Tag: t_DCA

pseudo-DCA ] %%system: lack`discipline

Posted on by tiger40490

See also my Dec 2021 mail to Aaron/Claris

My recreational system already uses DCA principle — “invest small amounts regularly throughout the year”.

Main benefit of my DCA — mistakes are minor and detectable.

— deviation from the standard DCA robot

  • in an overpriced market, I have fewer stocks to consider investing. I tend to notice the recent hype and stand aside
  • I tend to pick new names in each small purchase, rather than buying the same stock over and over.
  • DCA down the curve .. (the main deviation) See below

However, how do you tell “overpriced”?

— down the curve .. My system is supposed to reduce purchases during bull markets, building up a buffer, and increase purchases during decline, depleting the buffer. However, in reality, we often feel hesitant and try to wait for further declines.

Jolt: when we see an initial recovery, we don’t know if it is a temporary recovery, so we are usually hesitant

Jolt: when we see a zigzag decline then a recovery, we don’t know if the decline would continue, so we are hesitant

Jolt: when we see an up trend of 30% from the bottom, we often feel it’s too late to go in

— up the curve .. When SP500 rises after some decline, it could be still overpriced, or it could be bottoming out.. How do you tell? See overvalued@@ CDY,P/E,NGRY

[22] j4 buy@every correction/crash

Posted on by tiger40490

Warning: [[irrational exuberance]] gave lots of data against this /tactic/ — Invest at every correction or crash, invest in bigger amounts than you have recently done in normal times. If decline continues, then decide whether to buy-n-Forget or invest more.

ETF quickGrab: buy-low +! due diligence is a more concrete plan.

— J4: ECR compound return .. widely accepted, even on non-U.S. markets [1].
This perception basically assumes that after every decline, perhaps after a few years [1] of zigzag, market would eventually transition to a “fast_window”, where annual return stays above average for months or years.

Some traders focus on the shorter horizon and target to capture a few months of fast_window. In contrasts, authors (big influence on me), financial advisors, financial planners, bank staff … focus on a longer horizon of a few years to a decade. But regardless of horizon, all of them agree on one thing — the fast_window.

— J4: DCA robot.. See my blogpost on DCA
j4: DRIP robot is related

DCA and DRIP assume that even after a market /rally/, it’s not unwise, not risky, to let the robot continue investing _small_ amounts.

— [1] Warning: this analysis only applies to U.S. equities. Non-U.S. markets can experience a long trough before (hopefully) entering a fast_window.

exit_timing^BnH: K.Hu,Wood,Buffett

Posted on by tiger40490

 

k_babysit4exit

The most common j4 exit_timing are

  1. BB) damage control .. purge bleeding/toxic assets and improve “quality” of your portfolio.
  2. AA) optimize asset allocation .. including cashing out on an _overvalued_ stock.

[[Irrational Exuberance]] P12 talks about “investors who can commit their money to an investment for ten full years”. About half the (Hundreds) analyses in the domain talk about long-term investors, but I don’t know how common they are, like 20%? I think most retail investors are driven by AA+BB to sell within 10Y. Retirement accounts and ETF are something else.

— mostly for BB:

K.Hu’s description of his 2022 timely exit is yet another powerful nudge “You must babysit your stocks, and time their exits“. I don’t buy that idea. I have an opposing view. During the early 2022 decline in SP500, most [1] professional/institutional/smart money have exited or gone short equities, but some x% of the smart money stuck to buy-n-hold. Buffett once endorsed DCA. With DCA, you keep buying down the curve. This is a clash of philosophies.

This “clash” is swept under the carpet most of the time, but becomes a recurring theme whenever I review/evaluate my stock investment. The clash is related to many other recurring themes listed below.

What to avoid to get”marketReturn” explains why any selling is problematic.

[1] herd_instinct .. usually more emotional and less rational, and often lead to price insensitive selling

— hot stocks .. often requires BB. As I said, I am not keen about hot growth stocks, including tech stocks. Out of 200+ stocks I own, about 1% of them are hot growth stocks where I invested more than $100 each.

When I do invest in hot stocks, I am like Cathie Wood, not like K.Hu.

For hot or other stocks, I think most retail investors (not sure about institutional) would sell at a declining market. That leads to over-selling, creating buying opportunities for buy-n-hold guys like Buffett and Wood.

— buy-n-hold .. “3Y hold” rule implies no babysit for exit. After 3Y+, I do sell for AA reasons.

Buffett usually holds for decades.

— analysis or babysit .. entry/exit timing always requires price forecast and Sys2 resources. Some investors (maybe half of them) have to babysit before the exit. Some investors like K.Hu would “analyze” before the exit.

I don’t like babysit or analysis. (I only perform my 3-min due diligence at entry.)

— firewall .. is under threat when (for BB) you try to time the market for exit

— recreation .. I feel BB is toxic and incompatible with recreational investing.
Even AA can be considered incompatible.