Anyone think it's time to cut their losses?
- Thread starter Robert Mugabe
- Start date
as a short term investor I get the urge to sell. as a long term holding dividend investor I just ride the wave and when things drop enough where Im getting a reduce cost and better percentage dividend I buy.
I figure Ill buy when it drops another %15-20.
I agree.
Phase your buys at certain price percentage drop points. Broad American market down almost 25% as of today so, for me it is - if the market gets there - -35%, then 40%, then 45% and so.
However, this will have to be tempered with the inflation rates going forward and subsequent central bank tightening. The two go hand in hand together. However if wage inflation kicks in then it is a whole new ball game ala - '67 to '82, a horrible time for holding stocks.
Unfortunately, your last sentence shows that you are not a "long-term holding dividend investor" but the "market timing trader". Otherwise you will be buying not when market goes down by another 20% (in itself, it means absolutely nothing for future returns) but when you'll have money to invest. The best "time the market" strategy is invest the money when you have them and do not look at the stock prices.
He makes eminent sense to me.
"Long-term holding dividend investor" means holding long term, good quality stocks.
Liquid assets sitting and waiting to be employed at market price points that make more sense than the market we have had since gov'ts and central banks have flooded society and thus markets with free, loose and easy money creating froth that must be blown away.
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Long-term, dividend investing is fine if you are satisfied with an average of 5% return over 30 years. If you are 5 years away from retirement, in the current economic environment, you may be retiring with a lot less than you had planned.
This current downturn is unprecedented. In the last 6 months, there have been over 40 days where there were Triple-digit losses in all markets. And according to the experts, we are about halfway through it.
This current downturn is unprecedented. In the last 6 months, there have been over 40 days where there were Triple-digit losses in all markets. And according to the experts, we are about halfway through it.
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S&P 500 went up 50% since 5 years ago (even accounting for the current losses). 5% real return (i.e., above inflation) is a very good return even if there is +/- 15% around the trend each year. If you want higher return - you are a gambler, not investor.
I have no idea. On the shares I owned 5 years ago I made 50% from 5 years ago till today (I buy the same index fund). Some of them, naturally, I bough much earlier. I bough more during the last 5 years. I have no idea how much I made. I invest when I have extra $10K regardless of what stock market is doing. This way I diversify market's ups and downs. I do not plan to sell until I retire and, after that, sell when I need. I just treat stock marker as my saving account with high but volatile interest rate. This is what passive investment is about. Anything else is gambling. The "boring" way to invest is the best way to invest.
You should be concerned that you have no idea how much you have made or lost in the last 5 or 10 years. Your brokerage firm or bank should provide online documents that show you.
And if you are buying mutual funds, you are being charged fees which eat away at your gains.
I keep tab of my book value, so, I know exactly what my total capital gains are, but I have no idea what my annual return is. And I do not care because it is irrelevant. I pay $7.99 per trade (this is why I buy in chunks of at least $10K) and I invest in VCN.TO with 0.05% MER, so, I would not worry about the fees
. You see, boring...perhaps. I was regularly buying every month dividend paying stock, in a way dollar cost averaging over the years. I do look at the return I will get from my invested money and the quality of the company and the sectors its in. as far as future returns I base it on the companys dividend payout and history since they have a track record. more than likely the behavior will continue to occur.
when the market drops 20% and a stock drops equally how does that not mean anything for future return? a 20% drop will eventually turn around. a previous 4% dividend yield could be a 5-6%. I dont see how that can mean absolutely nothing as far as a future return.
in light of the recent drop, inflation and my own financial situation I decided to put the regular stock purchases on hold. once the BOC stops raising rates I will more than likely begin my monthly purchases again with stock.
I am timing in a way to get the most/best bang from my buck, but also I never sell unless I want to redeploy in other areas I think I could get better value.
the stock market is an emotional rollercoaster. I watch what the fed does and how the market reacts. people hear interest hike and market goes down. same with the BOC. I figure once the BOC stabilizes their prime rate that would be a good indicator that the emotional rollercoaster may be over. time to buy some stocks.
all I know is that if the BOC loses its mind and decides to jack rates(Im locked in for another 1.5 years at 3.79) I have the cash lying around to pay off my total mortgage. I will not sell anything if I dont have to.
its a balancing act.
Yes, the boring way, index funds is the best way to invest for most people, who don't mind small returns.I keep tab of my book value, so, I know exactly what my total capital gains are, but I have no idea what my annual return is. And I do not care because it is irrelevant. I pay $7.99 per trade (this is why I buy in chunks of at least $10K) and I invest in VCN.TO with 0.05% MER, so, I would not worry about the fees
Because if past excess returns would be able to predict future returns (either positive or negative auto-correlation), the demand for the stocks would have adjusted immediately in anticipation of such future returns and, thus, that "future" returns would never happen. Like in your example, if it would be true that there is a mean-reversion, it already "happened", i.e., you can consider the 20% drop as a 30% drop with simultaneous 10% recovery, so, you observe already "recovered" stocks. It is called weak-form efficiency and it has been confirmed by empirically for years now.
You can do it on the margin too or pay a bit more MER and buy leveraged fund. This way you will have higher risk and return, but still diversify all your systematic risk. Any "small" investor personal "investigation: of the company means absolutely nothing as there are much more capable players who did similar investigation, whose results are much more accurate, and they already reflected in the price. Relying on your own "investigation is just fooling yourself.
Diversification results in mediocrity.
But we digress. The answer to the OP's original question, is Yes, if your portfolio is down more than 15%.
Diversification results in higher expected return for a given amount of risk. Diversification + leverage also allows you achieve the lowest risk for any desired expected return.
And the answer to OPs question: YES only if you plan to spend the money right away. NO in any other situation. The stock prices are irrelevant.
I totally do not understand your explanation; however, I will research weak form efficiency.
