Timing the market

[audreyh1]

People who get out because things feel scary and they are afraid of a major market sell off, are often even more afraid once the market does sell off. Because it feels even less safe. The market stays down while there are scary headlines. Once things seem safer and the scary headlines recede, and it seems OK to reinvest, the market will have already recovered.

Lots of people had a really hard time buying back in in 2009 because they "felt" like the market would just sell off again. Headlines were still scary.

[haha]

Quote:

Originally Posted by audreyh1 People who get out because things feel scary and they are afraid of a major market sell off, are often even more afraid once the market does sell off. Because it feels even less safe. The market stays down while there are scary headlines. Once things seem safer and the scary headlines recede, and it seems OK to reinvest, the market will have already recovered. Lots of people had a really hard time buying back in in 2009 because they "felt" like the market would just sell off again. Headlines were still scary.

I think I understand what you are saying. However, I see that less as a criticism of the idea than that like any idea or plan, some people can do it, and some can't. Unless we have faulty mental maps that tell us that when prices are high, stocks must be good investments, and when prices are low, they must be bad.

I make a million mistakes investing, but not that one, which seems to be to be so easy to refute. In truth we have no idea what is going to happen, whether prices are high or low. But we can tell what the price is. Given the same surface to fall on, it is hard to get hurt more falling out a basement window than a window on the 20th floor.



Ha

[audreyh1]

Quote:

Originally Posted by haha Unless we have faulty mental maps that tell us that when prices are high, stocks must be good investments, and when prices are low, they must be bad.

In studies of investor psycology, it has be shown that many people have precisely this problem. Thus the adage that the stock market is the only market where people don't buy when things go on sale (fear). And the counterpoint about people chasing recent hot performers, or, "piling in at the top" (greed).

Quote:

Originally Posted by haha In truth we have no idea what is going to happen, whether prices are high or low.

Agreed. So a strategy that hedges bets, i.e. remains diversified, in the long run makes more sense than one that tries to jump all in to switch to one asset class or another based on near-term price predictions.

[target2019]

Thinking Fast and Slow.
m.cbsnews.com/fullstory.rbml?catid=57351940&feed_id=76&videofeed =43

[clifp]

Quote:

Originally Posted by target2019 Thinking Fast and Slow. m.cbsnews.com/fullstory.rbml?catid=57351940&feed_id=76&videofeed =43

I very much liked Thinking Fast and Slow, but found the investing chapter the least compelling. Primarily because like virtual all of these studies, if you study the performance of mutual funds, or hedge funds, you are going to get different result than if you study the performance of the individual managers who make the buying and selling decision. Because individual managers turn over fairly quickly and it is difficult to measure their performance and determine if the add alpha, almost all academic studies measure fund performance.

There is no doubt that most people have horrible instincts regarding the stock market but not everyone does.

For at least 20 years, I have been more inclined to sell when the market goes up for an extended period of time and more inclined to buy when went down. Now my timing isn't always very good, and as value investor I almost always buy too early and sell too early, except for when I fall into a value trap which happens.

But S&P 1450 makes far more nervous than S&P 1100 for the reason that Ha said falling from the 20th floor hurts more than from the first.

[cute fuzzy bunny]

I've "market timed" quite successfully but not through any metrics or a 'system'.

When the nasdaq hit 4000 in the late 90's/early 2000's, I decided to get out. 4000 was a stupid price by any measure, and it was built on the backs of companies without profits or even legitimate business plans. I actually decided to wait until after january 1st to defer the tax his and it went to 5000, and I gladly cashed out then.

No early retirement if I hadn't done that. My companies stock fell by 2/3+ and we actually had profits and a good business model. And the tons of money I scraped up by buying tech stocks and dumping them when they hit stupid levels was nice to have.

I missed a big chunk of the 2007/2008 debacle, but I also bought a $550k house thats worth 350k now. And I ducked that 20% drop last year.

I just go by Warren's credo. "Be greedy when others are fearful (I was buying hard into equities near the bottom a few years ago) and fearful when others are greedy (as in last year when the market was high, but the news was all bad)"

People are being greedy right now. I'm pretty sure Obama wins re-election and then the republican controlled congress antagonizes the situation and the market drops like a rock, then has a nice recovery around the 2nd quarter of next year. I'm feeling a lot more fearful than greedy right now.

[haha]

Quote:

Originally Posted by audreyh1 In studies of investor psycology, it has be shown that many people have precisely this problem. Thus the adage that the stock market is the only market where people don't buy when things go on sale (fear). And the counterpoint about people chasing recent hot performers, or, "piling in at the top" (greed).

A common problem, yes. Everyone's problem, no.

Quote:

Agreed. So a strategy that hedges bets, i.e. remains diversified, in the long run makes more sense than one that tries to jump all in to switch to one asset class or another based on near-term price predictions.

I'm not sure if you are respoonding to my post or not, but if so you did not understand my post. I said we do not know what will happen, but we do know current prices and values.

Wise timing has far more to do with current prices/values than it does with any predicitons, which I agree are often but not always worthless.

In any case,the fewer people that I convince the better I like it. I'll drop out now, since everyone knows what is correct. It is received wisdom around here.

Ha

[REWahoo]

Quote:

Originally Posted by haha In any case,the fewer people that I convince the better I like it. I'll drop out now, since everyone knows what is correct. It is received wisdom around here.

Ha, I know you are working hard at it but you really need to find a more subtle way to say "screw you idiots".

[haha]

Hey, that is not what I am doing. But when I carefully answer something, then someone picks a strawman out of the sky and refutes that strawman, someone is not being serious.

All I am saying is that this is not enjoyable to me. I don't argue with my best friends, why should I argue with the internet? It seems to me that what I am saying is, great, I am happy, I am glad you are happy. Wahoo, you have been here a very long time. You know there are classic poster fu's, none of which have I ever used. I also try hard not to misconstrue someone's statement, and then "prove" it wrong.

My typical statement is "horses for courses", but it seems that some others think that there is only one approved course, for all horses.

Ha