5 ms·

I have never thought about all-out selling during this. In fact I'm buying more with each dip. I feel that securities are a bargain right now. With select se

I have never thought about all-out selling during this. In fact I'm buying more with each dip. I feel that securities are a bargain right now. With select selling I'll also be taking advantage of tax loss harvesting for years to come.

iMuzz 7y ago
Be weary of catching falling knives. I've made that mistake before.
- deanmoriarty 7y ago
  Why, exactly? If you have a healthy emergency fund in cash to cover your liabilities for 6 months (or even 1 year to be more conservative in this environment), what is the problem in throwing every bit of cash that comes your way (paycheck savings, ...) and you won't need for a few years, at the stock market as it goes down? Over decades the stock market has had an IRR or 8%+, and that IRR includes crashes like these.
  - gbrits 7y ago
    “and that IRR includes crashes like these.” No it doesn’t.
    - deanmoriarty 7y ago
      Could you please substantiate your claims? This is what I mean and what I do, by always allocating the same amount of savings per year, in good or bad times [1]. You can see how in 2008 such portfolio had a drawdown of more than -50%. Despite that, it performed well above the 8% IRR I mentioned. Another interesting data point, by investing lump sums of money at the very peak of every market cycle, immediately followed by a massive crash [2]. I believe the IRR in this case is still above 7%, which is absolutely phenomenal considering the horrible investing timing. If you don't agree, please tell me exactly why I am wrong and why you are right, so I might learn something. I come to HN to read HN-quality comments, not Reddit-quality content. Thank you. [1] https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=1&timePeriod=4&startYear=1972&firstMonth=1&endYear=2020&lastMonth=12&calendarAligned=true&initialAmount=1000&annualOperation=1&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&asset1=TotalStockMarket&allocation1_1=100 https://www.portfoliovisualizer.com/backtest-asset-class-all... [2] https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ https://awealthofcommonsense.com/2014/02/worlds-worst-market...
      - tarsinge 7y ago
        The past is not a predictor of the future, 2008 is a single point hardly representative of any economic crisis to come. A lump sum invested in 1929 would have taken decade to recover, and with the Nikkei it still wouldn’t have. These models based on 1 or 2 selected crisis as if we had seen all always amaze me.
        deanmoriarty 7y ago
        it’s obvious that past performance is not a predictor for the future. Yet, I could have said your same exact words in 2000 and 2008: “this time is different, let me go out of the market!”. I don’t know any other investment which is completely passive that will statistically allow me to grow my capital over the long term. So yes, I will rely on 100 years of data I have, and to prevent Nikkei I try to diversify using a healthy international allocation. If you have a different investing vehicle to suggest, please let me know.
        ScottFree 7y ago
        > If you have a different investing vehicle to suggest, please let me know. Land, seeds, livestock and ammo. If you're worried that the market might collapse so hard that it won't recover in your lifetime, then trading money for lasting goods while money still has value is the best course of action. Personally, I'm not convinced it's going to get that bad, but I have friends who have gone down that route. They all prefer their new lives to their old ones.
- Gigablah 7y ago
  Just don’t catch falling knives with both hands.
lookingforsome 7y ago
Can you explain like I'm five how you plan to perform this tax loss harvesting for years to come?
- sobani 7y ago
  As far as I know US tax law (I've never dealt with US tax, so grab yourself a salt shaker): When you sell a stock for less than you bought it (like if you sell something right now that you bought less than 3 years ago) you can subtract that from your capital gains taxes. This works even when you turn around an immediately buy something similar (but not the same, you'll have to wait a month to buy the same thing back). There is a limit to the amount of tax losses you can claim for a given year, but you can claim the rest of your losses in the years to come. I'm not sure if you'll actually come out ahead, since everything you buy today will have a lower cost basis and thus will increase your capital gains taxes in the future. For now, wait and see if I just invoked Cunningham's Law. :)

iMuzz 7y ago

Be weary of catching falling knives. I've made that mistake before.

deanmoriarty 7y ago
Why, exactly? If you have a healthy emergency fund in cash to cover your liabilities for 6 months (or even 1 year to be more conservative in this environment), what is the problem in throwing every bit of cash that comes your way (paycheck savings, ...) and you won't need for a few years, at the stock market as it goes down? Over decades the stock market has had an IRR or 8%+, and that IRR includes crashes like these.
- gbrits 7y ago
  “and that IRR includes crashes like these.” No it doesn’t.
  - deanmoriarty 7y ago
    Could you please substantiate your claims? This is what I mean and what I do, by always allocating the same amount of savings per year, in good or bad times [1]. You can see how in 2008 such portfolio had a drawdown of more than -50%. Despite that, it performed well above the 8% IRR I mentioned. Another interesting data point, by investing lump sums of money at the very peak of every market cycle, immediately followed by a massive crash [2]. I believe the IRR in this case is still above 7%, which is absolutely phenomenal considering the horrible investing timing. If you don't agree, please tell me exactly why I am wrong and why you are right, so I might learn something. I come to HN to read HN-quality comments, not Reddit-quality content. Thank you. [1] https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=1&timePeriod=4&startYear=1972&firstMonth=1&endYear=2020&lastMonth=12&calendarAligned=true&initialAmount=1000&annualOperation=1&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&asset1=TotalStockMarket&allocation1_1=100 https://www.portfoliovisualizer.com/backtest-asset-class-all... [2] https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ https://awealthofcommonsense.com/2014/02/worlds-worst-market...
    - tarsinge 7y ago
      The past is not a predictor of the future, 2008 is a single point hardly representative of any economic crisis to come. A lump sum invested in 1929 would have taken decade to recover, and with the Nikkei it still wouldn’t have. These models based on 1 or 2 selected crisis as if we had seen all always amaze me.
      - deanmoriarty 7y ago
        it’s obvious that past performance is not a predictor for the future. Yet, I could have said your same exact words in 2000 and 2008: “this time is different, let me go out of the market!”. I don’t know any other investment which is completely passive that will statistically allow me to grow my capital over the long term. So yes, I will rely on 100 years of data I have, and to prevent Nikkei I try to diversify using a healthy international allocation. If you have a different investing vehicle to suggest, please let me know.
        ScottFree 7y ago
        > If you have a different investing vehicle to suggest, please let me know. Land, seeds, livestock and ammo. If you're worried that the market might collapse so hard that it won't recover in your lifetime, then trading money for lasting goods while money still has value is the best course of action. Personally, I'm not convinced it's going to get that bad, but I have friends who have gone down that route. They all prefer their new lives to their old ones.
Gigablah 7y ago
Just don’t catch falling knives with both hands.

lookingforsome 7y ago

Can you explain like I'm five how you plan to perform this tax loss harvesting for years to come?

sobani 7y ago
As far as I know US tax law (I've never dealt with US tax, so grab yourself a salt shaker): When you sell a stock for less than you bought it (like if you sell something right now that you bought less than 3 years ago) you can subtract that from your capital gains taxes. This works even when you turn around an immediately buy something similar (but not the same, you'll have to wait a month to buy the same thing back). There is a limit to the amount of tax losses you can claim for a given year, but you can claim the rest of your losses in the years to come. I'm not sure if you'll actually come out ahead, since everything you buy today will have a lower cost basis and thus will increase your capital gains taxes in the future. For now, wait and see if I just invoked Cunningham's Law. :)