Anyone go ALL IN at the depths of a crash?

[luutzu]

I'm comfortably retired now, mainly because l kept buying shares after the crash, in the same way as before the 2008 crash. We lived on my wife's wages and I threw everything I earned into the market. I think you have to look at it as buying a share of a company for the dividends and the capital growth is the cream. It was very tough doing this as you are going against the crowd. I'd often buy $10000 worth of shares and they would immediately slump. I relied on years of experience and reading about the long term trajectory of shares to keep myself on track. It was a frightening time to buy. And buy. And buy, and lose money, and lose yet more money on paper. I was in my sixties so I didn't relish the prospect of going broke and having to work until I dropped. The market started to turn around 2012 and in a very short time We were made very wealthy on paper by people who were now prepared to pay a lot more than what I paid for the shares we owned. I still wonder at this! I retired in 2013 after being made redundant. The cash settlement from the redundancy was invested in shares. I have sold houses and invested them in shares. We now live very well off the dividends we received. Investment is now my full time occupation. The companies I was invested with paid healthy dividends throughout the panic yet many people were selling at less than half price for the same share.I still buy shares for the long term. Generally I buy stocks that have demonstrated at least five years of steady income and are cheap P/E compared to the index. I concentrate on the dividends I receive. I generally try to return 6% before franking credits. I've, moved away from direct share ownership to a more index/lic fund bias for diversification and easier management. My top holding is with IHD- my other holdings are ARG, CDM, NSC,TOT,VAS,DUI, WBC. 80 odd percent of our wealth is in shares and 20% is in cash. I recently took a profit selling down DUI and a large holding in VEU as they had increased in value and I wanted to take a profit. As I have an SMSF in retirement I don't pay CGT. if I was holding them outside the SMSF I would not have sold them. I would prefer to keep them for the dividends. My advice is to stop trying to pick the bottom or the top. Those I know who have tried have failed or have been lucky. The WBC shares I bought recently, just before they went ex dividend. They pay around 6% plus franking credits. I looked at the graphs and they have been hammered because of the royal commission. Everyone has sold them down. I figured they would drop after they went ex dividend and they would go up and I would sell them to someone else for a profit. I have too much long term exposure to banks. Looks like I'll be holding on longer than expected as they are still sinking. Hopefully I will be compensated by a nice income stream in the meantime. Who knows? Not me. This is a tough mental game but if you keep buying regularly over time and don't do what everyone else does in the panic of a crash you will prosper. Unfortunately you will only know if you can do this when the crash is on. Good luck to you.

Yea, not a good feeling when you buy something and it just keep on falling.

Seems that the way the market is structured, with index fund managers, traders, algorithms etc., I think that a falling stock get smashed over a few rounds. Same with a rising star - being booted up for good results, then further booted up from the fact that it's been rising.

 

[Craton]

Spoiler alert! Long winded reply.

Firstly, as I've posted elsewhere here, I'm rarely all in as I like to have a min of 5~10% of that nice, dry powder for if/when opportunity beckons.

Secondly, I'm rarely all out as I primarily invest for the additional income stream along with the associated tax input credits and building those stocks up for my eventual retirement.

Lastly, my stock portfolio contains blue, green and spec stocks. Apart from the specs I have value and growth stocks.

As my sig. I am a mostly passive, contrarian investor meaning am not a trader per se but I do trade.

Examples of some of my bigger accumulation windows are, post dot com bubble, 9/11 and the CFG. Here I normally keep topping up on the big div payers and maybe adding a stock or two by way of diversification.

Examples of my distribution windows are, the lead up to what became the dot com bubble (anyone remember eCorp and the like? TLS over $9). Again post 9/11 simply because a SP will never rise infinitely. I sold off non div and specs stocks pre GFC simply because the writing was on the wall so to speak. Like Smurf1976 says, "...seen it all before." and now we come to the present.

Let me put it to you this way. What would you do if you had several non div paying and spec stocks showing between 2 and 8 bags?
Simply answer really.

Allow me to add one more observation. There has been an increasing amount of talk of a market top which means a crash is imminent or at least a correction perhaps into a bear market. Why?
The longer the bull runs, the quicker the bear comes out of hibernation. The signs are there IMHO. Oddly, I'm not hearing, "...it's different this time."

Now to the OP's question. Do you go all in when the bottom is perceived?
Ah, now that really is up to the individual, their investing style and appetite for risk but for this little black duck (g'day tech/a), simple answer really especially if you have time on your side.

 

[Mr ABC]

I’ve done this but in reality it plays out a bit different to going “all in” like one would in poker.

That One needs to be deploying cash is the general gist. However it’s completely unrealistic that an investor hoards a cash pile and buys the moment the ASX rings a bell at the low point.

More realistically, a dollar cost averaging strategy is used to deploy funds against a falling market where the more the market falls the greater the enthusiasm to deploy funds.

This can require savings before the decline, setting shares to reinvestment during the decline and the use of leverage in the later stages when dry powder is exhausted.

Some basic calculations are required - you need to be fairly Saavy with odds, risk and how one goes about this.

An example in real life may be a 100k portfolio suffering during a 50% declining market. 10-20 cash could be invested as the market falls 20 odd percent, dividends reinvested and ongoing contributions as the market falls another 10-20 percent and then a loan if/when another 10-20 occurs. I did this 2008-2012.

 

[So_Cynical]

Let me put it to you this way. What would you do if you had several non div paying and spec stocks showing between 2 and 8 bags?
Simply answer really.

My problem is that three of my four ~ 5/6/7 baggers pay dividends, one of them a crappy dividend, and its like a massive tax bill if i bail...

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An example in real life may be a 100k portfolio suffering during a 50% declining market. 10-20 cash could be invested as the market falls 20 odd percent, dividends reinvested and ongoing contributions as the market falls another 10-20 percent and then a loan if/when another 10-20 occurs. I did this 2008-2012.

I did similar 2007 - 2013 but without the loan, just kept plowing the money back in..you can only spend (invest) what you have.

 

[sptrawler]

We may be heading into this territory again IMO, so it may be worth refreshing the thread.
The problem with going all in at the depths of a crash, is it intimates, you have to be all out before the crash.
This is where the dilemma manifests itself, what do you hold through the crash, what do you dump in expectation of the crash?
Or do you just sell everything, in the expectation of the crash and forego dividends?

 

[willy1111]

We may be heading into this territory again IMO, so it may be worth refreshing the thread.
The problem with going all in at the depths of a crash, is it intimates, you have to be all out before the crash.
This is where the dilemma manifests itself, what do you hold through the crash, what do you dump in expectation of the crash?
Or do you just sell everything, in the expectation of the crash and forego dividends?

A little on the risky side . . . but I have heard some successful long term dividend income investors say they keep a Line of Credit against their home so that they can take advantage of these opportunities when they come along. Ie they may stay fully invested through the down turn, store up dividends as cash and when they think it has come off enough start deploying the cash into the market and use leverage from Line of Credit or Margin Loan, then they let the dividends from the new purchases pay down the debt.

 

[sptrawler]

A little on the risky side . . . but I have heard some successful long term dividend income investors say they keep a Line of Credit against their home so that they can take advantage of these opportunities when they come along. Ie they may stay fully invested through the down turn, store up dividends as cash and when they think it has come off enough start deploying the cash into the market and use leverage from Line of Credit

That is how I built up my portfolio, just kept the line of credit at a reasonable amount, so even if everything went pear shaped it didn't leave you financially exposed.
While things are bubbling along the balance is paid down, when that once in a lifetime event that happens ever 7-10 years comes along, add shares.

 

[MrChow]

This is my philsophy (not for everyone).

Instead of a significant win or lose bet why not allocate your assets in a manner in which you either win small or win big.

EG. Buy and Hold over 20 years would have gotten you between 2% to 18% depending on date in the past 100 years.

Any tinkering with variables such as timing brings extra variance which brings in the possibility of negative returns which didn't exist prior.

 

[Value Hunter]

Maybe somebody here can help me. There was a thread not along ago about being fully invested and not keeping cash on hand. I cannot find the thread now.

 

[cynic]

Maybe somebody here can help me. There was a thread not along ago about being fully invested and not keeping cash on hand. I cannot find the thread now.

When I do a search on the phrase "fully invested" a number of threads come up in the results.

Can you remember anything else to help narrow the search down?

 

[Value Hunter]

It was a thread with very recent discussion and the O.P. was discussing how he prefers as a methodology to be always fully invested at all times rather than keeping dry powder. I did not find in the search that is why I asked. I do not remember the title of the thread.

 

[cynic]

Could this be the one?

https://www.aussiestockforums.com/threads/being-100-invested-a-different-way-of-thinking.34526/

 

[Value Hunter]

Yes, that is the one! Thanks

 

[robby986]

I thought I might give a brief update on my original post about buying at the bottom. March 2020! I started buying and rebalancing in June. I have sold IHD,NSC,WBC,RDV and replaced with VAS.Why? Cheap fees and they do the same or better than the aforementioned. I took advantage of the drop in prices and bought up CDM, DUI,WHF,SOL,MLT and as mentioned before, VAS. Since then prices have recovered. I will eventually sell down some of my cdm as I am moving towards lower fees and cdm has grown to 28% of my portfolio due to mopping up the shares at very attractive prices. They have been repurchasing shares and trying to reduce their discount to NTA. It needs to be smaller. So far dividends are down in 2021 but the earnings season points to better dividend harvesting in the future. Share sight reports that we have made capital loss of -.9%,p.a, a dividend yield of 6.08% including franking credits, an overall gain of 5.24% p.a. Since December2014. If I had just bought and held Vas I would have made 8.82% p.a.. We live on the dividends so we won’t starve, and the capital loss will correct over time. We will now reinvest in Vas and low fee Lics when prices are attractive. No more fancy higher fee smart beta etfs and lics.

 

[Value Collector]

EG. Buy and Hold over 20 years would have gotten you between 2% to 18% depending on date in the past 100 years.

That is a decent argument in favour of dollar cost averaging.

 

[Cam019]

That is a decent argument in favour of dollar cost averaging.

That is a decent argument for classic trend following.

 

[Value Collector]

That is a decent argument for classic trend following.

Well a person that attempted to time the market jumping in and out through out the period mentioned could have ended up losing (as many did).

However, someone that just dollar cost averaged in over that period was guaranteed to succeed, without having to put in any real effort.

 

[Cam019]

Well a person that attempted to time the market jumping in and out through out the period mentioned could have ended up losing (as many did).

However, someone that just dollar cost averaged in over that period was guaranteed to succeed, without having to put in any real effort.

Uh, not if we are talking about real rates of return. Which we should be.

 

[Value Collector]

Uh, not if we are talking about real rates of return. Which we should be.

I guess what you are saying it that the dollar cost averaging that would have earned about 9% over that time would have earn less than 9% once you factor in inflation, that is true.

but inflation is still a curse on the trend follower, especially the one that got it wrong and earned 0% or worse lost 10% on average each year.


I am not here to argue which strategy has the highest possible growth, or which is best, just simply pointing out that in the example given where long term buy and hold earned 2% at worst and 18% at best, dollar cost averaging would have guaranteed an improved result of the 2% guy, and generated a credible long term return with almost zero effort.

of course you can rightly claim it’s possible to beat the hands off guy, but you also have to admit that if you try you are opening yourself up to the possibility of a worse result.

After all for every $1 you beat the market average return by, some one else has to underperform by $1 to fund your over performance, that’s just simple math.

If you recommend 100 people take up trend following rather than dollar cost averaging, some will win some will lose, but if you recommend 100 people take up dollar cost averaging the market, all 100 will get the market average return, which over time has proved to be a decent return.

 

[over9k]