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Discussion Starter #1
I'm curious, for those who buy regularly pretty much regardless of the market, do you still have cash in reserve for times when the market is in turmoil and dips way down?

I'm fairly beginner - not totally new but in no way do I know a lot. One thing I'm curious is, what are the risks / repercussions of a stock market crash to individuals who are simply buying and holding? Is there a real risk of something happening to those investments, such as a market crash causing a business to bite the bullet, risking losing your equity?

I'm holding onto my cash, hoping for a huge crash so I can go on a buying spree - is that bad?

If it's something thats been posted before, my apologies - I searched but wasn't sure what terms to search for. Or if there's a good site that explains this in basic terms I would really appreciate the link.
 

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I'm holding onto my cash, hoping for a huge crash so I can go on a buying spree - is that bad?

If it's something thats been posted before, my apologies - I searched but wasn't sure what terms to search for. Or if there's a good site that explains this in basic terms I would really appreciate the link.
Many will simply repeat the "dont try to time the market" mantra.

I am in a similar situation, the US market is at a 5 months high... i am not sure we can expect a "huge crash" anytime soon but a ~7-10% correction should come shortly.

Of course, if you are really in for the very long run (20years+), there no point in waiting for a good entry point.
 

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I'm holding onto my cash, hoping for a huge crash so I can go on a buying spree - is that bad?
1) You should never hope for a crash because you will have a lot more pressing issues than "buying lots of stocks" at low prices.

2) It won't crash. Buy NOW while things are still a little low/undervalued.

As the person above me said, if you're going to hold for long enough, the sooner you put the money in, the better. And then there's always Dollar Cost Averaging. Which you should always do, unless you're a risky bast*rd like myself ;) But I'm young, so I can afford to be risky. I dont know your age.
 

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I didn't really believe in asset allocation until I understood its purpose in regards to "timing the market" When the market is down, you buy more stocks to rebalance your cash-stocks. When markets are high, you buy less or trim profits to keep your cash % up

If you try to time the market, chances are you will miss the bottom or be too nervous when it comes. Averaging down is the way to go imo. I don't really have an asset allocation yet so I just buy less while I think markets are high, and if the markets drop I will dip into cash reserves more and more as it drops
 

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I am typically 100% invested in equities, with no spare cash to add at crash time. In 1982 I was broke and unemployed. I had to pass on the opportunity.

In October to December, 2008, I borrowed against my HELOC, bought more stocks and held them for a year before selling off enough to repay the HELOC.
 

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Slowly it is sounding like complacency is coming back into the market, if enough comes up the market will drop. From here I would simply dollar cost average into the market and not be all in or all out. Unless you know better it is stupid to be all in or all out at this point.
 

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I'm curious, for those who buy regularly pretty much regardless of the market, do you still have cash in reserve for times when the market is in turmoil and dips way down?

I'm fairly beginner - not totally new but in no way do I know a lot. One thing I'm curious is, what are the risks / repercussions of a stock market crash to individuals who are simply buying and holding? Is there a real risk of something happening to those investments, such as a market crash causing a business to bite the bullet, risking losing your equity?

I'm holding onto my cash, hoping for a huge crash so I can go on a buying spree - is that bad?

If it's something thats been posted before, my apologies - I searched but wasn't sure what terms to search for. Or if there's a good site that explains this in basic terms I would really appreciate the link.
Hold onto some of it if you like, you should always have some rainy day money. Holding and hoping for a huge crash is not wise. However, if you lucked out and got one you'd be laughing assuming of course you jumped in at the right time... good luck with that.

Of course there is a risk the company you invest in will go belly up. However, you're talking macro and micro in the same post. Buy the market worry about one company? Wth would you do that? Either buy the company stock and worry about it, or buy the market and focus on the macro picture, not both.

The idea is to buy good things at good values. There is always value in certain stocks, it's just the amount of value and quantity of stocks that vary.
 

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If you must, do it with tier 3 money and don't use your tier 1 and 2 money for it.

I agree with Kae. You'll have more pressing issues to address if the market crashes. Like job loss or other issues.

None of us really knows what tomorrow holds, and if you try to buy when the market is at a low point you'll really be playing a guessing game. You could buy today at what you think is a low price (after hearing the experts on TV saying 'this is a good time to buy!') only for prices to drop again following your purchase. Nobody knows how low things will go and at what point we are in the curve at any given time. In the meantime, you have a family to take care of and are probably quite busy with life. I wouldn't worry about market timing too much if I were you.
 

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Discussion Starter #9
All good points to think about, thank you!!

We are still buying, along with all our dividend stock are set up as faux drips, so occasionally there's a stock purchase there (we only have about 70K in equities right now). I shouldn't have impled I'm holding onto all cash - but I do not buy often lately because I do feel I miss opportunities by not having some cash (ie a few K at least) available for times when (what I feel is) a bargain comes along for whatever reason (low market, buy out, etc).

I like the sentimant that one should not 'hold out' for a crash, makes sense.
 

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Define huge crash :D
Does Oct 2008 - Mar 2009 qualify?
Does Oct 1987 qualify?
Does 1929 qualify?

As someone said, in a "huge crash", we may all have bigger problems to think about than stock returns.
Stock returns are merely the symptom, not the problem.
 

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(1) Don't put money in the stock market that you are going to need within five years.

(2) Don't put money in the stock market that you can't afford to lose.

(3) The most important thing is to have an asset allocation that allows you to sleep at night through all market conditions. The markets go up and the markets go down.

(4) The longer your time horizon, the less you have to worry about.

I am a buy-and-holder while others like to try to time the markets. To each his own. The past three years has been quite a rollercoaster ride!!!:eek::eek:
 

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Define huge crash :D
Does Oct 2008 - Mar 2009 qualify?
Does Oct 1987 qualify?
Does 1929 qualify?

As someone said, in a "huge crash", we may all have bigger problems to think about than stock returns.
Stock returns are merely the symptom, not the problem.
Perhaps worse than any of the above.

This time, it may truly be "different".

Never before in history has the US faced the kind of problems for which the only solution is the default on their promises to their Big Three obligations, Medicare, Social Security and Defence spending. They can never pay off their debt and they know it. Instead they will borrow until there are no more buyers for their debt. Then they will either default or they will print money out of thin air and pay their debts with worthless dollars.

There is no third option, as the obligations are too large.

The US will never be able to "grow" it's economy fast enough to keep up with their deficit spending, let alone pay down the debt.

During the Clinton years, when the appearance was that the US had a surplus, it was manufactured by taking the receipts from an imaginary Social Security fund and spending them. They replaced the money with IOUs. Bush followed and did the same to provide tax benefits to the wealthy and Obama is faced with a looming baby boomer retirement with IOUs coming due and no money to honour the committments. They basically robbed the people of their money to pay the bills at the time.

It is hard to be optimistic with these facts in front of us.

It is simple mathematics that will bring down the house of cards.
 

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(1) Don't put money in the stock market that you are going to need within five years.
I suppose; that's conventional wisdom. You can't count on the principal, but there's no reason why you can't spend the income that it generates.

(2) Don't put money in the stock market that you can't afford to lose.
By that rationale, I should have zero in stocks. But, I have a bigger worry than guaranteeing my original principal. I need to maintain and hopefully grow my buying power. In order to do that, I have to own stocks.

(3) The most important thing is to have an asset allocation that allows you to sleep at night through all market conditions. The markets go up and the markets go down.
On this we agree.

(4) The longer your time horizon, the less you have to worry about.
Actually, I'd argue the opposite; the longer your time horizon, the more you have to worry about due to uncertainty of outcome. Oh sure, you can be reasonably certain that equity will outperform bonds will outperform cash, but that's quite a bit different than the guarantees provided by a DB pension plan. That's why at least partial annuitization has an appeal to me.

I am a buy-and-holder while others like to try to time the markets. To each his own. The past three years has been quite a roller coaster ride!!!:eek::eek:
ISTM that it has been a roller coaster ride as long as I've been doing this going all the way back to 1996! Such is life when you are invested in the equity markets. If you don't like the ride, then get off the train. ;)
 

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Belguy;33935(4) said:
The longer your time horizon, the less you have to worry about.
This is an oft repeated cliche, I suspect, originally created by the financial services industry to get younger and middle income individuals to invest in the stock markets.
But it is complete BS.
The opposite is true.
I have a 30+ year time horizon, but my risk tolerance is lower than that of someone in their 40s or 50s.
Folks in their 20s and 30s have a lot of current committments or have several coming up in the next few years.
Paying off student debt, buying a home, getting married, raising kids, building emergency savings, etc.
Then comes the mortgage, saving for education, investing in oneself through higher education, health, rest/vacations, etc.

True risk tolerance does not come until all or most of the above are taken care of.
 

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This is an oft repeated cliche, I suspect, originally created by the financial services industry to get younger and middle income individuals to invest in the stock markets.
But it is complete BS.
The opposite is true.
I have a 30+ year time horizon, but my risk tolerance is lower than that of someone in their 40s or 50s.
Folks in their 20s and 30s have a lot of current committments or have several coming up in the next few years.
Paying off student debt, buying a home, getting married, raising kids, building emergency savings, etc.
Then comes the mortgage, saving for education, investing in oneself through higher education, health, rest/vacations, etc.

True risk tolerance does not come until all or most of the above are taken care of.
I am 20 years old.

I agree with you, but it depends.

I have some "safer" investments, but for the most part, I play the "Risk" game. Lots of penny stocks, lots of "jumping when its hot", buying and selling in about 30 seconds, etc.

Do I have money to lose? No. Because you're right. I have a lot to pay for in the future.

However, if I lose, I'm still young and theres nobody I need to support but myself.

So, it depends which way you look at it...

I think everyone should take more risk. I mean, thats the point of investing, isnt it? To GAIN?

Risk = Reward.
 
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