How to best plan for stock market fall

[hanera]

[Jil]

@hanera

@Jil

I agree this way, but the investor needs to watch for possible bottom (not exactly bottom) and plunge full, even during the first time. This way, investor has better safety.

Market timing. You guys really know how to twist the definition.
WB is market timing too but he redefines it as margin of safety. Wait for stocks to go down to 30% below intrinsic value… sound more sophisticated and academically acceptable to most degree holders, yes degree holders

1. Buy/Sell is part of investment.
2. Any buy or sell is associated with time. We can not get rid Market timing altogether.
3. Blind investment even with VOO is risky.
4. Analyze, Analyze and Analyze and plunge the money
5. Even with 401k/retirement mutual investment, people are asking review quarterly and re-balance appropriately.
6. Quarterly review is essential as companies are releasing reports every quarter. Things may change based on quarterly report.

[hanera]

@Jil

Blind investment even with VOO is risky.

You may want to define risk clearly.
WB defines risk as risk of the company losing its moat & pricing power thus decreasing revenue and margin.
VOO is always the best 500 US companies, weak ones would be replaced So the risk for VOO is the risk of USA goes under or the group/ process for selecting the 500 is corrupted.

[hanera]

[Jil]

@hanera

@Jil

Blind investment even with VOO is risky.

You may want to define risk clearly.
WB defines risk as risk of the company losing its moat & pricing power thus decreasing revenue and margin.
VOO is always the best 500 US companies, weak ones would be replaced So the risk for VOO is the risk of USA goes under or the group/ process for selecting the 500 is corrupted.

There are two things in stocks, one cost and another value. Cost (Price) what we pay, value is what we get. Value does not change day by day or hour by hour, by cost (price) changes any time as people are ready to pay Premium price than the value.

What WB and other says is watch out for price when it is coming below the value, buy that company.

In your example, if company value is represented by X-Axis, buying at green point is risky, but buying at blue point is safety which is what WB and Value investors do.

[marcus335]

@hanera

@Jil

Blind investment even with VOO is risky.

You may want to define risk clearly.
WB defines risk as risk of the company losing its moat & pricing power thus decreasing revenue and margin.
VOO is always the best 500 US companies, weak ones would be replaced So the risk for VOO is the risk of USA goes under or the group/ process for selecting the 500 is corrupted.

SP500 index isn’t meant to be the best companies. It’s meant to accurately represent the US economy. That’s why the sector weighting changes as the economy changes. It’s also market cap weighted for each company. They aren’t using financial metrics (revenue growth, gross margin, return on equity, etc) to pick the best companies. They usually pick the biggest by market cap in each sector and fill in around them. It is a bet that the US economy will do well overall. Now it’s more of a bet on the world economy, since over 50% of SP500 revenue is from outside the US.

[Lulu]

Well I only had one option that seemed safe/cash-like: frgxx

https://fundresearch.fidelity.com/mutual-funds/summary/31607A703

It’s a money market government portfolio, it’s actually only 15% treasury bills.

[hanera]

@marcus335

SP500 index isn’t meant to be the best companies. It’s meant to accurately represent the US economy. That’s why the sector weighting changes as the economy changes. It’s also market cap weighted for each company. They aren’t using financial metrics (revenue growth, gross margin, return on equity, etc) to pick the best companies. They usually pick the biggest by market cap in each sector and fill in around them. It is a bet that the US economy will do well overall. Now it’s more of a bet on the world economy, since over 50% of SP500 revenue is from outside the US.

Not sure to agree or not. However, what you said is accurate. Guess I have over extended my logic, but those are the best, if not second best, companies in their own sector.

[hanera]

@Jil

In your example, if company value is represented by X-Axis, buying at green point is risky, but buying at blue point is safety which is what WB and Value investors do.

From VOO to company? I’m commenting on VOO not individual company.

[hanera]

How WB defines risk

Buffett argues that if you intend to hold an investment for a long time, it doesn’t make sense to measure risk by standard deviation. If you’re not going to sell your investments anytime soon, what prices do in the near term should have no bearing on risk.

Instead, Buffett makes the case that risk really comes from possible deterioration of business fundamentals.

Using sine waves to illustrate risk seem to be using standard deviation
Mismatching of value and price is not the risk WB is thinking of.
WB won’t buy risky stocks.
WB wants to buy (not the risky one) stock at 30% margin of safety.

[manch]

@Lulu

Well I only had one option that seemed safe/cash-like: frgxx

FRGXX - Fidelity ® Investments Money Market Government Portfolio - Institutional Class | Fidelity Investments

It’s a money market government portfolio, it’s actually only 15% treasury bills.

1% yield? That’s really bad.

[Jil]

@hanera

@Jil

In your example, if company value is represented by X-Axis, buying at green point is risky, but buying at blue point is safety which is what WB and Value investors do.

From VOO to company? I’m commenting on VOO not individual company.

Yes, marcus said already…SP500 index isn’t meant to be the best companies. It’s meant to accurately represent the US economy.

You have seen my update on blind VOO and the impact on it.

[Lulu]

Don’t worry it’s not going to be in that fund forever! Am waiting for a correction to move back in. Maybe 1/3 at 20% correction, 1/3 at 25%, 1/3 at 30%. Will probably drop further but I’m not looking to get the absolute bottom, at least for 401K.

[harriet]

@Lulu

The options with fidelity aren’t great to be honest. Very limited funds and they all seem to be a “twist” on the thing I actually want. Even the treasury bill option I’m in seems to be some sort of “mix” of treasury bill type things which they warn me might fall? And it has a management fee of 0.45 percent or so! I’ve felt it a no brainer to max out 401K (esp as I missed a few years working for startups without one, and I cashed out my first one to buy property…) but I’m not thrilled with the options here.

I never liked any of the 401K options. Those web sites always give you failure warnings in case you bring a class action against the fund manager’s incompetence. If I were you, in a down market I’d pick a fund with large blue chips and in a moderate/up market I’d pick small or mid cap. Never pick treasury bills - if you invest in those might as well put your money in a CD.

[Jil]

@harriet

@Lulu

The options with fidelity aren’t great to be honest. Very limited funds and they all seem to be a “twist” on the thing I actually want. Even the treasury bill option I’m in seems to be some sort of “mix” of treasury bill type things which they warn me might fall? And it has a management fee of 0.45 percent or so! I’ve felt it a no brainer to max out 401K (esp as I missed a few years working for startups without one, and I cashed out my first one to buy property…) but I’m not thrilled with the options here.

I never liked any of the 401K options. Those web sites always give you failure warnings in case you bring a class action against the fund manager’s incompetence. If I were you, in a down market I’d pick a fund with large blue chips and in a moderate/up market I’d pick small or mid cap. Never pick treasury bills - if you invest in those might as well put your money in a CD.

Instead of CDs or Treasury Bills, better to invest in some SP500 funds if 401k has the funds. For my 401k, my company and fidelity gives access to SDA (self directed account) where I can freely invest in any stocks, ETFs and Mutual Funds.

[tomato]

vanguard 401k lets you buy pretty much anything.

[harriet]

@tomato

vanguard 401k lets you buy pretty much anything.

Maybe your company’s 401K plan has a lot of options but not every company has everything available. I don’t do 401K at all because my company doesn’t provide a matching and I get better returns investing on my own.

[tomato]

interesting - thanks for letting me know.

my eventual plan is to roll 401k into SD-IRA, but i don’t have enough there yet to do anything with sd-ira. maybe if btc drops to couple hundred dollars i can do something with it.

[harriet]

Do you already have a SD IRA opened? I need to figure out how to open one but it seems like a big hassle.

[manch]

Don’t you need to have a company set up to do SD IRA?