Will this be the big correction

I reckon if you keep going till November you should have captured most of this downturn. Could markets fall further after November? Sure. But you are trying the dca in order to capture any near term downturns rather than pin the absolute bottom.

You mentioned if there is another major correction after that. There will always be another major correction. You can only capture so much of any one downturn / correction. You can’t capture them all. Though there will be some on here who reckon they can and they have.

This. Focus on the growing the income stream rather than the portfolio value. I have an excel spreadsheet that captures cashflow from investments broken down into quarters and years. As long as it shows each years cashflow is larger than last years then I’m going in the right direction regardless of the portfolio value at any given moment. So far I’m on a 6 year winning streak. Next financial year will be a challenge as I’m diverting capital to the new house. But still confident I can pull off another year of cashflow growth even if only slightly.

 

Yeah I do the same in a spreadsheet. I find it to be a good visual reminder when the portfolio's value is moving downwards during market corrections.

 

Yes, I agree. We are tracking income and that is still coming in (although we are currently re-investing distributions until we've finished DCA).

 

Exactly. Our FP advised we deploy a lump sum now, however, we're happy DCA weekly until Nov. We know we won't pin the absolute bottom and we're totally fine with that.

Yes, you're right. Hoping to make the most of this impending correction if we can. If we can't, that's ok, too. In it for the long run.

I also have an Excel spreadsheet set up just as you've described (I'm pretty sure I got the idea off you). We have a few investments, so I thought it would simplify tax time to keep track of everything. Yes, cashflow is king -best wishes for continuing your winning streak!

 

From memory you and @Nodrog mentioned you already had more coming in than going out, does this then give a 'satiated' feeling, and the volatility of the market no longer fazes/interests?

 

To be honest I have no interest in looking. Wouldn't have a clue what the value of our portfolio is. That's the great thing about being able to live off income alone plus a cash buffer, no need to ever look at capital.

 

You're playing with fire thinking like this. Noone has any idea what will happen next, therefore you cannot think anything is impending in the short term. If you are "lucky" and a correction happens you'll think you can identify these things and then when it matters later on you may blow up trying to time things. If you are "unlucky" and it goes up you'll feel you missed the boat and may get caught in a "it's coming.... I'll just wait a bit longer" mindset.

Easy to say for me- I've been doing this a long time- but you have to understand you cannot predict movement in the markets. Literally noone can. It's all survivorship bias with thousands of monkeys using thousands of Bloomberg terminals. What you can do is control your risk exposure and set a rigid plan on how you react in events of big swings up or down. Even that is bloody hard to stick with. Being a stock investor gets easier over time so stick with it, but it's never easy.

Its taken me decades but I've learned you get handsome long-term returns because you tolerate the unpredictability and savage nature of Mrs. Market. Not because you can predict it. Every pattern/factor/strategy you love will be arbitraged away.....

 

If this

Will this be the big correction

plus this (chose your particular poison. It's only an example)

SPDR S&P/ASX 200 Fund

as well as including this:

Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.*

WB

* make that 10 + to forever.

The full implication becomes pretty clear to my mind. But that's just me.

I am now heading out and I may be some time before possibly returning.

 

I look at my superannuation and share portfolio this way now:

When the market is up :"awesome, my net worth is up"

When the market is down: "awesome, my DCA buys are getting me a bargain"

It's just what I've been telling myself to break the negative thinking.

 

October 1968 was the worst case time to retire according to research by Bill Bengen, originator of the 4% rule. Looks about right from the above graph.

 

It's also why most of historic comparisons from people like Thornhill start with "From 1979" or "From 1980"

 

It was inflation more so than market price volatility that caused the real damage.

 

Inflation was for the cost of living.
As for investing in a falling market assets are cheaper to buy.
So long as people had income and lived to tell the tale they could eventually come out ok.

Of course a chart on a screen or pic can't really explain this type of reality. All easy in theory

 

It might sound a bit ghoulish, but I'm hoping for a really sharp dip in the next few weeks.

I sold an investment property earlier this FY and have a rather large capital gains bill coming up.

So I'm primed to do some tax loss harvesting as I did in the 2020 Covid slump.

I've done a bit already when my 'growth' satellite dabbles reversed their growth but it isn't enough to wipe out my CGT bill yet.

Like some of the others above, the income I get from the portfolio is sufficient for our lifestyle so ups and downs don't hugely concern me.

I have a chunk of cash sitting on the sidelines from when I sold my bonds last year which I could deploy in a slump, but I'm also quite happy to have it there as additional insurance in case dividends do fall during a recession. Especially with interest rates heading up.

I have no idea where the market will be in six weeks, let alone six months. Other than my usual suspicion that experts tend to be wrong.

Hence why I get tempted to actually do something along the lines of this:

Inverse pundit ETF

 

You're absolutely right. We're not trying to predict what will happen next -what I should have said is that we're hoping to make the most of the current climate and continue purchasing at a discount.

We are not into timing the market at all -we started DCA in June last year, and we're continuing with that plan. If there is a major correction in the next several months, we'll deploy a lump sum of capital, if not, we'll continue just as we have been.

Our risk exposure is controlled and we have a generous buffer in case there's a significant downturn, so we should be fine regardless of what happens.

 

US stock market getting hammered


Lets see what happens today in our market

 

I predict a big up day.

 

The article Back In The Hunt contains some robust analysis of the CAPE ratio.
My takeaway is that CAPE is hard to use most of the time, but is probably useful at valuation extremes.

 

We've been at "extreme" levels since 2013 for the USA market. All the "value" people were warning about shares then. It's gone up A LOT since then.

The CAPE has too many flaws:
- 10yrs was pulled out of their butts. Why 10 years? Because it's a round number?

- Why is it not weighted? With more recent years counting for more?

- why doesn't it take into account sectors? In the early 20th century labour and machine intensive industries dominated. They should and do have a lower PER than software companies.

I much prefer the data on Yardeni's site if I bother to look. By sector, forward, backward, country etc etc.

I've never seen CAPE work out of sample. It backtests great though.....funny how if you make a model to suit data you already have it suits the data you already have....

"The idea that the future is unpredictable is undermined every day by the ease with which the past is explained." - Daniel Kahneman