How to stay invested in a surging market

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deepvalleys
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How to stay invested in a surging market

Post by deepvalleys »

I am tempted to take some money out of the market. At some point there will be a correction but nobody knows when. It is harder to fight the urge to sell now, than it was in march 2020. Well, I've got about 15% in a savings account and 85% stocks so I do have something in reserve.
Triple digit golfer
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Re: How to stay invested in a surging market

Post by Triple digit golfer »

Do you have an asset allocation and maintain it?
livesoft
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Re: How to stay invested in a surging market

Post by livesoft »

It is relatively easy if you have a written plan ahead of time of when to sell. Is that what you are asking? Or are you asking how to violate your plan?
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Brianmcg321
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Re: How to stay invested in a surging market

Post by Brianmcg321 »

When markets are dropping fast or rising fast and it gives you funny feelings of selling, that just tells me your asset allocation isn't correct. Whatever the market is doing you should be able to shrug your shoulders and think about something else.
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Re: How to stay invested in a surging market

Post by z3r0c00l »

Look at a graph of the stock market over long spans of time. It has been going up for over a century. Yes it could drop below the point we achieved today but we don't know that. You could easily miss out on another 100% while waiting for the drop to come. Some people went all cash in March 2020 and are still waiting to get back in. I can't imagine how that feels.
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deepvalleys
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Re: How to stay invested in a surging market

Post by deepvalleys »

I am asking how to resist the temptation to take profit. Intellectually I know market timing won't pay off, but emotionally it is hard to resist. My asset allocation i 85% developed and 15% emerging market, except that I've got an emergency fund that I don't really need placed in a savings account. But I'll leave it there for now.
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dogagility
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Re: How to stay invested in a surging market

Post by dogagility »

Easy. Realize the market will (very likely) keep going up over the long term.
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Re: How to stay invested in a surging market

Post by Marseille07 »

You don't take profit is the point. If your stock AA is inflated and bonds deflated, rebalancing would act as a form of profit taking.
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Re: How to stay invested in a surging market

Post by RadAudit »

deepvalleys wrote: Wed Jan 20, 2021 5:27 pm how to resist the temptation to take profit.
Resist the temptation to take profit by changing your thinking to maintaining AA.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
Triple digit golfer
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Re: How to stay invested in a surging market

Post by Triple digit golfer »

If you are 100% stocks there is no profit to take, you just let it ride. If you have a bond or cash allocation percentage that you're maintaining, then you maintain that and that's how you take profit.
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Re: How to stay invested in a surging market

Post by Nicolas »

I have the opposite inclination. I never think of selling in a surging market, instead I’m tempted to invest more. And in a falling market I’m tempted to sell. I try to resist in both types of markets. I never wrote an IPS, maybe that’s the problem.
gonefishing01
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Re: How to stay invested in a surging market

Post by gonefishing01 »

The chapter on volatility in The Psychology of Money by Morgan Housel is helpful to read (and re-read) whenever you’re thinking about things like this. Volatility is the price you pay for long term gains. Market timing is like trying to get the returns without paying the price of admission, which will catch up with you eventually. Get your allocation right and do nothing.
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Re: How to stay invested in a surging market

Post by JBTX »

If you're 100% stocks and fighting the urge to sell I'd say you need to review your asset allocation. If you're young (under 30,maybe 35) then you need to convince yourself it just doesn't matter, because you won't need the money in several decades anyway. If you are over 40, only the most risk comfortable investors should be 100% stocks.
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Callisto
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Re: How to stay invested in a surging market

Post by Callisto »

An interesting statistic to think about is that historically, the market has been within 5% of the ATH around half the time. Its been within 20% of the ATH around 80% of the time.

End of the day, if you are a long term buy and hold investor, you'll be buying at the top half the time. And that's fine, because the market is almost always reaching a new ATH.
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Re: How to stay invested in a surging market

Post by rockstar »

I can't time tops.
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Re: How to stay invested in a surging market

Post by minesweep »

What John Bogle said:
Time is your friend; impulse is your enemy - John Bogle | Learn every day, but especially from the experiences of others, it's cheaper! - John Bogle
gonefishing01
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Re: How to stay invested in a surging market

Post by gonefishing01 »

What would you do if you cashed out tomorrow and the market kept climbing for 3 months? Would you feel good missing out on 3 months of gains to buy a dip that may still be higher than the market is now? Most recent real world example of this is people who pulled out before the election in November expecting a drop, but instead the market went straight up for weeks. All of us who stayed the course were handsomely rewarded for doing nothing.
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Re: How to stay invested in a surging market

Post by Normchad »

There is nothing wrong with rebalancing, if your current allocation isn’t what you want it to be.

The market may drop. And it may drop a lot. And stay down for a long time. However, i am absolutely convinced it will be higher ten years from now than it is today. So if your time horizon is more than ten years, don’t sweat it.

Most people have a lot more trouble staying invested in a falling market. Times like these, giddy and everybody is flocking in.....
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Re: How to stay invested in a surging market

Post by FelixTheCat »

livesoft wrote: Wed Jan 20, 2021 5:20 pm It is relatively easy if you have a written plan ahead of time of when to sell. Is that what you are asking? Or are you asking how to violate your plan?
May I ask what is your plan to take stock profits and buy more bonds?

I went 50/50 when I considered retiring about a year+ ago. Due to the market run up, I am 55/45. In my mind, I have enough bonds and don't need anymore. At what point should we reallocate back to bonds?
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livesoft
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Re: How to stay invested in a surging market

Post by livesoft »

FelixTheCat wrote: Wed Jan 20, 2021 6:32 pm May I ask what is your plan to take stock profits and buy more bonds?
If you are asking me, then I have a nominally 60/40 asset allocation. I rebalanced earlier this year, but will need to rebalance again if things keep going like they are going.

I announced that I was overweight in equities and would exchange some from equities to bonds if the stock market went up 3% in one day. So the stock market obliged and I rebalanced partially. That is, I do not rebalance back to 60/40 all at once. I expect that when the number become available overnight that my portfolio will show AA of 62/38. I will also rebalance into bond funds if they drop by more than 0.5% or so in one day.

BTW, the stock market kept going up after that one-day gain of 3%. I would have been richer if I had not rebalanced, but I don't care.

See also: viewtopic.php?t=150267
Last edited by livesoft on Wed Jan 20, 2021 6:49 pm, edited 3 times in total.
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Re: How to stay invested in a surging market

Post by Broken Man 1999 »

I rebalanced some today, selling VTI (Total Stock Market Index ETF).

But, rebalancing is NOT taking money out of the market, it is for re-establishing your desired AA that the market activity has unbalanced. I will be adding to our bond holdings tomorrow.

Rebalancing prevents our AA from getting way out of balance, and perhaps affecting our comfortable retirement at some point. I don't want that to happen as DW would probably give me grief.

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Re: How to stay invested in a surging market

Post by secondopinion »

deepvalleys wrote: Wed Jan 20, 2021 5:18 pm I am tempted to take some money out of the market. At some point there will be a correction but nobody knows when. It is harder to fight the urge to sell now, than it was in march 2020. Well, I've got about 15% in a savings account and 85% stocks so I do have something in reserve.
If stability of principal is the concern, then you should have less stocks period. But a correction does not take long to recover. Would going to 80% stocks make you feel any better? Maybe it is a sign to dial it back (but never do so by much).
Last edited by secondopinion on Wed Jan 20, 2021 7:04 pm, edited 1 time in total.
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Re: How to stay invested in a surging market

Post by Nicolas »

secondopinion wrote: Wed Jan 20, 2021 6:45 pm
Nicolas wrote: Wed Jan 20, 2021 5:47 pm I am tempted to take some money out of the market. At some point there will be a correction but nobody knows when. It is harder to fight the urge to sell now, than it was in march 2020. Well, I've got about 15% in a savings account and 85% stocks so I do have something in reserve.
If stability of principal is the concern, then you should have less stocks period. But a correction does not take long to recover. Would going to 80% stocks make you feel any better? Maybe it is a sign to dial it back (but never do so by much).
I didn’t say that, the OP did.
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Re: How to stay invested in a surging market

Post by Broken Man 1999 »

FelixTheCat wrote: Wed Jan 20, 2021 6:32 pm
livesoft wrote: Wed Jan 20, 2021 5:20 pm It is relatively easy if you have a written plan ahead of time of when to sell. Is that what you are asking? Or are you asking how to violate your plan?
May I ask what is your plan to take stock profits and buy more bonds?

I went 50/50 when I considered retiring about a year+ ago. Due to the market run up, I am 55/45. In my mind, I have enough bonds and don't need anymore. At what point should we reallocate back to bonds?
I understand that feeling completely. Sometimes I look at our bond funds and think maybe I should come up with a minimum floor, and a maximum floor and let the equities grow if the maximum floor is exceeded.

But, I remember how nice it was to buy a lot of equities using our bond funds last year. So I keep selling equities and buying bond funds.

I stayed at 50% stocks/50% bonds for five years, moved to 55% stock and 45% bonds last year, and had given thought to going to a final AA of 60% stocks and 40% bonds in five more years.

Broken Man 1999
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Re: How to stay invested in a surging market

Post by secondopinion »

Nicolas wrote: Wed Jan 20, 2021 6:50 pm I didn’t say that, the OP did.
My mistake. Silly quote system.
deepvalleys wrote: Wed Jan 20, 2021 5:18 pm I am tempted to take some money out of the market. At some point there will be a correction but nobody knows when. It is harder to fight the urge to sell now, than it was in march 2020. Well, I've got about 15% in a savings account and 85% stocks so I do have something in reserve.
It is better to be half-wrong than have a 50% chance of being all-wrong. With the former, you will learn and have money to try again. Otherwise, you will never learn and will have nothing eventually.
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Re: How to stay invested in a surging market

Post by lostdog »

Long term money in stocks.

5-10 years in cash and bonds.
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Re: How to stay invested in a surging market

Post by minesweep »

FelixTheCat wrote: Wed Jan 20, 2021 6:32 pm
livesoft wrote: Wed Jan 20, 2021 5:20 pm It is relatively easy if you have a written plan ahead of time of when to sell. Is that what you are asking? Or are you asking how to violate your plan?
May I ask what is your plan to take stock profits and buy more bonds?

I went 50/50 when I considered retiring about a year+ ago. Due to the market run up, I am 55/45. In my mind, I have enough bonds and don't need anymore. At what point should we reallocate back to bonds?
I recall seeing John Bogle (a few years ago) on CNBC saying that he thought investors rebalanced too often. He suggested that instead of rebalancing at 5% they do it around 10%.
“We also did an earlier study of all 25-year periods beginning in 1826 (!), using a 50/50 US stock/bond portfolio, and found that annual rebalancing won in 52% of the 179 periods. Also, it seems to me, noise. Interestingly, failing to rebalance never cost more than about 50 basis points, but when that failure added return, the gains were often in the 200-300 basis point range; i.e., doing nothing has lost small but it has won big.”
Vanguard's Jack Bogle on Rebalancing - 2007 article

P.S. Not saying that you should follow his advice.
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Re: How to stay invested in a surging market

Post by RetiredAL »

OP,

I sold some today, but under totally different circumstances than you are considering.

I did so because my IPS directs me to do a replenishment of a fund each January and July in the IRA funded by my pension. This fund is my withdrawing fund in that IRA and goes to our checking to cover routine expenditures. It's a short-term Treasury Fund. My IPS says each January and July to replenish this fund to a level of 18 months of withdrawals, using either that IRA's fixed income or equity holdings, whichever gained the most. The equity holdings had gained the most, so I exchanged some $ out and into the s/t Treasury. I sleep well knowing that I have the next 12 to18 months of expenditures covered via a very low volatility fund.

While doing that, I also checked the AA for my other IRA, funded by my 401K, and determined was at +3% for the equities, with was inside of my re-balance bands. I had Roth Converted a modest amount in Dec and those $ came out of the equities portion.
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Re: How to stay invested in a surging market

Post by TheoLeo »

We could be in a period where all the gains for the next 10 years are made within maybe 1-2 years of fast growth. Just because the market is surging since months at an unsustainable pace it doesn´t mean that there will be a big correction. This surge could simply be followed by a long stagnation period. It will be easier to ride out this stagnation period if you are sitting on the gains of the run up.
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Re: How to stay invested in a surging market

Post by Beensabu »

Why don't you just admit that your risk tolerance isn't what you thought it was and change your AA to have some percentage allocated to fixed income? You can call it "taking profits", but it's the same as being afraid of losing gains. If you would prefer to have those "profits" somewhere more "stable", then it sounds like you want to be something other than 100/0. I doubt anyone will give you too much of a hard time about that, and it doesn't matter if they do.

Then whenever stocks keep going up, you won't be tempted to take profits. You'll just rebalance to your predetermined AA. It won't be market timing; it'll be rebalancing :D . As long as you don't do the whole "this is and has always been dry powder and I'm using it now!" thing later. I mean, you can. But that would definitely be market timing.
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Re: How to stay invested in a surging market

Post by Sandtrap »

Broken Man 1999 wrote: Wed Jan 20, 2021 6:56 pm
FelixTheCat wrote: Wed Jan 20, 2021 6:32 pm
livesoft wrote: Wed Jan 20, 2021 5:20 pm It is relatively easy if you have a written plan ahead of time of when to sell. Is that what you are asking? Or are you asking how to violate your plan?
May I ask what is your plan to take stock profits and buy more bonds?

I went 50/50 when I considered retiring about a year+ ago. Due to the market run up, I am 55/45. In my mind, I have enough bonds and don't need anymore. At what point should we reallocate back to bonds?
I understand that feeling completely. Sometimes I look at our bond funds and think maybe I should come up with a minimum floor, and a maximum floor and let the equities grow if the maximum floor is exceeded.

But, I remember how nice it was to buy a lot of equities using our bond funds last year. So I keep selling equities and buying bond funds.

I stayed at 50% stocks/50% bonds for five years, moved to 55% stock and 45% bonds last year, and had given thought to going to a final AA of 60% stocks and 40% bonds in five more years.

Broken Man 1999
Curious. . . .why are you on a rising equity % glidepath??

Would you alter the glidepath if market trends change over time?

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random_walker_77
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Re: How to stay invested in a surging market

Post by random_walker_77 »

I think this quote is appropriate here:
White Coat Investor wrote: Wed Feb 05, 2020 11:22 am Beginning investors have a hard time staying the course at market lows.
Intermediate investors have a hard time staying the course at market highs.
Advanced investors stay the course.
The trick is to find an allocation you can hold through highs and lows. Write it down, and then rebalance to that ratio every x months. Write down the allocation ratio, write down when/how often you'll rebalance. It's as simple as that (but not easy to do!!!)

And this is another reason why going 100% stocks is a white knuckle ride -- the act of rebalancing to bonds, as per your written plan, makes it easier to stick to your plan when you get these jitters.
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Re: How to stay invested in a surging market

Post by F150HD »

I am tempted to take some money out of the market.
Interesting that some sell on the way down (March 2020) due to panic. This seems almost the same behavior but when the market is going up.
z3r0c00l wrote: Wed Jan 20, 2021 5:24 pm Some people went all cash in March 2020 and are still waiting to get back in. I can't imagine how that feels.
+1 :|
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Re: How to stay invested in a surging market

Post by Ferdinand2014 »

If I need money, I sell stocks

If I don't need money, I don't sell stocks.

I do not have an asset allocation so do not rebalance, but instead hold one fund of equities and cash enough to avoid ever having to sell for reasons out of my control.

This keeps me sitting on my hands through thick and thin.
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Re: How to stay invested in a surging market

Post by Sandtrap »

deepvalleys wrote: Wed Jan 20, 2021 5:18 pm I am tempted to take some money out of the market. At some point there will be a correction but nobody knows when. It is harder to fight the urge to sell now, than it was in march 2020. Well, I've got about 15% in a savings account and 85% stocks so I do have something in reserve.
The "market" is like the ocean tides washing up on a white sandy beach in Hawaii. It's always "surging". . . and "receeding" unpredictably.

Adjust allocation.
How about 60/40? 70/30? 80/20? So the cycle of low and high is not so apparent. Then, don't watch it anymore.

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Re: How to stay invested in a surging market

Post by Alaric »

Market regimes too dangerous in which to invest:

• Overheated soaring markets at or near all-time highs.
• Cratering markets with dizzying downward momentum.
• Flat / sideways markets experiencing volatile up and down random movements.
• Slow but steady declining markets that inexorably deflate your investments like a slow tire leak.

Good market regime in which to invest:

• A nice steady rising market with no swings and no surprises. The market rises 0.03% each day = 7.6% annually.

When that market raises its head and I'm sure it's here to stay, I'll get my cash off the sidelines and back into equities! :wink:
Last edited by Alaric on Thu Jan 21, 2021 10:57 am, edited 1 time in total.
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Re: How to stay invested in a surging market

Post by random_walker_77 »

Alaric wrote: Thu Jan 21, 2021 8:43 am Market regimes too dangerous in which to invest:

Good market regime in which to invest:
Alaric, you might want to add a "/sarcasm" flag to your post to avoid inadvertently doing a disservice to anyone with a broken sarcasm detector (including possibly those for whom English is a 2nd language)
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Re: How to stay invested in a surging market

Post by 2903490324 »

Just do it
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Re: How to stay invested in a surging market

Post by alex_686 »

First, and foremost, make a plan, write a IPS, and stick with it.

Let me make two modest counter argument that you should take money off of the table.

You have goals. X dollars in Y years for Z. You have market expectations and a risk tolerance. This drives your asset allocation.

If you have won the game why are you still playing?

If you are ahead of schedule, why are you still taking such a high level of risk? At some point you probably will want to add some bonds. Why not now?

If it is risk that is getting out of control, another option to rebalance your portfolio is not to target a specific asset but rather target volatility. Since volatility is higher you would skew your portfolio towards bonds. While not exactly the same thing it is adjacent. There are numerous threads on this issue.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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Re: How to stay invested in a surging market

Post by Broken Man 1999 »

Sandtrap wrote: Wed Jan 20, 2021 11:04 pm
Broken Man 1999 wrote: Wed Jan 20, 2021 6:56 pm
FelixTheCat wrote: Wed Jan 20, 2021 6:32 pm
livesoft wrote: Wed Jan 20, 2021 5:20 pm It is relatively easy if you have a written plan ahead of time of when to sell. Is that what you are asking? Or are you asking how to violate your plan?
May I ask what is your plan to take stock profits and buy more bonds?

I went 50/50 when I considered retiring about a year+ ago. Due to the market run up, I am 55/45. In my mind, I have enough bonds and don't need anymore. At what point should we reallocate back to bonds?
I understand that feeling completely. Sometimes I look at our bond funds and think maybe I should come up with a minimum floor, and a maximum floor and let the equities grow if the maximum floor is exceeded.

But, I remember how nice it was to buy a lot of equities using our bond funds last year. So I keep selling equities and buying bond funds.

I stayed at 50% stocks/50% bonds for five years, moved to 55% stock and 45% bonds last year, and had given thought to going to a final AA of 60% stocks and 40% bonds in five more years.

Broken Man 1999
Curious. . . .why are you on a rising equity % glidepath??

Would you alter the glidepath if market trends change over time?

Aloha
j :D
I have two of Larry Swedroe's considerations for taking risk: I have the ability, and the willingness. I don't have the need, at all.

I'm gradually increasing equities in our AA for legacy reasons. We have a very solid, over-funded retirement. At the end of each move to a higher equity portion, our portfolio has five fewer years to support us. Through rebalancing we have more of equities and bonds, our current 55% equities/45% bonds has more dollars in bond funds than our previous 50%/50% AA.

Your second question, not sure what you mean. An AA of 50/50, 55/45, 60/40 would all be good allocations for us in any market, I believe.

So far as trends, one market trend (more of a reality) we see is low yield on fixed income. Any of the three AAs I have listed above, past, present, or future has a solid allocation to bonds, so I think my current glidepath is fine.

Going with a 10% change in AA over a ten year period isn't that radical.

Anyhoo, that's my story. The ending might change. It hasn't been written, yet.

Broken Man 1999
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Re: How to stay invested in a surging market

Post by jharkin »

deepvalleys wrote: Wed Jan 20, 2021 5:27 pm I am asking how to resist the temptation to take profit.
This is where a written IPS with target asset allocations and rebalancing thresholds comes in handy. It forces you to sell (gradually)on run ups and buy (gradually) on downturns automatically.
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Re: How to stay invested in a surging market

Post by rockstar »

This is very contrarian. The market is going up, which is good. Why do you want to sell? When do you want to be in the market: when it's going sideways? when it's going down?
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Re: How to stay invested in a surging market

Post by Sandtrap »

Broken Man 1999 wrote: Thu Jan 21, 2021 11:13 am
Sandtrap wrote: Wed Jan 20, 2021 11:04 pm
Broken Man 1999 wrote: Wed Jan 20, 2021 6:56 pm
FelixTheCat wrote: Wed Jan 20, 2021 6:32 pm
livesoft wrote: Wed Jan 20, 2021 5:20 pm It is relatively easy if you have a written plan ahead of time of when to sell. Is that what you are asking? Or are you asking how to violate your plan?
May I ask what is your plan to take stock profits and buy more bonds?

I went 50/50 when I considered retiring about a year+ ago. Due to the market run up, I am 55/45. In my mind, I have enough bonds and don't need anymore. At what point should we reallocate back to bonds?
I understand that feeling completely. Sometimes I look at our bond funds and think maybe I should come up with a minimum floor, and a maximum floor and let the equities grow if the maximum floor is exceeded.

But, I remember how nice it was to buy a lot of equities using our bond funds last year. So I keep selling equities and buying bond funds.

I stayed at 50% stocks/50% bonds for five years, moved to 55% stock and 45% bonds last year, and had given thought to going to a final AA of 60% stocks and 40% bonds in five more years.

Broken Man 1999
Curious. . . .why are you on a rising equity % glidepath??

Would you alter the glidepath if market trends change over time?

Aloha
j :D
I have two of Larry Swedroe's considerations for taking risk: I have the ability, and the willingness. I don't have the need, at all.

I'm gradually increasing equities in our AA for legacy reasons. We have a very solid, over-funded retirement. At the end of each move to a higher equity portion, our portfolio has five fewer years to support us. Through rebalancing we have more of equities and bonds, our current 55% equities/45% bonds has more dollars in bond funds than our previous 50%/50% AA.

Your second question, not sure what you mean. An AA of 50/50, 55/45, 60/40 would all be good allocations for us in any market, I believe.

So far as trends, one market trend (more of a reality) we see is low yield on fixed income. Any of the three AAs I have listed above, past, present, or future has a solid allocation to bonds, so I think my current glidepath is fine.

Going with a 10% change in AA over a ten year period isn't that radical.

Anyhoo, that's my story. The ending might change. It hasn't been written, yet.

Broken Man 1999
Thanks!
I've been pondering the same things. Similar positions and conditions in some ways than yourself.
Will ponder more and PM you so as not to hijack this thread main topic focus.

Mahalo,
j :D
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LHRAdam
Posts: 32
Joined: Thu Jul 26, 2018 7:58 pm

Re: How to stay invested in a surging market

Post by LHRAdam »

I’m incredibly grateful to have a written IPS right now. I too have been tempted to let my AA drift upwards as equities continue to climb. But if I get tempted then I read more of this blog which settles me.
Last year I rebalanced back to my AA twice - from bond to equity and then later from equity to bond. I’m nearly at my rebalancing band (Equity to bond) again when I will rebalance. Reviewed my IPS thoughtfully in November, and decided not to change AA or rebalancing bands, so now I will stick with it and keep disciplined.
makingmistakes
Posts: 146
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Re: How to stay invested in a surging market

Post by makingmistakes »

Triple digit golfer wrote: Wed Jan 20, 2021 5:20 pm Do you have an asset allocation and maintain it?
So I’ve been wondering if it makes sense to have a different asset allocation for when the valuations are high (e.g. average P/E of S&P 500 > 35, I’m going to lessen my stock percentage) versus a more “normal” range versus a historically low range (where might increase stock percentage).

Is this verboten to Bogleheads?
saintsfan342000
Posts: 190
Joined: Wed Apr 04, 2018 9:46 pm

Re: How to stay invested in a surging market

Post by saintsfan342000 »

The key for me is staying busy enough with other pursuits that I forget about my investments and the market’s recent performance.
Already impartial now
Triple digit golfer
Posts: 7251
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Re: How to stay invested in a surging market

Post by Triple digit golfer »

makingmistakes wrote: Thu Jan 21, 2021 12:26 pm
Triple digit golfer wrote: Wed Jan 20, 2021 5:20 pm Do you have an asset allocation and maintain it?
So I’ve been wondering if it makes sense to have a different asset allocation for when the valuations are high (e.g. average P/E of S&P 500 > 35, I’m going to lessen my stock percentage) versus a more “normal” range versus a historically low range (where might increase stock percentage).

Is this verboten to Bogleheads?
I wouldn't do it. People have been saying that valuations are high for years. Just maintain a fixed AA and rebalance.
3funder
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Re: How to stay invested in a surging market

Post by 3funder »

I would only take money out of the market if I needed it for something else. Feel free to time the market, but don't be surprised if it doesn't work out the way you had hoped.
Global stocks, US bonds, and time.
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FelixTheCat
Posts: 2003
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Re: How to stay invested in a surging market

Post by FelixTheCat »

minesweep wrote: Wed Jan 20, 2021 7:35 pm I recall seeing John Bogle (a few years ago) on CNBC saying that he thought investors rebalanced too often. He suggested that instead of rebalancing at 5% they do it around 10%.
“We also did an earlier study of all 25-year periods beginning in 1826 (!), using a 50/50 US stock/bond portfolio, and found that annual rebalancing won in 52% of the 179 periods. Also, it seems to me, noise. Interestingly, failing to rebalance never cost more than about 50 basis points, but when that failure added return, the gains were often in the 200-300 basis point range; i.e., doing nothing has lost small but it has won big.”
Vanguard's Jack Bogle on Rebalancing - 2007 article

P.S. Not saying that you should follow his advice.
I just read the section in Bogle's book on rebalancing.

Scenario 1. Pick a month and rebalance once a year. Good for those people that don't look at their portfolio.

Scenario 2. Rebalance using bands. A common rebalance target is 10%. Meaning in a 60/40 portfolio rebalance when stocks reach 66 percent or drop to 54 percent. The book used 10% of 60 stocks is 6%.
Felix is a wonderful, wonderful cat.
make_a_better_world
Posts: 155
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Re: How to stay invested in a surging market

Post by make_a_better_world »

You could look at this another way too. If you sold the stocks, where would you put it? If the answer is cash, there is a risk of the dollar falling in value too.
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