the idiot wrote:
seattle prattle wrote:... 96% of our net worth is exposed to the stock market portion.
Seattle,
With that kind of exposure, to what degree do you worry about the unlikely but surely possible scenario of a sudden gut-wrenching drop of 50% or more? Do you flinch and sell losers in jagged market dips?
That's generally the way it's been for many years so I've gotten used to it.
Actually, it was a little higher last year, but with the downturn i sold off a big chunk of the triple leveraged ETFs for two reasons: the obvious one being preservation of capital, but also becuase the high volatilty of last fall is esp. tough on leveraged ETFs that get re-balanced daily (as Racket referred to recently), and because the higher fees couldn't be justified in a market headed horizontally or even worse - down.
During the downturn, i sold off almost all the triple leveraged ETFs. And then i sold the losing stocks just to offset some of the big gains i had in the ETFs i just sold (tax loss harvesting). But I didn't touch any long term gainers and I didn't touch any of FANGMAN.
When the market turned after XMAS, I used the opportunity to re-balance, replacing the triple leveraged small cap with triple leveraged technology, in the belief that small caps outperform early on in a recovery cycle and we are well past that, and because technology had gotten so severely beaten down. I just ran a quick comparison and my intuition was right by a devastating percentage.
Lastly, I had had a bit of cash sitting on the sidelines from about 2015 - 2019, and I put that to work almost completely since the rebound.
That's the long answer, but the short answer is I trade based on degree of certainty. When the market starts looking dicey, i start slowly selling a little and when it looks good, i buy slowly over time. When i am unsure, i don't do anything and that's why i had more cash than normal from about 2015 - 2019.
That said, the strategy worked well enough that i plan to get out of the triple leveraged stuff when i re-visit my ATH balance, and i am within a few percent of that now. I have the feeling that things won't be nearly as interesting then...