bankmaggot wrote:If the market shot up 20% in 3 months would it make sense to take some profit off the table?...Just seems like its a no brainer to sell if the market shot up that fast in such a time period, that it will come down, eventually. In hindsight it seems like I could make a killing.
Well, when the market did
shoot up over 26% in the 3 months from 2/28/2009 to 5/31/2009, did
you take some profit off the table? Did
you make a killing?
I know it seems
like a no-brainer, but it isn't
. And don't kid yourself, we sort of see 2009-2013 as a steady rise now, but it wasn't that steady, and all along the way people were saying things like "it's a dead cat bounce," "nah, it's a bear trap," etc. etc. And today, of course, some people think we're on our way to Dow 36,000 at last, and others think it's 1936 all over again (the second crash that followed 1929).
I honestly don't know whether there are people capable of recognizing undervalued stocks; I think there probably are
, but I'm sure I'm not one of them. I honestly don't know whether there are people capable of out-psyching the faddish week, month, year-length emotional swings of the market; I think there probably aren't
, but, hey, if I'm wrong it doesn't matter because I'm definitely not one of them
. Someone like me, who doesn't know about stuff until it shows up in Morningstar articles and mutual-fund company think-pieces is absolutely certain to be late to every party.
What I do is to keep my stock allocation low enough so that I can
"buy and hold no matter what." I don't know how to beat the market. But I do
know a way to get within a few basis points of the long-term return of the market, and that way is to buy and hold a total market index fund
. I can do that. It works. If the long-term return of the market is good enough for you, you can get it. If you're greedy and want more than that, an awful
lot of people try for more and an awful lot of them end up getting less.
P.S. "Oh," you're going to say, "when I said 20% in three months, of course I didn't mean that
20% in that
three months. Right. That gets to what I call the "endless regress of rule revisionism." So tell me, if you didn't mean that
20% in that
three months, then what really is
your criterion? I guess it isn't 20% in three months, after all. It's some kind of complicated rule like "I before E, except after C, or when sounded like a
as in neighbor
, except seize, inveigle, either, weird, leisure, neither
." It sort of gets to be a brainer
, doesn't it? And then when you finally get it perfected and stake some real money on it, the financiers' efficient science deity will hit you with a seismic deficiency and reimburse you with a counterfeit sovereign.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.