Market timer or not?

[Danmar]

I'm always fully invested in equities but occasionally I will sell one stock to buy another. I suppose this is timing but really a trade based on the comparatives of the two stocks, not the market as a whole. Last one I did was sell bank buy pipeline in Dec/15. Working out so far.

 

[Islandtraveler]

I didn’t vote because I think that I might qualify as a “closet market timer” Although I do not buy and sell my index holdings, I do alter the annual withdrawal rates based on market performance. In good markets, I add to my cash position and in weak markets, withdraw more from my cash position. Does that mean I drank the Kool-Aid?

 

[Car-Guy]

I voted "other" since I do time the market (call it what you like, I day trade, swing trade or gamble on occasions), but I'm not an addict . I also buy and hold for years. Depends on the financial instrument and market volatility.

 

[easysurfer]

The closest I've been to a market timer was many moons ago this financial planner has a presentation during lunch hour at w*rk and being new to investing, I thought I'd check that out. Before I knew, I had signed up and turned over my IRA to this "marketing timing system" based on certain "signals" of when to enter and exit the market. That lasted for about 3 months before my shattered nerves took over and I discovered the beauty of indexing (and DIY for investing) .

 

[harley]

I voted "Other". With my main portfolio I try to do a buy, hold, and rebalance, but I have on occasion reacted to events. I got largely out of the market before the big 2008 crash, but then didn't get back in in time for the next running of the bulls. So I started DCA'ing back in, but bought extra during a couple of the dips in the last few years. So I would say "Very Occasionally" for that part of my portfolio.

I also have a gambling account that I buy and sell individual stocks in. It started out as a tiny account, but over the past 20 years has grown into a significant amount. I do a lot of market timing in that account. So, "Other".

 

[kcowan]

I do look at the tax consequences whenever rebalancing warrants a sale. Sometimes I will delay rebalancing due to avoid a tax hit that looks unnecessary.

Yes I answered Occasionally and it has nothing to do with the moon.

I didn't want to sell that much as I was trying to minimize capitol gains. I wanted to sell 10% and keep doing it for a while. He sold 50% and I had a 50K gain. So at the end of the year he sells off a bunch of stuff at a loss to zero out the gain. ...

Yup I do that regularly.

It seems like I get a small discount on most buys.

I time the market on all buys.

I suppose this is timing but really a trade based on the comparatives of the two stocks, not the market as a whole..

Yes I do this as well.

But overall I am buy and hold dividend investor and these events happen infrequently.

 

[Lsbcal]

I voted market timer "all the time". In the poll, I put in the "addict" part as an attempt at lightheartedness. But on reflection some might interpret this as meaning "bad". Don't worry if you market time. This is not about morality.

My market timing is only about once per year for all my equity assets. An example of this would be moving my international allocations to US equities (am all US at present). It is all in tax advantaged so I don't have to worry about the tax angle.

About once every 5 years it is possible I will move entirely out of the market into Treasuries but that depends on specific conditions which haven't triggered since 2008. In 2008 I was a buy-hold investor, not a fun ride but it worked out OK.

My market timing is heavily researched and is definitely not ad hoc. There are rules just like buy-hold except a few more of them.

 

[dixonge]

My wife says the best time to go to the market is in the morning - freshest produce.

 

[photoguy]

In march 2009, I remember seeing a news headline about Buffet calling a bottom. I hadn't been checking my portfolio much as I was way too busy with work but it motivated me to login and start buying some more equities. Does this count as market timing?

Also, market timing is roundly criticized by many as a losing game (especially by bogleheads) but can anybody point me to papers supporting this position? Most stuff I've seen focuses on active management and not specifically on a subset of investors using something like a PE10 approach.

 

[Lsbcal]

In march 2009, I remember seeing a news headline about Buffet calling a bottom. I hadn't been checking my portfolio much as I was way too busy with work but it motivated me to login and start buying some more equities. Does this count as market timing?

Yes. Some would say you are lucky and some would say you were smart. I would be in the envious smart camp . My current technique would have had me in the market starting May 2009 but I was buy-hold then and rebalanced in July 2009.

Also, market timing is roundly criticized by many as a losing game (especially by bogleheads) but can anybody point me to papers supporting this position? Most stuff I've seen focuses on active management and not specifically on a subset of investors using something like a PE10 approach.

There are so many ways people can market time that any proof of market timing being a loss versus buy-hold would be meaningless. To name a few: (1) HFT market timing, (2) moving average market timing in a huge number of flavors, (3) ad hoc market timing.

Most people who criticize it probably focus (rightly so) on loosing techniques. Really good techniques are probably few and not in the public domain. So no way to criticize it. Also most people who buy-hold haven't really done any homework on market timing.

FWIW, my advice to our son is to be a buy-hold investor. If things continue as in the past, he'll inherit a tidy sum and just has to hang on to it.

 

[NW-Bound]

...This is not about morality...

Market timing is only bad when you lose money.

When you do it right to buy low/sell high and be a contrarian, you act as a stabilizer of the market. I would argue that counteracting the craziness of the market is the right thing to do as it damps out market fluctuations. You are then rewarded handsomely for your ability to conquer greed and fear.

Just don't do it wrong. Not only do you lose money, you are called all kinds of dirty names, to rub salt into injuries. So, I can see why some people are afraid to do it, and just hold. That's all right too.

Buy-and-holders do not want to answer the question of whether the market is overvalued or undervalued. It's like some people who never vote, because they cannot tell which candidate is better. And they are right about the latter quite often!

 

[kcowan]

My wife says the best time to go to the market is in the morning - freshest produce.

And sometimes Tuesday morning is best! This talk about market timing is getting useful...

 

[G8tr]

I look for opportunities to add to my positions, a rather than have a set date and amount to invest. Yes, I do sit on a fair amount of cash for an extended period, but I believe it is better to wait for "sales" than buy at regular price. I make significant use of limit orders to take advantage of short term market volatility.


Sent from my iPad using Early Retirement Forum

 

[Lsbcal]

Just want to thank everyone who participated. This poll is going to remain open.

There were fewer 100% buy-holders in this (so far) then I would have guessed.

 

[photoguy]

Yes. Some would say you are lucky and some would say you were smart. I would be in the envious smart camp . My current technique would have had me in the market starting May 2009 but I was buy-hold then and rebalanced in July 2009.

I think I was just lucky. Rationally I know it's better to invest when prices are low but didn't really think much about the timing (other than things have been going down for a while).

In hindsight though I should have dumped all my extra cash into the market. However I did have some concern about losing my job which was unfounded. I did eventually get laid off, but it turned out to be a bonanza with severance + signing bonus for a new job (which I found immediately).

There are so many ways people can market time that any proof of market timing being a loss versus buy-hold would be meaningless. To name a few: (1) HFT market timing, (2) moving average market timing in a huge number of flavors, (3) ad hoc market timing.

Good point about their being a huge number of ways to MT, and probably too many to subset for a study.

Personally I lump myself as a buy and hold type investor. But if valuations get really out of whack (either too low or too high) I will likely do some market timing / rebalancing. But I generally like to let things ride and do nothing.

I will note that even the Bogleheads icon Swedroe did market timing leading up to the dot com crash by selling most of his equities (I think he kept only small value and EM).

 

[LOL!]

I am always looking for market timing opportunities, but the steady-state is buy, hold, and rebalance.

I think I am not doing too badly with the kind of market timing that I like to do.

I think there are many misconceptions about market timing with a couple addressed by the explanation that accompanied the poll. One misconception is that some people think one has to be perfect with timing all the time. Another is that one has to do it with one's entire portfolio as in go 100% into cash, then 100% into stocks, then back, then ....

 

[Lsbcal]

... Another is that one has to do it with one's entire portfolio as in go 100% into cash, then 100% into stocks, then back, then ....

Yes, I've recently come to appreciate this more.

Now I have a 60/40 portfolio that can go to a 40/60 under one set of market numbers and to even 0/100 under a more extreme set of these numbers. By going to the first level of risk reduction, I'm reducing the chance that my model doesn't work as well as backtesting indicates and/or that the market takes a terrible sharp plunge that we have not seen in US market history.