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I've been thinking about taking a large percentage of my retirement portfolio and putting it in a Stable Value Fund. I've had a good run in the S&P but I get a sense that the music will stop soon and that this bull market will end. I am not adhering to the traditional stock/bond/cash diversification and have been heavy into the S&P. I understand the risk associated this approach and that's why I'm thinking about taking my gains and seeking refuge in a Stable Value Fund.

I recognize the folly of trying to "time" the market, but I wanted to see what the group had to say. The dominant school of retirement savings seems to say: save regularly and don't worry about the fluctuations because you don't need the money for decades. I'm about to turn 30. The second school, which seems to be in the minority, advocates more active management. Like everyone else, I am scarred from the 2008 debacle and how long my retirement portfolio took to recoup its pre-crash value.

With debt ceiling talks resurfacing in September, no federal budget again, and, I think, the potential for another U.S. credit downgrade there's no shortage of risk events that could trigger a downturn. That's just on the domestic front. You have your pick of the litter with foreign policy crises. In reality, the catalyst for the downturn will probably be something that's not currently on the radar.
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I've had a good run in the S&P but I get a sense that the music will stop soon and that this bull market will end.

I don't doubt you believe this. That said, you are either delusional or have the ability to generate wealth beyond Warren Buffett and Bill Gates combined. You are talking about market timing. History is full of millions of claims to do that and many thousands of studies saying at the end of the day (think a 10 to 20 year time frame) investors have more money by staying fully invested.

In recent times, there was a bit of a market drop in 2008. The bottom happened in March 2009. Those who stayed in the market returned to pre-drop levels in 2011. There are also people who still have the cash they got from selling in December 2008 in CDs. They will never recover the 50% of their funds lost.

Decide on an investment strategy and stick with it. Market timing is not a strategy, it is predicting the future.

Gordon
Atlanta
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It is not foolish to try to time the market. Timing the market is just like knowing when to buy or sell a particular stock. Technical indicators are extremely powerful.

Look at http://www.actwin.com/kalostrader/VisualMethods.htm

Nothing is perfect, but the market usually trends, and you can follow the trend, being in when the trend is up, and out when it is down.

Look at the Mechanical Investing board for some timing systems.

I am not sure what a Stable Value Fund is, but I bet if you look at the chart of one, you will see quite a bit of fluctuation.
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In recent times, there was a bit of a market drop in 2008. The bottom happened in March 2009. Those who stayed in the market returned to pre-drop levels in 2011. There are also people who still have the cash they got from selling in December 2008 in CDs. They will never recover the 50% of their funds lost.

Stupid people do stupid things. Don't be stupid.
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Thanks. Yeah, I'm inclined to think that the answer lies somewhere in the middle. When I first started working and opened my 401(k), I really bought into the hands-off approach--save and look at it in 40 years. Gradually decrease your share of equities and increase your share of bonds. Now, the total hands-off approach doesn't seem like the way to go. I can't argue with empirical evidence to the contrary--maybe I can just hope to be an outlier!
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Back in 1995, we used to joke that the name "Windows 95" didn't mean that it would come out in 1995, just that Microsoft hoped that they'd be able to ship something within 95 months of 1995.

IOW, a name not a description.

Similarly, "Stable Value Fund" is a name not a description. It doesn't do what you are hoping it does.
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Now, the total hands-off approach doesn't seem like the way to go.

You can still have a relatively hands-off approach with a "lazy portfolio". I few funds/ETFs and rebalance maybe once a quarter to once a year.

http://assetbuilder.com/lazy_portfolios/

I use this QTAA portfolio for part of my investments.

http://www.siliconvalleyaaii.org/images/20081108_Zmyslowski....

Since you use some "market timing" (simple 200 day moving average) it takes the emotion and guess work out of the equation.

JLC
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There are always fears and worries in the world. You are only 30. You have a long investing life ahead of you.

Stay invested. If the market drops, invest MORE.

D.
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I'll be blunt. You are being emotional and irrational.

On the other hand, any successful retirement plan must take into account the fact that virtually all people are emotional and irrational. We are each emotional and irrational in our own way.

So you need to find a plan that meets two needs. It needs to let you sleep at night, and it needs to have a good chance of success.

I like the suggestions for you to look at the Mechanical Investing board. They have several ways of looking at stocks and the market that attempt to remove as much emotion from the process as they can. It's also important to understand your own temperament - what things bother you and what things don't.

As to timing, you are correct that you can't avoid every little downdraft in the market. However, there is decent evidence that you can use some strategies to avoid the largest part of big market drops. The Mechanical Investing board would be the place to check those out. One I particularly like is the mungofitch 99 day rule. But there are other "bear catchers" they also look at.

--Peter
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Trynottosellout writes,

Like everyone else, I am scarred from the 2008 debacle and how long my retirement portfolio took to recoup its pre-crash value.

I got scared, too in 1987 after the big Black Monday crash where the DOW lost 23% in one day.

https://en.wikipedia.org/wiki/Black_Monday_%281987%29

I sold everything and put it in fixed income for about 2 years while the stock market gained 50% over that time. Big mistake. I bet I could have retired a couple of years earlier had I remained in the market. I eventually quit my job and retired in 1994 at age 38.

Stick with a reasonable asset allocation and don't monkey around trying to time events.

intercst
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I would not use the "simple 200 day moving average" for much of anything. By the time you get below that, you have suffered significant losses.
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I would not use the "simple 200 day moving average" for much of anything. By the time you get below that, you have suffered significant losses.

--------------


What would you use, then?

AM
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What would you use, then?

The 21 day EMA, and the 8,55 or 8,34 EMA crossovers work pretty well. For IWM, the 21 day EMA works well, but still, there are some losing trades. Nothing is perfect. Average annual return for the 21 day EMA timing is 9.11%, while untimed it is 7.39%. Major drawdowns are eliminated. This is since 5/28/2000 which is the first day of data on Fasttrack, and I assume the first day of trading.
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The 21 day EMA, and the 8,55 or 8,34 EMA crossovers work pretty well. For IWM, the 21 day EMA works well, but still, there are some losing trades. Nothing is perfect. Average annual return for the 21 day EMA timing is 9.11%, while untimed it is 7.39%. Major drawdowns are eliminated. This is since 5/28/2000 which is the first day of data on Fasttrack, and I assume the first day of trading.

Here's a bit I read a while ago and re-read periodically:

Roger Nusbaum:
I don't really think it matters which trigger is used as no single trigger can be the best for all times but they can be effective which is the priority as I see it. Here effective is simply defined as avoiding the full brunt of a large decline. Aside from my belief in its effectiveness, the 200 DMA is simple to explain and understand.
No one rule is always correct. they all give false signals.

True bear markets start slowly giving many months to get out as was the case in both 2000 and late 2007 into 2008. Fast declines, or panics typically retrace quickly and are better bought than sold for someone who is a trader.

It does not make sense to try to sell now before any indicator is triggered because (repeated for emphasis) there may not be a recession. It makes more sense to heed a trigger in the market for defensive action because in addition to it being objective and simple, stocks will turn down before the next recession, whenever that is, as a function of normal market behavior; capital markets turn down before the economy. Also if somehow there was a recession but stocks did not go down there would be no reason to sell.


and
"Simple is better, because simple is more robust."
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