Wimpy Market Timing

[livesoft]

Uhh, buying on any day in 2012 made money.

Tell that to the folks who bought Vanguard Emerging Markets Index on March 01, 2012. Yes, they made 0.6%, but only because of the gain on 12/31/2012.

In contrast, that fund had a RBD in June. If you could choose in hindsight which month or day to buy VEIEX in 2012, what day would you have chosen?

[jdilla1107]

If you could choose in hindsight which

There's your error.

And you're not counting dividends.

[livesoft]

Not my error. I bought VWO back in June.

And yes, I am counting dividends because I use a M* "growth of" chart for VEIEX.

[jdilla1107]

With what money? What was the return on that money before you bought it?

[livesoft]

With what money? What was the return on that money before you bought it?

As noted elsewhere, I change my asset allocation on an RBD. I reduced my bond fund shares and increased my VWO shares.

[jdilla1107]

Do you change it back on a RGD? Or have you forever increased your risk tolerance? And what pct in AA are we talking?

[livesoft]

I posted the answers to those questions previously as well when nisiprius et al. asked them.

[jdilla1107]

Everything I have read from you and others about RBD is about rebalancing. If you are counting when to rebalance as market timing, then I think you and I have a very different definition of market timing. Or maybe you are being flippant with the term.

Market timing implies predicting the future direction of markets, you are simply doing risk adjustments assuming all markets are going up over a long enough time frame.

[sscritic]

So what are your favorite indicators?

McClellan oscillator and the summation index. I remember watching Sherm on Charting The Market with Gene Morgan on KWHY, Channel 22, long before CNBC was a gleam in anyone's eye.

[peppers]

McClellan Oscillator...I think the last time I heard that was on Louis Rukeyser's Wall Street Week.

[sscritic]

McClellan Oscillator...I think the last time I heard that was on Louis Rukeyser's Wall Street Week.

No, that would have been on his father's show.

[peppers]

Wasn't Mel one of the guest panelists with Jim Grant and Marty Zwieg?

[livesoft]

Everything I have read from you and others about RBD is about rebalancing. If you are counting when to rebalance as market timing, then I think you and I have a very different definition of market timing. Or maybe you are being flippant with the term.

Market timing implies predicting the future direction of markets, you are simply doing risk adjustments assuming all markets are going up over a long enough time frame.

Actually, I am predicting that the ETF that has experienced a RBD is going to go up at least a few percent over the following 2 weeks.

But since "market timing" is a dirty word on this forum, you can call what I do "rebalancing" if you like. I won't mind.

[jdilla1107]

Everything I have read from you and others about RBD is about rebalancing. If you are counting when to rebalance as market timing, then I think you and I have a very different definition of market timing. Or maybe you are being flippant with the term.

Market timing implies predicting the future direction of markets, you are simply doing risk adjustments assuming all markets are going up over a long enough time frame.

Actually, I am predicting that the ETF that has experienced a RBD is going to go up at least a few percent over the following 2 weeks.

But since "market timing" is a dirty word on this forum, you can call what I do "rebalancing" if you like. I won't mind.

You must not have very high confidence in it since you are not trading it. Why limit yourself to just rebalancing points on what you have discovered? What confidence level do you have in it? (Just enough to make it a rebalance strategy implies not much to me.)

I know that if I had a predictive signal with high confidence, I would drop this bogglehead stuff.

[livesoft]

What are you talking about? I traded on EVERY single RBD in 2012 and in 2011 and in ....

However, I admit that no market timing method is 100% perfect.

And what's the title of this thread anyways?

[jdilla1107]

You certainly don't need 100%, 60-70% that's repeatable will do just fine.

I don't understand your use of the word "traded". A trade means a corresponding buy and sell. Or an entry point and an exit point. You don't even have an exit point, you're just acquiring more as your equity risk is reduced.

Your confusing trading with your risk balancing, as far as I am concerned. Why do like to call that trading or market timing?

My argument is that you aren't doing anything like trading or market timing, unless I misunderstand what you do. Shifting asset allocation after a move, is not trading or market timing, in my opinion. Especially if your hold time is allowed to be forever.

[sscritic]

I thought a buy was a trade. My broker thinks so. That's why he charges me a commission.

[livesoft]

I no longer describe my buys and sells on this forum, but I do so on another forum that is more receptive to market timing, so my trades are documented in the public domain. I sold the shares I bought on RBDs in 2012 in less than a month after purchase at nice gains. I am not out to make a killing with this strategy, so I do not expect to make 100% a year. You can see that not even VWO bought in June made a lot of money, but it was a very profitable short-term trade that most people on this forum would not and did not make.

[jdilla1107]

I no longer describe my buys and sells on this forum, but I do so on another forum that is more receptive to market timing, so my trades are documented in the public domain. I sold the shares I bought on RBDs in 2012 in less than a month after purchase at nice gains. I am not out to make a killing with this strategy, so I do not expect to make 100% a year. You can see that not even VWO bought in June made a lot of money, but it was a very profitable short-term trade that most people on this forum would not and did not make.

This is becoming pedantic, so I'm going to stop soon. I was merely trying to get at, "when do you know to exit the"trade"?". If you have't predefined that and you are just willing to hold forever, then that's more like buy and hold to me.

As an example, I can imagine this strategy would have worked very poorly during the financial crisis, UNLESS your strategy is willing to hold for a long time. But, no one in the industry would call this trading. You can't go to your risk manager and say "it will all come back by the time I retire."

[livesoft]

An explicit exit strategy was described previously on the forum. I can surmise that either (a) you did not read it or (b) you did not understand it if you read it.

Your mention of a "risk manager" hints that you might work or might have worked in the industry. Are you looking to for free market timing method that you have not heard of before that you can try to validate?

[LadyGeek]

Please stay on topic...

[jdilla1107]

c) Could not find it. There are a lot of posts on the subject.

Maybe you should make a facebook page to refer people to.

[livesoft]

Maybe I should charge for that information?

[jdilla1107]

This is pretty standard stuff:

Investopedia explains 'Fade'
1. An example of fading would include buying on a dip in price and selling when the price rallies. Often it's a rather volatile strategy, but one which offers the potential for significant short-term gains. It requires little in the way of complicated analysis but the risk that trend continues is always present.

Read more: http://www.investopedia.com/terms/f/fad ... z2JEc3tRMJ

Buying RBD will work well in bull markets and badly in bear markets. (You would do the opposite in a bear market) So congrats, this has been a pretty nice bull market.

The point I REALLY wanted to make is that many people market time with flawed mental accounting. (I'm sure not yourself)

1) When the strategy wins, pat yourself on the back and say you won.
2) When it fails, well "You're just in it for the long term anyway. You will hold long term"

[livesoft]

Thanks for link about "fade". I see some difference, but it is subtle.

Late 2008 was a GREAT time for the RBD strategy. Go backtest it yourself.

[ilan1h]

I'm not sure why everyone is giving him a hard time. I actually do exactly what he is proposing when I rebalance. For example, I know that my AA is asking for more international and more REITS. I also know that due to some retarded blip in European politics the international funds are suffering. Therefore, I'll buy international this month (since it's on sale) and buy REITS another time. Likewise, whenever I need to stock up on VTI or total market funds I always like to buy on a day when the market is losing ground because of some temporary idiocy. I do this purely based on gut instinct and not on any indicators. If somebody else wants to do it based on other methods that's good enough for me. I've made a lot of money by re-balancing my AA in this predatory way.

[jdilla1107]

Thanks for link about "fade". I see some difference, but it is subtle.

Late 2008 was a GREAT time for the RBD strategy. Go backtest it yourself.

I once worked with a young analyst who was backtesting a strategy. He came back and said it worked, but only worked went the market went up. Hmm, that sounds like "buying", I said.

[livesoft]

Actually, I do not mind the folks "giving him a hard time." It has helped me think about it more, do backtesting, and refine my strategy. I would rather be paid for additional information than give it out free.

[jdilla1107]

I'm not sure why everyone is giving him a hard time. I actually do exactly what he is proposing when I rebalance. For example, I know that my AA is asking for more international and more REITS. I also know that due to some retarded blip in European politics the international funds are suffering. Therefore, I'll buy international this month (since it's on sale) and buy REITS another time. Likewise, whenever I need to stock up on VTI or total market funds I always like to buy on a day when the market is losing ground because of some temporary idiocy. I do this purely based on gut instinct and not on any indicators. If somebody else wants to do it based on other methods that's good enough for me. I've made a lot of money by re-balancing my AA in this predatory way.

You are talking about a rebalancing strategy. We all have to pick times to rebalance. I believe he is claiming this as a trading strategy. (Like even if you were already over allocated to equities, you would still do it and sell later)

[learning_head]

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.

Hi xram, while I know you want to explore various indicators around the timing that will be based on relative underperformance of your options, I think there is a better answer to your specific question... in your question above, why not buy the one that is the most out of line with your target AA? So if MUNIs are trailing your desired AA more than VSS, buy MUNIs; else buy VSS.

In the unlikely case they are both out of line in exact same percentage, buy same amounts of each... Basically, try to get to your desired AA as the main goal instead of trying those other techniques...

The reason I think it will serve you better is because relative underperformance you'd get from other indicators is based on relatively arbitrary patterns, whereas if you go with aligning to your AA, it will be specific to what you need, i.e. to controlling your risk.

[xram]

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.

Hi xram, while I know you want to explore various indicators around the timing that will be based on relative underperformance of your options, I think there is a better answer to your specific question... in your question above, why not buy the one that is the most out of line with your target AA? So if MUNIs are trailing your desired AA more than VSS, buy MUNIs; else buy VSS.

In the unlikely case they are both out of line in exact same percentage, buy same amounts of each... Basically, try to get to your desired AA as the main goal instead of trying those other techniques...

The reason I think it will serve you better is because relative underperformance you'd get from other indicators is based on relatively arbitrary patterns, whereas if you go with aligning to your AA, it will be specific to what you need, i.e. to controlling your risk.

A very reasonable thought.....

[umfundi]

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.

Hi xram, while I know you want to explore various indicators around the timing that will be based on relative underperformance of your options, I think there is a better answer to your specific question... in your question above, why not buy the one that is the most out of line with your target AA? So if MUNIs are trailing your desired AA more than VSS, buy MUNIs; else buy VSS.

In the unlikely case they are both out of line in exact same percentage, buy same amounts of each... Basically, try to get to your desired AA as the main goal instead of trying those other techniques...

The reason I think it will serve you better is because relative underperformance you'd get from other indicators is based on relatively arbitrary patterns, whereas if you go with aligning to your AA, it will be specific to what you need, i.e. to controlling your risk.

A very reasonable thought.....

Some might call this rebalancing.

Keith

[Orion]

I didn't see this posted before. Apologies if I missed it:

200-day moving average market timing

I've only skimmed a bit of it, but with 1192 posts, there must be something relevant in there.