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Trying to time the markets
Old 11-10-2020, 07:16 AM   #1
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Trying to time the markets

Everywhere you see warnings about this... here's my story:

I'm back to where I started in February of this year. But this year has been more stressful because of an experiment of sorts, where I decided to see how trying to time the markets would go...

Here's my story in a nutshell, shared because I tend to learn so much from reading others ...

In early February, when COVID news was just starting to break in China but there wasn't a case in the US (found at least) yet... I used that as a trigger to step out of the market. I watched the bull for the previous decade and kept wondering when the drop would happen... I guess I felt it coming. I was lucky. I managed to pull 50% of my stock investments (into treasuries) when the DOW was at 29,200ish, a few days before everything fell. I watched the DOW drop to below 20K. I bought back in 25% of what I sold when it was at 19,500, and the rest when it was close to the bottom in March. I felt pretty good about this (it was luck though... I guess it's human emotions to tell yourself skill had something to do with it, you can do it again right)

Anyway... I watched the market tick upwards. and when it got to 22,500 I sold 50% again (this time to cash, money market) thinking this was a dead cat bounce. No way the market would EVER return to near it's Jan highs with COVID ravaging the global and US economies (still seems incredible to me now, that the market is where it is despite the roadmap behind us...) I sold the other half (also to cash) when it reached 24,000... and it's been difficult watching it continue to climb sitting on the sideline... I can say that missing gains (after abandoning your AA plan) is more painful than sitting in losses. At least for me it has been...

Yesterday (by my math) my account's value reached exactly what it would be if I had never touched it... that is, I've lost all the gains I received from timing that drop, by sitting in cash and seeing the market climb to where it is now (close to 30K). I guess it was a bit of a relief... I put it all back in, at the same asset allocation I was back in February. A relief that essentially nothing changed... except a lot of stress getting here, and a higher blood pressure I'm sure. It's not worth it.

I always read, don't try to time the markets... now I really understand it. Never again. I'm fortunate I can share this story of this experience (the last 6 months I've watched the market ever single day - something I never did in the last 15 years of investing to build my retirement) and still come out the other side, essentially back at square one. Regardless of what the market does moving forward.

It is much more comfortable to sit in your plan with faith in it... focused on the long term, and not the day to day (month to month) jitters, and trying to time them. I'm not sure how day traders do this. It would send me to an early grave.
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Old 11-10-2020, 07:28 AM   #2
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Quote:
Originally Posted by EvrClrx311 View Post
Everywhere you see warnings about this... here's my story:

I'm back to where I started in February of this year. But this year has been more stressful because of an experiment of sorts, where I decided to see how trying to time the markets would go...

Here's my story in a nutshell, shared because I tend to learn so much from reading others ...

In early February, when COVID news was just starting to break in China but there wasn't a case in the US (found at least) yet... I used that as a trigger to step out of the market. I watched the bull for the previous decade and kept wondering when the drop would happen... I guess I felt it coming. I was lucky. I managed to pull 50% of my stock investments (into treasuries) when the DOW was at 29,200ish, a few days before everything fell. I watched the DOW drop to below 20K. I bought back in 25% of what I sold when it was at 19,500, and the rest when it was close to the bottom in March. I felt pretty good about this (it was luck though... I guess it's human emotions to tell yourself skill had something to do with it, you can do it again right)

Anyway... I watched the market tick upwards. and when it got to 22,500 I sold 50% again (this time to cash, money market) thinking this was a dead cat bounce. No way the market would EVER return to near it's Jan highs with COVID ravaging the global and US economies (still seems incredible to me now, that the market is where it is despite the roadmap behind us...) I sold the other half (also to cash) when it reached 24,000... and it's been difficult watching it continue to climb sitting on the sideline... I can say that missing gains (after abandoning your AA plan) is more painful than sitting in losses. At least for me it was been...

Yesterday (by my math) my account's value reached exactly what it would be if I had never touched it... that is, I've lost all the gains I received from timing that drop, by sitting in cash and seeing the market climb to where it is now (close to 30K). I guess it was a bit of a relief... I put it all back in, at the same asset allocation I was back in February. A relief that essentially nothing changed... except a lot of stress getting here, and a higher blood pressure I'm sure. It's not worth it.

I always read, don't try to time the markets... now I really understand it. Never again. I'm fortunate I can share this story of this experience (the last 6 months I've watched the market ever single day - something I never did in the last 15 years of investing to build my retirement) and still come out the other side, essentially back at square one. Regardless of what the market does moving forward.

It is much more comfortable to sit in your plan with faith in it... focused on the long term, and not the day to day (month to month) jitters, and trying to time them. I'm not sure how day traders do this. It would send me to an early grave.
+1

You are very kind to share that story. And you did somewhat conduct an experiment for the benefit of others. Hang in there and I'm happy it turned out for you. I think a lot people are basically where they were at the beginning of the year (depending on AA, of course) even if they stayed in. So under no circumstance should you be beating yourself up. Take care.
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Old 11-10-2020, 07:37 AM   #3
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Thanks for that bit of real world evidence and story. I am sure that there are others who have done similar, but may still be waiting for that drop they believe in. Meanwhile they are missing out of the gains by being out of the market during that waiting period. I think the lesson learned is to stay invested, stick with an AA that works for your risk tolerance and timeframe.
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Old 11-10-2020, 08:48 AM   #4
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Originally Posted by EvrClrx311 View Post
... I always read, don't try to time the markets... now I really understand it. Never again. I'm fortunate I can share this story of this experience (the last 6 months I've watched the market ever single day - something I never did in the last 15 years of investing to build my retirement) and still come out the other side, essentially back at square one

It is much more comfortable to sit in your plan with faith in it... focused on the long term, and not the day to day (month to month) jitters, and trying to time them. ...
Thank you for this. You have performed a great service for some people you will never hear from or meet.

The problem with this sort of thing and with amateur stock picking, too, is that people who "win" are the people who post. The people who do not win generally do not post. This creates an illusion of easy success that is not reality. Taleb calls this the "silent evidence" that by its absence misleads people. You've broken the silence and will hopefully lead at least a few readers to a better understanding of the market reality.

Glad to see, too, that you didn't pay much tuition for your lesson. Many have paid more for their lessons.
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Old 11-10-2020, 08:50 AM   #5
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Thanks for sharing your story.
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Old 11-10-2020, 09:02 AM   #6
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Thank you for this. You have performed a great service for some people you will never hear from or meet.

The problem with this sort of thing and with amateur stock picking, too, is that people who "win" are the people who post. The people who do not win generally do not post. This creates an illusion of easy success that is not reality. Taleb calls this the "silent evidence" that by its absence misleads people. You've broken the silence and will hopefully lead at least a few readers to a better understanding of the market reality.

Glad to see, too, that you didn't pay much tuition for your lesson. Many have paid more for their lessons.
+1 Absolutely!

If you consider my situation in April/May (and I even posted about it at the time on this forum) it reads as evidence that timing the market is doable, and hindsight of the COVID disaster seemed 'obvious' (readers might consider... 'why didn't I do this!?')... I certainly felt very good about what I accomplished.

The reality is that I've lost a lot since May, in relative value. So although I'm even on the year, I'm way down from that perceived height. And I happen to know by exactly how much (on the order of $170,000 had I otherwise not continued trying to time after that winning call in Feb/Mar). Back to big picture... if I had simply, horribly, misjudged this market and was down for the year... I might simply reinvest now at that lower level, regret the bad call in private and consider how it set me back year(s) on my path and never posted about it out of embarrassment. I think that is what happens multiple times over, for every success story of how someone navigated timing the market.

What I really appreciate from this experience is the heightened awareness of how detrimental it can be, to have to manage the emotions around the gains and loses as one deviates from an otherwise solid plan/path forward that requires no management.
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Old 11-10-2020, 09:04 AM   #7
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That was very interesting. Thanks for sharing. Many folks who sell at peaks have trouble getting back in again even as the market passes them by, so you doing so is a huge plus.

Edited to add: Many folks who bail at peaks (or more commonly after a big drop) become convinced that the market will drop the minute they get back in. So they remain sidelined like a dear in the headlights.

Having to watch market action daily can certainly be stressful. Finding a system (like rebalancing) that requires no monitoring is a great alternative.

I don’t think anyone here expected the markets to behave as they did. The snap back was so sudden and strong I only got half of my planned fund exchanges done. But better than nothing.

You know what they say - markets behave to fool most of the people most of the time. Or something like that.

A fairly recent Ritholtz article on the very topic: https://www.bloomberg.com/opinion/ar...-fool-s-errand
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Old 11-10-2020, 09:09 AM   #8
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It does appear... that doing the opposite of what seems rational (or obvious) works more often than not. Easier said than done.
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Old 11-10-2020, 10:22 AM   #9
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Thanks for sharing. I think the first rule of investing, for me anyway, is summed up in three words: Stay Fully Invested. It was not that easy to do so this spring, but in fact it never is.

As an active investor, I took some profits in the winter, and tilted more toward secular growth after the selloff. A lot of tiptoeing with small positions, but it has paid off nicely.
I never could have expected the market would come back this strongly, but low interest rates create value so powerfully-and vice versa.

All the best.
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Old 11-10-2020, 10:47 AM   #10
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A number of posters reported going to cash before the big drop. The problem is always when to get back in. The upturns tend to be sudden and rapid. Wait a few days and you miss a substantial portion. Your apprehension of a dead cat bounce was widely shared. I still wonder when the reckoning will occur. Maybe never.
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Old 11-10-2020, 10:52 AM   #11
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Thank you for the story. Just in case it's not obvious, you still may "win."

Paraphrasing Morrison, "You cannot petition the market with prayer." In either direction, I add.
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Old 11-10-2020, 11:22 AM   #12
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I have also fumbled around with 'market timing' this year. Going into the year I was less than 50% equity, because I pulled back last year. Then in January/February I started putting money in as it had pulled back from the highs, only to see the bottom fall out with COVID. I then started again to add more money back in July/August on dips. Got myself back to an 85/15 split, and somehow managed to be up 6.9% today, but it was not pretty. If I went back and looked at 2019-2020, I bet I would have done as well or better just letting the money sit where it was (100% equities).

(Although there is some 'value' in feeling like a bigshot moving several hundred thousand dollars around on a whim:-)
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Old 11-10-2020, 11:55 AM   #13
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Thanks for sharing. Timing the market is difficult for certain. I do at times pull money out of individual stocks, but never sell everything. Sometimes I’m successful by reinvesting in the same stock, sometimes a different stock, and sometimes I’m not successful. Our portfolio is higher than it was at the begin the year, including the withdrawal of funds for a home purchase for our son and significant taxes for tIRA conversions to Roth IRA and significant charitable contributions because of COVID. AAPL, AMZN and CMG were nice plays because of their volatility. I was able to buy into those by ridding myself of BA and RCL before they tanked. I didn’t touch my other dividend stocks because I wanted the income and didn’t see them getting too low during the pandemic. I also kept some proceeds from sales in cash as a cushion.
Bottom line is I don’t time the entire market, but do with a few stocks during times of volatility. YMMV
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Old 11-10-2020, 12:27 PM   #14
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I too tried to time the market this year. I pulled out 30% in early February and then another 30% in March thinking it would keep on sinking... But it sailed up quickly again and I didn't make it back in. Bought back in to about 50% and I am now 4.5% behind where I was at the beginning of the year if you don't count contributions and rental real estate investments. Those included I am ahead by 4%, but behind where I would have been by staying invested...

Good lesson - but hard to swallow
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Old 11-11-2020, 04:31 AM   #15
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The problem is always when to get back in. The upturns tend to be sudden and rapid. Wait a few days and you miss a substantial portion.
OP even got the second part right, too, and still failed to reap any benefits! Very interesting. Many thanks for sharing.
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Old 11-11-2020, 05:26 AM   #16
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OP even got the second part right, too, and still failed to reap any benefits! Very interesting. Many thanks for sharing.
Yeah - that was the clincher. OP actually did it twice. The first time he got out at a great time, and then got back in at a great time. But he then tried again due to sell off concerns (again) - got out at a not so great time, but was at least smart enough to get back in at time when it was a wash as he realized it hadn’t worked. Many will not take that last step and get stuck on the sidelines.
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Old 11-11-2020, 06:16 AM   #17
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OP even got the second part right, too, and still failed to reap any benefits! Very interesting. Many thanks for sharing.
I certainly had a false sense of optimism on that second set of sales, of an impending false correction's correction... also a hint of "playing with the casino's money..." which is hard to admit (for a rational minded individual like myself), but true.

All reminders that... we can make investing a gamble or we can use the winds to our advantage with a long term plan.
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Old 11-11-2020, 06:48 AM   #18
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Thanks for confirming one of the investment commandments, don't time the market!!

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Old 11-11-2020, 06:49 AM   #19
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As a very novice investor, I gave timing a try several times in the 80s and early 90s. It always seemed to turn out wrong due to something completely unexpected. I realized I couldn’t predict the markets and neither could the pundits. I was delighted to discover the more passive (reactionary) approach of a chosen AA and periodic rebalancing as I prepared for retirement. I was quite relieved to have the guesswork and constant market watching taken out of the equation. A system that required minimal maintenance and could function just fine with no more than a once a year review/action was critical to me in retirement as I wanted to be able to go off and do stuff for long periods without paying attention to the financial world.
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Old 11-11-2020, 07:07 AM   #20
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I didn't go all cash, but I did make two moves:

I took about $200k in underperformers, sold to cash in Feb, when the market first went wobbly and lost the YTD gains.

In May, after the initial recovery (S&P was down around 10% vs. 30), we shifted our non-taxable AA down by about 20%. While we spent most of the summer wondering what in the heck why is the market strong, we didn't worry about "losing gains" as we'd sold at a comfy-for-us spot. Decided we'd go back after the election if the other shoe hadn't dropped. I definitely had some FOMO during those months but not enough to really worry about it.

Got back in Friday. Give or take overall we're about even with Jan'20, (maybe slightly up have to run the details at YE), but no regrets. If anything this episode has improved my risk tolerance. I shouldn't feel the need to tinker next time.
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