Re-balancing yet?

Dumbstruck, a lot of people do what you are describing, which amounts to trading a lot based on gut feelings and various recipes like "sell if the market goes down two days in a row" (just an example).

Numerous studies of, say, clients of brokerages and their trades, reveals that this approach does not generate any extra returns, but it does generate extra trading costs.

What this strategy amounts to is being in and out of the market at essentially random times, and paying for it. The statistical outcome of it (without looking at trading costs) is not very different from simply allocating a part of money to cash and not trading.

Therefore, you would expect your returns (without considering costs) to be somewhat above the market if it goes down for a while, and below the market if it goes up for a while. Costs make you even less likely to win.

This approach is also very time consuming and that time could be used for better pursuits, for example reading financial literature or even fishing.

i

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Reply to
Igor Chudov
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No, this program only kicks in for a severe emergency, like a 30% trailing loss (from peak) across a wide range of stocks. I would be financially dead without this plan, having early retired at a same-as- today SP500 level so many years ago with no other income. I finished the selling just before current levels, so am sitting pretty and calm for a while. Yeah, will eventually have to sweat to avoid missing real upticks vs sucker rallies in future.

Maybe you need an inborn internal momentum compass to do this, or follow quality journalism like the very thorough Economist magazine like I do. The hard part is the timing to sell. Catching the way up is easier - would you believe I long ago rode crest of the Japanese market and got out near 40k, which is now at 8k? Lots of similar experience tells me the hard part is timing the selling, which is hopefully behind me.

Hanging on to mutual funds won't protect you from tax craziness this December because there could be massive cap gain distributions due to their forced liquidation of long term holdings for redemptions. Maybe switch to etfs now that the trading costs are near zero anyway. Anyway, the bottom line of this "dufus" approach is to avoid near term poverty, not to gain a few ticks on long term.

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
dumbstruck

For better, or worse, I put all my and my spouse's 401k into stock funds. I used to have approximately 20% in stocks in my 401k, slightly varied at times. My spouse had all cash.

I think that at this price of approximately 9-10 times forward earnings, not too much can go wrong if I hold them for a while. The effective yield would be better than a bank account.

i

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Igor Chudov

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