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chang
Valued Contributor

R48 - pyramid up

The idea (and pros/cons) of "pyramiding up" have been discussed many times in the past. The underlying idea - that you cannot lose money because you are always in profit - is attractive. But there are also philosophical objections. A security can become (theoretically) overvalued - what Morningstar would call a 1* or 2* stock - in which case is it wise or safe to continue buying it? Also, value investors tend to "buy on weakness, sell into strength". While I don't do that anymore, because it has failed me too many times, I do tend to hold pat and "let it ride" into strength, but not buy more.

I can give an example where I should have bought more into rising prices. For many years I wanted to own McCormick (MKC). A few years ago, it suffered a big drop to $65 and I bought an initial $10k worth. That's about 1/5 of what I wanted to own. (I usually set a minimum of $50k for any security.) It started going up, so I decided to wait for a dip to buy more on. And I waited. And waited. And waited... And now the SOB stock is trading at $111, and I sat on the sidelines the whole time. So that's an example where R48's strategy would have worked well.

So now to my current situation. Last month I decided to make an EM Value play, and bought more SIVLX and a new position in PRIJX. I earmarked $50k (near term) for PRIJX and bought an initial $25k. Now a month later it's up 8% and worth $27k. Should I just buy another $25k now without giving the matter any more thought? That's the question. 

0 Kudos
80 Replies
PaulR888
Participant ○○○

Re: R48 - pyramid up

Chang ...  For me, if I had a plan to invest a certain amount and only went half way I would continue with the full trade.  You are talking about relatively small amount to your overall wealth.  I assume this would bring you to your desired overall AA.  I generally like to be fully invested into my overall AA.  Yes the price may come down in the short run, but that's life.  Isn't the longer term what really matters when it comes to bucket 3 stocks?

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chang
Valued Contributor

Re: R48 - pyramid up

Paul: thanks, I'm leaning that way too. As Nike says, just do it.
0 Kudos
CupertinoBiker
Explorer ○

Re: R48 - pyramid up

When I want to build a position in something, I tend to set a buy mark around 2% higher.  So if price continues up, I buy more every 2% upwards.  It's not something I'm rigorous with, it's more an idea than a rule. 

0 Kudos
Lily
Follower ○○○

Re: R48 - pyramid up

@CupertinoBiker @retiredat48 

I can see the advantage of this for lump sum, after the first bucket, if it goes up, great, if it's down, no problem since it's 1/5 only, risk control in place.

Say we want to invest 50K, pyramid up, 10K each every 2% up.

Assume after we deploy 30K when this go up 2%*3=6% or more, then the following happens,

1. it drops 10% but still move above SMA 200: do we continue or stop the 4th bucket?

2. If we do stop, then when do we resume?

 

0 Kudos
retiredat48
Participant ○○○

Re: R48 - pyramid up


@chang wrote:

The idea (and pros/cons) of "pyramiding up" have been discussed many times in the past. The underlying idea - that you cannot lose money because you are always in profit - is attractive. But there are also philosophical objections. A security can become (theoretically) overvalued - what Morningstar would call a 1* or 2* stock - in which case is it wise or safe to continue buying it?

R48 reply in bold:  Pyramid Up is a BUY-IN SCHEME... it's goal is to permit one to BEGIN at any time, under any market conditions, and to provide 100% assurance that when you are fully bought in, you will be in a positive, GAIN POSITION.  This buying can be completed as soon as a month...up to a few months, or if your mutual fund never gets in an uptrend, you never complete your buy-in.

Yes, the fund you bought can become overvalued...but PyrUp is not in effect long term.  But I often do Pyramid Down concepts...selling in buckets, if I want to exit a fund...for any reason.  In a follow post I will provide a summary of what Pyramid Up Investing is, and links to details, for anyone interested.

Also, value investors tend to "buy on weakness, sell into strength". While I don't do that anymore, because it has failed me too many times, I do tend to hold pat and "let it ride" into strength, but not buy more.

It is fine to get started by making your initial partial buy "on weakness", or where you consider a COMPELLING VALUE EXISTS to get started.  You simply buy about 1/5th of the amount you are investing.  HOWEVER, FROM THERE YOU MAY BUY ONLY IF THE FUND IS A CERTAIN PERCENTAGE UP FROM THE PREVIOUS BUY (I like 2 to 3% increments).  And yes, you can buy on "dips" as long as the buy is higher in price than the previous one.  Otherwise, you are buying into a downtrend, which is to be avoided.

I can give an example where I should have bought more into rising prices. For many years I wanted to own McCormick (MKC). A few years ago, it suffered a big drop to $65 and I bought an initial $10k worth. That's about 1/5 of what I wanted to own. (I usually set a minimum of $50k for any security.) It started going up, so I decided to wait for a dip to buy more on. And I waited. And waited. And waited... And now the SOB stock is trading at $111, and I sat on the sidelines the whole time. So that's an example where R48's strategy would have worked well.

Indeed.  However, again, OK to buy on dips as long as NAV price is above previous buy.  I buy often this way.  BTW, most mutual fund managers pyramid up buy...they have to, as they get new money into their funds.  To never buy at a higher price is absurd.

So now to my current situation. Last month I decided to make an EM Value play, and bought more SIVLX and a new position in PRIJX. I earmarked $50k (near term) for PRIJX and bought an initial $25k. Now a month later it's up 8% and worth $27k. Should I just buy another $25k now without giving the matter any more thought? That's the question..   

Generally, yes...you should have bought more before you got to 8% gain.  Using a 3% min up move to buy more, a five bucket approach means when you are in, the first buy is up by 12% minimum.  You will absolutely be in a gain position after buy #5.  Which means "YOU CAN THINK STRAIGHT IF ANY DECLINE FOLLOWS."  I ALSO INSIST THE FUND BE TRADING nav above it's 200 day moving average for subsequent buys; that is, I want funds to be in an uptrend.

Hope this answers things.  In the next post is a summary of Pyramid Up buying technique.

Good day...

R48

 


 

0 Kudos
retiredat48
Participant ○○○

Re: R48 - pyramid up

 

What the heck is PYRAMID UP INVESTING, the theme of this original post by Chang??

Here's the answer, in a post I made to another on the old forums.

On your situation...having sold out fully, now reentering.  The biggest challenge will be in how to re-enter the stock markets.  You could lump sum in, but I think you are one for which this is almost impossible  emotionally.  You can Dollar Cost Average...putting in a set amount, let's say every two weeks or monthly.  This is TIME BASED investing.  Academic studies show lump sum is better, and the DCA is just an averaging of the lump sum.  With a severe down market over this time, LS would be worst, and DCA will have mitigated it some, but you will have declined a goodly amount.

Pyramid Up is PERFORMANCE BASED.  You are only partly describing it.  Dividing your target monies into buckets, one buys more of a fund only after it has gone up from the previous purchase.  ONLY ONE OF THESE BUCKETS IS BOUGHT VIA CROSSING THE 200 DAY MOVING AVERAGE.  So one doesn't need to be that familiar with anything about 200 day MAs.  You can start buying any fund at anytime, then Pyramid Up.  The advantage is that you will most likely not have a loss after you are fully invested in each fund.  Many posters find this is very comforting, enabling them to buy in without excessive fretting over the current market. 

Here's what one poster recently posted:  (quote) I'm not a sophisticated investor, but I've been using R48's strategy for a number of months, and I find it a truly easy system to implement.  I don't view it as a list of complicated rules, but rather as an overarching concept for how to select asset classes, pick specific products, and reduce risk;  the rules follow almost intuitively from that, and I always think of the concepts first in order to recall the specific rules. And the pyramiding up factor gives me the confidence to continue buying, whereas I surely would have hesitated to jump in with a large, one-time buy.

So here is a summary of what Pyramiding Up is about...posted for another having a situation similar to yours:

---------------------------------------------------------------------------------------------------

Pyramid Up is not a term in the general financial literature.  Rather it is a name I gave to an investing method I adapted for buying mutual funds...a name I brought to the forums.  And the technique has been adapted by some, and sure gaining wider usage.
 
Mostly for my own use, and partly in response to Buffett's Rule #1 (Not lose money), I adapted a technique popular among certain guru stock buyers in the 1950's called Pyramid Up.  The mantra was to always average up...never down, to mitigate the single stock risk (think Enron). 
 
In its simplest form, you buy a small amount into a mutual fund, and do not buy more unless it goes up.  Then buy more...and more, repeating the process only if the fund goes up.  An investor selects a percent increase upwards, to making new buys, ranging from 3% to a very conservative 10%. 
 
An investor also selects the amount of each purchase, in terms of "buckets" of the targeted amount designated towards a fund.  For example, a five bucket approach and $15,000 to invest in a fund means $3000 per purchase.
 
By the mathematics, Pyramiding Up generally keeps one in a positive gain position, enabling one to think properly.  It primarily limits one's actual money losses to very small amounts.  And the amounts lost on any given fund are usually offset by gains in another, so that the portfolio is not losing.
 
Pyramid Up can be employed in both accumulator and retiree portfolios, and indeed was fully employed in the two model portfolios seen by clicking on the suitcase icon next to my name.  Of importance is that both portfolios were started in 2008 before the brunt of the bear market, each only had a marginal drawdown (due to M* inability to handle MM funds/cash in sample portfolios) and are now up handsomely, and well positioned.


Here's an example of Pyramid Up buying:

Early Retiree $400,000 Portfolio, Vanguard's  VUG Growth ETF: Bought in 2009 as follows:

7/15    $43.66/share
7/23      45.87
7/30      46.71
8/03      47.04
9/15      49.11
11/16    $52.29/share
Today    $56.66/share, 13% of portfolio by weight.


If that initial buy had gone down, no more buying would have followed.  Now I have a very comfortable cushion that a decline could ensue before I would experience an actual loss.

I further complement Pyr Up buying with what I call 200 day Moving Average controls.  This forces me to take some monies off the table if the trends reverse to downward, and eroding gains could approach losses.  The threshold value must prevail. Further drops continuing below 200 day MAs require further selling.  I would call this tactical asset reallocating.
  
I don't necessarily like to seemingly "push" something I do, but I see no other way to coming to grips with risks than what I actually do.  Retiring very early meant risk mitigation was top priority.  I sacrifice some upside gains to ensure the portfolio declines are minimal. 

------------------------------------------------------------------------------------------------------

Here are some links to Pyramid Up Investing details:

Links to Pyramiding Up

 

http://socialize.morningstar.com/NewSocialize/forums/p/269209/2920919.aspx#2920919

 
socialize.morningstar.com
New Poster – New Portfolio – Please Help - -

 

 

R48...direct link that describes your "buckets" & "Pyramid Up"

 

http://socialize.morningstar.com/NewSocialize/forums/p/281989/3053164.aspx#3053164

 
socialize.morningstar.com
R48...direct link that describes your "buckets" & "Pyramid Up" -

 

 

R48 BUYING/SELLING STRATEGY/BRIEF OUTLINE

 

 

 

 

 

 

 

http://socialize.morningstar.com/NewSocialize/forums/p/259048/2985219.aspx#2985219

 
socialize.morningstar.com
R48 BUYING/SELLING STRATEGY/BRIEF OUTLINE - Welcome! Please Log In. Home Portfolio Stocks Bonds Funds ETFs Advisors Markets Tools Real Life Finance Discuss


---------------------------------------------------------------------------------------------------------------------------------

R48 

 

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chang
Valued Contributor

Re: R48 - pyramid up

So I’m too late (again) for my second buy. My initial buy is now up 9.1% as of today. By waiting too long, I have reduced the margin if safety (profit) I will enjoy after my second buy.

In this case, do you buy and keep your fingers crossed, or wait for a drop?

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sugarhill6
Explorer ○○

Re: R48 - pyramid up

"Should I just buy another $25k now without giving the matter any more thought?"

Every investment one makes should be thought through.   If the reason you added to these positions a month or so ago still stands, then make the investment.   I am assuming so, as 4 weeks...and an 8% move, is nothing in the grand scheme of things.  

 

 

 


@chang wrote:

The idea (and pros/cons) of "pyramiding up" have been discussed many times in the past. The underlying idea - that you cannot lose money because you are always in profit - is attractive. But there are also philosophical objections. A security can become (theoretically) overvalued - what Morningstar would call a 1* or 2* stock - in which case is it wise or safe to continue buying it? Also, value investors tend to "buy on weakness, sell into strength". While I don't do that anymore, because it has failed me too many times, I do tend to hold pat and "let it ride" into strength, but not buy more.

I can give an example where I should have bought more into rising prices. For many years I wanted to own McCormick (MKC). A few years ago, it suffered a big drop to $65 and I bought an initial $10k worth. That's about 1/5 of what I wanted to own. (I usually set a minimum of $50k for any security.) It started going up, so I decided to wait for a dip to buy more on. And I waited. And waited. And waited... And now the SOB stock is trading at $111, and I sat on the sidelines the whole time. So that's an example where R48's strategy would have worked well.

So now to my current situation. Last month I decided to make an EM Value play, and bought more SIVLX and a new position in PRIJX. I earmarked $50k (near term) for PRIJX and bought an initial $25k. Now a month later it's up 8% and worth $27k. Should I just buy another $25k now without giving the matter any more thought? That's the question. 


 

0 Kudos
Gary1952
Contributor ○○○

Re: R48 - pyramid up

I like to do the math to analyze things. Using the numbers I could find you would be at a 4.3% gain if buying 50% at +9.1% NAV increase vs. a 4.8% gain if you had bought at a +8% NAV increase. Mentally I would feel bad having missed on the extra .5% gain but it is not very much in the big picture as sugarhill6 said.

From what I have read pyramid up is a discipline strategy to build a position because often times trying to average down is a faulty thought process because the security has shown weakness and you could be pyramiding down.

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FD1001
Valued Contributor

Re: R48 - pyramid up

I have tried to understand this method for years but I can't get it all.

1) I never start from cash.  This means I have to sell something I don't like and buy something I like more.

2) Suppose I bought 3 buckets of 5 and now this fund is actually going down, do I keep it?   

3) if I find a fund I like more, how do I sell? the reverse of Pyramid up?

4) Suppose I sold 2 buckets and now it started to go up, do I buy again?

5) Suppose I select bond OEFs and the NAV hardly moves, do I look now at TR instead of NAV?  and what happens when I own a stock fund that had a 10% distributions and the NAV is 10% lower?

Just my opinion, the above has too many moving parts. 

=======================

In my case 1) I look at all the funds I own (usually 3-5 funds)     2) I look at other possible funds    3) If a new fund looks absolutely better, I sell an existing fund and replace it with the new.  If I'm not sure, I sell a nice port of an existing fund and replace it with the new. I wait another 1-5 days and replace the remaining portion.

Basically, I'm saying to myself each time the following....suppose you won a million Dollars now and you must invest it tomorrow in your 3-5 best ideas(=funds), what funds are you going to select?

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dtconroe
Contributor ○○

Re: R48 - pyramid up


@FD1001 wrote:

I have tried to understand this method for years but I can't get it all.

1) I never start from cash.  This means I have to sell something I don't like and buy something I like more.

2) Suppose I bought 3 buckets of 5 and now this fund is actually going down, do I keep it?   

3) if I find a fund I like more, how do I sell? the reverse of Pyramid up?

4) Suppose I sold 2 buckets and now it started to go up, do I buy again?

5) Suppose I select bond OEFs and the NAV hardly moves, do I look now at TR instead of NAV?  and what happens when I own a stock fund that had a 10% distributions and the NAV is 10% lower?

Just my opinion, the above has too many moving parts. 

=======================

In my case 1) I look at all the funds I own (usually 3-5 funds)     2) I look at other possible funds    3) If a new fund looks absolutely better, I sell an existing fund and replace it with the new.  If I'm not sure, I sell a nice port of an existing fund and replace it with the new. I wait another 1-5 days and replace the remaining portion.

Basically, I'm saying to myself each time the following....suppose you won a million Dollars now and you must invest it tomorrow in your 3-5 best ideas(=funds), what funds are you going to select?


I don't try to do this as much anymore, but I do understand how FD approaches his buys and sells--I don't have the temperament or skills to risk this much money in my buys and sells, but I still follow his approach on a smaller scale, smaller purchases, for only a portion of my portfolio.

0 Kudos
ElLobo
Participant ○○○

Re: R48 - pyramid up


@dtconroe wrote:

@FD1001 wrote:

I have tried to understand this method for years but I can't get it all.

1) I never start from cash.  This means I have to sell something I don't like and buy something I like more.

2) Suppose I bought 3 buckets of 5 and now this fund is actually going down, do I keep it?   

3) if I find a fund I like more, how do I sell? the reverse of Pyramid up?

4) Suppose I sold 2 buckets and now it started to go up, do I buy again?

5) Suppose I select bond OEFs and the NAV hardly moves, do I look now at TR instead of NAV?  and what happens when I own a stock fund that had a 10% distributions and the NAV is 10% lower?

Just my opinion, the above has too many moving parts. 

=======================

In my case 1) I look at all the funds I own (usually 3-5 funds)     2) I look at other possible funds    3) If a new fund looks absolutely better, I sell an existing fund and replace it with the new.  If I'm not sure, I sell a nice port of an existing fund and replace it with the new. I wait another 1-5 days and replace the remaining portion.

Basically, I'm saying to myself each time the following....suppose you won a million Dollars now and you must invest it tomorrow in your 3-5 best ideas(=funds), what funds are you going to select?


I don't try to do this as much anymore, but I do understand how FD approaches his buys and sells--I don't have the temperament or skills to risk this much money in my buys and sells, but I still follow his approach on a smaller scale, smaller purchases, for only a portion of my portfolio.


As I understand, PU is for investing lump sums equal to what you consider a full position, say 20% of your portfolio, where you would use five 4% buckets, for example.  Then, once you were at fully invested, with 1 or more buckets left to go on your chosen fund, as more cash comes in, say 401k rollover or portfolio distributions, you would use PU to finish up that fund tranch.

Once you are fully invested in your chosen fund, ifn anther comes along that you like better than one you own, you would sell it and PU in the new, possibly selling off a tranch whenever you are ready to buy a new one.

Finally, PU up also has a PD, as I understand, but I don't remember the rules.  After all, funds don't always go up!

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DJANG0
Explorer ○○

Re: R48 - pyramid up

Chang, have you considered "value averaging"? 

For example, I know I want to have $100,000 in a fund by year 5. I'm investing $5000 every quarter, or $20,000 annually, but I adjust each new contribution to incorporate performance. If the fund is up $500 since my last purchase, my next purchase is $4500. If the fund is down $500, my next purchase is $5500.

Admittedly, lump sum investing will unusually outperform value averaging, but for nervous investors like myself, value averaging provides a disciplined method of building a position over time and allows me to sleep a little better.

0 Kudos
Coptomist
Explorer ○○

Re: R48 - pyramid up


@retiredat48 wrote:

 

What the heck is PYRAMID UP INVESTING, the theme of this original post by Chang??

Here's the answer, in a post I made to another on the old forums.

On your situation...having sold out fully, now reentering.  The biggest challenge will be in how to re-enter the stock markets.  You could lump sum in, but I think you are one for which this is almost impossible  emotionally.  You can Dollar Cost Average...putting in a set amount, let's say every two weeks or monthly.  This is TIME BASED investing.  Academic studies show lump sum is better, and the DCA is just an averaging of the lump sum.  With a severe down market over this time, LS would be worst, and DCA will have mitigated it some, but you will have declined a goodly amount.

Pyramid Up is PERFORMANCE BASED.  You are only partly describing it.  Dividing your target monies into buckets, one buys more of a fund only after it has gone up from the previous purchase.  ONLY ONE OF THESE BUCKETS IS BOUGHT VIA CROSSING THE 200 DAY MOVING AVERAGE.  So one doesn't need to be that familiar with anything about 200 day MAs.  You can start buying any fund at anytime, then Pyramid Up.  The advantage is that you will most likely not have a loss after you are fully invested in each fund.  Many posters find this is very comforting, enabling them to buy in without excessive fretting over the current market. 

Here's what one poster recently posted:  (quote) I'm not a sophisticated investor, but I've been using R48's strategy for a number of months, and I find it a truly easy system to implement.  I don't view it as a list of complicated rules, but rather as an overarching concept for how to select asset classes, pick specific products, and reduce risk;  the rules follow almost intuitively from that, and I always think of the concepts first in order to recall the specific rules. And the pyramiding up factor gives me the confidence to continue buying, whereas I surely would have hesitated to jump in with a large, one-time buy.

So here is a summary of what Pyramiding Up is about...posted for another having a situation similar to yours:

---------------------------------------------------------------------------------------------------

Pyramid Up is not a term in the general financial literature.  Rather it is a name I gave to an investing method I adapted for buying mutual funds...a name I brought to the forums.  And the technique has been adapted by some, and sure gaining wider usage.
 
Mostly for my own use, and partly in response to Buffett's Rule #1 (Not lose money), I adapted a technique popular among certain guru stock buyers in the 1950's called Pyramid Up.  The mantra was to always average up...never down, to mitigate the single stock risk (think Enron). 
 
In its simplest form, you buy a small amount into a mutual fund, and do not buy more unless it goes up.  Then buy more...and more, repeating the process only if the fund goes up.  An investor selects a percent increase upwards, to making new buys, ranging from 3% to a very conservative 10%. 
 
An investor also selects the amount of each purchase, in terms of "buckets" of the targeted amount designated towards a fund.  For example, a five bucket approach and $15,000 to invest in a fund means $3000 per purchase.
 
By the mathematics, Pyramiding Up generally keeps one in a positive gain position, enabling one to think properly.  It primarily limits one's actual money losses to very small amounts.  And the amounts lost on any given fund are usually offset by gains in another, so that the portfolio is not losing.
 
Pyramid Up can be employed in both accumulator and retiree portfolios, and indeed was fully employed in the two model portfolios seen by clicking on the suitcase icon next to my name.  Of importance is that both portfolios were started in 2008 before the brunt of the bear market, each only had a marginal drawdown (due to M* inability to handle MM funds/cash in sample portfolios) and are now up handsomely, and well positioned.


Here's an example of Pyramid Up buying:

Early Retiree $400,000 Portfolio, Vanguard's  VUG Growth ETF: Bought in 2009 as follows:

7/15    $43.66/share
7/23      45.87
7/30      46.71
8/03      47.04
9/15      49.11
11/16    $52.29/share
Today    $56.66/share, 13% of portfolio by weight.


If that initial buy had gone down, no more buying would have followed.  Now I have a very comfortable cushion that a decline could ensue before I would experience an actual loss.

I further complement Pyr Up buying with what I call 200 day Moving Average controls.  This forces me to take some monies off the table if the trends reverse to downward, and eroding gains could approach losses.  The threshold value must prevail. Further drops continuing below 200 day MAs require further selling.  I would call this tactical asset reallocating.
  
I don't necessarily like to seemingly "push" something I do, but I see no other way to coming to grips with risks than what I actually do.  Retiring very early meant risk mitigation was top priority.  I sacrifice some upside gains to ensure the portfolio declines are minimal. 

------------------------------------------------------------------------------------------------------

Here are some links to Pyramid Up Investing details:

Links to Pyramiding Up

 

http://socialize.morningstar.com/NewSocialize/forums/p/269209/2920919.aspx#2920919

 
socialize.morningstar.com
New Poster – New Portfolio – Please Help - -

 

 

R48...direct link that describes your "buckets" & "Pyramid Up"

 

http://socialize.morningstar.com/NewSocialize/forums/p/281989/3053164.aspx#3053164

 
socialize.morningstar.com
R48...direct link that describes your "buckets" & "Pyramid Up" -

 

 

R48 BUYING/SELLING STRATEGY/BRIEF OUTLINE

 

 

 

 

 

 

 

http://socialize.morningstar.com/NewSocialize/forums/p/259048/2985219.aspx#2985219

 
socialize.morningstar.com
R48 BUYING/SELLING STRATEGY/BRIEF OUTLINE - Welcome! Please Log In. Home Portfolio Stocks Bonds Funds ETFs Advisors Markets Tools Real Life Finance Discuss


---------------------------------------------------------------------------------------------------------------------------------

R48 

 


Thanks for your posts on this R48!

However, I get a "This page doesn't exist" message for all the links provided. I'm using a Mac, but I suspect it's a Morningstar issue.

 

0 Kudos
Bentley
Contributor ○

Re: R48 - pyramid up


@Coptomist wrote:

@retiredat48 wrote:

 

What the heck is PYRAMID UP INVESTING, the theme of this original post by Chang??

Here's the answer, in a post I made to another on the old forums.

On your situation...having sold out fully, now reentering.  The biggest challenge will be in how to re-enter the stock markets.  You could lump sum in, but I think you are one for which this is almost impossible  emotionally.  You can Dollar Cost Average...putting in a set amount, let's say every two weeks or monthly.  This is TIME BASED investing.  Academic studies show lump sum is better, and the DCA is just an averaging of the lump sum.  With a severe down market over this time, LS would be worst, and DCA will have mitigated it some, but you will have declined a goodly amount.

Pyramid Up is PERFORMANCE BASED.  You are only partly describing it.  Dividing your target monies into buckets, one buys more of a fund only after it has gone up from the previous purchase.  ONLY ONE OF THESE BUCKETS IS BOUGHT VIA CROSSING THE 200 DAY MOVING AVERAGE.  So one doesn't need to be that familiar with anything about 200 day MAs.  You can start buying any fund at anytime, then Pyramid Up.  The advantage is that you will most likely not have a loss after you are fully invested in each fund.  Many posters find this is very comforting, enabling them to buy in without excessive fretting over the current market. 

Here's what one poster recently posted:  (quote) I'm not a sophisticated investor, but I've been using R48's strategy for a number of months, and I find it a truly easy system to implement.  I don't view it as a list of complicated rules, but rather as an overarching concept for how to select asset classes, pick specific products, and reduce risk;  the rules follow almost intuitively from that, and I always think of the concepts first in order to recall the specific rules. And the pyramiding up factor gives me the confidence to continue buying, whereas I surely would have hesitated to jump in with a large, one-time buy.

So here is a summary of what Pyramiding Up is about...posted for another having a situation similar to yours:

---------------------------------------------------------------------------------------------------

Pyramid Up is not a term in the general financial literature.  Rather it is a name I gave to an investing method I adapted for buying mutual funds...a name I brought to the forums.  And the technique has been adapted by some, and sure gaining wider usage.
 
Mostly for my own use, and partly in response to Buffett's Rule #1 (Not lose money), I adapted a technique popular among certain guru stock buyers in the 1950's called Pyramid Up.  The mantra was to always average up...never down, to mitigate the single stock risk (think Enron). 
 
In its simplest form, you buy a small amount into a mutual fund, and do not buy more unless it goes up.  Then buy more...and more, repeating the process only if the fund goes up.  An investor selects a percent increase upwards, to making new buys, ranging from 3% to a very conservative 10%. 
 
An investor also selects the amount of each purchase, in terms of "buckets" of the targeted amount designated towards a fund.  For example, a five bucket approach and $15,000 to invest in a fund means $3000 per purchase.
 
By the mathematics, Pyramiding Up generally keeps one in a positive gain position, enabling one to think properly.  It primarily limits one's actual money losses to very small amounts.  And the amounts lost on any given fund are usually offset by gains in another, so that the portfolio is not losing.
 
Pyramid Up can be employed in both accumulator and retiree portfolios, and indeed was fully employed in the two model portfolios seen by clicking on the suitcase icon next to my name.  Of importance is that both portfolios were started in 2008 before the brunt of the bear market, each only had a marginal drawdown (due to M* inability to handle MM funds/cash in sample portfolios) and are now up handsomely, and well positioned.


Here's an example of Pyramid Up buying:

Early Retiree $400,000 Portfolio, Vanguard's  VUG Growth ETF: Bought in 2009 as follows:

7/15    $43.66/share
7/23      45.87
7/30      46.71
8/03      47.04
9/15      49.11
11/16    $52.29/share
Today    $56.66/share, 13% of portfolio by weight.


If that initial buy had gone down, no more buying would have followed.  Now I have a very comfortable cushion that a decline could ensue before I would experience an actual loss.

I further complement Pyr Up buying with what I call 200 day Moving Average controls.  This forces me to take some monies off the table if the trends reverse to downward, and eroding gains could approach losses.  The threshold value must prevail. Further drops continuing below 200 day MAs require further selling.  I would call this tactical asset reallocating.
  
I don't necessarily like to seemingly "push" something I do, but I see no other way to coming to grips with risks than what I actually do.  Retiring very early meant risk mitigation was top priority.  I sacrifice some upside gains to ensure the portfolio declines are minimal. 

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Here are some links to Pyramid Up Investing details:

Links to Pyramiding Up

 

http://socialize.morningstar.com/NewSocialize/forums/p/269209/2920919.aspx#2920919

 
socialize.morningstar.com
New Poster – New Portfolio – Please Help - -

 

 

R48...direct link that describes your "buckets" & "Pyramid Up"

 

http://socialize.morningstar.com/NewSocialize/forums/p/281989/3053164.aspx#3053164

 
socialize.morningstar.com
R48...direct link that describes your "buckets" & "Pyramid Up" -

 

 

R48 BUYING/SELLING STRATEGY/BRIEF OUTLINE

 

 

 

 

 

 

 

http://socialize.morningstar.com/NewSocialize/forums/p/259048/2985219.aspx#2985219

 
socialize.morningstar.com
R48 BUYING/SELLING STRATEGY/BRIEF OUTLINE - Welcome! Please Log In. Home Portfolio Stocks Bonds Funds ETFs Advisors Markets Tools Real Life Finance Discuss


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R48 

 


Thanks for your posts on this R48!

However, I get a "This page doesn't exist" message for all the links provided. I'm using a Mac, but I suspect it's a Morningstar issue.

 


 

links work on my iPad using Safari

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yogibearbull
Valued Contributor

Re: R48 - pyramid up


@Coptomist wrote:


.....

However, I get a "This page doesn't exist" message for all the links provided. I'm using a Mac, but I suspect it's a Morningstar issue.


Copy a link URL, paste it in the browser window of a new tab, change http to https, then it will work.

YBB
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ElLobo
Participant ○○○

Re: R48 - pyramid up

"However, I get a "This page doesn't exist" message for all the links provided. I'm using a Mac, but I suspect it's a Morningstar issue."

Pyramid Up to a PC running Windows by Pyramidding Down your Mac!!!  Mister Softee pays 1.46% yield while APPL pays only 1.26%. 8-))

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Coptomist
Explorer ○○

Re: R48 - pyramid up


@yogibearbull wrote:

@Coptomist wrote:


.....

However, I get a "This page doesn't exist" message for all the links provided. I'm using a Mac, but I suspect it's a Morningstar issue.


Copy a link URL, paste it in the browser window of a new tab, change http to https, then it will work.


Weird, it still didn't work on my Mac using Safari, but when I opened a Chrome browser it did!

Thanks!

0 Kudos
ElLobo
Participant ○○○

Re: R48 - pyramid up


@Coptomist wrote:

@yogibearbull wrote:

@Coptomist wrote:


.....

However, I get a "This page doesn't exist" message for all the links provided. I'm using a Mac, but I suspect it's a Morningstar issue.


Copy a link URL, paste it in the browser window of a new tab, change http to https, then it will work.


Weird, it still didn't work on my Mac using Safari, but when I opened a Chrome browser it did!

Thanks!


The Ghost of Steve Jobs past.  Wait until Gates goes!

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