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Increase your cash/bond position if one feels uncomfortable with the market. It does not have to one way or the other. A balanced approach makes a lot sense.
Reply to @Sven: Hi Sven... I totally agree. I am just tired of 'timing the market'. I think it maybe better just buy a couch portfolio and follow MFO/Skeeter's commentary to see what to do. I don't think we have much legs to stand on and we don't really know how much true cash is on the sideline...but maybe it's good to have more cash currently
You wrote: " I am just tired of 'timing the market'. I think it maybe better just buy a couch portfolio and follow MFO/Skeeter's commentary to see what to do. I don't think we have much legs to stand on and we don't really know how much true cash is on the sideline...but maybe it's good to have more cash currently."
>>> Are you timing the market with real buys and sells; or are you having a buyers remorse feeling? The buyers remorse being the: would've, could've and should've mood when looking backwards the past six months and wondering "why wasn't the portfolio 90% equity?"
Your investment portfolio sure won't mirror the "Funds Boat" for more reasons than a likely 30+ year difference in our ages. Some of your investments are in current taxable form and will have different considerations for buys and sells. Your sheltered portfolio will consist of dollar cost averaging, which smooths part of the investment side.
The most difficult aspect of investing; in my opinion, is dealing with one's own demons of having missed an investment that becomes stellar. Geez, these are everywhere, eh? On the flip side is the I should have sold then.
All of this depends on your gained knowledge and own comfort level with risk reward.
Our Funds Boat is about at the same YTD level (+4.8%) as where we finished the year of 2011. In July, 2011; the YTD was at about +4.8%, got kicked with the summer (Aug) melt and then moved back up to finish the +4.8%. We didn't stomp any big numbers, but for that year we were ahead of many other indexes leaning towards equities. This year could be the reverse. No rocket returns with any of this; but we are still able to build upon the 4.8% return of 2011. This is positive compounding. Even tiny positive compounding over many years is one of an investors best friends. It is the reverse function of a mortgage or any other debt payment and how it eats away at the principle of a payment. Back in the day, and still roughly applies today. When one used a traditional 30 year mortgage, and with what was a positive trend in home values; after 30 years of mortgage payments, whatever $ value one purchased over this time period needed to be worth 3X the original cost to be close to a break even point for a future sale.
Your house is at least investing and continuing to learn. Your house is likely more ahead of the game than many U.S. households. Don't beat yourself too much. Find what lets you sleep. Perhaps your house needs to settle upon a 50/50 mix of equity and bonds. Equity sectors could be globally diverse; as well as the bonds.
Reply to @catch22: Hi catch, tried timing market last yr, but only a small portion of my portfolio, got no where so I got 'p*ssed off' and bought more bonds.
So I think it's maybe best just to have a couch portfolio and just watch it over the next 20s+ yrs, then when you are about to retire put everything into bonds. Remember fundamentals? He had a very robust portfolio with constant variables/frequent tradings and much careful analysis. I've compared his portfolio when he was constantly posting few yrs back, guess what? his portfolio has similiar yearly returns of index target funds 2030 @ 3 yrs. I think you are right, just how much you want to gains are how much you can stand and how much maalox you need at night. And if you do plays with all the numbers, you are more likely to belong to the 15% of the guy that keep loosing [since about 84% of funds loose to index over time].
Currently, for information purposes, I am 20% cash 25% income and 55% equity and other. The equity allocation is one that is currently set by Morningstar's Market Valuation Graph. I take a ten day rolling average of the discount and add it to, or subtract it from, fifty which is a neutral allocation for a good number of balanced mutal funds. That computes to 53.3% as of Friday. As long as my equity allocation factors to 95% to 105% of this number then I am good to go. From my weekly reports I am now 55.35% equity. This is on the high side but within tolerance to a max allocation of 56.15%. The low side would be 50.65%. In addition, since I am still with my seasonal equity strategy of overweighting equities during the winter months and underweight them in the summer months ... You've got the picture ... use the 95% allocation factor during the off season or summer months and the 105% allocation factor during the season and winter months.
You will have to play with this some and tweak it to fit your style and risk level. So far, it seems to work, thus far, just fine for me.
Another way I look at my equity allocation is by referencing the forward P/E Ratio for the S&P 500 Index. A good historical forward P/E number I have found and feel is about right for the S&P 500 Index is 15. So with this I set my equity allocation to 50% when the forward P/E Ratio for the Index is 15. With a forward P/E Ratio of 14 I would then set equities to 55% and with a forward P/E Ratio of 13 or lower I would set my equity allaction to 60%. Like wise as the P/E Ratio increases above 15, I would reduce my allocation to equities. With a forward P/E Ratio of 16 then my equity allocation would be 45% and with a forward P/E Ratio of 17 or above then I would set my equity allocation to about 40%. All of these equity allocations from a low range of 40% to a high range of 60% fall within the allocation that was determined to be within my tollerance for risk. However, I most likely will not go below 45% ... but, one can never be certain of that. If I was to do that my allocation most likely would be 20% cash, 40% income and 40% equity.
Another, way I look at my equity allocation is to comare it to that of Columbia's Thermostat Mutual fund, CTFAX. Its allocation to equities is set by the valuation of the S&P 500 Index. As the valuation of the index falls the allocation to equities is raised and when the index's valuation rises it allocation to equies is reduced ... buy low, sell high.
I have linked the fact Sheet for CTFAX for those that might be interested in reading about its features in more detail. See page two for the details on its asset allocation scale.
In addition, I use some T/A to assist me with entry and exit of special equity ballast positions. I have found it best to average in and out of these special positions as no one knows for certain when the exact best time is to increase or decrease these special positons. And, then there is also the SWAG!
I hope this has been helpful ... and, I wish you "good investing."
Reply to @johnN: Even being a couch portfolio requires discipline. It is not easy to be a passive investor when you keep reading endless possibilities for both outcomes.
BTW: I am by passive I am referring to the investor, not funds. Your funds could be active but you could be passive or funds could be passive with an active investor.
Reply to @johnN: I got that way last year and made less moves in the back half of last year and will make far less moves this year. I own the stocks/funds I want to own, and that's it (plus, less moves = less of a tax/paperwork hassle next March.)
Comments
Hi Sven... I totally agree. I am just tired of 'timing the market'. I think it maybe better just buy a couch portfolio and follow MFO/Skeeter's commentary to see what to do.
I don't think we have much legs to stand on and we don't really know how much true cash is on the sideline...but maybe it's good to have more cash currently
anyways enjoy this article - related
stock looking for a reason to rally?
http://money.cnn.com/2012/04/02/markets/stocks/?source=cnn_bin
You wrote: " I am just tired of 'timing the market'. I think it maybe better just buy a couch portfolio and follow MFO/Skeeter's commentary to see what to do.
I don't think we have much legs to stand on and we don't really know how much true cash is on the sideline...but maybe it's good to have more cash currently."
>>> Are you timing the market with real buys and sells; or are you having a buyers remorse feeling? The buyers remorse being the: would've, could've and should've mood when looking backwards the past six months and wondering "why wasn't the portfolio 90% equity?"
Your investment portfolio sure won't mirror the "Funds Boat" for more reasons than a likely 30+ year difference in our ages. Some of your investments are in current taxable form and will have different considerations for buys and sells.
Your sheltered portfolio will consist of dollar cost averaging, which smooths part of the investment side.
The most difficult aspect of investing; in my opinion, is dealing with one's own demons of having missed an investment that becomes stellar. Geez, these are everywhere, eh? On the flip side is the I should have sold then.
All of this depends on your gained knowledge and own comfort level with risk reward.
Our Funds Boat is about at the same YTD level (+4.8%) as where we finished the year of 2011. In July, 2011; the YTD was at about +4.8%, got kicked with the summer (Aug) melt and then moved back up to finish the +4.8%. We didn't stomp any big numbers, but for that year we were ahead of many other indexes leaning towards equities.
This year could be the reverse.
No rocket returns with any of this; but we are still able to build upon the 4.8% return of 2011. This is positive compounding. Even tiny positive compounding over many years is one of an investors best friends. It is the reverse function of a mortgage or any other debt payment and how it eats away at the principle of a payment.
Back in the day, and still roughly applies today. When one used a traditional 30 year mortgage, and with what was a positive trend in home values; after 30 years of mortgage payments, whatever $ value one purchased over this time period needed to be worth 3X the original cost to be close to a break even point for a future sale.
Your house is at least investing and continuing to learn. Your house is likely more ahead of the game than many U.S. households. Don't beat yourself too much. Find what lets you sleep. Perhaps your house needs to settle upon a 50/50 mix of equity and bonds. Equity sectors could be globally diverse; as well as the bonds.
Regards,
Catch
So I think it's maybe best just to have a couch portfolio and just watch it over the next 20s+ yrs, then when you are about to retire put everything into bonds. Remember fundamentals? He had a very robust portfolio with constant variables/frequent tradings and much careful analysis. I've compared his portfolio when he was constantly posting few yrs back, guess what? his portfolio has similiar yearly returns of index target funds 2030 @ 3 yrs. I think you are right, just how much you want to gains are how much you can stand and how much maalox you need at night. And if you do plays with all the numbers, you are more likely to belong to the 15% of the guy that keep loosing [since about 84% of funds loose to index over time].
regards
Hi JohnN, Thank you for the kind words.
Currently, for information purposes, I am 20% cash 25% income and 55% equity and other. The equity allocation is one that is currently set by Morningstar's Market Valuation Graph. I take a ten day rolling average of the discount and add it to, or subtract it from, fifty which is a neutral allocation for a good number of balanced mutal funds. That computes to 53.3% as of Friday. As long as my equity allocation factors to 95% to 105% of this number then I am good to go. From my weekly reports I am now 55.35% equity. This is on the high side but within tolerance to a max allocation of 56.15%. The low side would be 50.65%. In addition, since I am still with my seasonal equity strategy of overweighting equities during the winter months and underweight them in the summer months ... You've got the picture ... use the 95% allocation factor during the off season or summer months and the 105% allocation factor during the season and winter months.
You will have to play with this some and tweak it to fit your style and risk level. So far, it seems to work, thus far, just fine for me.
Another way I look at my equity allocation is by referencing the forward P/E Ratio for the S&P 500 Index. A good historical forward P/E number I have found and feel is about right for the S&P 500 Index is 15. So with this I set my equity allocation to 50% when the forward P/E Ratio for the Index is 15. With a forward P/E Ratio of 14 I would then set equities to 55% and with a forward P/E Ratio of 13 or lower I would set my equity allaction to 60%. Like wise as the P/E Ratio increases above 15, I would reduce my allocation to equities. With a forward P/E Ratio of 16 then my equity allocation would be 45% and with a forward P/E Ratio of 17 or above then I would set my equity allocation to about 40%. All of these equity allocations from a low range of 40% to a high range of 60% fall within the allocation that was determined to be within my tollerance for risk. However, I most likely will not go below 45% ... but, one can never be certain of that. If I was to do that my allocation most likely would be 20% cash, 40% income and 40% equity.
Another, way I look at my equity allocation is to comare it to that of Columbia's Thermostat Mutual fund, CTFAX. Its allocation to equities is set by the valuation of the S&P 500 Index. As the valuation of the index falls the allocation to equities is raised and when the index's valuation rises it allocation to equies is reduced ... buy low, sell high.
I have linked the fact Sheet for CTFAX for those that might be interested in reading about its features in more detail. See page two for the details on its asset allocation scale.
https://performance.columbiamanagement.com/content/columbia/pdf/LIT_DOC_3C97987F.PDF
In addition, I use some T/A to assist me with entry and exit of special equity ballast positions. I have found it best to average in and out of these special positions as no one knows for certain when the exact best time is to increase or decrease these special positons. And, then there is also the SWAG!
I hope this has been helpful ... and, I wish you "good investing."
Skeeter
BTW: I am by passive I am referring to the investor, not funds. Your funds could be active but you could be passive or funds could be passive with an active investor.