Wimpy Market Timing

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Wimpy Market Timing

Postby xram » Fri Jan 25, 2013 9:22 pm

Hello. My question will follow in a minute but first two facts about my situation.

1) I am lucky to have new money to rebalance with every month so hopefully I'll never have to sell anything.

2) I very much enjoy tinkering with my Mac numbers spreadsheet to track my portfolio.

QUESTION: I plan to add another worksheet to my spreadsheet that follows Market Timing indicators (not that I believe them) but I would like to just kinda watch them and see what happens. And maybe, just maybe, use them to decide which fund to buy if several are down (ie less than desired AA). For example, if my AA says MUNIs and VSS are both down, perhaps THAT month I will buy the one whose indicators say it is undervalued. Again, not planning on building my entire portfolio around this, but just looking to tinker around the edges and have a little fun learning about these things. So what are your favorite indicators?

200 day moving average?
P/e?

Again, I barely know what these things are so just trying to learn.....

Xram...
Last edited by xram on Fri Jan 25, 2013 10:15 pm, edited 1 time in total.
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Re: Wimpy Market Timing

Postby Calm Man » Fri Jan 25, 2013 9:24 pm

These are all artificial. I bet you would be just as well off with a 187 day moving average and P/E x log dividends. What I mean is stick to your portfolio and don't try to create something that is way behind what the people with powerful computers are doing.
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Re: Wimpy Market Timing

Postby xram » Fri Jan 25, 2013 9:40 pm

Calm Man wrote:These are all artificial. I bet you would be just as well off with a 187 day moving average and P/E x log dividends. What I mean is stick to your portfolio and don't try to create something that is way behind what the people with powerful computers are doing.


Thanks. I plan on sticking to my portfolio.

I mean this with all due respect, not looking for tons of posts about staying the course etc, I got that already.

Just looking to tinker around the edges and learn a little bit. Again, if I'm "down" 5k on munis and 5k on VSS and i only have 5k to invest then maybe I'll buy the one that is "undervalued by the indicators" .....that's all.....no big whoop.... :happy

And then next month buy whichever one is down next month as long as I dont stray to far from AA Etc.....

And again, don't think there is anything wrong with learning about these things, I'm sure Larry swedroe and Rick ferri and all the other big wigs understand them even if they don't believe the hype (Flavor flav/public enemy reference).....

Thanks
Xram
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Re: Wimpy Market Timing

Postby Ranger » Fri Jan 25, 2013 11:12 pm

http://www.mebanefaber.com/timing-model/

This timing model is as good or bad as any timing model
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Re: Wimpy Market Timing

Postby umfundi » Fri Jan 25, 2013 11:20 pm

So far as I know, Bogleheads do not grant market timing exemptions.

If that is really your question, you are in the wrong place.

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Re: Wimpy Market Timing

Postby Ranger » Fri Jan 25, 2013 11:31 pm

umfundi wrote:So far as I know, Bogleheads do not grant market timing exemptions.

Keith


I do not see this under under forum policy.

viewtopic.php?t=405
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Market Timing--What experts say.

Postby Taylor Larimore » Fri Jan 25, 2013 11:33 pm

I plan to add another worksheet to my spreadsheet that follows Market Timing indicators (not that I believe them) but I would like to just kinda watch them and see what happens. And maybe, just maybe, use them to decide which fund to buy if several are down.


Xram:

Don't waste your time (and your money). Listen to experts:

"The stock market will fluctuate, but you can't pinpoint when it will tumble or shoot up. If you have allocated your assets properly and have sufficient emergency money, you shouldn't need to worry." (AAII Guide to Mutual Funds)

"Endless tinkering is unlikely to improve performance, and chasing last period's stellar achiever is a losing strategy." (Frank Armstrong, author and adviser)

"It must be apparent to intelligent investors--if anyone possessed the ability to do so (market time) he would become a billionaire--quickly--." (David Babson, author, adviser)

"What it really takes to improve your returns and diminish your risks is a willingness to stop focusing exclusively on the movement of the markets." (Baer & Ginsler, The Great Mutual Fund Trap)

"If we haven't said it enough, we'll say it again: Market timing is dangerous." (Barron's Guide to Making Investment Decisions.)

"Only liars manage to always be "out" during bad times and "in' during good times. (Bernard Baruch, famed investor)

"You have to keep reminding yourself. We don't know what's going to happen with anything, ever." (Peter Bernstein)

"There are two kinds of investors, be thay large or small: those who don't know where the market is headed, and those who don't know that they don't know." (Wm Bernstein, author and adviser)

"I do not know of anybody who had done market timing successfully and consistently. I don't even know anybody who knows anybody who had done it successfully and consistently." (Jack Bogle, Vanguard founder)

The Boglehead (forecasting) Contest began in 2001. Of 99 Diehard guesses that year, only 11 even guessed the direction of the stock market.

"If you're determined to succeed at investing, make it your first priority to become a buy-and-hold investor." (Jack Brennan, Straight Talk on Investing)

"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two." (Warren Buffet)

"Market timing is an ineffective strategy for mutual fund investors." (CDA/Wiesenberger)

"Any investment method that relies on predicting the future is doomed to fail." (Chandan & Sengupta, financial authors)

"A successful investor has a good knowledge base, a well-defined investment plan, and nerves of steel to stick with it." (Andrew Clarke, financial author)

"Most investors are unable to profitably time the market and are left with equity fund returns lower than inflation." (2003 Dalber Study)

"Take my word on it. Buy-and-hold is still your best long-run strategy." (Jonathan Clements, author & journalist)

"Market-timing is bunk." (Pat Dorsey, M* Director of Fund Analysis."

"The performance of 185 tactical asset allocation mutual funds was compared with buy-and-hold strategies and equity mutual funds over the years 1985-97. Over this period the S&P 500 Index increased 734%, average equity funds increased 598%, and tactical asset allocation funds increased 384%." (David Dreman, author)

"Market timing is a wicked idea. Don't try it-ever." (Charles Ellis author of The Loser's Game)

"Forget market timing in any form." (Paul Farrell, (CBS Marketwatch.com)

"The best practice for investors is to design a long-term globally diversified asset allocation based on present and future financial needs. Then follow that plan religiously, through all markets good and bad." (Rick Ferri, author and adviser)

"Benjamin Graham spent much of his career trying to devise a goodformula for when to get into--and out of--the stock market. All formulas, he concluded, failed." (Forbes, 12-27-99)

"Buy and hold. Diversify. But your money in index funds. Pay attention to to the one thing you can control--costs." (Fortune Investor's Guide 2003)

"Dont' sell out of fear or buy out of greed. Just keep making investments, and let the market take its course over the long-term." (Norman Fosback, author, researcher)

"The only function of economic forecastng is to make astrology look respectful." (John Kenneth Galbraith, Economist)

"I've learned that market timing can ruin you." (Elaine Garzarelli)

"Staying on course may be just as difficult in bull markets as in bear markets." (Good & Hermansen, Index Your Way to Investment Success)

"For most investors the odds favor a buy-and-hold strategy." (Carol Gould, author & financial columnist)

"If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting that's going to happen to the stock market." (Benjamin Graham)

"From June 1980 through December 1992, 94.5% of 237 market timing investment newsletters had gone out of business." (Graham/Campbell Study)

"Your very refusal to be active, and your renunciation of any pretended ability to predict the future, can become your most powerful weapon." (Graham & Zweig, The Intelligent Investor)

"The best advice: buy and hold." (John Haslem, author and researcher)

"Even in a bear market, market-timing and actively managed mutual funds generally hurt investment performance more than they help it." (Mark Hulbert, N.Y.Times columnist)

"After receiving the Nobel Prize, Daniel Kahneman, was asked by a CNBC anchorman what investment tips he had for viewers. His answer: "Buy and hold."

"Timing the market is for losers. Time IN the market will get you to the winner's circele, and you'll sleep better at night." (Michael Leboeuf, author)

"No one is smart enough to time the market's ups and downs." (Arthur Levitt, former SEC chairman)

"It never was my thinking that made the big money for me. It always was my sitting." (Jesse Livermore, author & famed investor)

"Nobody can predict interest rates, the future direction of the economy or the stock market." (Peter Lynch)

"Buying-and-holding a broad-based market index fund is still the only game in town." (Burton Malkiel, Random Walk Down Wall Street)

"At the peak of the bull market in March of 2000 only 0.7% of all recommendations on stocks issued by Wall Street brokerages and investment banks were to "Sell." (Miami Herald, 1-26-03)

"If you can't handle the short term, if the uncertainty is stressful and the headlines are unbearable, then the markets are too hot for you: get out of the kitchen." (Moshe Milevsky, author & researcher)

"We're not keen on market-timing. It just doesn't work." (Morningstar Course 106)

"We've yet to find anyone who can accurately and consistently predict the market's short-term moves." (Motley Fools)

"Odean and Barber tested over 66,400 investors between 1991 and 1997. Their findings: "The most active traders earned 7% less annually than buy-and-hold investors."

"Forget trying to time the market and do something productive instead." (Gerald Perritt, financial author)

"The market timer's Hall of Fame is an empty room." (Jane Bryant Quinn)

"Countless studies have proved that no one is able to time the market effectively." (Mary Roland, author & journalist)

"Trading is based on the rather arrogant belief that the trader knows more than the buyers and sellers with whom he is trading." (Ron Ross, The Unbeatable Market)

"In the long run it doesn't matter much whether your timing is great or lousy. What matters is that you stay invested." (Louis Rukeyser, TV host)

"For the 10 years that ended 12-31-2000, only one newsletter out of the 112 that Timers Digest follows managed to beat the S&P 500 Benchmark." (Jim Schmidt, editor)

"I have learned the hard way that market timing and trying to pick a fund that will out-perform the market are both losing strategies." (Bill Schultheis, author and advisor)

"I'm a strong advocate of buying and holding." (Charles Schwab)

"It turns out that I should have just bought them (securities), and thereafter I should have just sat on them like a fat, stupid peasant. A peasant however, who is rich beyond his limited dreams of avarice." (Fred Schwed Jr., 'Where are the Customers' Yachts?)

"If you are not going to stick to your chosen investment method through thick and thin, there is almost no chance of your succeeding as an investor. (Chandan Sengupta, financial author)

"Investors should look with a jaundiced eye at any market timing system being peddled by its guru-creator." (W. Scott Simon, financial author)

"Buying and holding a few broad market index funds is perhaps the most important move ordinary invests can make to supercharge their portfolios." (Stein & DeMuth, (authors & advisor)

"It's my belief that it's a waste of time to try to time any market decline, or try to pinpoint a market bottom." (James Stewart, Smart Money columnist)

"It's a staple of personal finance advice: Buy-and-hold, because trading the stock market is a sucker's bet." Larry Swedroe, author and adviser.

"People should stop chasing performance and just put together a sensible portfolio regardless of the ups and downs of the market." (David Swensen, Yale Investments)

"Trust in time and forget market timing. Allow time to work its compounding magic for you. Let market timing inflict its miseries on someone else." (Tweddell & Pierce, financial authors)

"Although market-timing sounds good in theory, a wealth of studies and evidence shows that market timing simply doesn't work in practice." (Eric Tyson, author, Mutual Funds for Dummies."

"Few if any investors manage to be consistently successful in timing markets." (Wall Street Journal Lifetime Guide to Money)

"If you're considering doing your own market timing, the best advice is this: Don't." (John Waggoner, USA Today financial columnist)

"If you buy, and then hold a total-stock-market index fund, it is mathematically certain that you will outperform the vast majority of all other investors in the long run." (Jason Zweig, author and Wall Street Journal columnist)


Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: Wimpy Market Timing

Postby umfundi » Fri Jan 25, 2013 11:38 pm

Ranger wrote:
umfundi wrote:So far as I know, Bogleheads do not grant market timing exemptions.

Keith


I do not see this under under forum policy.

viewtopic.php?t=405

What I meant was, if you are seeking approval for your market timing plan, you are in the wrong place, asking the wrong people.

Keith
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 5:15 am

Thanks everybody for taking the time to post on my question.

If you want to post another million "stay the courses" go ahead but I am more interested in folks responding to my actual question.

Do you folks actually read the post before you start getting all excited about somebody breaking LAW#1??

Is there an actual rule on the boglehead webpage that it is off limits to ask about P/E, 200 day moving averages etc in order to learn?

"I am in the wrong place"?? Wow. Sorry Mr. Nazi Judge and Jury.....Sounds alot like "WE DONT LIKE YOUR KIND 'ROUND THESE PARTS...."

With all due respect, Mr Taylor,...I do not see how any of your quotes apply to my question. If I have to buy 5K of XX and 5K of YY based upon my AA, and normally I would flip a coin and buy one or the other or split the difference etc,....how the HECK can it be a mortal sin to look at a few numbers and maybe take an educated guess as to which is "undervalued" (if that is the right term)....and then buy that one!.....I would have bought one or the other anyway based upon accepted bogle LAW........

NOt seeking approval, if you dont want to respond, please dont but why would you actually waste the energy necessary to type a response that does NOT actually address the question at hand???? THis forum is ridiculously cultish and Nazi-ish at times.....its kinda creepy

WIth that being said, I am very grateful for everything I have learned from this site and would not have accomplished so much without this site.......

JUst as proof that I follow all the commandments of bolgedome....

In 17 months since finishing training........
1) Paid off 60-70 K in cc debt , paid 50K loan
2) Paid off 35K car
3) Paid off lots and lots and lots of little loans and bills
4) The ONLY debt we have left is a large school loan at very low interest rate but making extra payments AND CC balance each month (pay full amount) and get miles
5) Established 50K Emergency fund - moving to online bank to make extra ~450 per year or so
6) Saved >200K in my portfolio (VTSAX, VTIAX, VSS, VWO, VBMFX, inter bond, muni fund, ibonds) -- all in the "right" location
7) Started 529 - still very small amount, but will get that going soon
8) put away every single freakin penny i can save..... come home for lunch, dont order soda when out to eat....blah blah blah
9) work my butt off every day for my family....
10) thinking about buying a house to stop "losing" my money to rent
11) bought 4 million life insurance, term life
12) 18k a month in disability insurance
13) need umbrella insurance

So I really dont need the lecture on the principles of the bogle religion/cult

If there is a rule here that one is not allowed to ask about well known financial concepts then please show me that rule...otherwise please try your best to refrain from posting "stay the course" 47 million times....i mean you can if you want....but jeeez dont you ever want to just give it a break??

thanks
xram
Last edited by xram on Sat Jan 26, 2013 10:45 am, edited 2 times in total.
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 5:40 am

Calm Man wrote:These are all artificial. I bet you would be just as well off with a 187 day moving average and P/E x log dividends. What I mean is stick to your portfolio and don't try to create something that is way behind what the people with powerful computers are doing.


Thank you. I will look those up.
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Re: Wimpy Market Timing

Postby humandraydel » Sat Jan 26, 2013 6:32 am

xram wrote:If there is a rule here that one is not allowed to ask about well known financial concepts then please show me that rule...otherwise please try your best to refrain from posting "stay the course" 47 million times....i mean you can if you want....but jeeez dont you ever want to just give it a break??

thanks
xram


I don't think you understand your audience. It's not that they are just stubbornly refusing to answer your question - they CAN'T answer it! It's like you asking me the best way to talk to the dead; I don't even know what "methods" people use, nor will I ever, because I don't believe in it!

Why don't you just google something like "stock technical analysis"?
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Re: Wimpy Market Timing

Postby peppers » Sat Jan 26, 2013 6:37 am

In the spirit of learning, this may or may not help.

http://www.plansponsor.com/uploadfiles/Russell.pdf
"..the cavalry ain't comin' kid, you're on your own..."
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Re: Wimpy Market Timing

Postby BBL » Sat Jan 26, 2013 7:58 am

QUESTION: I plan to add another worksheet to my spreadsheet that follows Market Timing indicators (not that I believe them) but I would like to just kinda watch them and see what happens. And maybe, just maybe, use them to decide which fund to buy if several are down (ie less than desired AA). For example, if my AA says MUNIs and VSS are both down, perhaps THAT month I will buy the one whose indicators say it is undervalued. Again, not planning on building my entire portfolio around this, but just looking to tinker around the edges and have a little fun learning about these things. So what are your favorite indicators?



It's your money - do what you want with it. Reading the above it seems like a conflation of technical analysis [market timing 'indicators']; value averaging, and merely directing your newly available funds each month to the asset that is most below target.

I'm not sure you'll get anywhere with the technical analysis aspect. Value averaging has some support but there are some aspects to it that are pretty difficult in practice - but do some investigating and see what you think. Directing newly available funds into whatever is furthest from target is standard fare around here and is a good way to keep in balance absent formal rebalancing.

Feel free to monitor what you want to but I would be leery of letting the technical analysis enter the decision making process.

Be sure to post what you find and what you think it means if you pursue this. Could be interesting.... Good luck.
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Re: Wimpy Market Timing

Postby livesoft » Sat Jan 26, 2013 8:26 am

My impression is that lots of folks on this forum follow an RBD market timing strategy. Search the forum for quite a number of threads on the subject.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Wimpy Market Timing

Postby bottomfisher » Sat Jan 26, 2013 8:35 am

There are many on this forum who tilt their portfolio toward small and value equities based on research by Kenneth French and Eugene Fama. The valuation tilt is based on price to book ratio. The small tilt is based on the market capitalization. companies. Larry Swedroe, asset manager, author, and finicial journalist, has indicated that he feels "valuation matters." Price/earnings , p/e, is a valuation measure he has commented on in the past. An isolated p/e has many limitations that you can learn more about in your readings. Robert Shiller, a Yale economist, has developed PE10. It is also Shiller P/E or CAPE or cyclically adjusted price-to-earnings ratio. It is a valuation defined as price divided by the average of ten years of earnings, adjusted for inflation. There are many other technical factors. But these 3 are readily available without having to purchase access to the technical data. I hope this helps.
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Re: Wimpy Market Timing

Postby jeffyscott » Sat Jan 26, 2013 9:46 am

xram wrote:not looking for tons of posts about staying the course etc.


Too bad :D

I look at valuations. Things like GMO's monthly forecasts, M* fair value estimates for ETFs, Shiller's PE10 (aka. CAPE), Tobin's Q.

I have no use for technical indicators, like moving averages.
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 10:33 am

humandraydel wrote:
xram wrote:If there is a rule here that one is not allowed to ask about well known financial concepts then please show me that rule...otherwise please try your best to refrain from posting "stay the course" 47 million times....i mean you can if you want....but jeeez dont you ever want to just give it a break??

thanks
xram


I don't think you understand your audience. It's not that they are just stubbornly refusing to answer your question - they CAN'T answer it! It's like you asking me the best way to talk to the dead; I don't even know what "methods" people use, nor will I ever, because I don't believe in it!

Why don't you just google something like "stock technical analysis"?

,.......

Thanks for posting.....
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 10:40 am

bottomfisher wrote:There are many on this forum who tilt their portfolio toward small and value equities based on research by Kenneth French and Eugene Fama. The valuation tilt is based on price to book ratio. The small tilt is based on the market capitalization. companies. Larry Swedroe, asset manager, author, and finicial journalist, has indicated that he feels "valuation matters." Price/earnings , p/e, is a valuation measure he has commented on in the past. An isolated p/e has many limitations that you can learn more about in your readings. Robert Shiller, a Yale economist, has developed PE10. It is also Shiller P/E or CAPE or cyclically adjusted price-to-earnings ratio. It is a valuation defined as price divided by the average of ten years of earnings, adjusted for inflation. There are many other technical factors. But these 3 are readily available without having to purchase access to the technical data. I hope this helps.


Thank you.
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 10:40 am

jeffyscott wrote:
xram wrote:not looking for tons of posts about staying the course etc.


Too bad :D

I look at valuations. Things like GMO's monthly forecasts, M* fair value estimates for ETFs, Shiller's PE10 (aka. CAPE), Tobin's Q.

I have no use for technical indicators, like moving averages.


Thank you
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 10:41 am

livesoft wrote:My impression is that lots of folks on this forum follow an RBD market timing strategy. Search the forum for quite a number of threads on the subject.



Thanks. What percentage drop is a really bad day?
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 10:41 am

BBL wrote:
QUESTION: I plan to add another worksheet to my spreadsheet that follows Market Timing indicators (not that I believe them) but I would like to just kinda watch them and see what happens. And maybe, just maybe, use them to decide which fund to buy if several are down (ie less than desired AA). For example, if my AA says MUNIs and VSS are both down, perhaps THAT month I will buy the one whose indicators say it is undervalued. Again, not planning on building my entire portfolio around this, but just looking to tinker around the edges and have a little fun learning about these things. So what are your favorite indicators?



It's your money - do what you want with it. Reading the above it seems like a conflation of technical analysis [market timing 'indicators']; value averaging, and merely directing your newly available funds each month to the asset that is most below target.

I'm not sure you'll get anywhere with the technical analysis aspect. Value averaging has some support but there are some aspects to it that are pretty difficult in practice - but do some investigating and see what you think. Directing newly available funds into whatever is furthest from target is standard fare around here and is a good way to keep in balance absent formal rebalancing.

Feel free to monitor what you want to but I would be leery of letting the technical analysis enter the decision making process.

Be sure to post what you find and what you think it means if you pursue this. Could be interesting.... Good luck.


Thanks. This(me) might go nowhere but I guess we will see...
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Re: Wimpy Market Timing

Postby matt.danley » Sat Jan 26, 2013 12:28 pm

Hey xram,

Personally, I am glad you are wanting to spend some additionally time with your investments. In my experience, market timing does little to add RETURNS, but does provide protection against extreme DRAWDOWNS. This is well worth the 30 minutes per month I spend with my spreadsheets/charts to decide on my allocations for the month. I do appreciate the boglehead philosophy of utilizing extremely low cost index funds and that the future is unknowable, but the vast evidence supporting basic market timing models to decrease drawdowns is just too obvious for me to ignore. I am happy to see you are researching this. The idea behind investing is to find a system that you can stick with and matches your personality. Don't try to "best fit" someone else's system to your needs. The following links are provided for your enjoyment, but really think about how the research you find fits in with your investment goals.

To begin with, the Mebane Faber website has videos for Quantitative TAA and Risk Parity that are great primers (scroll down, on right hand side under "Research Papers"): http://www.mebanefaber.com/

Primer on Adaptive Asset Allocation (decent overview, they also have research on momentum and volatility that are good reads): http://www.macquarieprivatewealth.ca/da ... cation.pdf

Scroll down to "More FREE Trend Following Resources" to find a wealth of information here. I also highly recommend the book "Trend Following" by Michael Covel: http://www.trendfollowing.com/resources.html http://www.amazon.com/exec/obidos/ASIN/ ... ollowin-20

I find it sad that many individuals totally dismiss multiple decades of strong performance data by individuals that use "market timing" techniques. Many trend following traders have been featured in numerous books, like "Market Wizards". Such people include Tom Baso, Bill Eckhardt, Bill Dunn, Ed Seykota, David Harding, Paul Mulvaney, John W Henry, and Salem Abraham. Even Hugh Hendry admits to wait for trends to confirm his discretionary ideals. These guys mostly started off with "commodities", but they trading everything from corn, to interest rates, to oil, to JPY, to stock indexes. Mebane took many of their ideas and put research into ETF investments, which is more practical for us retail investors.

Keep looking. There are plenty of resources available. Please let me know if you have any questions.


All the best,
Matt
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Re: Wimpy Market Timing

Postby minesweep » Sat Jan 26, 2013 2:48 pm

matt.danley wrote:I find it sad that many individuals totally dismiss multiple decades of strong performance data by individuals that use "market timing" techniques. Many trend following traders have been featured in numerous books, like "Market Wizards". Such people include Tom Baso, Bill Eckhardt, Bill Dunn, Ed Seykota, David Harding, Paul Mulvaney, John W Henry, and Salem Abraham. Even Hugh Hendry admits to wait for trends to confirm his discretionary ideals. These guys mostly started off with "commodities", but they trading everything from corn, to interest rates, to oil, to JPY, to stock indexes. Mebane took many of their ideas and put research into ETF investments, which is more practical for us retail investors.

I've never heard of any of those folks. Maybe it just as well that I haven’t.

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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 5:18 pm

Ahhh.....it's back. Thanks. :D
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Re: Wimpy Market Timing

Postby Alex Frakt » Sat Jan 26, 2013 5:23 pm

This thread was temporarily removed for moderator review due to several reports over the antagonistic posts on this thread. I decided to leave everything as is, but I want to categorically state:

Discussions of all investing approaches are on topic on this forum.

Furthermore, let me remind people of the heart of our forum policies:

We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones. Respect your debating opponents. Debates are about issues, not people. If you disagree with an idea, go ahead and marshal all your forces against it. But do not confuse ideas with the person posting them; at all times we must conduct ourselves in a respectful manner to other posters.
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Re: Wimpy Market Timing

Postby livesoft » Sat Jan 26, 2013 5:31 pm

xram wrote:
livesoft wrote:My impression is that lots of folks on this forum follow an RBD market timing strategy. Search the forum for quite a number of threads on the subject.

Thanks. What percentage drop is a really bad day?

It depends and the algorithm is well-defined. I have a computer program that tells when an RBD occurs in any number of ETFs. The algorithm has been posted on the forum.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Wimpy Market Timing

Postby Petrocelli » Sat Jan 26, 2013 5:38 pm

I have a spreadsheet which calculates the average of the following returns of each of the stock funds in my company's 401(k) plan: 12 month, 6 month, 3 month, and 1 month. I use this to track the momentum of each fund.

Each month, I sell an amount of one of the funds with lower momentum and buy one of the funds with higher momentum. I sell/buy and amount equal to .25% of the portfolio each month. Thus, I am not making major allocation changes, but simply tinkering with the portfolio.

I maintain a bond allocation equal to the Target 2025 Fund. Last year, I outperformed that fund by 1.12%. So far this year, I am outperforming it by .23%.
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Re: Wimpy Market Timing

Postby umfundi » Sat Jan 26, 2013 5:50 pm

xram,

Just a short comment, before you start down this road.

If you read the Bogleheads' philosophy, especially the Investment Policy Statement, you will see it is about making a strategy and sticking to it. It's about trying to remove yourself from continuously making decisions and second-guessing previous decisions.

The problem you face is that you will start to believe your own market timing indicators. Which (trust me) will lead to a spiral where you take your money out of the market and can never have enough confidence to reinvest.

I have two good friends who have done just that.

So, the point is not whether market timing works. It's about your own psychology.

Keith
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Re: Wimpy Market Timing

Postby Hatch Batten » Sat Jan 26, 2013 6:10 pm

CXO Advisory tests a wide assortment of 'systems' and has a page titled "What Works Best?"

http://www.cxoadvisory.com/what-investi ... work-best/

I'm also fond of the Gummy Stuff archive, put together by a very talented gentleman who used to hang out right here in the Theory, News & General boglehead forum. It looks like Web 1.0 but a lot of the information is timeless and the ideas most certainly are:

http://www.financialwebring.org/gummy-s ... _stuff.htm

If you want to get mixed up in this stuff, even just for research purposes, I think it's good to ask yourself "how often do I intend to trade?" You'll have very different starting points if you target trading twice a year vs. twice a day. Other questions to ask include "now that I'll be shifting money around -- what investments will I be shifting it amongst?", "what are the tax and fee implications of this trading activity?" (which is related to the frequency question) and "is this the most productive, educational or entertaining use of my time?"
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Re: Wimpy Market Timing

Postby LadyGeek » Sat Jan 26, 2013 6:31 pm

Hatch Batten wrote:I'm also fond of the Gummy Stuff archive, put together by a very talented gentleman who used to hang out right here in the Theory, News & General boglehead forum. It looks like Web 1.0 but a lot of the information is timeless and the ideas most certainly are: http://www.financialwebring.org/gummy-s ... _stuff.htm

That would be gummy, who is also (primarily) a member of our sister Canadian site: Financial Webring Forum, which hosts gummy stuff ... about Investing (mostly) (the link in human readable form)

You may find this of interest: Searching for Patterns

The key to finding information is using the right keywords. The bottom of the page has this: stock patterns - Google.ca Search (Canada) (or use stock patterns - Google.com Search)
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 10:22 pm

livesoft wrote:
xram wrote:
livesoft wrote:My impression is that lots of folks on this forum follow an RBD market timing strategy. Search the forum for quite a number of threads on the subject.

Thanks. What percentage drop is a really bad day?

It depends and the algorithm is well-defined. I have a computer program that tells when an RBD occurs in any number of ETFs. The algorithm has been posted on the forum.


If anybody has bookmarked the algorithm please post it...thanks.....
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 10:27 pm

umfundi wrote:xram,

Just a short comment, before you start down this road.

If you read the Bogleheads' philosophy, especially the Investment Policy Statement, you will see it is about making a strategy and sticking to it. It's about trying to remove yourself from continuously making decisions and second-guessing previous decisions.

The problem you face is that you will start to believe your own market timing indicators. Which (trust me) will lead to a spiral where you take your money out of the market and can never have enough confidence to reinvest.

I have two good friends who have done just that.

So, the point is not whether market timing works. It's about your own psychology.

Keith


Thanks. Im actually hoping that doing this helps me to NOT stay out of the market. Let me explain. Right now based upon my very simple way of looking at things, everything seems "UP" right now. And ill admit that I made the mistake over the last month of waiting for a crash (fiscal cliff etc) and have some money waiting to get in. So I am thinking that if had some other "indicator" that led me to believe that this or that fund isn't as "UP" as i think it is ... then perhaps I will pull the trigger quicker....make sense kinda??

thanks
xram
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 10:30 pm

Petrocelli wrote:I have a spreadsheet which calculates the average of the following returns of each of the stock funds in my company's 401(k) plan: 12 month, 6 month, 3 month, and 1 month. I use this to track the momentum of each fund.

Each month, I sell an amount of one of the funds with lower momentum and buy one of the funds with higher momentum. I sell/buy and amount equal to .25% of the portfolio each month. Thus, I am not making major allocation changes, but simply tinkering with the portfolio.

I maintain a bond allocation equal to the Target 2025 Fund. Last year, I outperformed that fund by 1.12%. So far this year, I am outperforming it by .23%.


this is the kinda thing im hoping to do.....
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 10:34 pm

Hatch Batten wrote:If you want to get mixed up in this stuff, even just for research purposes, I think it's good to ask yourself "how often do I intend to trade?" You'll have very different starting points if you target trading twice a year vs. twice a day. Other questions to ask include "now that I'll be shifting money around -- what investments will I be shifting it amongst?", "what are the tax and fee implications of this trading activity?" (which is related to the frequency question) and "is this the most productive, educational or entertaining use of my time?"



Not looking to do a big system or anything..just tinker around the edges. For example, if I am down 5K of munis and 5K of VSS according to my AA.....and I only have 5K to invest....i would like to look at the "indicators" to see which one is actually down more not just according to my random AA that I have chosen, but which is down more by some calculations etc.....and keep in mind that if i wasnt doing these calculations and i was in the same situation i would just buy one or the other with the flip of the coin....so this is not some crazy scheme im trying to put together....just trying to tinker and learn a little bit........

thanks
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Re: Wimpy Market Timing

Postby grayfox » Sat Jan 26, 2013 10:42 pm

xram wrote:200 day moving average?
P/e?



200-day moving average is a technical indicator used by people that want to market time, meaning they think they have a prediction of where prices are headed in the short term. They are basically momentum investors, trying to spot the trends.

P/E is a fundamental measure that would be used by value investors like Ben Graham, David Dremen or Warren Buffet who are mostly by and hold investors. They are contrarians and buy stuff that has been beaten down.

Technical analysis and fundamental analysis are pretty much diametrically opposed. Quite often, when technical analysts are selling, like after the death cross, fundamental analysts are buying because stocks look cheap. It's kind of hard to be a trend follower and a contrarian at the same time. You gotta pick one path or the other.

You should probably do a whole lot of research on what fundamental analysis and technical analysis are. Many fundamental analysts think technicians are crackpots, with nutty theories like the Eliot Wave Theory. On his television show, Louis Rukeyser used to call the technical analysts elves.
Last edited by grayfox on Sat Jan 26, 2013 10:52 pm, edited 1 time in total.
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 10:51 pm

grayfox wrote:
xram wrote:200 day moving average?
P/e?



200-day moving average is a technical indicator used by people that want to market time, meaning they think they have a prediction of where prices are headed in the short term. They are basically momentum investors, trying to spot the trends.

P/E is a fundamental measure that would be used by value investors like Ben Graham, David Dremen or Warren Buffet who are mostly by and hold investors. They are contrarians and buy stuff that has been beaten down.

Technical analysis and fundamental analysis are pretty much diametrically opposed. Quite often, when technical analysts are selling, like after the death cross, fundamental analysts are buying because stocks look cheap. It's kind of hard to be a trend follower and a contrarian at the same time. You gotta pick one or the other.

You should probably do a whole lot of research on what fundamental analysis and technical analysis are. Many fundamental analysts think technical analysts are crackpots, with nutty theories like the Eliot Wave Theory. On his television show, Louis Rukeyser used to call the technical analysts elves.



thanks. and as i have admitted i know nothing about this stuff.....right now trying to find the description/algorithm for livesoft's really bad day calculation.....going through old forum posts...so far no luck....somebody must have it bookmarked right?????

thanks
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 10:54 pm

i have reason to believe it might be in here

gonna check it out

let ya know


viewtopic.php?p=800755#800755
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Re: Wimpy Market Timing

Postby grayfox » Sat Jan 26, 2013 10:58 pm

Try googling RBD site:bogleheads.org
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 11:05 pm

really bad day

is this just an example or the actual number cutoffs??? anybody know?

livesoft wrote:
For this discussion, I will define precisely a "really bad day" in an ETF as a drop of at least 2.5% AND greater than the 4th biggest drop in the ETF in the past 150 trading days. That is, the drop would become the 4th biggest drop for the ETF in the most recent 151 days (including the RBD) and would be more than 2.5%.

Eligible ETFs are: VTI, VEU, VXUS, VSS, VBR, VNQ, VWO, DGS, VEA, and a few more.

Take VEA for example.

Last 4 really bad days in the last 150 days occurred on
2010-11-23: -3.1
2011-03-16: -3.02
2011-02-22: -2.88
2010-10-19: -2.72

So any drop greater than 2.72% would be a really bad day for VEA. As time marches on, the 2010-11-23 date would be too old to be part of the "last 150 days", so the threshold could be lower. Note that VEA dropped on 2011-03-10 by 2.41%, on 2011-03-14 by 1.82%, and on 2011-03-15 by 2.21%. None of these were RBDs, but the 3.02% drop on 2011-03-16 was a RBD.

In contrast, VTI has not had a RBD in a while. Its worst one-day drop in the last 150 trading days was 2.14% on 2011-02-22, but that did not exceed 2.5%. One would have to go back to 2010-08-11 to find a day when VTI dropped by more than 2.5%.

Edit to add: Another nuance to this: 2010-11-23 was not a RBD for VEA despite being the worst drop in the last 150 days. Can you tell me why?
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Re: Wimpy Market Timing

Postby LadyGeek » Sat Jan 26, 2013 11:24 pm

grayfox wrote:Technical analysis and fundamental analysis are pretty much diametrically opposed.

Burton Malkiel's A Random Walk Down Wall Street has a chapter on this very topic. His conclusion was that each had advantages and disadvantages - no real conclusion on which was better.

From the wiki: Book sources (ISBN 0393081435) I downloaded this book into my Nook, it's worth reading.
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Re: Wimpy Market Timing

Postby umfundi » Sat Jan 26, 2013 11:38 pm

I searched the Wiki and did not find RBD or Really Bad Day.

Really?

Maybe LadyGeek can convince someone to contribute an entry? I believe it is mostly a rebalancing signal. Right?

I think it has enough adherents, and is a plausible enough strategy, that it should be explained in the Wiki.

Best wishes,

Keith
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Re: Wimpy Market Timing

Postby xram » Sat Jan 26, 2013 11:41 pm

I can't find it either,,,,,but I'll keep looking

Nobody has it?
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Re: Wimpy Market Timing

Postby umfundi » Sun Jan 27, 2013 12:09 am

xram wrote:Thanks. Im actually hoping that doing this helps me to NOT stay out of the market. Let me explain. Right now based upon my very simple way of looking at things, everything seems "UP" right now. And ill admit that I made the mistake over the last month of waiting for a crash (fiscal cliff etc) and have some money waiting to get in. So I am thinking that if had some other "indicator" that led me to believe that this or that fund isn't as "UP" as i think it is ... then perhaps I will pull the trigger quicker....make sense kinda??

thanks
xram

Actually, no.

Check in with your money. Ask it if it has any memory. The answer, I believe, is "No".

Even if there is anything to this, remember: The other guys have much bigger and faster computers than you do, and will eat up the the opportunity long before you figure it out.

Take the time to make a plan. Write it down in an Investment Policy Statement, then implement it as expeditiously as you can.

Personally, I have done very well with the attitude that I am too stupid to take advantage of tilts, momentum, reversion to the mean, ... whatever. I invest simply because there is a positive expected return. If I delay investing, I am giving up the opportunity for exposure to that return.

FWIW, the bulk of our savings is in a 50/50 passive portfolio managed by a professional, with a 0.25% fee and (plus) a portfolio ER of 0.18%. The funds I manage, our taxable investments, are in Vanguard Life Strategy Moderate. It's taken me decades to get here, but I have nothing to decide.

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Re: Wimpy Market Timing

Postby LadyGeek » Sun Jan 27, 2013 11:13 am

umfundi wrote:I searched the Wiki and did not find RBD or Really Bad Day.

Really?

Maybe LadyGeek can convince someone to contribute an entry? I believe it is mostly a rebalancing signal. Right?

I think it has enough adherents, and is a plausible enough strategy, that it should be explained in the Wiki.

First, livesoft needs to publish his algorithm- which I don't think will be forthcoming any time soon. However, this would be original research and therefore can't go into the wiki (see: Wikipedia:No original research).

For background info, see: Livesoft: Worst day? (xram has just resurrected that thread), better info is here: Missing the best and worst days

(Hint for new investors: This exercise is experienced investors having some fun with predicting future performance. It's a mixed bag of serious discussions with good natured comments.)
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Re: Wimpy Market Timing

Postby sscritic » Sun Jan 27, 2013 11:29 am

To learn about RBD, type RBD in the search box. Then ignore all the entries about the other RBD.*

* Required Beginning Date for your RMD.**

** Required Minimum Distribution for your IRA.***

*** Individual Retirement Arrangement.

For those who have trouble typing:
http://www.google.com/search?q=RBD&site ... eheads.org
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Re: Wimpy Market Timing

Postby grayfox » Sun Jan 27, 2013 11:56 am

LadyGeek wrote:
grayfox wrote:Technical analysis and fundamental analysis are pretty much diametrically opposed.

Burton Malkiel's A Random Walk Down Wall Street has a chapter on this very topic. His conclusion was that each had advantages and disadvantages - no real conclusion on which was better.

From the wiki: Book sources (ISBN 0393081435) I downloaded this book into my Nook, it's worth reading.


It is similar to the difference between convex and concave investors.

Convex Investors
Investors who are more risk averse and reduce the amount of stock as risk increases. They sell stock as volatility increases with falling prices. Convex investors are trend followers and momentum traders. They may use stop loss orders or 200-day SMA market timing, or just exit the market at any sign of danger.

Concave Investors
Investors that increase the amount of stocks as risk and expected return increase. They' buy stock as the price falls. Concave investors are Constant Mix re-balancers. Also bargain hunters who increase their stock allocation at lower valuations and bottom fishers. Generally investors that are expecting a trend reversal or mean reversion.

The market wouldn't function well without both convex and concave investors. When risk increases, and convex investors want to sell their shares, it is concave investors who buy them.
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Re: Wimpy Market Timing

Postby livesoft » Sun Jan 27, 2013 12:54 pm

I'd give seminars on the RBD strategy in hotels around the country after advertising on late-night TV and talk-radio, but I make too much money using the strategy to bother divulging more than I already have. Every RBD trade in 2012 made money.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Wimpy Market Timing

Postby xram » Sun Jan 27, 2013 5:03 pm

livesoft wrote:Best/worst days defined as follows: A gain or loss in a single day that is among the top 3 best/worst in the last 3 to 6 months for the fund/ETF under consideration.
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Re: Wimpy Market Timing

Postby xram » Sun Jan 27, 2013 5:06 pm

How/when do you buy for a mutual fund bad/worst day?
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Re: Wimpy Market Timing

Postby jdilla1107 » Sun Jan 27, 2013 5:47 pm

livesoft wrote:Every RBD trade in 2012 made money.


Uhh, buying almost any major index on any day in 2012 made money.

I am fully confident that various technical analysis techniques worked 20 years ago. None of that stuff works anymore because everyone knows about it and competition eliminates it. I assure you that everyone of the "market wizards" are no longer making money or are doing something entirely different.

Also, techniques that do make money are lasting shorter and shorter as the markets become more accessible and competitive.
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