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No. of Recommendations: 7
Economist Teresa Ghilarducci says, "delay SS to age 70 and you can take closer to 5%" -- I agree, at least for less wealthy retirees where SS makes up more of their monthly income.

https://www.fa-mag.com/news/retirees--forget-the-4--withdraw...

Some advisers like annuities, but private annuity markets are tricky. The best annuity is to delay claiming Social Security even if you have to tap into your retirement assets. Social Security is inflation-indexed (a great deal in the face of future price hikes) and the payments last until the end of your and your spouses’ lives.

Tapping into retirement assets and delaying Social Security can result in an annual 8% increase in inflation-indexed Social Security benefits. If you wait until, say 70, you'll have more Social Security income—then you can withdraw closer to 5% and live it up a little because you’ll have fewer years to draw the assets down.

</snip>


intercst
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No. of Recommendations: 4
If your Social Security benefit and any pensions that you might receive exceed your normal living expenses, do you really need to pay any attention to the 4% or a 5% rule at all?

At age 68, I retired from the workforce and claimed Social Security in 2013. I started withdrawal or RMD in 2015. Since then all that I have done is transfer the RMD to a taxable investment account and reinvested it. To date, I've been following the 0% rule.

One of these days, I may have to use a portion of my RMD to pay taxes on my RMD, Social Security, two small pensions, and qualified dividends earned in my taxable investment account.
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No. of Recommendations: 4
If your Social Security benefit and any pensions that you might receive exceed your normal living expenses, do you really need to pay any attention to the 4% or a 5% rule at all?

</snip>


No. The 4% rule is the maximum withdrawal amount that survived all historical 30-year pay out periods. Spending less than 4% is always going to be safer.

Of course, there's always a chance you could end up in a nursing home and have your expenses rise so much that the 4% rule comes into play again. That's why it's useful to do some planning around those extreme events.

intercst
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No. of Recommendations: 4
Economist Teresa Ghilarducci says, "delay SS to age 70 and you can take closer to 5%" -- I agree, at least for less wealthy retirees where SS makes up more of their monthly income.

Assuming SS will actually be what you expect...
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No. of Recommendations: 13
If you invest 100% in the S&P500, but only when it's above its 200 day moving average, you can safely withdraw well over 4% annually.

Using the 200DMA to either be in or out of the market, from the market peak on November 1, 1968 through to December 31, 2020 (which includes a 64% market decline from Nov '68 to Jul '82), with a 95% confidence*, you could have safely withdrawn 7.23% annually.

If you wanted to raise the confidence to 99%, you could still have withdrawn 6.75% annually.

Over that same time frame, if you just invested in the S&P500 and took your lumps when they came, with a 95% confidence, you could have withdrawn 5.65%. With a 99% confidence, you could have withdrawn 4.71%.

If you go all the way back to 12/31/1925 and include the great depression's 84.6% decline, the safe annual withdrawal rate at 95% confidence is 4.75%. 99% confidence SAWR is 3.2%. If you had incorporated the 200 DMA, the SAWR was 6.65% at 95% confidence, and 5.3% at 99% confidence.

Moral to the story, do something to limit the damage from major crashes, and live better in retirement! It doesn't have to be a cosmic solution.

Tails

* Confidence (in this example) is defined as: percentage chance that the ending portfolio value is no less than the initial portfolio value.
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No. of Recommendations: 2
If you invest 100% in the S&P500, but only when it's above its 200 day moving average, you can safely withdraw well over 4% annually.

I had a difficult time understanding that. It seems to say it is better to invest when the market is higher than its average. To me that sounds backwards. Obviously I was missing something important, which seems to be jumping in and out of the market. I'm unclear to me on what basis the in and out transactions would be triggered.

Can you provide a link to an article or paper that goes into this idea?
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You might want to pop over to the mechanical investing board and see what they have to say about this approach. Should be right up their alley.

—Peter
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No. of Recommendations: 3
It seems to say it is better to invest when the market is higher than its average. To me that sounds backwards.

It doesn't "seem to say". It *does* say.
Think about what "market is higher than its average" means?
Restate it. Try "..is in the process of going up."


To me that sounds backwards.

Sounds backwards to a lot of people. Just like lots of people think that it is good to buy stocks that are near their 52 week low, and crazy to buy stocks that are near their 52 week high -- and worse yet, absolutely crazy to buy stocks at a new all-time high.

These people are the ones who apply for jobs as Walmart greeter when they are 70+ years old.


Can you provide a link to an article or paper that goes into this idea?

p.s. Google is your friend. Their are probably a zillion papers and articles on this subject. Maybe start off with Mel Faber's paper.
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No. of Recommendations: 3
Sounds backwards to a lot of people. Just like lots of people think that it is good to buy stocks that are near their 52 week low, and crazy to buy stocks that are near their 52 week high -- and worse yet, absolutely crazy to buy stocks at a new all-time high.These people are the ones who apply for jobs as Walmart greeter when they are 70+ years old.

Well I guess it all depends, since the market is always hitting an all time high from 2014. So if you didn't buy in you would be sitting in cash for 7 years. Unless you jumped in at the 2020 flash crash. But than you would still be buying higher than 2014. It's really hard to time the market.

Andy
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No. of Recommendations: 6
<<<If you invest 100% in the S&P500, but only when it's above its 200 day moving average, you can safely withdraw well over 4% annually.>>>

I had a difficult time understanding that. It seems to say it is better to invest when the market is higher than its average. To me that sounds backwards.

</snip>


What he's describing is "active management" and "momentum investing". You'd need to be tied to your computer so that you could execute buy/sell signals in a timely fashion. That's what they do on the Mechanical Investing board.

If you're saving for retirement (and the hopefully 20-30 year period you'll be in retirement), you're better off just maintaining your asset allocation and enjoying life. You shouldn't have any money you expect to spend in the next 5 years in the stock market.

The two 50% drops in my net worth (i.e., 2000 and 2008) were immaterial over an investing lifetime as long as I didn't panic and sell.

intercst
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No. of Recommendations: 0
Implications of DragonTail's interesting analysis:

[1] You need to monitor the market daily to check that the previous day's S&P500 is above the 200 daily moving average. If it still is, keep invested in S&P500; if not, sell.
[2] Withdraw 4% each year or 1% a quarter is the normal rule. But taking the last half century of data, and the 99% confidence limit, then it's 6.75%. annually using the 200DMA application. Otherwise (NOT using the 200DMA) the limit would have been 4.71%. Go back a century of data and the limit would be 5.3% confidence using the 200DMA.

DragonTales:
(Only if you can afford the time...)
[1] For an easier existence, suppose I were to check every weekend in my retirement instead of every day, what would the withdrawal rate look like, assuming I executed the following Monday at close?
(This would be based just for the 1925 analysis at the 99% confidence level)
[2] How many false alarms (sale followed by fairly swift repurchase) per annum would there be?
[3] Average trades per annum?

John
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No. of Recommendations: 3
"If you're saving for retirement (and the hopefully 20-30 year period you'll be in retirement), you're better off just maintaining your asset allocation and enjoying life. You shouldn't have any money you expect to spend in the next 5 years in the stock market."

Yep. I am significantly overweight cash but that is because I am 65 years old. If the markets fall by 50% or worse over the next year, I have enough cash to live on. If they rise by 50%, I can continue to enjoy the benefits of participating in an irrationally exuberant market without agonizing over when to get out or when to get back in.

Sleep at night rule.
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No. of Recommendations: 6
It's really hard to time the market.

Not really. If you do it right. It's just that most people don't do it right.

Most people view timing as a way to capture & avoid every little movement of prices. But that can't be done, because in the short-term price movements are random.

The right way to view timing is viewing the market like the ocean tides. Long slow period of up and long slow periods of down. You want to catch the tides, not the waves.

All you need to do to soundly beat the the market is to avoid the deep plunges. One writer said that what good timing accomplishes is "avoiding the full brunt of a large decline." It's amazing what happens long-term if you can limit your losses to -20% while the market goes down -40%.

"The moving average timing strategy makes the majority of its money by avoiding large, sustained market downturns."

Melbane Faber's famous paper goes into this for 40+ pages. I can state the simple rule in 2 sentences.
1) Be in (buy) when the S&P 500 is above it's 43 week (200 day, 10 month) moving average.
2) Be out (sell) when the S&P 500 is 4% or more below it's 43 week (200 day, 10 month) moving average.
2a) Or, when the S&P 500 has been below it's 43 week moving average for 4 consecutive weeks.

But, yeah, the Mechanical Investing board is the place where this topic is discussed.
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No. of Recommendations: 6
[1] You need to monitor the market daily to check that the previous day's S&P500 is above the 200 daily moving average.

No you don't. You only need to check once a week, or once a month.


[2] How many false alarms (sale followed by fairly swift repurchase) per annum would there be?
[3] Average trades per annum?


All this and more can be found in, or derived from, the spreadsheet I developed a few years ago. https://www.dropbox.com/s/cbzvg74iyeyfwt6/SPX-monthly-1950-2...

Note that this data is monthly, and that is also the timing frequency.

Using the timing rules in my previous post (sell at 4% below the 10 month SMA, buy at the SMA) there were only 48 trades (24 buys & 24 sells) between 1950 and 2017. That's 48 signals in 67 years. But note that sometimes there are no trades for several years in a row.

Number of whiplashes (reverse in/out status in the next 1 or 2 months) was 7. Not bad, 7 faulty signals out of 24.

The spreadsheet doesn't do confidence levels though, it just does one run. You specify the start date and the initial amount and withdrawal. You'd have to keep changing the start date and noting the final value and then plot that out. Actually, you'd want to note the 30 year value (or 20 or 40 year), not the final 2017 value.

Is this timing scheme a lot of work? No.
Does it keep you tied to your computer? No.
Will most people do it? No.
Will very many people do it? Also no.
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No you don't. You only need to check once a week, or once a month.

I was referring to DragonTale’s data which are based on daily data. Further on, I’m asking for what it would look like if checking weekly.

Thanks for your spreadsheet which I’ve downloaded. I’ll have a closer look. I’ve read about your/Faber’s system before on the Mechanical Investing board. (I’d forgotten about the 4-consecutive weeks rule though.)

A simple non-spreadsheet application might be to inspect this chart weekly via StockCharts. I adapted one of WendyBG’s control panel urls to get this:
https://stockcharts.com/freecharts/candleglance.html?$SPX|B|...
Then set the SMA to 43 weeks. (Once set up, click ‘Permalink’ under the chart to bookmark.)

For this particular weekend it shows the end reading as 4352.33 and the 43-week SMA as 3835.47.

You’re probably right that most won’t follow this scheme, but at least a look-up in StockCharts should simplify the process. For the vast majority of weeks a quick glance would reassure; but the call for potential impending action would be fairly obvious.
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No. of Recommendations: 9
Melbane Faber's famous paper goes into this for 40+ pages. I can state the simple rule in 2 sentences.
1) Be in (buy) when the S&P 500 is above it's 43 week (200 day, 10 month) moving average.
2) Be out (sell) when the S&P 500 is 4% or more below it's 43 week (200 day, 10 month) moving average.
2a) Or, when the S&P 500 has been below it's 43 week moving average for 4 consecutive weeks.

</snip>


Seems to me that there would be a mutual fund operating on this simple system that is just crushing it with fantastic long-term returns.

Can someone point me to the symbo1?

Or is this more like the "Foolish Four"?

http://www.investorhome.com/dogs.htm

intercst
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Seems to me that there would be a mutual fund operating on this simple system that is just crushing it with fantastic long-term returns.

Keep in mind that one problem mutual funds can have is that they have to accommodate customers buying and selling the funds, and the customers' schedules don't match the fund manager's plans. So exactly when the fund manager's plan is to get out, more money comes into the fund. Likewise, when the fund is ready to buy, people can be selling it. It can impact returns, though I have no idea to what degree.
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No. of Recommendations: 1
Keep in mind that one problem mutual funds can have is that they have to accommodate customers buying and selling the funds, and the customers' schedules don't match the fund manager's plans.

</snip>


That's why "closed end" mutual funds were invented. People can buy & sell their shares, but it doesn't affect the management of the fund. They're operating with a fixed pool of capital.

https://www.investopedia.com/terms/c/closed-endinvestment.as...

intercst
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Seems to me that there would be a mutual fund operating on this simple system that is just crushing it with fantastic long-term returns.

Remember the agency problem. If a fund manager sells all the stocks and goes to cash, customers are going to say "Why do I need you, I can hold cash on my own and not have to pay your fee."

Plus the size problem. You or I could sell even as much as $500,000 of stock with no problem, in an afternoon, and not move the market. A MF could not possibly sell $50,000,000 of stock easily or quickly.

Mice can get into areas where elephants cannot.

Keep in mind that timing like this works over LONGTERM, over periods of decades. Mutual fund investors tend to focus on the last 3 years.
Timing has not had a chance to work for the last 12 (!!) years, because the market has been in bull territory since 2009.
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No. of Recommendations: 12
My problem is that successful market timers announce their results in hind sight. None have shown me how to time both my exit and re-entry consistently and profitably in real time.

And I built up enough of an estate to retire comfortably and early by dollar cost averaging for 3 decades.

Sleep at night.

Don't change a winning game plan.

Call it what you want.
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Rayvt writes,

Remember the agency problem. If a fund manager sells all the stocks and goes to cash, customers are going to say "Why do I need you, I can hold cash on my own and not have to pay your fee."

Plus the size problem. You or I could sell even as much as $500,000 of stock with no problem, in an afternoon, and not move the market. A MF could not possibly sell $50,000,000 of stock easily or quickly.

</snip>


See my comments regarding a "closed end fund". That would solve the problem of customer complaints limiting fund manager's ability to act and follow the plan (formula).

With regard to "size", you're telling me you can do this by trading in and out of the S&P500. That's a large, liquid market. A $20 Billion fund would be lost in the round-off.

intercst
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No. of Recommendations: 12
iampops5 writes,

My problem is that successful market timers announce their results in hind sight. None have shown me how to time both my exit and re-entry consistently and profitably in real time.

</snip>


Exactly! You get most of your investment return by being in the market on the best few days out of the year, but you don't know which few days they are in advance. Better to just stay in and avoid the burdens and hassles of trading. If I can make enough to retire early and have more than enough to fund my retirement by spending 2 hours per year managing a Long-Term Buy & Hold portfolio, there's no reason to spend 3 hours per year on it.

What Happens When You Miss the Best Days in the Stock Market?
https://www.fool.com/investing/2019/04/11/what-happens-when-...

</snip>


Since the stock market goes up over the long-term, missing the "10 best days" does more to hurt your investment perfomance, than being out of the market on the "10 worst days" helps it.

It's just arithmetic, but people always want to make things harder than they need to be. "Hard work" is prized over "good decision making" and leisure.

Fortunes are made by limiting "fees, expenses and costs" and taxation. Once you do that, just a market return will provide you with more money than you can spend.

That doesn't make Wall Street or investment newsletter promotors any money, but it's the truth.

intercst
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No. of Recommendations: 3
I do not have the cardio capacity these days to run this out, but addressing only the fanciful cracker barrel palaver concerning "the 10 best days" schtick: This has been around since the loaves & fishes story was in the news and I find it hilarious that you of all people would bring this up. Bring up anything else... but this...?

Many (probably half, haven't done a head count) of the "10 best days" in market history were worthless counter rallies on the way down. Losers. Don't count. The rest were obviously big up-days during that part of the cycle wherein any market timer using a 200 day MA related something-or-other system would by definition already be in the mercado. So, who's missing what? Somebody missing something? No. The Fool, the Bible, any Lawyer, Fox News, all authoritative sources when they say what the speaker wanted to hear anyway or help make your case. When they don't, they're not and people "consider the source."
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Yeah the "10 best days" thing has been seriously debunked. I looked at it 2016, and in the previous 65 years, 50% of the best and worst days happened during the Great Financial Crisis (Sep '08 to Mar '09). 1951-2016 inclusive, 8 of the best 10, and 10 of the best 20, as well as 5 of the worst 10, and 9 of the worst 20 were during that short eight month period.
The 1987 crash had 3 of the best 10, 3 of the worst, and 4 of the worst 20, all between Sep '87 & Dec '87. The best and worst are all clumped together during periods of max volatility, which almost always happens during significant corrections. Turns out, if you miss both the best 25, and worst 25, you end up doing quite a bit better than B&H. Which means getting out of the way during the carnage. As Rayvt points out, you don't have to cut it with a scalpel, lots of basic timing methods work great, his two included. Also, if you use a small moving average to smooth out daily spikes, it cuts down drastically on whipsaws. Just sticking a 6 DMA helps a lot. You can see that during November and December 2007 on this chart, that SPY crossed the 200 DMA nine times. But add a 6 DMA, and and it knocks it down to three times, effectively. https://schrts.co/tBRwnJnJ So there's little bit of whipsaw at times, but that seems like a small price to pay to avoid this: https://schrts.co/DbiQUNVJ

Tails
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No. of Recommendations: 7
All you need to do to soundly beat the the market is to avoid the deep plunges. One writer said that what good timing accomplishes is "avoiding the full brunt of a large decline." It's amazing what happens long-term if you can limit your losses to -20% while the market goes down -40%.


That's where our philosophies vary. I don't worry about the drops. I stay fully invested. Because a 40% drop is few and far between. It's amazing what 20% growth year over year will do to a portfolio. When the 40% drops come they become less and less scary.

Andy
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addressing only the fanciful cracker barrel palaver concerning "the 10 best days" schtick: This has been around since the loaves & fishes story was in the news and I find it hilarious that you of all people would bring this up. Bring up anything else... but this...?

Many (probably half, haven't done a head count) of the "10 best days" in market history were worthless counter rallies on the way down.



What??? And let mere facts get in the way of an erudite-sounding narrative??

IIRC, Mel Faber kinda soundly thrashed this "10 best days" schtick some 10-15 years ago. Both the "best days" and the "worst days" occurred during bear markets. The volatility is higher when the market is below the 10 month moving average.

Anyway, it is more important to miss the bad days than to capture the good days.

---
Aaah, just found one paper I saved on my computer, from 2008. Sadly, link rot has made a number of the original links unreachable anymore.

"Roughly 70% of the best and worst days (as measured by 10 and 100 best/worst days) occurred when the market was below the 200 day moving average." https://mebfaber.com/2008/03/29/more-on-volatility-clusterin...

It's easy enough to download historical prices and plug them into a spreadsheet and check this out yourself. I did back in the 2008-2009 timeframe.

But, why let mere facts get in the way of an erudite-sounding narrative??
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If you invest 100% in the S&P500, but only when it's above its 200 day moving average, you can safely withdraw well over 4% annually.

Using the 200DMA to either be in or out of the market...


I wondered if Portfolio Visualizer can do this. It can:

https://www.portfoliovisualizer.com/test-market-timing-model...

Worked great through 2000 and 2007.

Not quite so good for the last ten years or so. That makes it difficult to stick with.
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No. of Recommendations: 2
"Using the 200DMA to either be in or out of the market..."

Worked great through 2000 and 2007.

Not quite so good for the last ten years or so. That makes it difficult to stick with.


Timing works by having you sit out the big down markets. In a period where there is not a big down market, timing doesn't do anything for you.

"For everything there is a season."
It's just that a bull market is not the season for timing.

Frankly, someone who is retired and living off their portfolio needs to be very careful to avoid the portfolio losses of a big bear market. People who experienced the 2001 and 2008 bears know full well how your portfolio can get demolished. It's one thing when you have a paycheck and can add to your portfolio. You have time and ability to recover from the loss. It's another thing when you are withdrawing from your portfolio.
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Not quite so good for the last ten years or so. That makes it difficult to stick with.

This comes up all the time. Because I found a point when it didn't work it must not work. ALL methods do this. The school of Buy and hold because even tho we're all smarter than everybody else that's why we're so good with money but we can't ever use our brains effectively is built on it. It doesn't have to work relative to everything else all the time. B&H doesn't.

As far as the 10 month MA specifically... I think it's a little too binary. On/off/on/off. That's probably why the poor performance on Portfolio Visualizer. Most people who are anti-timing usually do the same with the 200 DMA. They put forth you're in and out a million times when the price is hugging the line and that kills you. Well, yeah, that'll kill ya. So apply a capacitor and smooth it out.
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Because I found a point when it didn't work it must not work.

Nah, I didn't say that. I'm saying schemes that don't add value for a decade or more can be hard for many people to stick with. Value investing has been the same way. Diversifying into foreign stocks the same.

As far as the 10 month MA specifically... I think it's a little too binary. On/off/on/off. That's probably why the poor performance on Portfolio Visualizer. Most people who are anti-timing usually do the same with the 200 DMA. They put forth you're in and out a million times when the price is hugging the line and that kills you. Well, yeah, that'll kill ya. So apply a capacitor and smooth it out.

What do you suggest? A percentage above/below before trading?
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I backtested these strategies a few years back. Played around with various parameters and thresholds looking for behavior that is robust to specific choices. You can always tune a parameter to get good results in a backtest but that way lies overfitting and madness.

I decided there were two robust results:
1) momentum timing strategies tend to have slightly lower returns than buy and hold
2) momentum timing strategies avoid large downside fluctuations

So, surprise, there's no free lunch. On average, you get large downside protection at the expense of a small loss on the upside.
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"Most people who are anti-timing usually do the same with the 200 DMA. They put forth you're in and out a million times when the price is hugging the line and that kills you. Well, yeah, that'll kill ya. So apply a capacitor and smooth it out."

What do you suggest? A percentage above/below before trading?



Lotta different ways. I already said two.
Sell at 4% below the SMA. Or sell at 4 consecutive weeks below the SMA.

See, the thing is that you have lots of time at the top before it completely rolls over and plunges. So you want to be slow to sell, so that you don't get out on just a burble

Tops are rounded, bottoms are vee-shaped. Get out slow, get in quick.


An even better way is GTT (growth trend timing). There's a long paper on that. Basically, you use the regular simple SMA sell signal except that you block (ignore) the sell signal *unless* the economy appears to be in a recession. Use two FRED economic measures to decide if a recession is disconfirmed.

Doesn't much matter---most people won't do timing the right way. They want timing to avoid all the little speed bumps (which it cannot do) and so they abandon it because it doesn't do that.

Like I said, the purpose of timing is avoiding the full brunt of a large decline. In a period where there is no large decline, it does not have a chance to come into play.
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What large decline did you avoid? And when did you get back in?
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What large decline did you avoid? And when did you get back in?

</snip>


I had a college friend that told me he sold when the market started to drop in Feb 2020 on the COVID scare.

He's still waiting for the "bat signal" to get back in.

intercst
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I had a college friend that told me he sold when the market started to drop in Feb 2020 on the COVID scare.

He's still waiting for the "bat signal" to get back in.

intercst


So what does this mean? It has nothing do to with the topic in progress. I don't know the guy. Maybe he is truly a shaky guy. Maybe he is the same as a buy-and-holder? He already has so much money he doesn't care how much he loses or for how long and with nothing more than an expectation of making it back... someday? If that's his case, how has he lost anything? That's a rhetorical question.
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"So what does this mean? It has nothing do to with the topic in progress.

It is squarely on topic for me because not once in 40 years has anybody shown me in advance that such timing strategies have worked consistently in the real world. Many of my favorite posters right here at tmf have mentioned going into cash, and sometimes all cash, at differing times in 2008 and 9, December 2018, and Spring 2020. None have shown me that they profitably got back in - except in hindsight.

Since ltbh has worked for me and millions of others in a tangible way, color me skeptical until somebody tells me in real time that they are getting out based upon such a rule, and profitably getting back in by a methodology that is reproducible.
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until somebody tells me in real time that they are getting out based upon such a rule, and profitably getting back in

Nobody is going to tell you this. Nobody is going to hold your hand, they figure your trading is up to you.



None have shown me that they profitably got back in ...

Nor will they. NOBODY feels that it is incumbent on them to tell you when they are buying. Nobody real, anyway. But for sure you can find many poseurs on places like SeekingAlpha who do this. They all tend to go quiet fairly quickly. My favorite one was a self-proclaimed expert (albeit a newbie) who wouldn't buy AAPL at 25 (100 at the time, before the 4-1 split), because it would soon be at a reasonable 20. He hasn't posted in like 4-5 years.

Nobody feels the need to prove anything to you. Show the way, yes. But whether or not you believe it or chose to implement it is up to you.

Anyway, have you looked at the spreadsheet I posted the other day? 'cause I'm doing that, but don't shout out whenever I sell or buy. Show the path, but taking it -- or not -- is your decision.
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rayvt: "Nobody feels the need to prove anything to you. Show the way, yes. But whether or not you believe it or chose to implement it is up to you.

"Anyway, have you looked at the spreadsheet I posted the other day? 'cause I'm doing that, but don't shout out whenever I sell or buy. Show the path, but taking it -- or not -- is your decision.

I have looked at it. In detail. For years. I will continue to follow it in real time.

At this point it continues to appear to me to be yet another con.

At some point in the next decade I will have another opportunity to watch the markets, read your posts extolling the virtues of the 99 day rule, some of you will say you followed the rule to 'get out', and some of you will post sometime long after the fact that you 'got back in' in a timely fashion.'

I don't wish to be disrespectful, but that is what I see.
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Since ltbh has worked for me and millions of others in a tangible way, color me skeptical until somebody tells me in real time that they are getting out based upon such a rule, and profitably getting back in by a methodology that is reproducible.

Gigantic drops in the market are, by definition, not reproducible. There is no schedule for a tech meltdown after the tech bubble as happened in the 1990’s. Nobody can predict when there’s going to be a housing crash, as happened in 2008. The pandemic’s appearance, which precipitated another 40% drop in the market was a once in a century event, and therefore: unpredictable.

I will say this: I went to cash all three times, at least in our tax-advantaged accounts. (I have a few holdings in our regular accounts which either have huge gains (Facebook) or which I have held for 25 years (Berkshire) and which I did not touch because of the tax implications.

But the rule is: if you see a freight train coming, there’s a reasonable chance the market is going to see it too, possibly a bit later than you do. In the way-back days it would cost $30 per trade to clear out 10-20 stocks from the account: something like $300-$600 (double it to get back in), which seems small change to avoid hundreds of thousands of dollars in “losses.” Nowadays, with trades being free, it costs nothing.

Here’s my second rule: if the market goes down 40%, start buying back in. While I may run screaming and (literally) clean everything out in an hour, I walk slowly back in as the market recovers. Frankly, I also find it a healthy time to reevaluate the holdings, which I tend not to do on a periodic basis as I probably should. I do end up buying some of the same thing, but often different things, depending on mood, etc.

For each of those three events above I have successfully come back in. Which is not to say “I bought at the very bottom” because I didn’t, but let me tell you how peacefully Mrs. Goofy and I slept in 2008 knowing we were mostly “out” as the market cratered. And each time I have come back in profitably, one of those times with only slight gains, the other two with quite good ones.

Now, there’s a “rest of the story.” I also exited just prior to the 2016 election because of the uncertainty and animus preceding the election. That was a mistake, the market did not stop and, in fact, went up before I got back in. That was the only time I “lost”, but there were two other times when I exited and re-entered and nothing happened, and I neither lost nor gained anything.

Most of these I have documented in real time, or semi-real time (within a couple/few days) here on the boards. These days I’m a passive investor, unlike the 90’s when I was scouring the market, subscribing to ValueLine, etc. but I still subscribe to the “freight train” theory. If I see one coming before the rest of everybody, I’ll be out. The tech crash, the real estate crash, the pandemic crash, those were all pretty well telegraphed before the general market noticed.

I read the news, not for this but because I like to. I don’t and can’t make a “predictable” system out of this nor will I try, but I will say that *some* “market timing” is possible, at least for this kind of event.
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Since you are one of my favorite posters, I will search for common ground. My investing strategy is also governed by the 'sleep at night' rule even though my overall strategy is precisely the opposite of yours. I was totally unprepared for the downturn of 2000-2, and watched helplessly as my main sheltered account and my primary taxable account lost more than 50% of their value. I mindlessly continued to dollar cost average my way through the downturn of 2000-2 in my sheltered account, and eventually started putting some of my year end bonuses in my taxable accounts.

In the early 2000s, especially 2003-7, I continued to dollar cost average in the sheltered account and also my taxable account(s), but I also started accumulating extra cash when the markets seemed richly valued to me. You may know this because we lodges posts on the same boards during that time frame.

When the crash of 2008-9 hit, I again dollar cost averaged my way through that crash in my sheltered account and eventually deployed some of my cash in my taxable accounts as well. Wendybg lodged a post sometime in July of 2009 naming some of the stocks she was buying by then, (jnj? pg?) I don't recall specifics but she did make a real time call that made sense to me at the time.

So now, at the age of 65, I have a 7 digit stock position and a nearly 7 digit cash position with stocks roughly double my cash, and I will sleep at night even if the markets crash by 50% or more this year, and even if they double in price this year.

I will not lose much sleep either way and I won't have to fret over when to follow some sort of 99 day rule, how much to cash in adherence to that rule, and when to start getting back in thereafter.

But as a form of entertainment I will, if still healthy, see if you or rayvt or anybody else actually gets out in adherence to that rule and/or shows that they can deploy their cash thereafter in a way that is better than just riding it out - from a monetary perspective AND a 'sleep at night' perspective.
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...In the early 2000s I continued to dollar cost average
...When the crash of 2008-9 hit, I again dollar cost averaged my way through that crash


You can only DCA in if you have an income stream. Which for most people means you have a job. When you are retired you are generally _withdrawing_ money from your portfolio, not putting money in.



at the age of 65, I have a 7 digit stock position and a nearly 7 digit cash position with stocks roughly double my cash, and I will sleep at night even if the markets crash by 50% or more this year,

So, roughly $3 million. If you have a conventional middle class lifestyle you don't much need to worry about money. Even after a 50% crash.



But as a form of entertainment I will, if still healthy, see if you or rayvt or anybody else actually gets out in adherence to that rule and/or shows that they can deploy their cash thereafter in a way that is better than just riding it out - from a monetary perspective AND a 'sleep at night' perspective.


Keep waiting. You are unlikely to see it. I won't announce when I get out or when I get back in. I don't care what other people do, and don't care if they do the same thing I do or not.

I certainly don't plan to lift the kimono for your entertainment.

I will privately suggest to my kids & close relatives when/if the signals say to get out and get back in. Whether they do that is totally up to them, though.
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Anyway, have you looked at the spreadsheet I posted the other day? 'cause I'm doing that, but don't shout out whenever I sell or buy. Show the path, but taking it -- or not -- is your decision.

RayVT, do you use this for your whole portfolio, or just a portion?

I remember you posting about other strategies, such as Global Equities Momentum.
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RayVT, do you use this for your whole portfolio, or just a portion?

As it applies. Switch strategy things like GEM already have a rule that takes them to cash.

Most of the fixed income stuff like preferred stocks and some income-type CEFs & ETFs I just leave alone. The price doesn't much matter as long as they are paying the dividends. (Preferred stocks are really bonds. Income-type CEFs & ETFs you just have to depend on the fund managers to handle things. In for a penny, in for a pound.)

The capital gain stock strategies/screens are the ones to apply timing rules to. Also individual stocks. Except perhaps BRK; I haven't made my mind up about that, backtests of timing are not conclusive.

I have a mix of all 3 categories.
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Since you are one of my favorite posters, I will search for common ground. My investing strategy is also governed by the 'sleep at night' rule even though my overall strategy is precisely the opposite of yours.

Thank you for the kind words; I’m all for whatever strategy lets people sleep at night, even if it doesn’t produce the very last 12¢ in the account.

There have been lots of declines that I’ve sat through. (We may be in one now.) Sometimes the market goes down “just because.” What I’m talking about for me are the kinds of macro events that shake the market and which I’ve been lucky enough to recognize ahead of time (sometimes only by days.) Not everybody sees them at the same time, obviously, or I wouldn’t have been able to get out early.

Corrections happen. 20% or more, I think the definition is. The three events I talked about sent the (relevant) indexes down 40% or thereabouts.

I will not lose much sleep either way and I won't have to fret over when to follow some sort of 99 day rule, how much to cash in adherence to that rule, and when to start getting back in thereafter.

I agree with you. Those sorts of triggers may work for some, but then I don’t follow my port daily nor do I do these kinds of arcane calculations *ever*, so they don’t work for me. If they work for others, bully. If somebody wants to post about them in real time I’ll read those (mungo does on the Berkshire board, sometimes) but otherwise I, like you, sleep through it.

(There will also be some events you don’t see coming: 9/11, a nuke accident, peasants storming the Congress, etc. No magic cure for me on those, either. Recession coming? I think I can usually see that. Market overvalued (like now?). Ditto. Other stuff, maybe not so much.)
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The three events I talked about sent the (relevant) indexes down 40% or thereabouts.

Yes, this is very much the goal: to recognize not just the greater chance of this happening, but the very probable expectation that it will happen, given the macro events unfolding.

The push-pull tide also comes into play not just with the idea that what if I'm wrong and cash out when the market actually continues up (or at least levels), but also with the major tax consequences in cashing out large figures in taxable accounts.

Pete
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You also have seen things that ended up being not real. Or, at least, didn't tank the market. I seem to recall you said you had sold a lot of your holdings when Trump was elected. Somehow the market shrugged that off (I don't know how), and kept going up. I didn't sell out, but I was ready to for the first year or so of his term.

I'm still concerned that the market hasn't been rational for the past several years. Short-term declines followed by new highs within months, all "just because". Even COVID and lockdowns haven't been able to affect this bull run much. Doesn't make sense to me.

Back to topic, I just use the 4% "rule" as a sort of guide. I figure when 4% is more than my normal annual expenses, I'm probably good. And it is, so I'm free at last. Barring the unforeseen, my trigger date will be Jan 1. It is tempting to wait for the ESPP purchase in March, but I may not do that. Probably won't.

1poorguy
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...what if I'm wrong and cash out when the market actually continues up (or at least levels), but also with the major tax consequences in cashing out large figures in taxable accounts.

Not really. Long term cap gains are 15%, which is likely below your income tax rate.

I know people stress about taxes, but you're only paying taxes on gains (and income). So you're still ahead because you have gains and/or income. Other than setting aside some cash to cover taxes if I make a large sale, I don't sweat paying taxes. I'm much more concerned if I have a capital loss because that means I lost money.

1poorguy
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Not really. Long term cap gains are 15%, which is likely below your income tax rate.

Agreed. What I'm talking about is the psychological effect that paying a major tax bill (even if "only" 15%) has with weighing the effect of what looks like an upcoming down market. If correct, there is still a big win, but if incorrect, there is a large opportunity cost lost.

Pete
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...I don't sweat paying taxes. I'm much more concerned if I have a capital loss because that means I lost money.

1poorguy


AMEN! Taxes. Another "Don't me started" subject. Let's hear it for making money and poo-poo LOSING MONEY.
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... but also with the major tax consequences in cashing out large figures in taxable accounts.

</snip>


Fortunes are made by avoiding taxation. Stocks and bonds go up and down, but what you lose to fees, expenses, trading costs, and taxes is gone forever.

intercst
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