Risk, Reward and Sticking to the Plan

I may have just shot my own foot off.  I don’t know yet, but I should find out in another year or so.  You see I should have rebalanced our RRSP portfolios back in January, but with the market in free fall at that time I decided to hold off.  I was still scared of losing more money.

Then recently a bunch of little things made me think about it.  There was not one thing that changed my mind, but several articles here and there which reminded me: there is never a right time to do it.  If I don’t do it I may miss out on some lower prices before things may move up.  Also things could drop again and I might miss that too.  So I’ve slowly rebalanced over a few weeks and took the risk.  I might get burned and I might make money on it.

I’ve started to realize that I was trying to time the market, which is a bit silly to try.  There is never a perfect time to invest, there will always be better times and worst times too.  So I got over my fear and stuck to the plan (later than normal, but better than never).  I invested my money and I’ll take what I get.  I’ve accepted I can’t predict much of anything with the stock market so I’m best to just invest regularly and play this out for the long term.

How is your mood with investing? Still fearful or have you been optimistic and buying?

12 thoughts on “Risk, Reward and Sticking to the Plan”

  1. My RRSP is set up in a plain-vanilla couch potato portfolio in index funds – 1/3 Canadian Index, 1/3 US Index, 1/3 Canadian Bond Index.

    Whenever I contribute new money to the account, I purchase whichever fund currently has the lowest balance.

    If any of the funds gets more than 5% higher or lower than the 33.33% target, I rebalance everything so that it’s split equally three ways.

    In the past six months, this has resulted in me rebalancing by selling some of the bond index and buying some of the stock indexes.

    I’ve done this for several years now, and it strikes me as a simple, understandable, and principled way to invest.

  2. just bought hxd at 19.50 today
    this markett has gone up to far to fast
    we’ll see how this trade makes out
    very conservative investor looking for a short term trade?

  3. If it is impossible to time the market, then all your actions are just having a random effect. Doing re-balancing on time, or doing it late are just the same.

  4. Thanks everyone for your thoughts.

    CM – I don’t have anything on that at my figure tips. Are you thinking about rebalancing annual versus waiting until the % are too far out? Or something else?


  5. I’m greedy, greedy, greedy. Bought aggressively in late Feb and early March – up +50% since. This market is where the big money is made. I’m still buying here, there’s another 30-40% to go over the next 12 months.


  6. I “rebalanced” by selling all stock holdings in the months leading up to the start of the bear market and currently have no long positions.

    At this time, even with the strong rally of the last two months, I can’t make a credible technical case for the bear market having ended.

    My plan is to wait for those signals before going long again.


  7. I purchased a basket of common shares of Canadian banks back in early april. I’m up and average of about 30% on the month.

    every expert i’ve been talking to and all the research i’ve done led me to believe it was the perfect time to buy (even if timing the market is silly, you can’t ignore historical changes).

    If the the market pulls back from here, it will help you with any DRIP program with the banks, but i remain confident we won’t revisit the lows and the upside for canadian financials is huge long-term if you buy the common shares.

  8. Man, how time flies! I haven’t visited for a year or more but was lead back to this blog through a series of links related to Derek Foster – that’s another story! I was glad to see Canadian Dream and others stuck through the “bad” market and are doing better now (hey CD, re: “Is It Worth It?” YES, IT IS!). BTW, timing the market is not only possible it’s quite easy, relatively obvious, requires a measure of patience and is extremely profitable – don’t let “them” tell you otherwise. I was flipping through some of the older articles from around the time when the market was turning the corner and was taken aback when I read this particular comment above from May 5, 2009 that begins “I’m greedy, greedy, greedy…” Reading this I thought, “Wow, that guy thinks like I did at that time.” Then I realized it WAS me! And how about that call – within 12 months (almost to the day) the DOW appreciated 34.2%, the S&P500 appreciated 34.4% and TSX appreciated (only) 24.8%. Not only that, but the prediction I made on my blog in April 2009 (many articles were started since then but never finished – that’s another story that begins and ends with “I derive zero enjoyment from the writing process”) about 52-week-highs coming in November 2009 also turned out to be correct. This at a time when the media was heaving headlines like “DOW 1,000” and “A Night With The Bears”; Roubini’s 15 minutes seemed to last longer than Kato Kaelin’s; and the U.S. banks were about to be nationalized. Just look at some of the comments above: one bought the HXD, another sat on the sidelines, another was waiting for signals, and another thought the markets were ahead of themselves. Scary times, for sure. There were other calls I made and documented, mostly on the yahoo finance pages, which were also correct. The reason for my “correctness”? Financial history repeats itself over and over and over. At age 38 it’s been one year since I left my job and retired (I don’t need to work although last fall I acquired my pyrotechnics license to do professional fireworks displays which after a half dozen or so shows this year I earned a little over $600; the first couple are freebies as you learn the ropes so it’s not as bad as it seems but you get the point – no book revenues, no speaking engagement fees, etc.) and my wife works less than 20 hrs/week at a job she absolutely loves. No kids yet but probably in the not-too-distant future – my wife is 9 years my junior so there’s time. We spent 2 months in Europe earlier this year (did I mention IT IS WORTH IT!), which was our second trip there in 2 years and plans are to return in 2012 (we both have some family there). So, basically I’m living the dream and doing it on WAAAAAY less than what some of you are targeting for so you’ll all do just fine. Just to be clear: there are no silver spoons in my house. As a matter of fact, as recently as 2001 I had over $33,000 net debt (excluding mortgage) primarily consisting of student loans compounded by a “want” problem. We still have a mortgage but no other debts and the “want” problem is under control. Canadian Dream, given your latest financial situation and the number of years to age 45 you will have absolutely no problem whatsoever being free by age 45. About a year and a half ago I thought I’d like to write a book (who here hasn’t?) and have been compiling notes and ideas since. However, a visit to my blog, the lack of paragraphs here and the 3 hours it took me to write this comment indicate it would be better to “leave” the “thesis” in the trees. Besides, does the world really need another investing book? So, I’m in the planning stages of opening an office where I would offer free financial consulting and investing guidance because I prefer to speak than write and maybe I’ll sell some fireworks on the side…but that’s another story.

  9. TBS,

    Thanks for the follow up. Great to hear things worked out for you. I love hearing good news stories!


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