Gyroscopic Investing

Suppose we get another Flash Crash like earlier this year?  How do you handle this?
My concern is that if I initiate a sell order on my Treasuries ETF and then initiate a buy order on my Stock ETF, that I might wind up getting one order cancelled and getting screwed.

I heard that many orders during the last flash crash were reversed retroactively.

So what happens if half of my rebalancing trades get reversed?  Am I completely screwed?

Is this a reason to use mutual funds instead?

How about if I sell Individual Treasury LT Bonds on the secondary market to fund my stock purchases, and the LT Bond sale goes through and the stock sale gets reversed?  I guess in that case, I am selling the bonds "high" and the next day the bond price should drop and I can rebuy them cheaper.

In investing I find it very helpful to move slowly when making decisions. If the markets are going wonky due to a flash crash I would just stay put and let things sort themselves out.

My rebalancing internal dialogue works kind of like this:

Me: "Looks like something may be out of balance. I should probably look into it."

Me (a week later): "Hmmm. I should check to see if I need to rebalance."

Me (two weeks later): "Ah yeah it seems like I should rebalance."

Me (a week or so later still): "Yep still out of balance, I'll do a trade this week sometime."

The reason I take a long time to do a rebalance is because it's expensive to do trades. Whether you pay for trades with commissions or have to pay taxes on gains. So you should really be sure you need to rebalance and aren't just responding to market whipsaw noise which can actually make you trade too much as assets are bobbing up and down.

You should touch your portfolio as little as possible. When you do think you need to touch it, make sure you think about it good and long and never in response to a panic situation.

The flash crash happened so quickly with such high volumes that unless you were a brokerage with ties directly into the trading network you probably couldn't have gotten an order through anyway.

The flash crash was a non event for people that held on as the markets recovered very quickly. The crash of 1987 was another example of markets recovering quickly after a nasty crash where it paid to just sit back and not do anything.

From the linked article:

Interestingly, the DJIA was positive for the 1987 calendar year. It opened on January 2, 1987, at 1,897 points and would close on December 31, 1987, at 1,939 points.