4 ms·

I'm sorry but that's just awful advice. Just because you don't have control over something doesn't mean you can't foresee it and take appropriate action to prot

by 1_2__4 9y ago

I'm sorry but that's just awful advice. Just because you don't have control over something doesn't mean you can't foresee it and take appropriate action to protect yourself in advance.

nfriedly 9y ago
The automatic investments part is the appropriate action for most people to protect themselves in advance.
enraged_camel 9y ago
You cannot time the stock market. Trying to predict a crash and taking money out in an attempt to avoid losses is a recipe for disaster. For individual investors who use the stock market for their retirement funds, the appropriate action to protect oneself from the fluctuations of the market, including crashes, is to have the appropriate retirement target set, along with the proper level of acceptable risk (which automatically allocates the funds among different asset classes). After that, it's a matter of waiting... and not doing anything rash during extreme events.
- fulafel 9y ago
  The reality is a little more nuanced, as the discussion was about the effects of stock market crashes on the real world: It's possible identify periods of high risk for stock market crashes. It's hard to make money on the stock market using this information, but you can apply it to decisions in areas of life you think would be affected by a stock market crash.
- koonsolo 9y ago
  There is a way on how to time a recession, that is able to indicate it right before it happens, see: http://www.philosophicaleconomics.com/2016/02/uetrend/ http://www.philosophicaleconomics.com/2016/02/uetrend/ And it is also possible to have a slightly better ROI than buy and hold, even if you don't have the timing of future recession dates. See http://www.philosophicaleconomics.com/2016/01/gtt/ http://www.philosophicaleconomics.com/2016/01/gtt/ In that last article, you also see that "perfect recession timing" (looking backwards instead of to the future) actually doesn't have that much improvement over buy and hold. So for me, it doesn't seem like the return is worth the effort, so I just buy and hold.
- Ntrails 9y ago
  >have the appropriate retirement target set, along with the proper level of acceptable risk You make that sound so easy. It's not. None of the maths of retirement planning is hard - but the actual decisions really kind of are. For example, I've got 10% in corporate debt. Is that more or less risky than Equity? What's the distribution? What's the correlation? How does it compare with Reinsurance, or Property? Is property strongly correlated with the stock market at the tails, or is it a diversifying asset class? Does my passive fund hedge currency risk? Do I want it to? Is private equity a good or a bad idea? Do I want FTSE ALL or FTSE 100? How about looking at risk appetite. What is the most time it could take for my retirement savings to recover to inflation adjusted parity after a crash (I feel like 15 years is the historical max, but it's a vague memory). Should I look at risk in terms of retirement income or retirement date? Do I expect Annuity rates to improve (e interest rates to go up) or should I mark to current rates for planning purposes. I think about the amount of context that trustees for DB pension schemes needed to make investment decisions that were sound, and I can't help but wonder how we've ended up with individuals making these decisions on their own. I've long felt that outside of fees Diversified Growth Funds (Multi Asset Funds?) are a pretty good place to "inactively" manage retirement savings. After fees I'm less convinced. I suspect the Australian model might be closest to what I internally model as best?
  - turk183 9y ago
    If it's any consolation, 2008/9 proved that everything is pretty much correlated--stocks went down, bonds went down, everything went down. There were no safe havens except for massive government bailouts. To this day, the illegal acts that banks undertook to stay afloat have not been prosecuted (moving all unperforming assets to "off balance sheet vehicles" like holding companies). Also, mark-to-market accounting was suspended and has never been reinstated.
    - pragmatic 9y ago
      One notable exception: Farm land.
- turk183 9y ago
  Please read the above advice! In 2008, I saw the crash coming. I got tipped off, kind of: My bank was NetBank and it was the first one to fail. I pulled all my money out of stocks and sat out the crash. Brilliant, right? Yeah, except in 2010, I didn't re-invest it! I sat on a lot of cash and missed out on tons of gains. So while I preserved my wealth (and that was dicey because Money Markets nearly collapsed and that's where all my "cash" was). Had I stayed invested I would have taken some paper losses but I would have come out further ahead by now. My one concern is that these markets are just pretend bs because of QE and the effects money printing has had on all assets.

by 1_2__4 9y ago

I'm sorry but that's just awful advice. Just because you don't have control over something doesn't mean you can't foresee it and take appropriate action to protect yourself in advance.

nfriedly 9y ago

The automatic investments part is the appropriate action for most people to protect themselves in advance.

enraged_camel 9y ago

You cannot time the stock market. Trying to predict a crash and taking money out in an attempt to avoid losses is a recipe for disaster. For individual investors who use the stock market for their retirement funds, the appropriate action to protect oneself from the fluctuations of the market, including crashes, is to have the appropriate retirement target set, along with the proper level of acceptable risk (which automatically allocates the funds among different asset classes). After that, it's a matter of waiting... and not doing anything rash during extreme events.

fulafel 9y ago
The reality is a little more nuanced, as the discussion was about the effects of stock market crashes on the real world: It's possible identify periods of high risk for stock market crashes. It's hard to make money on the stock market using this information, but you can apply it to decisions in areas of life you think would be affected by a stock market crash.
koonsolo 9y ago
There is a way on how to time a recession, that is able to indicate it right before it happens, see: http://www.philosophicaleconomics.com/2016/02/uetrend/ http://www.philosophicaleconomics.com/2016/02/uetrend/ And it is also possible to have a slightly better ROI than buy and hold, even if you don't have the timing of future recession dates. See http://www.philosophicaleconomics.com/2016/01/gtt/ http://www.philosophicaleconomics.com/2016/01/gtt/ In that last article, you also see that "perfect recession timing" (looking backwards instead of to the future) actually doesn't have that much improvement over buy and hold. So for me, it doesn't seem like the return is worth the effort, so I just buy and hold.
Ntrails 9y ago
>have the appropriate retirement target set, along with the proper level of acceptable risk You make that sound so easy. It's not. None of the maths of retirement planning is hard - but the actual decisions really kind of are. For example, I've got 10% in corporate debt. Is that more or less risky than Equity? What's the distribution? What's the correlation? How does it compare with Reinsurance, or Property? Is property strongly correlated with the stock market at the tails, or is it a diversifying asset class? Does my passive fund hedge currency risk? Do I want it to? Is private equity a good or a bad idea? Do I want FTSE ALL or FTSE 100? How about looking at risk appetite. What is the most time it could take for my retirement savings to recover to inflation adjusted parity after a crash (I feel like 15 years is the historical max, but it's a vague memory). Should I look at risk in terms of retirement income or retirement date? Do I expect Annuity rates to improve (e interest rates to go up) or should I mark to current rates for planning purposes. I think about the amount of context that trustees for DB pension schemes needed to make investment decisions that were sound, and I can't help but wonder how we've ended up with individuals making these decisions on their own. I've long felt that outside of fees Diversified Growth Funds (Multi Asset Funds?) are a pretty good place to "inactively" manage retirement savings. After fees I'm less convinced. I suspect the Australian model might be closest to what I internally model as best?
- turk183 9y ago
  If it's any consolation, 2008/9 proved that everything is pretty much correlated--stocks went down, bonds went down, everything went down. There were no safe havens except for massive government bailouts. To this day, the illegal acts that banks undertook to stay afloat have not been prosecuted (moving all unperforming assets to "off balance sheet vehicles" like holding companies). Also, mark-to-market accounting was suspended and has never been reinstated.
  - pragmatic 9y ago
    One notable exception: Farm land.
turk183 9y ago
Please read the above advice! In 2008, I saw the crash coming. I got tipped off, kind of: My bank was NetBank and it was the first one to fail. I pulled all my money out of stocks and sat out the crash. Brilliant, right? Yeah, except in 2010, I didn't re-invest it! I sat on a lot of cash and missed out on tons of gains. So while I preserved my wealth (and that was dicey because Money Markets nearly collapsed and that's where all my "cash" was). Had I stayed invested I would have taken some paper losses but I would have come out further ahead by now. My one concern is that these markets are just pretend bs because of QE and the effects money printing has had on all assets.