Lesson to myself re- Market Timing and Activity.

[Cortina]

Nothing new here , just a "real example" with some actual figs .............


In July 2016 , I opened an account with Schwab ("forced" on me , by Smith Barney not wanting to deal anymore with accounts owned by non US residents) - Grand : So I transfered in cash and some Stock, 95% of value was in stock. Lot of money for me - figure is irrelevant , but there were 6 digits in total $.
Up to now I have worked hard with it - buying stock , selling stock - not trying to time markets , but just make sensible profits where I could and trying to diversify from the one stock I started with . Up to today , I have a return of 157% (cash is now about 20% of total , and I have seven holdings vs the one I started with)


I was feeling quite good about this ................ untill


I calculated what my return would have been if I had done NOTHING.



Answer : up 190% , and that's ignoring any return and the compounding affect of reinvesting dividends from those initial shares


Hmm ..... I don't feel so good (smart) anymore. me thinks there is a lesson in there somewhere !

 

[disneysteve]

Well, market timing is one thing. Diversification is another. You are more likely to hit a home run with a concentrated investment but you're also more likely to strike out if that one stock goes bad. A diversified portfolio will likely temper the returns but also lessen your chances of a big loss.

 

[Fermion]

Any time I feel good about an investment I just look at Dogecoin, up 10,000% in 5 months.

 

[NW-Bound]

Any time I feel good about an investment I just look at Dogecoin, up 10,000% in 5 months.

I compare my performance to the S&P but never to any individual asset because I will never put all in a single basket, and certainly not to something like Dogecoin or Bitcoin, which I never thought of buying.

 

[TheHobbit]

Any time I feel good about an investment I just look at Dogecoin, up 10,000% in 5 months.

Except that Dogecoin isn’t really investing. It’s more like knowingly participating in Bernie Madoff’s fund and playing chicken with your fellow holders of the fund.

If you aren’t one of the last ones out you do amazing, otherwise …. probably won’t end well.

Ultimately indexers make waaaay more money than Crypto folks because we can out 80-90% of our NW into the strategy and sleep like babies. On a good day 1% of a 7 figure sum in the S&P is a good deal more money than the vast majority of the clowns are making on Crypto since they dare not risk this kind of coin on it.

In short, I’ll take consistent small returns over the latest fad any day, compounding will ultimately mop the floor with these fads. I just have to sit here at Starbucks, sip my Mocha and wait.

 

[DrRoy]

I had that lesson a while back myself. All index since then.

 

[Closet_Gamer]

Been there. I thought I was an investing genius in the late 90s because my returns were great...but not as good as the broad market.

We've all been there.

 

[street]

Cortina, that is interesting and have seen a few threads here on the same style of investing. I guess for me doing nothing has served me well, but am diversified in the markets.

If I remember there has been like data shown that rebalancing verses doing nothing seems to be about the same results.

Please correct me if that is not true. I also remember that doing nothing, actually did better but not by much.

I wish you the best in the future.

 

[Markola]

^^^^. Street, You’ve got me in chart making mode [emoji857]. Here’s doing nothing with a 60/40 allocation (Portfolio 1) vs. the constant rebalancing that the Vanguard Balanced Fund comprising those same Funds and allocation. The only difference is, the non-rebalanced portfolio endures more volatility (see the table at the bottom). If you’re ok with it, more power to ya.

 

[street]

Markola, that is awesome data, and the numbers are the numbers. My way of investing may not have been as unproductive as I once thought.

Thank you for the charts and giving real facts in comparisons. Outstanding!!

I want to add thou, if I was more into moving/rebalancing things and felt comfortable doing so, I see nothing wrong with doing it either.

 

[Markola]

You’re welcome. I was amazed at the comparison, too. One can play for free to their heart’s content on Portfolio Visualizer.

 

[OverThinkMuch]

Except that Dogecoin isn’t really investing. It’s more like knowingly participating in Bernie Madoff’s fund and playing chicken with your fellow holders of the fund.

If you aren’t one of the last ones out you do amazing, otherwise …. probably won’t end well.

Except with a fraud like Madoff's, there's claw backs. Meaning if you invest $20,000 and withdraw $25,000 ... the FBI/SEC agents will come after you for $25,000. And then when all the dust settles, all victims will get roughly equal pennies on their dollars. Even if you win against a scam, you lose.

 

[Time2]

My son is playing with individual stocks, but, I got him to put a good percentage of his money in VTSAX. I hope at some point he sees, that the funds did better than his individual stocks. He does no research and wouldn't know what to look for, he just hears a friend say this one or that and he buys it.

 

[Chuckanut]

Except with a fraud like Madoff's, there's claw backs. Meaning if you invest $20,000 and withdraw $25,000 ... the FBI/SEC agents will come after you for $25,000. And then when all the dust settles, all victims will get roughly equal pennies on their dollars. Even if you win against a scam, you lose.

They also get to hassle with the IRS about the previous income tax they paid on earnings that really never existed. What fun!

In regards to timing the market, or buying and selling stocks, I did that for a while in my youth and found that my losses had a way of neutralizing my gains. And back then transaction fees were rather high compared to today. I bought my first mutual fund in the 80's and never looked back.

 

[lordjust]

Been there. I thought I was an investing genius in the late 90s because my returns were great...but not as good as the broad market.

We've all been there.

Same for me. My play/touch account has profited 1/2 of my don’t touch account. There is a lesson in there somewhere regarding my investing abilities.

 

[pjigar]

I learned it personally few years ago since I started tracking my portfolio returns by entering transactions on the same spreadsheet. All indices since awakening. I try to pass this lesson to all my friends unsuccessfully by posing a subtle question: Have you ever computed CAGR of your portfolio? I loose them at CAGR