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(Marketwatch)   20% stock market correction coming. It's time to sell   (marketwatch.com) divider line 52
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922 clicks; posted to Business » on 05 Aug 2014 at 9:12 AM (8 weeks ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2014-08-05 06:25:12 AM
www.macmeisters.com
 
2014-08-05 08:14:40 AM
No, it's a buying opportunity for a those who are smart enough to take advantage of all the nervous Nellies who don't understand "buy low, sell high."
 
2014-08-05 09:15:21 AM
www.gq.com


IT'S PIXIE DUST!
 
2014-08-05 09:16:33 AM
Says analysis firm that is heavily invested in shorts
 
2014-08-05 09:23:54 AM
Small caps just correct something like 9% in the last month.  DJIA is down 0.5% for the year.  Meh.
 
2014-08-05 09:24:07 AM

Earguy: No, it's a buying opportunity for a those who are smart enough to take advantage of all the nervous Nellies who don't understand "buy low, sell high."


Except that's 100% wrong based on the headline.

If you think a 20% correction is COMING then now is EXACTLY the time to sell because you ARE selling high.

Now would be the EXACT WRONG time to buy as you would be buying into a 20% slide.
 
2014-08-05 09:28:54 AM

Lost Thought 00: Says analysis firm that is heavily invested in shorts


I'm only into Bermuda options as far as my shorts go.
 
2014-08-05 09:30:53 AM
Either stock prices are divorced from earnings, or forecasted earnings are going to drop 20%.  I don't see either for the near future.  We're not in a bubble when everyone is running around asking if we're in a bubble, while there is a record amount of cash on the sidelines and central banks around the world are still pumping cash like crazy.
 
2014-08-05 09:47:05 AM

Deneb81: Now would be the EXACT WRONG time to buy as you would be buying into a 20% slide.


i assume he meant that you buy at the bottom of the correction. the key is knowing the bottom. but if it is indeed 20 percent, then you do know the bottom and can start buying.
 
2014-08-05 09:51:39 AM
Newflash: No one can predict the stock market. If they did, they would be wealthy and not working and writing articles anymore.
 
2014-08-05 10:11:33 AM

FlashHarry: Deneb81: Now would be the EXACT WRONG time to buy as you would be buying into a 20% slide.

i assume he meant that you buy at the bottom of the correction. the key is knowing the bottom. but if it is indeed 20 percent, then you do know the bottom and can start buying.


But not NOW is my point. Now would be the time to sell, which is the opposite of what he was arguing.
 
2014-08-05 10:17:05 AM
It's not time to sell my stocks.  I'm invested in vice and violence.
 
2014-08-05 10:21:50 AM
I use any major correction as an opportunity to move money from IRA's to Roth IRA's. The upside return more than makes up for the tax hit.
 
2014-08-05 10:23:34 AM
Man I really need to learn about this stock market stuff :(
 
2014-08-05 10:25:32 AM
Meh, last time I went on a buying spree and made out really well. I'll do it again. As an individual your advantage is time as long as you don't buy hyped stock.
 
2014-08-05 10:26:14 AM
i3.photobucket.com
 
2014-08-05 10:28:06 AM

DaStompa: Man I really need to learn about this stock market stuff :(


You really don't. Just buy a cheap index fund and hold it indefinitely. You'll beat 70% of professional fund managers in the long term.

It's like walking into a casino and betting that the house will win.
 
2014-08-05 10:30:03 AM

machoprogrammer: Newflash: No one can predict the stock market. If they did, they would be wealthy and not working and writing articles anymore.


If Economists really new what they were talking about then they would have all of the money.
 
2014-08-05 10:32:56 AM

BMFPitt: DaStompa: Man I really need to learn about this stock market stuff :(

You really don't. Just buy a cheap index fund and hold it indefinitely. You'll beat 70% of professional fund managers in the long term.

It's like walking into a casino and betting that the house will win.


Actually, it's higher than that. Over a 10-year period, index funds beat 70%. Over 15 years, I think it's 80%. Over 25 years, it's something like 98%.

Put your money in a low-cost total stock market index, total international index or a combination of the two and you'll do just fine.
 
2014-08-05 10:36:49 AM

machoprogrammer: BMFPitt: DaStompa: Man I really need to learn about this stock market stuff :(

You really don't. Just buy a cheap index fund and hold it indefinitely. You'll beat 70% of professional fund managers in the long term.

It's like walking into a casino and betting that the house will win.

Actually, it's higher than that. Over a 10-year period, index funds beat 70%. Over 15 years, I think it's 80%. Over 25 years, it's something like 98%.

Put your money in a low-cost total stock market index, total international index or a combination of the two and you'll do just fine.


This is good advice & check out Bogleheads
 
2014-08-05 10:48:01 AM
I hope so, I have $30K just sitting around waiting for a correction.
 
2014-08-05 10:54:27 AM

altside: machoprogrammer: BMFPitt: DaStompa: Man I really need to learn about this stock market stuff :(

You really don't. Just buy a cheap index fund and hold it indefinitely. You'll beat 70% of professional fund managers in the long term.

It's like walking into a casino and betting that the house will win.

Actually, it's higher than that. Over a 10-year period, index funds beat 70%. Over 15 years, I think it's 80%. Over 25 years, it's something like 98%.

Put your money in a low-cost total stock market index, total international index or a combination of the two and you'll do just fine.

This is good advice & check out Bogleheads


Thanks guys
I'll look into it, having actual income to do something besides eat and live is new to me so this is all voodoo and magic
 
2014-08-05 10:56:15 AM

Shazam999: I hope so, I have $30K just sitting around waiting for a correction.


Market timing is a bad idea for a few reasons.

1. You don't know when the dip will be. You could miss out on another huge amount of gains
2. You don't know what the lowest point will be.

Just invest it all and ride it out.
 
2014-08-05 10:57:47 AM

machoprogrammer: BMFPitt: DaStompa: Man I really need to learn about this stock market stuff :(

You really don't. Just buy a cheap index fund and hold it indefinitely. You'll beat 70% of professional fund managers in the long term.

It's like walking into a casino and betting that the house will win.

Actually, it's higher than that. Over a 10-year period, index funds beat 70%. Over 15 years, I think it's 80%. Over 25 years, it's something like 98%.

Put your money in a low-cost total stock market index, total international index or a combination of the two and you'll do just fine.


the advice of people ranging from scott adams to warren buffet.

In fact, the advice of pretty much everyone that isn't selling actively managed funds.

I've always "managed" my own stock portfolios because its fun and I'm biased towards dividend paying stocks, but I tell everybody I know to go the broad market low fee index route and that I'm a fool who won't stay lucky for ever.

Also I don't want to pay a lot of capital gains selling my current stuff all at once, but I'm starting to take my own advice with new money
 
2014-08-05 10:59:10 AM

BMFPitt: DaStompa: Man I really need to learn about this stock market stuff :(

You really don't. Just buy a cheap index fund and hold it indefinitely. You'll beat 70% of professional fund managers in the long term.

It's like walking into a casino and betting that the house will win.


^^ that.

Pay in a little regularly so highs and lows balance out.
 
2014-08-05 11:03:19 AM
Seize the money for a health care program.
 
2014-08-05 11:05:15 AM

machoprogrammer: Shazam999: I hope so, I have $30K just sitting around waiting for a correction.

Market timing is a bad idea for a few reasons.

1. You don't know when the dip will be. You could miss out on another huge amount of gains
2. You don't know what the lowest point will be.

Just invest it all and ride it out.


The only market timing that works is same-day timing.  Always try and buy near the end of a day when the market is down 1.5 - 2%.
 
2014-08-05 11:13:11 AM

Incontinent_dog_and_monkey_rodeo: machoprogrammer: Shazam999: I hope so, I have $30K just sitting around waiting for a correction.

Market timing is a bad idea for a few reasons.

1. You don't know when the dip will be. You could miss out on another huge amount of gains
2. You don't know what the lowest point will be.

Just invest it all and ride it out.

The only market timing that works is same-day timing.  A

lways try and buy near the end of a day when the market is down 1.5 - 2%.

that is not a thing. if it was I could average over 1% a day just by buying at close and selling the next day.

one thing I'm absolutely certain of is that a ridiculous number of very smart people with sophisticated tools are searching for and exploiting into non-existence any simplistic pattern in stock behavior.
 
2014-08-05 11:16:32 AM

DaStompa: altside: machoprogrammer: BMFPitt: DaStompa: Man I really need to learn about this stock market stuff :(

You really don't. Just buy a cheap index fund and hold it indefinitely. You'll beat 70% of professional fund managers in the long term.

It's like walking into a casino and betting that the house will win.

Actually, it's higher than that. Over a 10-year period, index funds beat 70%. Over 15 years, I think it's 80%. Over 25 years, it's something like 98%.

Put your money in a low-cost total stock market index, total international index or a combination of the two and you'll do just fine.

This is good advice & check out Bogleheads

Thanks guys
I'll look into it, having actual income to do something besides eat and live is new to me so this is all voodoo and magic


As mentioned above, the best way to go for the typical everyman investor is a mixture of index funds. Vanguard does a number of cheap index funds, but their Target Retirement Funds are the simplest. You just plug in your expected retirement date and they take care of the asset allocation as you progress towards retirement.

Of course other companies also have Target Retirement Funds.
 
2014-08-05 11:25:50 AM
It doesn't matter one way or another to some:

http://en.wikipedia.org/wiki/Flash_Boys
 
2014-08-05 12:12:34 PM
Here is the single best reason in the world for NOT trying to time the market:

img1.imagesbn.com
 
2014-08-05 12:26:28 PM

Earguy: No, it's a buying opportunity for a those who are smart enough to take advantage of all the nervous Nellies who don't understand "buy low, sell high."


Catching a falling knife is more difficult than you think.
 
2014-08-05 12:29:21 PM

BalugaJoe: machoprogrammer: Newflash: No one can predict the stock market. If they did, they would be wealthy and not working and writing articles anymore.

If Economists really new what they were talking about then they would have all of the money.


Economists use decimal points so that weathermen have someone to laugh at.
 
2014-08-05 01:04:15 PM

machoprogrammer: Shazam999: I hope so, I have $30K just sitting around waiting for a correction.

Market timing is a bad idea for a few reasons.

1. You don't know when the dip will be. You could miss out on another huge amount of gains
2. You don't know what the lowest point will be.

Just invest it all and ride it out.


It's not like I'm not invested in other things - I have like $250K already spoken for...
 
2014-08-05 01:37:15 PM

Shazam999: I hope so, I have $30K just sitting around waiting for a correction.


I'm jealous. If I wasn't already 100% equities, I would be selling any bonds after the drop to buy in low.
 
2014-08-05 01:48:55 PM

umad: Shazam999: I hope so, I have $30K just sitting around waiting for a correction.

I'm jealous. If I wasn't already 100% equities, I would be selling any bonds after the drop to buy in low.


I turned my entire 401k into bonds about 3 or 4 weeks ago.  I know nobody beats the indexes long term, but I really just don't want to expose what money I have to what I believe will be a substantial crash in the market.
 
2014-08-05 01:50:06 PM

rvesco: Here is the single best reason in the world for NOT trying to time the market:

[img1.imagesbn.com image 260x408]


Almost as good as

ecx.images-amazon.com

Published in February 2005

ecx.images-amazon.com

Published in January 2006.

Housing prices peaked three months later.
 
2014-08-05 02:11:43 PM

rvesco: Here is the single best reason in the world for NOT trying to time the market:


So that's how he managed to get a show on Comedy Central.
 
2014-08-05 02:44:57 PM

BMFPitt: DaStompa: Man I really need to learn about this stock market stuff :(

You really don't. Just buy a cheap index fund and hold it indefinitely. You'll beat 70% of professional fund managers in the long term.

It's like walking into a casino and betting that the house will win.


Sad but true.

Sad because you really want the market to be exciting and fun.

It'll get more fun when my dividend checks get big enough for me to quit my job.

A LONG time from now.
 
2014-08-05 03:01:35 PM

AteMyBrain: Sad because you really want the market to be exciting and fun.


Adventure?  Excitement?  A long-term investor craves not these things.
 
2014-08-05 03:08:11 PM

rugman11: rvesco: Here is the single best reason in the world for NOT trying to time the market:

[img1.imagesbn.com image 260x408]

Almost as good as

[ecx.images-amazon.com image 229x346]

Published in February 2005

[ecx.images-amazon.com image 232x346]

Published in January 2006.

Housing prices peaked three months later.


Still not the funniest/saddest (published in 1999):

www.ritholtz.com


Kevin Allen Hassett:

From his wiki: "He was John McCain's chief economic adviser in the 2000 presidential primaries and an economic adviser to the campaigns of George W. Bush in the 2004 presidential election and McCain in the presidential election of 2008. He was Mitt Romney's economic adviser for the 2012 presidential campaign."
 
2014-08-05 04:13:59 PM

machoprogrammer: BMFPitt: DaStompa: Man I really need to learn about this stock market stuff :(

You really don't. Just buy a cheap index fund and hold it indefinitely. You'll beat 70% of professional fund managers in the long term.

It's like walking into a casino and betting that the house will win.

Actually, it's higher than that. Over a 10-year period, index funds beat 70%. Over 15 years, I think it's 80%. Over 25 years, it's something like 98%.

Put your money in a low-cost total stock market index, total international index or a combination of the two and you'll do just fine.


You can count on one hand the number of fund managers that have beat the market over the past 10 years.  Luckily I picked one of them :P
 
2014-08-05 04:28:29 PM

Earguy: No, it's a buying opportunity for a those who are smart enough to take advantage of all the nervous Nellies who don't understand "buy low, sell high."


Yep.  When stock values tanked during the great recession and people did stupid things like cashing out their 401(k), I increased my 401(k) contribution from 10% to 20% and left it that way until things started regaining value.
 
2014-08-05 05:31:57 PM

Cyclonic Cooking Action: umad: Shazam999: I hope so, I have $30K just sitting around waiting for a correction.

I'm jealous. If I wasn't already 100% equities, I would be selling any bonds after the drop to buy in low.

I turned my entire 401k into bonds about 3 or 4 weeks ago.  I know nobody beats the indexes long term, but I really just don't want to expose what money I have to what I believe will be a substantial crash in the market.


I'm fine with crashes. It isn't a real loss until you sell and make it official. I'm not cashing any of it out for 20+ years anyway, so crashes don't really mean anything to me.

/other than wishing I had a chunk of change sitting around to buy in with after them
//but I usually don't, since I already invest every spare nickel I have
 
2014-08-05 07:14:09 PM

machoprogrammer: Shazam999: I hope so, I have $30K just sitting around waiting for a correction.

Market timing is a bad idea for a few reasons.

1. You don't know when the dip will be. You could miss out on another huge amount of gains
2. You don't know what the lowest point will be.

Just invest it all and ride it out.


That is one school of thought.  Others, myself included, prefer to wait for a good price before buying in. Has worked well for me.
 
2014-08-06 09:18:46 AM

Shazam999: machoprogrammer: BMFPitt: DaStompa: Man I really need to learn about this stock market stuff :(

You really don't. Just buy a cheap index fund and hold it indefinitely. You'll beat 70% of professional fund managers in the long term.

It's like walking into a casino and betting that the house will win.

Actually, it's higher than that. Over a 10-year period, index funds beat 70%. Over 15 years, I think it's 80%. Over 25 years, it's something like 98%.

Put your money in a low-cost total stock market index, total international index or a combination of the two and you'll do just fine.

You can count on one hand the number of fund managers that have beat the market over the past 10 years.  Luckily I picked one of them :P


How do you know they beat the market? A lot of managers diversity their funds to get better returns (or at least make it appear they did).

I.e. a managed large cap fund could invest 10% into small cap. Since small caps can have better returns, the fund could "beat" the S&P 500 but in reality, it was only 90% S&P 500.

Pumpernickel bread: machoprogrammer: Shazam999: I hope so, I have $30K just sitting around waiting for a correction.

Market timing is a bad idea for a few reasons.

1. You don't know when the dip will be. You could miss out on another huge amount of gains
2. You don't know what the lowest point will be.

Just invest it all and ride it out.

That is one school of thought.  Others, myself included, prefer to wait for a good price before buying in. Has worked well for me.


What happens if you had sold at the end of 2012, since it was also a peak? You would've missed last year's huge gains. You also miss dividends and such, too. They have done many, many studies, and trying to "time" the market rarely ever works out well.
 
2014-08-06 11:31:45 AM

machoprogrammer: trying to "time" the market rarely ever works out well.


You seem so be talking about trying to milk the market for a relatively short-term windfall. If I were to do that, I'd invest on bad news and a precipitous drop in a particular stock price.  I like to track those kind of things, but don't actually invest money in them because I'm very risk-averse.

Example, in November 2012, Hewlett-Packard announced that their purchase of a company called Autonomy was an extreme waste of money, taking an $8.8 billion write-off.  Their stock, already on a steady decline, dropped to below $12.  Following my hunch, I "bought" (I didn't buy anything) $1000 worth at $12/share.  It has been climbing ever since, presently at a shade over $35, nearly tripling my purchase value in less than 2 years.  Honestly, I think HP's stock is going to continue to rise for another year or two, but if I'd actually bought their stock back in 2012, I'd be selling it within the next 6 months.

Anyway, my real life strategy is much longer term and when things went to shiat in 2007 it was pretty clear that it was going be quite a while before it got much better, hence my earlier mentioned increased 401(k) contribution during the nastiest of it.  My mantra "buy low, and I ain't selling for a couple of decades".
 
2014-08-06 11:42:28 AM
Ooh, oooh!  Better example:

In Jan 2012 I "bought" $1000 worth of AARMQ at $0.26/share after the news of American Airlines' bankruptcy. I "sold" it in Nov 2013 at about $11/share for a  payout of over $30,000.
 
2014-08-06 12:23:50 PM

machoprogrammer: Shazam999: machoprogrammer: BMFPitt: DaStompa: Man I really need to learn about this stock market stuff :(

You really don't. Just buy a cheap index fund and hold it indefinitely. You'll beat 70% of professional fund managers in the long term.

It's like walking into a casino and betting that the house will win.

Actually, it's higher than that. Over a 10-year period, index funds beat 70%. Over 15 years, I think it's 80%. Over 25 years, it's something like 98%.

Put your money in a low-cost total stock market index, total international index or a combination of the two and you'll do just fine.

You can count on one hand the number of fund managers that have beat the market over the past 10 years.  Luckily I picked one of them :P

How do you know they beat the market? A lot of managers diversity their funds to get better returns (or at least make it appear they did).

I.e. a managed large cap fund could invest 10% into small cap. Since small caps can have better returns, the fund could "beat" the S&P 500 but in reality, it was only 90% S&P 500.


Yeah I don't think you understand how funds work.  At the end of the day you have units, those units are priced at some dollar amount, you can easily compare against an index fund's unit price, ta da.
 
2014-08-06 01:55:48 PM

Shazam999: machoprogrammer: Shazam999: machoprogrammer: BMFPitt: DaStompa: Man I really need to learn about this stock market stuff :(

You really don't. Just buy a cheap index fund and hold it indefinitely. You'll beat 70% of professional fund managers in the long term.

It's like walking into a casino and betting that the house will win.

Actually, it's higher than that. Over a 10-year period, index funds beat 70%. Over 15 years, I think it's 80%. Over 25 years, it's something like 98%.

Put your money in a low-cost total stock market index, total international index or a combination of the two and you'll do just fine.

You can count on one hand the number of fund managers that have beat the market over the past 10 years.  Luckily I picked one of them :P

How do you know they beat the market? A lot of managers diversity their funds to get better returns (or at least make it appear they did).

I.e. a managed large cap fund could invest 10% into small cap. Since small caps can have better returns, the fund could "beat" the S&P 500 but in reality, it was only 90% S&P 500.

Yeah I don't think you understand how funds work.  At the end of the day you have units, those units are priced at some dollar amount, you can easily compare against an index fund's unit price, ta da.


What? Each fund has a different NAV price due to the size of it and the shares. $10000 of Fund A may be 300 shares, while $10000 of Fund B may be 600 shares. You can't go by the unit price alone. Hell, Vanguard's 500 index is like $180 a share, while Fidelity's is like $55.

What I am saying is that a managed fund may claim to be large cap, but it is actually 90% large cap and 10% small cap (they add the small cap to try beat "their" index). When that happens, you can't compare it to the S&P 500 or any other large cap index because it isn't entirely that cap. If it is 90% large cap and 10% small cap, for example, you would have to compare 90% of it to S&P 500 and 10% of it to the Russel 2000 (or whatever index you want), so .90 x S&P_500 + .10 x small_index. In summary, a managed fund may be comparing apples to oranges with regards to beating their index.

It's like how a standard, non-high yield, bond fund will load up on junk bonds to try to get more return, when that is adding a ton of risk.
 
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