Timing the Market

BlackKnightMonty

Qyburn said:

I'm thinking along the lines of riding out a 50% drop with four following years to recover. That would need a cash buffer of 1.5 years.  

That is crackers. Switch to cash/gold and buy back in 30-50% cheaper. (If you think the market is going to crash)

AlanP_2

fizio said:

I'm taking the opportunity to re-balance (rather than time the market). I have had a decent decade as my portfolio(DC+isa/etc)has been 50% S&P, 30% USA, 15% rest-of-the-world, 3% UK and 2% EM. I am ok with risk due to having a decent DB but now that I have retired, I plan to change the mix and have 10-20% bonds and some more UK. Hence, I am taking profits from some S&P to re-balance - not necessarily in one go but over next 6-12 months. 

What is the distinction between S&P and USA, or are you actually 80% USA?

Linton

BlackKnightMonty said:

Qyburn said:

I'm thinking along the lines of riding out a 50% drop with four following years to recover. That would need a cash buffer of 1.5 years.  

That is crackers. Switch to cash/gold and buy back in 30-50% cheaper. (If you think the market is going yo crash)

Whether you think the market is going to crash tends not to be a useful guide as to whether, and more importantly when, it does.  As to buying back at 30-50% cheaper would you really have the nerve to reinvest to a significant extent in the middle of a crash having sold out on the basis of media speculation?   I would think that many people would wait until it was very clear to them that the crash was over. 

Better to assume that it could crash at any time and set your asset allocations accordingly. In my case it's 100% equity for the long term and sufficient in diversified safer investments to cover perhaps 10 years of essential expenditure.

Qyburn

BlackKnightMonty said:

Qyburn said:

I'm thinking along the lines of riding out a 50% drop with four following years to recover. That would need a cash buffer of 1.5 years.  

That is crackers. Switch to cash/gold and buy back in 30-50% cheaper. (If you think the market is going to crash)

To cover that 50% drop and four years recovery needs around 4% of our funds held as cash or cash-like. I'm happy keeping that available, not relying on switching investment when I "think the market is going to crash".

Triumph13

cfw1994 said:
Snip...

One thought I have is that you could take recent gains to cash with it your funds.  So if this year has risen 15%, move 15% to a “money market fund” or similar 🤷‍♂️

NOT something I have done, but with all the talk of potential crashes (which will always happen!), it might mitigate or give you a comfort feeling.
You could potentially then move them back in if markets do fall.  

Of course, markets could continue to rise, & potential future gains be lost.  That’s the challenge of “market timing” 😉

There is an argument for doing this, to an extent, if you have already 'won' the game.  It's not so much timing the market, as taking advantage of the fact that the run up has already pushed you far enough beyond your targets that you can afford to change to a more conservative asset allocation.  The value of anything extra decreases once you already have 'enough', even more so once you reach 'more than enough' and that changes the calculus of risk and reward.

snowlaser

BlackKnightMonty said:

dunstonh said:

BlackKnightMonty said:

jim8888 said:

Sounds to me like you're already quite prepared to weather the coming storm - providing it comes. I've got most of my pension in equities - probably over 80% - and I'm currently sticking to my "Do Nothing" strategy on the basis that this saw me through the dot.com crash, 9/11, the 2008 meltdown, Covid. Saying that, it's quite difficult to ignore all the negative talk about bubbles bursting and the end being nigh, even when you've seen it all before.

Not tempted to switch to cash and buy back into the market after a crash.

The Berkshire Hathaway approach.

That is not the Berkshire Hathaway approach.

It is at the moment.

No it isn't - the Berkshire Hathaway approach is to research individual companies in great detail, buy the ones that they see as having good prospects, and hold them for decades.  They recently bought Alphabet (Google) for example.

They absolutely do NOT look at the whole market and try and time crashes.

They ARE currently holding a lot of cash, but that's because they don't see much as good value.  At a time of a stockmarket bubble then very few things will look like good long term investments, so you certainly could see that as indicative of current values being too high.  BUT even if the stockmarket fell 50% tomorrow you wouldn't suddenly see Berkshire Hathaway leapt into buying lots of stuff.  They would analyse companies and slowly look for value.  They do not "switch to cash and buy back".

snowlaser

BlackKnightMonty said:

Qyburn said:

I'm thinking along the lines of riding out a 50% drop with four following years to recover. That would need a cash buffer of 1.5 years.  

That is crackers. Switch to cash/gold and buy back in 30-50% cheaper. (If you think the market is going to crash)

That's not investing or risk management though, that's just gambling.

If you're wrong you could be in all sorts of trouble.  

BlackKnightMonty

snowlaser said:

BlackKnightMonty said:

Qyburn said:

I'm thinking along the lines of riding out a 50% drop with four following years to recover. That would need a cash buffer of 1.5 years.  

That is crackers. Switch to cash/gold and buy back in 30-50% cheaper. (If you think the market is going to crash)

That's not investing or risk management though, that's just gambling.

If you're wrong you could be in all sorts of trouble.  

Passively taking a 50% hit doesn’t make any sense. Where is the risk management in that!

BlackKnightMonty

snowlaser said:

BlackKnightMonty said:

dunstonh said:

BlackKnightMonty said:

jim8888 said:

Sounds to me like you're already quite prepared to weather the coming storm - providing it comes. I've got most of my pension in equities - probably over 80% - and I'm currently sticking to my "Do Nothing" strategy on the basis that this saw me through the dot.com crash, 9/11, the 2008 meltdown, Covid. Saying that, it's quite difficult to ignore all the negative talk about bubbles bursting and the end being nigh, even when you've seen it all before.

Not tempted to switch to cash and buy back into the market after a crash.

The Berkshire Hathaway approach.

That is not the Berkshire Hathaway approach.

It is at the moment.

No it isn't - the Berkshire Hathaway approach is to research individual companies in great detail, buy the ones that they see as having good prospects, and hold them for decades.  They recently bought Alphabet (Google) for example.

They absolutely do NOT look at the whole market and try and time crashes.

They ARE currently holding a lot of cash, but that's because they don't see much as good value.  At a time of a stockmarket bubble then very few things will look like good long term investments, so you certainly could see that as indicative of current values being too high.  BUT even if the stockmarket fell 50% tomorrow you wouldn't suddenly see Berkshire Hathaway leapt into buying lots of stuff.  They would analyse companies and slowly look for value.  They do not "switch to cash and buy back".

Fancier words, but essentially what I originally said.

NormalNorman

My simplistic thoughts are...

Considering you already have a cash buffer what other pensions/income do you have? Any DBs schemes due to start paying out, PT job, rental income how far away is SP, how flexible are your outgoings, how tight is your pot - does it have any slack at current value to see you up to a grand old age etc?