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wrong timing in the market
Tug Boat
Posted: 18 February 2018 21:13:42(UTC)
#43

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It's mainly about timing. If you buy a tracker at the top of the market it takes yonks to get your money back.

Sure if you hold for 20 years you will, but no one does.

We all try to time the markets or no one would hold cash.


Everyone is looking to buy the dips... timing the market.


So just admit it, in the real world that's the most important thing, it's like drugs, timing just takes the edge off.

*waits for comments, gulp*
King Lodos
Posted: 18 February 2018 22:16:22(UTC)
#45

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It's mainly about how much you save, and compounding – that's what Warren Buffett epitomises.

If you look at long-term returns from stocks with dividends reinvested, it doesn't make a huge difference where you get in – there was that little bump before the Great Depression, then the other worst one was the top of the Tech Bubble .. but just being in the market, collecting dividends, buying stocks, is the main factor:

http://www.econlib.org/library/Enc/art/lfHendersonCEE2_figure_041.jpg

If you read the Market Wizards series (the Bible of trading/timing), there's not a single successful trader throughout history who ever got anywhere guessing when to buy or sell – saying "The market can't rise much more from here", or guessing peaks and dips.. It's absolutely crazy that retail investors do this – and they do, and it's why their returns are so terrible – when it's their finances at risk .. "Market top" and "bottom" only mean anything when you're looking back – if you look at that long-term chart, it's spent 90% of the time at a "market top", in total returns
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The Spanish Inquisition on 19/02/2018(UTC)
philip gosling
Posted: 18 February 2018 22:20:17(UTC)
#46

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Tug Boat

I think you are on your own trying to time the market - I mean where was your money in 2008 and the 20 years before that? in the bank ready to invest when the market 'crashed"? Arguments for time to pass and always reinvesting the dividends is stronger than scientific claims that we have impacted badly on our Climate.
JohnW
Posted: 18 February 2018 22:57:11(UTC)
#47

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If you stay in the market, and are reinvesting dividends, then as share prices drop the dividends will by more shares. That of course assumed the dividends are maintained. But many IT's have increased their dividends for very many years, and in the case of CTY over 50 years, a record they are not going to lose if it can possibly be avoided.
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dlp6666 on 19/02/2018(UTC)
Tug Boat
Posted: 19 February 2018 09:39:53(UTC)
#48

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If I could clarify my somewhat frivolous post:

I'd been watching two trusts MRCH and SCIN with a view to purchase. I watched prices and the derivative was getting rediculous. I did nothing in December and the rate of price increase became even more ridiculous in Jan. I bought both after the correction saving over 10%.

After the brexit wobble I bought SREI after a 30% drop.

BBOX has a sinusoidal period in its price from 140 to 150p. I've bought a couple of times at the low price.

This is timing the market. A better description would be timing the entry into the market.

Where was I in 2007 - I was a very lucky Boat. I'd been out of the market for a few years and threw everything in a corporate bond fund as a holding position.
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Mickey on 19/02/2018(UTC)
dyfed
Posted: 19 February 2018 09:56:28(UTC)
#44

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Tug Boat;57500 wrote:
It's mainly about timing. If you buy a tracker at the top of the market it takes yonks to get your money back.

Sure if you hold for 20 years you will, but no one does.

We all try to time the markets or no one would hold cash.


Everyone is looking to buy the dips... timing the market.


So just admit it, in the real world that's the most important thing, it's like drugs, timing just takes the edge off.

*waits for comments, gulp*


Didn't want to leave you out there all on your own!
I agree to some extent: I am always looking for a good time to buy into the assets on my watch list or top up existing holdings, so I wait for a dip and rarely if ever buy at an annual high. I also regularly review ITs to see which has the highest discount, or has dropped most. Isn't this shorthand for "value orientated": you think an asset has been oversold and has potential? Unless you are a momentum fan surely lots of folk here do something not dissimilar?

I tend to try and time the market when buying individual stocks or topping up core holdings; when I'm after growth I usually go for ITs or ETFs as I don't trust my stock-picking skills - then I'm less worried about buying dips.
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dlp6666 on 19/02/2018(UTC), Mr Helpful on 19/02/2018(UTC), Mickey on 19/02/2018(UTC)
King Lodos
Posted: 19 February 2018 10:16:57(UTC)
#49

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Tug Boat;57508 wrote:
If I could clarify my somewhat frivolous post:

I'd been watching two trusts MRCH and SCIN with a view to purchase. I watched prices and the derivative was getting rediculous. I did nothing in December and the rate of price increase became even more ridiculous in Jan. I bought both after the correction saving over 10%.

After the brexit wobble I bought SREI after a 30% drop.

BBOX has a sinusoidal period in its price from 140 to 150p. I've bought a couple of times at the low price.

This is timing the market. A better description would be timing the entry into the market.

Where was I in 2007 - I was a very lucky Boat. I'd been out of the market for a few years and threw everything in a corporate bond fund as a holding position.


I did it too on this recent dip .. But here's the thing: it's a Martingale Strategy.

If you don't know it, say you're playing roulette: you bet on black; you lose; so you double up on the next bet; if you lose that, you double up again .. etc. Meaning you never walk away from the table with a loss; you just wait until you win one game.

But of course it doesn't work mathematically .. It might work 50 times in a row, but eventually you hit the string of losses you can't double up on, and it wipes you out completely.

Of course when we buy dips, it's usually 1-5% of a portfolio, on a dip so small it wouldn't register on that long-term stocks chart – so we're not really risking or gaining – we're just buying into an uptrend .. But the way it's a Martingale Strategy is that one day the dip isn't a dip; it's the start of a bear market.

And that means: 1) you weren't fully invested when the market was going up; and 2) you're now putting capital to work in a (probably) overvalued market, and losing purchasing power.

And this is such a bad outcome – even though it's a 1 in 10 year event – these trading algorithms that took the market down recently will almost always sell into volatility .. Bear markets are usually just a long string of dips people keep buying into, and I always recommend a look at the Japanese stock market, from 1990 – how would you have known not to buy those dips?

https://upload.wikimedia.org/wikipedia/commons/thumb/6/6d/Nikkei_225%281970-%29.svg/375px-Nikkei_225%281970-%29.svg.png
Chris Squire
Posted: 19 February 2018 11:35:46(UTC)
#40

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Aminatidi;57491 wrote:
Could someone explain how comments like "The US market is as high as it can go" work?

I only ask as presumably someone would have been saying that in 1907, 1929, 1987, 2008.

You get the idea...

[img]null[/img]

Here's the gen on analysis by percentile:

A search on ‘price earnings ratio 98th percentile’ yields just 23 hits; this one is up to date:

‘Is the Stock Market Cheap?’ by Jill Mislinski, 2/2/18 https://www.advisorperspectives.com/dshort/updates/2018/02/02/is-the-stock-market-cheap

‘ . . Percentile Analysis; We can also use a percentile analysis to put today's market valuation in the historical context. As the chart below illustrates, latest P/E10 ratio is approximately at the 98th percentile of this series . . Relative to the mean, the market remains quite expensive, with the ratio approximately 99% above its arithmetic mean and 115% above its geometric mean.’

This is illustrated by a chart running back to 1880.

It is amusing but unsurprising to see that Ms Mislinski, the author of this article, intended to be read by advisors not by retail investors, can't bring herself to say anything stronger than 'the market remains quite expensive'. Quite ?? - typical British undertstatement, perhaps.
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Freefall Junkie on 19/02/2018(UTC)
Tug Boat
Posted: 19 February 2018 12:03:40(UTC)
#50

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I would have bought the dips in the Japanese market. Probably lost a lot. I was in domestic stocks back then.

I would hope I'd have sold some on the way up too. The lights had been flashing red a while.
King Lodos
Posted: 19 February 2018 12:10:07(UTC)
#41

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Chris Squire;57517 wrote:
A search on ‘price earnings ratio 98th percentile’ yields just 23 hits; this one is up to date:

It is amusing but unsurprising to see that Ms Mislinski, the author of this article, intended to be read by advisors not by retail investors, can't bring herself to say anything stronger than 'the market remains quite expensive'. Quite ?? - typical British undertstatement, perhaps.


This is one of those cases where it depends what measure you use .. Do we really think investors have gone mad and piled into US equities? Why would they be overpriced when we've had such a muted recovery, and so many are sitting on the sidelines in cash?

The question is: do you measure stock valuations by historical stock valuations, or by what you can get elsewhere??

People and pension funds need to make some return on their capital, and when bonds only offer 2%, an asset that offers 5% looks like a bargain .. There's almost never been a time stocks have been this cheap relative to bonds and other assets .. The fact, right now, is that stocks are cheap – compared to anything else you can invest in: they're much better value .. It all comes down to whether bonds revert to *their* historical valuations, because if they get back to 6%, stocks suddenly look less cheap ... But the big mistake would be thinking markets can't go 100% higher again, because they certainly can
mc2
Posted: 19 February 2018 12:35:14(UTC)
#52

Joined: 01/04/2015(UTC)
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the LONG argument is no doubt the winner in this debate - at least in terms of popularity... HOWEVER, surely even for the most fanatic LONG holders there must be plenty of times when the market's DIPS ... and HIGHS... are so inviting that you can't help it or resit it - your greediness rearing its ugly head - you put aside the LONG argument... And you buy the dips and sell the highs... Greediness remember, as an investor you can never get rid of it
King Lodos
Posted: 19 February 2018 12:40:26(UTC)
#51

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Tug Boat;57522 wrote:
I would have bought the dips in the Japanese market. Probably lost a lot. I was in domestic stocks back then.

I would hope I'd have sold some on the way up too. The lights had been flashing red a while.


The problems with Japan crept up pretty quickly .. It was a case of the P climbing, then the E suddenly falling .. That can happen in really benign markets.

The thing with market timing is there's always a seller for every buyer, and vice versa .. So market timing has to be a zero-sum game – and after fees and opportunity costs, has to be a net loser.

So it puts you in a game against the best human and machine traders .. And if you've ever played poker against a really good AI, you experience futility ... If you're a great player, you win far more hands than you lose, but you're always taking slightly too much risk (and every victory reinforces a skew towards risk – the biggest risk to a trader is thinking you're 'good').

And after 300 hands, you're broke .. but somehow you still feel like the hands you lost were down to freak mistakes.

Buying dips is pretty harmless because you're usually only gambling with a few % .. But if you could just take the timing decisions in isolation, and see how much real alpha you generated, you'd either be damn lucky or better than most MIT-graduate hedge fund traders if it was a positive at all
j j
Posted: 21 February 2018 10:55:00(UTC)
#53

Joined: 21/02/2018(UTC)
Posts: 1

You can always treat losing £300 as your ticket to entry. Now that you are in the game try not too stress out too much, 10 years is a pretty long way off. 20-30 years even better where you will still only be 62.
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