Stocks in 2013

[socialinvestor2013]

Will 2013 be a pull back year for stocks? Is it time to move investments temporarily away from stocks?

[disneysteve]

Will 2013 be a pull back year for stocks? Is it time to move investments temporarily away from stocks?

Market timing doesn't work. Never has. Never will.

Will 2013 be a down year for stocks? Nobody knows. Set an asset allocation that you are comfortable with and stick with it. When it gets out of whack, rebalance. Dollar cost average every paycheck or every month or every quarter and ignore the talking heads on TV.

[gostumpy]

I'm sure people do more damage than good listening to 'stock market indications'....

[socialinvestor2013]

Agreed that Market Timing is impossible. Let's ignore the sentiments and "expert views" and just look at numbers and historical trends. Dow closed at near historical high today and stock market has been trending up for the most part for the last 4 years. This is what makes me think some sort of a correction is inevitable. It's hard to say when!
Looking back, 2009 was a great time to get into stocks after the meltdown.
I guess I'm talking about riding up/down waves not necessarily trying to time the market.

[snafu]

Most years are roller coaster years, stocks go up...stocks go down. Your portfolio allocation is very important and it's in your interest to review the reasons you bought a specific holdings and decide whether your circumstances have changed or whether that sector is under pressure. If you're holding single stock rather than Mutual Fund, you might wish to add a 'stop loss,' which is a sell order at a specific price. Many of us have a specific number in mind for Mutual Fund/ETF holdings. If the NAV goes below a price, I'll go on line and Sell as I'm not going to go through the angst of 2008 again!

I still have one small position that is s-l-o-w-l-y coming up but is still below the pre crash, my purchase price level. I haven't sold because I like the holdings within the fund and it will likely be ok. Because it's in a retirement type a/c I can't write off the loss so I wait.

On the other hand, with some prices so high, I've sold some units to crystallize a profit and plan to buy units back when the price more closely relates to value.

[mavycharm]

Idts

A year can't tell! Each and every year there are always those ups and downs, you can determine that. Best to re-evaluate your last year's progress and assess which ones are the reasons of market drop offs. By that assessment you can best apply the necessary actions to prevent those from happening again and double time with last year's excellent and effective marketing plans.

[jpg7n16]

I guess I'm talking about riding up/down waves not necessarily trying to time the market.

Trying to figure out when the wave up/down will begin is the exact definition of market timing.

[disneysteve]

Agreed that Market Timing is impossible.

some sort of a correction is inevitable. It's hard to say when!

Exactly. It isn't just "hard to say when." It is IMPOSSIBLE to say when.

Trying to figure out when the wave up/down will begin is the exact definition of market timing.

Bingo.

[bjl584]

I would say that it's not impossible to time certain aspects of the market. There is a small minority of traders that can play options and are very successful at it. But, beyond that, there are some common sense things that happen in the markets that you can take advantage of. A lot of stocks are cyclical and a lot are seasonal. You can take advantage of this.

[socialinvestor2013]

Exactly..I am only referring to the common sense broad trends in the market.
It's unlikely that we will see the kind of returns on stocks in the next 2-3 years as we have in the past 2-3.

[disneysteve]

Exactly..I am only referring to the common sense broad trends in the market.
It's unlikely that we will see the kind of returns on stocks in the next 2-3 years as we have in the past 2-3.

For what purpose are you investing and what is your time horizon? If this is money that you anticipate needing soon, I wouldn't argue with locking in some profits and selling some stuff. If, however, you're talking about long term investments and retirement accounts (assuming you aren't close to retirement age), I just don't see the point. The whole idea of dollar cost averaging is to buy more when prices are low and less when prices are high to reduce overall cost basis over time. Sitting on the sidelines when you think prices may drop doesn't help in the long run and you run the risk of missing further run up in prices.

[bjl584]

For what purpose are you investing and what is your time horizon? If this is money that you anticipate needing soon, I wouldn't argue with locking in some profits and selling some stuff. If, however, you're talking about long term investments and retirement accounts (assuming you aren't close to retirement age), I just don't see the point. The whole idea of dollar cost averaging is to buy more when prices are low and less when prices are high to reduce overall cost basis over time. Sitting on the sidelines when you think prices may drop doesn't help in the long run and you run the risk of missing further run up in prices.

Longterm investments and retirement accounts, absolutely dollar cost average and stay the course.

But, with a small percentage of a portfolio I can support an argument for making some intelligently timed market plays. As an example, when the markets crashed in 2008 it was a good time to get into some specific sectors. Historically, in times of recession certain areas will do good. Utilities, discount retailers, and grocery retailers to name a few. When government stimulus started it was a good opertunity to get into heavy machinery producers. I don't have the sophistication to time specific stocks like a day trader does, but there are some macro factors that occur in the economy that can be taken advantage of.

[socialinvestor2013]

I like what you are suggesting. And I actually am thinking of both. I plan to divert some of my stock portfolio to real estate but was also wondering about my retirement accounts. I'm a long way from my retirement and only focused on the long term for these accounts. What is dollar cost average and how exactly do you make it work?

[thekid]

If you are going to look at any metric, look at valuations not recent trends.

I would not say the S&P is "overvalued" that much at present. There is no reason (ie. currently available information) for me to expect a "correction" any time soon. Just as likely, continued recovery and earnings growth will push prices higher as their expected yield will look even more attractive comparared to bonds.

I agree with some shifts from bonds to equities and vice versa based on valuations ( which will drive long term returns), but current valuations actually tell me to stay away from bonds (in as much as your age/situation aspecific allocation calls for) and that equities are not too badly priced.

Long term, expect low returns compared to historical performances. Bonds are at or near a summit in price and their long term yield will very likely be meager (i would expect 1-2% real) and stocks in the 4-5% real (after inflation) range. If you believe that interest rates will start rising soon, keep some more cash/short term bonds around, but understand you do so at the risk of losing short term returns that may be greater than any price corrections rising interest rates can bring.

Moral of the story, exactly as DS said, you will be much better off setting an appropriate asset allocation and sticking to it long term with periodic rebalancing. Don't try to outsmart the market pros or outdivine future events. Your willingness to stick to a sound allocation and to rebalance will in overwhelming likelyhood bring you far superior long term results than attempts to play ahead of the curve.

Note that i'm not saying the "market" won't go down in 2013. It could well do so. It could also well continue to rise. It's impossible to divine short term price movements (and one year is very short term). Long term, returns are much more predictable as they will reflect earnings (rather than speculation) to a much greater degree.

[thekid]

Longterm investments and retirement accounts, absolutely dollar cost average and stay the course.

But, with a small percentage of a portfolio I can support an argument for making some intelligently timed market plays. As an example, when the markets crashed in 2008 it was a good time to get into some specific sectors. Historically, in times of recession certain areas will do good. Utilities, discount retailers, and grocery retailers to name a few. When government stimulus started it was a good opertunity to get into heavy machinery producers. I don't have the sophistication to time specific stocks like a day trader does, but there are some macro factors that occur in the economy that can be taken advantage of.

It's undeniable that timing the market brings great rewards, problem is that it is only possible to do so with any success in hindsight. The overwhelming majority of professional fund managers and pension funds don't succeed in a durable manner (and certainly not in a manner that offsets costs), to say nothing of day traders.