Market Timing Schmarket Timing

[Gumby]

SDY has more of a "value" orientation than a straight SPY investment. I've favored that end of the spectrum since the day I read Benjamin Graham's The Intelligent Investor for the first time. DIV would have been another alternative, but I already have a large amount of that.

 

[target2019]

It would have been a brutal hit but my assets are indeed nearly 100% in IRAs.

My opinion is that your AA must have been wrong, or you would have made a smaller tactical move.

Given the week's market moves, and usual summer doldrums, you actually are ahead, now. Do you have a plan for getting back to a different AA?

We discussed, and moved, about 2% small/midcap to stable value last week.

 

[REWahoo]

With all the noise about a pending major market correction, here's a dissenting opinion:

History says don’t count on a big correction anytime soon

Chadha says big corrections are unusual mid-cycle, which is where he reckons we are right now. Instead, three-fourths of such corrections happen near recessions (measured as one year on either side) — and almost never occur when the trend in the unemployment rate is down, Chadha writes.

Chadha also downplays the scope of the current rally when stacked up versus other mid-cycle runs. While the average rally between corrections has been 43% over 1 1/2 years, Chadha says the averages are skewed by short rallies interrupted by frequent corrections around crises and recessions. A better comparison are the “long business cycles” of the 1960s, 1980s, 1990s and 2000s, he says, when the stock-market rallies averaged 110% and lasted four years.

Knowing my market timing track record, I'd be sitting on the sidelines in cash when the downturn suddenly reversed itself, leaving me on the sidelines while the market continued to climb.

Then again, the OP may be the smartest guy in the room...

 

[eta2020]

SDY has more of a "value" orientation than a straight SPY investment. I've favored that end of the spectrum since the day I read Benjamin Graham's The Intelligent Investor for the first time. DIV would have been another alternative, but I already have a large amount of that.

Even here at least 50% of people don't follow Graham's "The Intelligent Investor"

 

[robnplunder]

Wheeeeeeee ... bring on a market correction please. Let's get it over with and take the DOW industry average to 25000 . I am tired of OMY. Retire early, I will.

 

[eta2020]

I would be interested if OP posted into this thread on the day when jumps back into the market.

 

[bob boag]

I would be interested if OP posted into this thread on the day when jumps back into the market.

Will do. Vanguard won't let my back into my old funds via online transfer until I believe October 27, so I'm thinking about then - unless the sky is falling.

 

[NW-Bound]

On Friday, I bought a bit of a triple-leveraged small-cap ETF. I had sold it off earlier and was buying it back. It moves at about 3X or more relative to the Nasdaq. If the S&P is Tabasco sauce, then this is pure habanero. Heh heh heh...

Of course I am chicken and limit myself to no more than 3-4% in these ETFs. Of course, when I happened to make money, I kicked myself for not putting in more. Market timing ain't easy...

 

[Lsbcal]

Great timing NW. You bought at a local minima. Only time will tell just how local.

 

[NW-Bound]

In the past, I tended to sell too soon, and only made a few $K instead of a lot more had I held on longer.

However, stocks are more or less fully priced now, and I shall not be greedy. If I can make a couple of extra $K to help put gas in my RV for the upcoming RV fall trek with these plays, I will be happy.

PS. These volatile ETFs are great for playing the short-term market movements. Because they are leveraged, I can get a larger effect while committing only 3-4% of portfolio, while leaving my long-term holdings alone.

 

[TimSF]

This thread is a very interesting read. Much thanks to bobboag for his willingness to share his big move with us in real-time, a move that many of us have been tempted to in the past, and some have exercised. I am interested in the psychological impact over time of such a move, if OP would continue to be willing to share his experience. Does he sleep better at night knowing his nest egg is not subject to further nominal losses for the next few months? Or is he anxious about how and when to get back into the market? Does he find himself checking market news less frequently now; or is he tempted to follow the market daily to replay his decision in his mind? Is OP even still checking in with this, or other, financial websites? If by October a big correction has not occurred, will he buy back into the market even if prices are higher than when he got out or will he continue to stay on the sidelines? Will he go back in all at once, or DCA over time?

 

[Texas Proud]

This thread is a very interesting read. Much thanks to bobboag for his willingness to share his big move with us in real-time, a move that many of us have been tempted to in the past, and some have exercised. I am interested in the psychological impact over time of such a move, if OP would continue to be willing to share his experience. Does he sleep better at night knowing his nest egg is not subject to further nominal losses for the next few months? Or is he anxious about how and when to get back into the market? Does he find himself checking market news less frequently now; or is he tempted to follow the market daily to replay his decision in his mind? Is OP even still checking in with this, or other, financial websites? If by October a big correction has not occurred, will he buy back into the market even if prices are higher than when he got out or will he continue to stay on the sidelines? Will he go back in all at once, or DCA over time?

I think there are two types of people who try and 'market time'.... people who try and 'trade' and people who do long term market timing... your question about getting back in Oct has to be toward the former... if you were the latter, you would not even think about a 3 month time frame...


Most of the people who I hear talk about a correction are talking about another long one that would be up to two years... and they do not think a 10%, or even 20% correction is the issue... heck, some are talking rioting in the streets and the collapse of our government....

It would be interesting to know if the OP is doing a trade in 3 months or not... but I do not think so...

 

[MARKET-TIMER]

Hi, I am new to this board. You all have a lot of great information based on actual experiences. I appreciate your viewpoints. I think that most people are market timers. This is proven by the mutual fund inflow data. Most of you might be able to resist this. However, with the probability is high that stocks and bonds are very richly valued. Therefore, those that have the temperament may add alpha over time to their portfolio via Market Timing. Long term Market Timing has worked for me for the past 20 years. My returns are several percentage points higher than the mutual funds I have invested in over the past 20 years (and my drawdowns significantly lower). The primary goal of Market Timing is to reduce risk rather than increase returns. For those who want to reduce risk Market Timing is a viable option---if you have the right temperament!

 

[REWahoo]

I'm always learning something on this forum. Today I learned Market Timing should be capitalized. Who knew?

Seriously, good luck on this forum MT. You have an uphill battle if you think you can convince the majority of those who post here that timing the market is a viable strategy for them.

 

[REWahoo]

My returns are several percentage points higher than the mutual funds I have invested in over the past 20 years (and my drawdowns significantly lower).

Two questions:

Isn't it equally possible your MT numbers were better because you made bad choices with the funds you picked?

Also, how has MT caused your drawdowns to be significantly lower? Did you spend less because you were dedicating more time to investing and had less time for other activities?

 

[papadad111]

There are sadly a lot of curmudgeons out on this board of late who discount discussion of theory with "I wouldn't do it" and flip/snarky remarks like "good luck". just not terribly insightful for the sake of discussion. Some folks need their meds adjusted or are just old and cranky. Don't let it get to ya !!!

Can one not hedge market risk with put options in an index (spy for example) rather than "selling all" and paying Uncle Sam a wad in what could be short and long term capital gains taxes?

I have tried to be more consistent on buy and hold but did bail in spring 2007 - and traded in and out in 2009-2011. Did not get back in for a sustained buy and hold til 2012. Still holding now.

I do think being on the sideline while carnage of 2008-2009 was hitting was beneficial to my health. I slept well at night. Saw many buy and holders freaking out when the 401k turned into a 201k in 6 months time. It took SP500 til I think mid 2013 to get back to 1575 October 2007 highs -- (ex dividends) so no regrets getting out nor getting back in.


Buy insurance:
. When I get the urge to sell I have looked at the tax liability it will create and determine what I can afford as an alternative to my money going right to Uncle Sam - I instead try a put option strategy that will hedge a portion of my long position - I do not hedge all. I do hedge Just enough to maintain survival in ER. Out of the money puts can be reasonably Cheap insurance if you are so inclined.

 

[REWahoo]

There are sadly a lot of curmudgeons out on this board of late who discount discussion of theory with "I wouldn't do it" and flip/snarky remarks like "good luck". just not terribly insightful for the sake of discussion. Some folks need their meds adjusted or are just old and cranky.

Speaking of "...just not terribly insightful for the sake of discussion," how does making flip/snarky remarks about someone's age and medical condition improve the level of discourse?

 

[MARKET-TIMER]

Market Timing

I don't care to convince anyone to become a market timer. I merely stated what has worked for me in the past. No one knows what the future holds. It is quite possible that those who sit on a 50% decline in the future may have to wait decades to be made whole. Of course, this can happen to market timers as well.

What has not changed throughout history is that investors get greedy and fearful. This can be exploited. Even a simple 10 or 12 month moving average system in a diversified portfolio shows reduced drawdowns without hurting performance (Mebane Faber research). Portfolio insurance is a viable option for those who insist on being fully invested. The point that is beyond technical dispute is that some with the right temperament have been successful market timers. Some on this board disagree with this assertion.

 

[REWahoo]

Even a simple 10 or 12 month moving average system in a diversified portfolio shows reduced drawdowns without hurting performance (Mebane Faber research).

I see the confusion. You are speaking of drawdowns in terms of peak to trough decline of an investment, while most of us here think of the term drawdown referring to how much we pull from our portfolio in retirement.

Now, about your fund choices...

 

[target2019]

I don't care to convince anyone to become a market timer. I merely stated what has worked for me in the past. No one knows what the future holds. It is quite possible that those who sit on a 50% decline in the future may have to wait decades to be made whole. Of course, this can happen to market timers as well.

What has not changed throughout history is that investors get greedy and fearful. This can be exploited. Even a simple 10 or 12 month moving average system in a diversified portfolio shows reduced drawdowns without hurting performance (Mebane Faber research). Portfolio insurance is a viable option for those who insist on being fully invested. The point that is beyond technical dispute is that some with the right temperament have been successful market timers. Some on this board disagree with this assertion.

I agree with some of this. For instance, I believe you can partially mitigate the downside by using MA signals. Some take serious issue with this, and quickly go for an all-or-none argument, and quickly douse discussion. Still, you need to recognize where you are praying, I think. You're just not gonna achieve any positive critical mass in a discussion about MT on this forum. It quickly goes all negative.

There are more open financial forums where a wide spectrum of approaches and theories get discussed (like Morningstar).

I think your choice of forum alias is really cool, but you might choose something less incendiary next time.

Take care, and hope we can carry on a discussion of something or other.

 

[REWahoo]

Still, you need to recognize where you are praying, I think.

I think you've identified the essence of my concern about market timing...

 

[aim-high]

I think you've identified the essence of my concern about market timing...

You're praying for indexing too because you're at the mercy of the "economy". Whatever the markets give you is what you get.

Logical people who use market timing aren't likely to beat the market. I have to index because I know I am an emotional investor.

What I should do is manage a small portfolio and create my own market timing newsletter. When I'm depressed and panicking and wanting to move 100% to bonds, that's the time to buy stocks. When I'm manic and thinking I'm going to be a gazillionaire and that I should be 100% stocks, that's the time to move to bonds.

 

[REWahoo]

What I should do is manage a small portfolio and create my own market timing newsletter. When I'm depressed and panicking and wanting to move 100% to bonds, that's the time to buy stocks. When I'm manic and thinking I'm going to be a gazillionaire and that I should be 100% stocks, that's the time to move to bonds.

Please post your results here so we can celebrate your success with you.

 

[ERD50]

I don't care to convince anyone to become a market timer. I merely stated what has worked for me in the past. ...

No need to try to convince anyone, but I would be interested in your methodology. I don't think you 'stated what has worked for me (you) in the past', I think you just stated that some form of market timing worked.

Details? And as REWahoo asked, what was your benchmark?

I think there may be ways for the little guy to boost earnings, I just have not seen one that I feel confident about, yet. It is possible to have a good discussion of this on this forum, but it needs some transparency - info that can be evaluated openly.

-ERD50

 

[target2019]

I think you've identified the essence of my concern about market timing...

That wasn't my intent.

It meant that bringing up an MA idea here will convert no one. It's just not a topic that can be discussed for long.

As I suggested, M-T might find decent discussion on Morningstar or similar site, where there are forums set aside for those who want to discuss a revolutionary concept.