New expert investor who's not sure what he's doing

[NW-Bound]

Quote:

Originally Posted by panacea Ok, now I can't tell if you're just trying to be funny. You should probably crack open the book.

It looks like the OP is just starting out. Investing, like most things in life, has to be learned by doing (after a lot of reading).

[Boho]

Quote:

Originally Posted by panacea Ok, now I can't tell if you're just trying to be funny. You should probably crack open the book.

If you pinpoint what's wrong with what I said I may be able to provide you with a reference. Even though I didn't read the book yet I've read other pro-indexing stuff and there's usually some indication that there's a work-around to fix whatever the problem was with market timing.


There's the fact that day trading can work, and if you're extra careful and do it infrequently, I think it's obvious that your chances of picking correctly would improve, the problem being that you may be out of the market too often.


And I already posted a link about hedge fund managers being able to time the market. I have more stuff, but it's hard to reply to a general comment like "are you joking?"

[nun]

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Originally Posted by NW-Bound Some balanced funds such as Wellesley, Wellington, and Dodge and Cox do not have a star manager. Rather, they have a philosophy of investing that tries to conquer greed and fear.

"Greed is not good" when it comes to long term investing because it makes you do dumb things. Many people fear that they are missing out of the best returns and so will chase that return by buying and selling and going after the latest hot fund or stock. This leads to portfolios with far too many investments, high costs and lower than average returns.

[REWahoo]

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Originally Posted by Boho If you pinpoint what's wrong with what I said I may be able to provide you with a reference. Even though I didn't read the book yet I've read other pro-indexing stuff and there's usually some indication that there's a work-around to fix whatever the problem was with market timing.

Note the past tense of the "fix" as it can only be known in retrospect. IOW, the work-around is called time travel. Let us know when you've read the book on that.

[nun]

Quote:

Originally Posted by Boho I And there's the fact that day trading can work, and if you're extra careful and do it infrequently, I think it's obvious that your chances of picking correctly would improve, the problem being that you may be out of the market too often.

You are right to highlight probability. It's the probability distribution of returns that is important. Unfortunately people like shiny things and they focus on the maximum possible amount of return and ignore the very low probability of getting those returns. They should focus on simply being average, however, it's hard to sell "average" even when it gives you the highest probability of investing success.

[Boho]

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Originally Posted by REWahoo Note the past tense of the "fix" as it can only be known in retrospect. IOW, the work-around is called time travel. Let us know when you've read the book on that.

I don't mean that kind of fix. I mean, for example, it's been shown that when you read that you should "hold" a mutual fund, that's a better indication that you should buy it than a "buy" recommendation is. people read that and think it means you should ignore the experts. I read it and think it means I should ignore "buy" recommendations while considering "hold" and "sell" useful.

[REWahoo]

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Originally Posted by Boho I don't mean that kind of fix. I mean, for example, it's been shown that when you read that you should "hold" a mutual fund, that's a better indication that you should buy it than a "buy" recommendation is. people read that and think it means you should ignore the experts. I read it and think it means I should ignore "buy" recommendations while considering "hold" and "sell" useful.

History indicates all those recommendations are excellent - at increasing commissions.

[easysurfer]

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Originally Posted by Boho I already got my main question answered in another section. It's pretty much what I figured. I guess if I had to pick another question it would be what country's index fund do you think would make a good investment for the coming years, not including the U.S. I believe a little market timing could work and I want to weight my portfolio a little bit towards countries that Trump will have the least effect on, but I want more reason than that before I buy a foreign index fund.

Welcome aboard Boho.

I think you have do decide first if you want to be an active or passive investor. Don't know if there was a poll (there's plenty of polls here ) or not here on that topic, but my guess is the majority are passive, indexer types. Once you decide, don't jumping back and forth between the two strategies or else you'll be a serial market timer .

[exnavynuke]

Quote:

Originally Posted by Boho If you pinpoint what's wrong with what I said I may be able to provide you with a reference. Even though I didn't read the book yet I've read other pro-indexing stuff and there's usually some indication that there's a work-around to fix whatever the problem was with market timing.

What "work-around" to fix whatever the problem was with market timing will work to make market timing better than index investing in the future? If you have that answer, go to Wall Street and become a billionaire because no one has ever found something that consistently works.

Quote:

Originally Posted by Boho There's the fact that day trading can work, and if you're extra careful and do it infrequently, I think it's obvious that your chances of picking correctly would improve, the problem being that you may be out of the market too often.

Day trading can work. Becoming an NFL quarterback can also work at increasing net worth. A similar percentage of people wanting either dream tend to succeed at their endeavor.

Quote:

Originally Posted by Boho And I already posted a link about hedge fund managers being able to time the market. I have more stuff, but it's hard to reply to a general comment like "are you joking?"

No, you posted a link to an article that says that some fund managers have done "very well" over the long term. Most of them have nothing to do with "timing the market". In fact, I'd be surprised if any of the names mentioned were trying to time the market for decades. Bernard Baruch is right at the top of the list and he made him money speculating on the sugar market. He got in on a growing market segment and made money off of it. That's not market timing. Buffett doesn't time the markets, he researches and buys into companies based on his own criteria. Even the guy you linked to earlier wasn't timing the market or trying to buy into a specific area, he set criteria for companies he wanted to invest in and followed his criteria for investing. That's not timing the market, it's buying and holding companies that meet specific criteria. Buy and hold was his "market timing". He just had an unusual set of criteria for what to buy and hold which worked some of the time and failed miserably at other times.


Of course, the one thing all of the people mentioned in the article you linked have in common is that it was their profession to research companies and markets and determine what investments to pursue. Like hundreds of thousands of other fund managers over the years. Most of those people haven't fared nearly as well as the 30 or so names mentioned. Overall, about or less than 1% of them have consistently beat the markets over the long haul. So, with the overwhelming majority of professionals, spending all of their work-days researching and planning and learning, yet still failing to do better than the market; one question arises:

What in the world makes you think you'll succeed at market timing when just about everyone, with arguably better education and/or training on the subject, has consistently failed to achieve your objective for more than 100 years?

[REWahoo]

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Originally Posted by exnavynuke What in the world makes you think you'll succeed at market timing when just about everyone, with arguably better education and/or training on the subject, has consistently failed to achieve your objective for more than 100 years?

Boho, this ^ is why you were asked if you were joking.

[Big_Hitter]

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Originally Posted by exnavynuke What in the world makes you think you'll succeed at market timing when just about everyone, with arguably better education and/or training on the subject, has consistently failed to achieve your objective for more than 100 years?

well there was that guy that ran the fido magellan fund....

[RetiredGypsy]

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Originally Posted by Big_Hitter well there was that guy that ran the fido magellan fund....

I heard another guy did pretty well for himself too, but only after he stayed at a Holiday Inn Express.

[REWahoo]

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Originally Posted by Big_Hitter well there was that guy that ran the fido magellan fund....

He did great - until he didn't.

[Big_Hitter]

he beat the "market" every single year he ran the fund until he retired?

https://en.wikipedia.org/wiki/Peter_Lynch

oh but he was against market timing - i got it

[REWahoo]

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Originally Posted by Big_Hitter oh but he was against market timing - i got it

+1

And even the legendary Mr. Lynch didn't beat the market every year.

Quote:

Peter Lynch managed the Fidelity Magellan Fund from 1977 to 1990, during which time the fund\'s assets grew from $20 million to $14 billion. More importantly, Lynch reportedly beat the S&P 500 Index benchmark in 11 of those 13 years, achieving an annual average return of 29%.

The Greatest Investors: Peter Lynch | Investopedia

[Boho]

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Originally Posted by exnavynuke What in the world makes you think you'll succeed at market timing when just about everyone, with arguably better education and/or training on the subject, has consistently failed to achieve your objective for more than 100 years?

I'll be doing more of a review of others' work than original research. I'll be looking for a consensus on certain things, but I won't buy if there's just one sell recommendation. I'll avoid certain countries for the part of my portfolio that isn't an index fund, and I'll choose by considering several things in a way that's probably not especially novel but I've yet to find information that says such an approach (when you're buying index funds of only a small number of countries) is risky. Indexing the world accurately doesn't seem to be a typical strategy and it won't be mine either. The difference is that I admit it and I'll put effort into how to diverge from a perfect index.

[MichaelB]

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Originally Posted by Boho I'll be doing more of a review of others' work than original research. I'll be looking for a consensus on certain things, but I won't buy if there's just one sell recommendation. I'll avoid certain countries for the part of my portfolio that isn't an index fund, and I'll choose by considering several things in a way that's probably not especially novel but I've yet to find information that says such an approach (when you're buying index funds of only a small number of countries) is risky. Indexing the world accurately doesn't seem to be a typical strategy and it won't be mine either. The difference is that I admit it and I'll put effort into how to diverge from a perfect index.

Sounds like you have it all worked out. Good luck.

[Dawg52]

I would recommend doing what a lot of people do. Use index or managed funds for your core holdings and keep a small amount for individual stock investing. That may satisfy your desire to stock pick. I own one stock and follow it. But even if it goes to zero, it won't kill me.

[Boho]

Quote:

Originally Posted by exnavynuke He got in on a growing market segment and made money off of it. That's not market timing. Buffett doesn't time the markets, he researches and buys into companies based on his own criteria. Even the guy you linked to earlier wasn't timing the market or trying to buy into a specific area, he set criteria for companies he wanted to invest in and followed his criteria for investing. That's not timing the market, it's buying and holding companies that meet specific criteria.

It's kind of half timing the market. I considered diverging from an index to be timing the market but maybe it isn't. I expect that I'll occasionally consider selling for reasons other than needing cash and rebalancing. I don't think I'll do it often. I don't know what to call it and I'm not sure exactly what I'll do, but I'll be choosing a country or countries soon and I'll be tempted to make a public prediction that the index of those countries will rise beyond the world index by 2018.

[target2019]

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Originally Posted by Dawg52 I would recommend doing what a lot of people do. Use index or managed funds for your core holdings and keep a small amount for individual stock investing. That may satisfy your desire to stock pick. I own one stock and follow it. But even if it goes to zero, it won't kill me.

You saved me some typing time.
It is possible to get performance beyond what the market provides in an index fund. But it probably won't happen for most. Still, go ahead if it makes you happy.