Gyroscopic Investing

Libertarian666 wrote: Instead, I put in a limit order slightly above the market price when buying and one slightly below the market price when selling. If things are normal, I get that price or better; otherwise I try again shortly afterwards.

I understand why you added, "If things are normal." I remember ~1999 something weird happened with a limit order. I called the brokerage house and was told that my limit price was only the trigger, but that the trade would still execute "at market."  Normally, that doesn't matter, but things can get screwy.

Libertarian666 wrote: I never put in market orders because I'm concerned about a flash crash (or the opposite), or just a really slow market where someone has a "stink bid" in far from the current price.

Instead, I put in a limit order slightly above the market price when buying and one slightly below the market price when selling. If things are normal, I get that price or better; otherwise I try again shortly afterwards.

That's exactly what I did.  It's not the first time it's backfired.  I have never put in a market order because the price fluctuations can be a bit unpredictable, but this was probably no worse than the occasional flash crash would be.

dualstow wrote:

Libertarian666 wrote: Instead, I put in a limit order slightly above the market price when buying and one slightly below the market price when selling. If things are normal, I get that price or better; otherwise I try again shortly afterwards.

I understand why you added, "If things are normal." I remember ~1999 something weird happened with a limit order. I called the brokerage house and was told that my limit price was only the trigger, but that the trade would still execute "at market."  Normally, that doesn't matter, but things can get screwy.

I believe that you were told a lie. There is an order type like that, but it is called "market if touched", not "limit". A limit order should not be executed unless you get the limit price or better.

sophie wrote:

Libertarian666 wrote: I never put in market orders because I'm concerned about a flash crash (or the opposite), or just a really slow market where someone has a "stink bid" in far from the current price.

Instead, I put in a limit order slightly above the market price when buying and one slightly below the market price when selling. If things are normal, I get that price or better; otherwise I try again shortly afterwards.

That's exactly what I did.  It's not the first time it's backfired.  I have never put in a market order because the price fluctuations can be a bit unpredictable, but this was probably no worse than the occasional flash crash would be.

If you put a limit bid in slightly above the last price, it should have been executed. Was there a big gap?

Libertarian666 wrote: I believe that you were told a lie. There is an order type like that, but it is called "market if touched", not "limit". A limit order should not be executed unless you get the limit price or better.

That had always been my understanding, too.

Libertarian666 wrote:

sophie wrote:

Libertarian666 wrote: I never put in market orders because I'm concerned about a flash crash (or the opposite), or just a really slow market where someone has a "stink bid" in far from the current price.

Instead, I put in a limit order slightly above the market price when buying and one slightly below the market price when selling. If things are normal, I get that price or better; otherwise I try again shortly afterwards.

That's exactly what I did.  It's not the first time it's backfired.  I have never put in a market order because the price fluctuations can be a bit unpredictable, but this was probably no worse than the occasional flash crash would be.

If you put a limit bid in slightly above the last price, it should have been executed. Was there a big gap?

Fidelity doesn't let you put in limit bids to buy above the price at market close when it's after hours.  Not sure why.  So I always put it in for just under the current price.

sophie wrote:

Libertarian666 wrote:

sophie wrote: That's exactly what I did.  It's not the first time it's backfired.  I have never put in a market order because the price fluctuations can be a bit unpredictable, but this was probably no worse than the occasional flash crash would be.

If you put a limit bid in slightly above the last price, it should have been executed. Was there a big gap?

Fidelity doesn't let you put in limit bids to buy above the price at market close when it's after hours.  Not sure why.  So I always put it in for just under the current price.

Why would you put orders in after hours? You are asking to get a bad price.

Probably a lot of people have this issue if they're at work and unable to trade.

Libertarian666 wrote:

sophie wrote: Good for you, Budd.  If only I took my own advice!  I put in limit orders a few days ago for equal amounts of stocks, bonds and gold in a Roth account.  Guess which asset purchase went through, and which are still sitting there because the assets took off skyward and left my limit order in the dust.

Argh!!!

Next time I'll just put in market orders and call it a day.

I never put in market orders because I'm concerned about a flash crash (or the opposite), or just a really slow market where someone has a "stink bid" in far from the current price.

Instead, I put in a limit order slightly above the market price when buying and one slightly below the market price when selling. If things are normal, I get that price or better; otherwise I try again shortly afterwards.

I know little about the way the exchanges work, but I remember hearing something about limit orders being "visible" to counterparties making it somehow more likely that you get the exact limit price you set and not better... maybe something about your own own brokerage being allowed to execute on that limit price.  That said, it's a vague recollection and I still do the exact thing you all mention by setting a limit price slightly above/below the current market price.  If I'm not in a hurry I just use the current bid/ask.

dualstow wrote: Probably a lot of people have this issue if they're at work and unable to trade.

I'm actually running a free service these days to help people who have this problem. Just PM your brokerage login details to me, and the trades you want me to execute.  I'll handle it all for you!  No need to pay me, I'm just a really nice guy.

dragoncar,
Will you need my social? I don't usually give it out, but you seem harmless.

buddtholomew wrote:

Matthew19 wrote: I don't think HB was suggesting you invest your entire nest egg at once (lump sum or dollar cost average).

Harry suggested doing the PP with the money that you can't afford to lose. The rest can be variable portfolio, which for me is about 3%. The money that I could afford to lose was already lost 

dualstow wrote: Probably a lot of people have this issue if they're at work and unable to trade.

I think most people could use their smartphones to place a trade during lunch hours.

With a PP I'm not sure dollar cost averaging or spacing out purchases makes a whole lot of sense...it is a pretty good bet one of the three assets will be oinking and another flying...remember the assets are meaningless, it is the portfolio construction that matters.

Kbg wrote: With a PP I'm not sure dollar cost averaging or spacing out purchases makes a whole lot of sense...it is a pretty good bet one of the three assets will oinking and another flying...remember the assets are meaningless, it is the portfolio construction that matters.

I don't think you would be saying that living through that 108 week drawdown.  DCA is the best way to deal with sequence of returns risk, epsecially the dismal 2013 and 2015.

MachineGhost wrote:

Kbg wrote: With a PP I'm not sure dollar cost averaging or spacing out purchases makes a whole lot of sense...it is a pretty good bet one of the three assets will oinking and another flying...remember the assets are meaningless, it is the portfolio construction that matters.

I don't think you would be saying that living through that 108 week drawdown.  DCA is the best way to deal with sequence of returns risk, epsecially the dismal 2013 and 2015.

Come on MG you KNOW that's a bad argument to make unless you think you can predict the future. I'll make you a pride of I told you so bet that if we make the bet starting Jan 16 and go through Dec 17 that DCA will be the exact wrong thing to have done.

The efficacy of DCA is entirely time series dependent and the ONLY reason it is superior is because it lowers average price. It is by no means a good risk mitigation strategy. I can see it for a single asset to avoid sequence risk (which will work ONLY if price goes down), but not for a PP.

Either you buy into HBs premise that the future can't be predicted or you don't. You saying DCA is a good thing is the same as you predicting the PP is going down and on an annual returns basis is a very poor bet to make.

Lest I go all theoretical on us, if I had a very large chunk of money I was going to roll into a PP I would spread it out over year, but using PP historical returns this most likely will prove to not be beneficial to the bottom line.

I'm up 8.39% YTD and extremely happy about that.  S&P 500 up only 2.78%.  Happy I never wavered (not that I really considered it).

Kbg wrote: Lest I go all theoretical on us, if I had a very large chunk of money I was going to roll into a PP I would spread it out over year, but using PP historical returns this most likely will prove to not be beneficial to the bottom line.

Actually, one of the data mining hobbyists with access to daily data (Tyler?) could quantify how likely this "most likely" is and what the range of the long term penalty might be.

Just guessing, I'd expect on a daily basis going all in ends up better something like 70-80% of the time and, even if you lose, the long term loss (measured against a 12 monthly DCA where you keep the uninvested portion in cash - which earns more than nothing) is never more than about 10%.

Kbg wrote: Either you buy into HBs premise that the future can't be predicted or you don't. You saying DCA is a good thing is the same as you predicting the PP is going down and on an annual returns basis is a very poor bet to make.

You're worried about the returns.  I'm worried about the risk.  The risk is the PP has had 108-week in a row of of being underwater.  That is a fact.  DCA is a way to mitigate that risk if it reappears.  The returns will more than take care of themselves -- that's why we invest in the PP after all, right?

But if it's "market timing", then investing a lump-sum all at once in the PP at this juncture seems riskier than normal because you're relying on several things continuing to happen: extremely overvalued stocks continue to go up, extremely overvalued bonds continue to go up and gold is not going to fall victim to the deflationary forces that would finally consume us all if either/both of the first two finally mean-revert and because the central banks QEternity has finally lost their magical and illusionary power on the masses.  The context of that 108-week drawdown isn't so dissimilar to where the PP is at the moment.

Lest I go all theoretical on us, if I had a very large chunk of money I was going to roll into a PP I would spread it out over year, but using PP historical returns this most likely will prove to not be beneficial to the bottom line.

A year or 108 weeks, its all the same DCA.

108-weeks might actually be too long if you're new and don't have sufficient gold exposure.  I do already so I'm less worried about it.

rickb wrote: Just guessing, I'd expect on a daily basis going all in ends up better something like 70-80% of the time and, even if you lose, the long term loss (measured against a 12 monthly DCA where you keep the uninvested portion in cash - which earns more than nothing) is never more than about 10%.

Let's get this debate settled!!!  Maths has a way of being objectively and factually truthful.

Off-topic note: for the longest time, MG, I thought you were American. The avatar, for starters. But, you just have to have grown up with a British education. "Maths." "Colo(u)red people." Right?

dualstow wrote: Off-topic note: for the longest time, MG, I thought you were American. The avatar, for starters. But, you just have to have grown up with a British education. "Maths." "Colo(u)red people." Right?

No?

dualstow wrote: No?

Okay, I went to boarding school in England for a few years... 

MachineGhost wrote:

dualstow wrote: No?

Okay, I went to boarding school in England for a few years... 

Excellent call, Dualstow! I caught the "Maths" thing too but I thought MG was just putting on airs (or that maybe he was from India!).

Or Singapore.