going. The money goes into everything, hindering the invisible hand and self-correcting function of the market. Our ETFs remain stagnant for years. Their nominal value does not drop, but the real value plummets.

#5

For my business, 3 month ago I paid back a mortgage that was for a fixed time and arrived to its end. This move had been planned two years ago and the inflow of money was placed on saving accounts and some bonds as well. This mean that my investment in stock these last 2 years have been minimal but not null.
I am now free of debt and could potentially take a new mortgage on the same building in 6 month time in the case the market would really go down.
I do not make any movement with what had been invested, I am still on the winning side with the actual price. I am able to track the income from dividend and I keep a pace of ~8% increase each year. I also look at the price to book and the price to earn ration of Vanguard ETF available at the six stock exchange and must say that it goes again in reasonable values.
Keep cool and take it easy.


#6

2018 has been quite successful for me as I did everything that the Mustachian Community told me not to do, that is buying individual stocks and timing the market.
I managed to avoid most of the crash since October and beat the SPX performance this year quite substantially.

However at the current levels I am thinking to dump it all into VOO, basically taking a hands off approach with my portfolio. It is quite stressful managing the market daily, especially yesterday was such a PITA … I keep buying and selling and then buying again, basically daytrading the same stock multiple times, then once I accidently bought instead of selling … it was a mess.

So in conclusion i think the stress free route is to simply buy VT and then delete all trading apps from your phone and never look at it again for the next 10 years


#7

i just keep vesting into my ETF portfolio :slight_smile:


#8

I just bought more yesterday!

I trained myself to think that I couldn’t have chosen a better moment to start investing. Even if I bought some at the very peak, I know I will only buying cheaper for several months to come. A total meltdown, soon, is the best what could happen to me actually.

As for “crisis” adjustments I:

  • removed overweight to small caps (good call for now) and moved to a mkt. cap weighted mix
  • increased overweight to EM, with large individual positions in Turkey (positive returns) and China A-Shares (neutral)
  • looks like Gold has reversed, I’m still negative for the year on this but helps to balance out other losses in my portfolio.

#9

Hi @glina

Could you please explain why you increase weight on EM to adjust for a crisis ? is this a general step you would take for any crisis, or is it just a unique step you do just for this current pending crisis because you see potential in EM at the moment?

Thanks


#10

This is absolutely not an advice and definately not a general rule. More of a gut feeling more than anything else and only for the time beeing.

Overinflated assets drop strongest. Look at FAANG or Nasdaq 100 index in general, Russel 2000 (small caps), SMIM, Nikkei to see for yourself.

Emerging Markets started correction already in January and dropped 30% by now which makes them comparatively cheap. IMHO.


#11

However, usually in an uncertain situation, money flees from emerging markets to developed markets. In past crashes, EM had stronger crashes than DM.


#12

Do you feel like we are having a crash or more of a correction?

I think S&P will reach around 2300-2350pts (so another 5-6% from here). If it goes lower, I will have to worry about stock allocations :slight_smile:


#13

We’re not having any crash… yet.


#14

I’m in the red, but not as much as I would have been if I would have put my money in the market all at once.

I keep investing monthly, but I have this weird strategy: If on the designated day the market is going down, I wait for the next day and see what happens. It is of course a flawed approach in specific scenarios, but I don’t mean it to gain 20-30chf more for each trade, it’s just that if something goes really down, I avert the problem.
maybe.


#15

Janet Yellen in June 2017:

…no new financial crisis in ‘our lifetimes’…

Source here.
Then it should be OK for the remaining days of 2018, and 2019 ?


#16

LOL, excellent joke XD


#17

OK that went fast. Let’s see what happens now.


#18

Stocks are cheaper and the dividend yield is going up.
It’s not that bad, in the “value investing” perspective…


#19

Ok I hoped for a bounce of 2350 but 5% in a day. Wow.


#20

What happened so special today that it all jumped that much :smiley: