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Moving to a defensive portfolio
Posted by Skeezer on 9/12/18 at 7:40 am
1
3Is anyone else moving from more aggressive or tech heavy to a more defensive balance? If so what’s your strategy?
I’ve sold off some stocks and bought T and WMT.
And Im thinking about moving from my vanguard growth fund into the high dividend fund. I would still have a large holding of amazon and smaller ones of TDOC and TTD.
I’ve sold off some stocks and bought T and WMT.
And Im thinking about moving from my vanguard growth fund into the high dividend fund. I would still have a large holding of amazon and smaller ones of TDOC and TTD.
re: Moving to a defensive portfolioPosted by L S Usetheforce 
on 9/12/18 at 8:19 am to Skeezer
on 9/12/18 at 8:19 am to SkeezerWhat estimated ror on the high dividend fund?
re: Moving to a defensive portfolioPosted by Jag_Warrior 
on 9/13/18 at 5:52 am to Skeezer
on 9/13/18 at 5:52 am to SkeezerHow close are you to retirement or needing the money?
re: Moving to a defensive portfolioPosted by ATLdawg25 
on 9/13/18 at 6:52 am to Jag_Warrior
on 9/13/18 at 6:52 am to Jag_WarriorMy guess is that OP is buying into all the inverted yield curve nonsense.
re: Moving to a defensive portfolioPosted by stonerolledaway 
on 9/13/18 at 7:38 am to Skeezer
on 9/13/18 at 7:38 am to SkeezerNo. Disconnected from emotions years ago. Staying the course as usual. 60% total stock index, 40% total bond index. I have no idea what tomorrow will bring and 60/40 is my comfort level for all seasons.
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This article is a quick read and sums it up decently.
Link to Time article
There are assumptions out there that an inverted curve is the harbinger of a crash to rock bottom. 3 main counterpoints that should prevent any rational investor from using that information to go to a "defensive" portfolio allocation today:
1) The curve has not inverted yet.
2) Once (or rather, if) it does invert, the move towards any recession is delayed by roughly an entire year. Historically during that period between inversion and recession, the market has returned 22% (see article above).
3) Once (or rather, if) it does invert, no one knows if it will represent a period of stagnation, a recession, or a crash.
When you factor in the probabilities of the different outcomes, you will probably get to the same answer that most wealth managers preach - unless you are nearing retirement, you will likely be better off staying the course than going defensive today.
Link to Time article
There are assumptions out there that an inverted curve is the harbinger of a crash to rock bottom. 3 main counterpoints that should prevent any rational investor from using that information to go to a "defensive" portfolio allocation today:
1) The curve has not inverted yet.
2) Once (or rather, if) it does invert, the move towards any recession is delayed by roughly an entire year. Historically during that period between inversion and recession, the market has returned 22% (see article above).
3) Once (or rather, if) it does invert, no one knows if it will represent a period of stagnation, a recession, or a crash.
When you factor in the probabilities of the different outcomes, you will probably get to the same answer that most wealth managers preach - unless you are nearing retirement, you will likely be better off staying the course than going defensive today.
I think the market has room to move up yet, but I am leery of upcoming volatility. Volatility has been exceptionally calm lately. I think passive investing and an overall good economic climate lends support to the thesis. However, my friend Trump is quite volatile and I suspect the market to eventually take on some of the personality at some point even if temporarily. Just one Trumpian comment out of left field can send the VIX into a tizzy and possibly the market spiraling south.
So, I keep some powder available for TVIX when it dips low like this morning down to its 52 week low. I jumped in bigly at $29.05. Would love to catch a double bagger without too much market fallout. However, high VIX in a prosperous market can be detrimental to the market. It is a form of insurance for me. It is a leveraged ETN but I still feel pretty safe jumping in at these levels.
So, I keep some powder available for TVIX when it dips low like this morning down to its 52 week low. I jumped in bigly at $29.05. Would love to catch a double bagger without too much market fallout. However, high VIX in a prosperous market can be detrimental to the market. It is a form of insurance for me. It is a leveraged ETN but I still feel pretty safe jumping in at these levels.
re: Moving to a defensive portfolioPosted by LSUsuperfresh 
on 9/13/18 at 1:47 pm to iAmBatman
on 9/13/18 at 1:47 pm to iAmBatmanquote:
Why? Are you estimating that you’ll need the funds within the next 5 years?
Time in the market beats timing the market
re: Moving to a defensive portfolioPosted by lynxcat 
on 9/13/18 at 3:56 pm to LSUsuperfresh
on 9/13/18 at 3:56 pm to LSUsuperfreshChanging our position in the market is very different than exiting the market completely.
quote:
an inverted curve is the harbinger of a crash to rock bottom
An inverted curve has preceded the past 7 or so recessions and I believe if you think logically about what a yield inversion means in the economic sense, then you can agree it should be a heads up.
I’d argue a lot of it has to do with sentiment, just as much as the economics of it all. When sentiment erodes, big money scoops up short term debt because they don’t believe in longer term growth prospects. The sentiment dominoes start falling. When you start to see sentiment erode & biz confidence sliding, CAPEX falls, money velocity slows, etc... It’s interesting how much physchology of the business environment plays into itself.
I also think the yield curve is much more popularized after 2008. Will be interesting to see the narrative when/if it happens.
quote:
the move towards any recession is delayed
True. It takes time for macro events to play out. From what I’ve read the time dispersion is pretty wide. Anywhere from months to a few years, I believe.
But I agree that you don’t want to go selling all your stocks right here. We’re still in a strong growth trend and sentiment is up. Tax reform is still playing out.
That said, I see nothing wrong with selling some AMZN to pick up T or a quality energy name if you’re over-allocated to growth.
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