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Comment by tekkk | Hacker News Reader

I am already worrying but so what? Sell everything and have all cash? And what then, wait for the "crash" to happen?

Sure the article gets clicks but in reality, if you have invested smartly and with a long-term outlook it shouldn't matter if the market took a momentary nosedive. Good companies remain good companies and I don't mind being invested in them even while my holdings go temporarily to perhaps negative.

One of the most annoying things as an investor I feel is the constant pressure to validate my investments to see if I should I sell them or not. It's just too much of a hassle and unless the company really does something dumb, I'll keep holding until the sun starts shining again. I'm not in a hurry either way as a young person, so time is on my side.

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I tend to follow Benjamin Graham's advice from The Intelligent Investor. Summarized by investopedia:

- Graham recommended distributing one's portfolio evenly between stocks and bonds as a way to preserve capital in market downturns while still achieving growth of capital through bond income. Remember, Graham's philosophy was first and foremost, to preserve capital, and then to try to make it grow. He suggested having 25% to 75% of your investments in bonds and varying this based on market conditions. This strategy had the added advantage of keeping investors from boredom, which leads to the temptation to participate in unprofitable trading (i.e. speculating).

I've been shifting over to bonds for a while now (currently sitting something like 70/30). Running the numbers on where I would have been if I hadn't started swinging towards bonds, I haven't missed out on much at all. The S&P is pretty flat since the January 2018 peak, and I'm in a safer position if a crash happens.

https://www.investopedia.com/articles/basics/07/grahamprinci...

It's still just timing the market with more steps. You may have done well the past two years but there are many other periods of uncertainty in which a large bond allocation would significantly underperform.

Bonds or bond funds? Those are two different beast with two different behaviors when crises hit.

A lot of people buy bond funds and think they own bonds. Bond funds can lose principal quite easily, bonds generally cannot, but are a pain to buy.

Anecdotally, you're the third person I hear talking about their savings recently and all of you have mentioned you think we are near a top and have been swinging your allocation from stocks to bond.

Now if this is a general trend, it would mean stock prices have been held back by people doing this transition and we might be due for a rebound.

I want to do these things but the 15% deduction for tax constantly scares me away. I guess I should assume that my equities are gonna drop 40+% so the 15% is easier to swallow?

One thing that a person could do with this information: if you were counting on your pension to last the rest of your life, you might postpone your retirement a few years.

Does that actually help with pensions? If the pension fund has problems, when 1 beneficiary delaying retirement wont make a noticeable difference. You might as well just retire and take what you can get while the fund is still paying out in full.

As an aside, before making an individual decision on what to do about your pension, look into what happens if it fails. At least in the US, private pension funds are insured.

I meant it more as, you may not be able to count on your pension, so work a few more years and save additional money for retirement.

> I am already worrying but so what? Sell everything and have all cash? And what then, wait for the "crash" to happen?

Unless you can predict the crash / dip to with-in the day, dollar cost averaging and just hanging on for the ride is the best strategy:

* https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...

Simply change the equity-bond allocation balance the closer you get to your retirement date.

All that shows is that dollar cost averaging has been better than the strawman he set up. 1. It might not be the case in the future. 2. There may be better strategies not explored. 3. It relies on the stability of the financial system and has extreme home country survivorship bias. Of course the richest country for the last 100 or so years is going to look like it has a stock market that can't loose.

In other words this look backward only, and beats the shit out of a lousy straw man.

> All that shows is that dollar cost averaging has been better than the strawman he set up.

What strawman? The "buying the dip" is a popular strategy that lots of people try to employ:

* https://www.thestreet.com/investing/earnings/when-to-buy-the...

* https://www.bloomberg.com/news/articles/2019-09-03/look-who-...

* https://www.nerdwallet.com/blog/investing/buying-the-dip-sto...

It explores two strategies that have are used by many people: yes there are others, but it simply does A/B testing to try to find the better of these two. It seems that DCA is better than buying the dip (BtD); that doesn't mean there's something better than DCA, but it says that DCA wins over BtD in this part of the bracket.

It looks at past data to build a model and makes future predictions: we can invest theoretical money and test the theory that DCA is better the BtD, and check back in a few years to see if the prediction is correct.

You’re right, I had assumed it was showing that dca is the best strategy.

> It seems that DCA is better than buying the dip (BtD)

Dca was better than BtD

The problem with some if this is that it frequently happens that strategies work the best right before they stop working without warning. It’s difficult to rule out that possibility.

Article is kind of silly, because you'd obviously be levered when playing any kind of non-momentum strategy (e.g. buying the dip), especially if you were actually omniscient, which would completely crush dollar-cost averaging.

> ... because you'd obviously be levered when playing any kind of non-momentum strategy ...

I think to underestimate the number of people who try to be clever with their (401k) retirement savings and who day trade as a hobby:

* https://www.thestreet.com/investing/earnings/when-to-buy-the...

* https://www.bloomberg.com/news/articles/2019-09-03/look-who-...

* https://www.nerdwallet.com/blog/investing/buying-the-dip-sto...

DCA assumes a large lump sum to invest, otherwise it’s simply a regular investment plan often linked to when you get your pay check.

If you have a lump sum to invest, DCA is simply a way to reduce variance often at the cost of higher transaction fees. I don’t understand why DCA is touted as anything special, if you have a long term outlook and no specific market knowledge just buying in one lump sum probably would have better EV than DCA.

Yes, DCA is technically breaking up large sum; compared to periodic payments:

* https://www.investopedia.com/terms/p/periodic-payment-plan.a...

* https://en.wikipedia.org/wiki/Dollar_cost_averaging#Confusio...

A good number of studies have shown that putting in a lump sum all-at-once gives better results most of the time.

The problem arises when people 'lose their nerve' when they read headlines about the market tanking, or recessions, or whatever. Market timing--trying to get out when things go down, and in again when they're up--is something that many people try to do:

* https://www.investopedia.com/articles/stocks/08/passive-acti...

There are all sorts of articles about "technical indicators" that one can use as a DIY investor to get out during bear markets. Or you can pay other people for their "expertise" by buying their actively managed funds.

The "DCA" comes in where people set aside money to invest, but do not issue a Buy because it's the 'wrong time' to invest: so the cash ends up sitting around, doing nothing much. But the article is arguing that trying to time the market (by buying the dip) is a fool's errand, and simply putting away a little every month into index funds (S&P, Russell) is the best thing most people can do.

If you're nearing retirement, push more towards bonds if concerned. If not, just let it ride. Your dividends, future contributions will buy into lower market prices.

Gold

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