"Don't time the market" vs. "Buy low, sell high"

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
vicp88
Posts: 10
Joined: Sat Mar 11, 2017 1:29 pm

"Don't time the market" vs. "Buy low, sell high"

Postby vicp88 » Wed Mar 15, 2017 2:47 pm

These two proverbs are ubiquitous in the world of investing, but they seem mutually exclusive to me. How can you know whether you are "buying low" or "selling high" without timing the market?

Here is a quote by Warren Buffet: "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."
I don't think this is part of the quote, but it was in the same article where I found it - Be prepared to invest in a down market and to "get out" in a soaring market.

I remember the market crash in 2009, and it was obvious then that people were fearful. But are people "greedy" today?

I am stuck between my intellect (Don't time the market. Stay disciplined and stick to your plan), and my intuition (Buy low, sell high. The market is high. People are greedy. There will be a correction). But I question this intuition. I am by no means a financial expert. And my intuitions have been wrong many times before. Where does this intuition come from? Albert Einstein has said, "intuition is nothing but the outcome of earlier intellectual experience."

I have been obsessively reading and researching in hopes of making an investment plan I can simply stick to in the long term (I recently made my first Bogleheads post asking for advice viewtopic.php?p=3277674#p3279652). But I have cold feet and can't get myself to take the plunge. And perhaps I am suffering from paralysis by analysis. I've been ready to invest since December, but was naively waiting for a market correction that never happened (stupid market timing). Intellectually, I knew it probably wouldn't happen. As Murphy's law would have it, the market correction won't happen until I jump into the market.

From everything I have seen, this forum has been full of wisdom and positive reinforcements. So I would like to thank you all in advance for your time and your thoughts.

MotoTrojan
Posts: 88
Joined: Wed Feb 01, 2017 8:39 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby MotoTrojan » Wed Mar 15, 2017 2:50 pm

This exert from Random Walk is what would keep me from doing this:

"Because there is a long-term uptrend in the stock market, it can be very risky to be in cash. An investor who frequently carries a large cash position to avoid periods of market decline is very likely to be out of the market during some periods where it rallies smartly. Professor H. Negat Seybun of the University of Michigan found that 95 percent of the significant market gains over a thirty-year period came on 90 of the roughly 7,500 trading days. If you happened to miss those 90 days, just over 1 percent of the total, the generous long-run stock-market returns of the period would have been wiped out... Laszlo Birinyi... has calculated that a buy-and-hold investor would have seen one dollar invested in the DJIA in 1900 grow to $290 by the start of 2013. Had that investor missed the best 5 days each year, however, that dollar investment would have been worth less than a penny in 2013."

livesoft
Posts: 53233
Joined: Thu Mar 01, 2007 8:00 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby livesoft » Wed Mar 15, 2017 2:53 pm

vicp88 wrote:These two proverbs are ubiquitous in the world of investing, but they seem mutually exclusive to me. How can you know whether you are "buying low" or "selling high" without timing the market?

Sometimes you gotta do both, but not at the same time.

You know you are buying low when you buy something lower than it was in the recent past. You also know that it will go higher eventually because you are not buying individual stocks, but are buying index mutual fund and ETF shares instead. One might call this "rebalancing", but one is free to call it "market timing" if they want to.

And one doesn't have to be doing either of these things because one can just be buying when they have money to buy with. There is no rule that one must only market time or only buy low or only sell high or only rebalance or only stay-the-course. One can do different things at different times depending on the recent past. I would not do anything based on a prediction of the future though.
This signature message sponsored by sscritic: Learn to fish.

Jack FFR1846
Posts: 4500
Joined: Tue Dec 31, 2013 7:05 am

Re: "Don't time the market" vs. "Buy low, sell high"

Postby Jack FFR1846 » Wed Mar 15, 2017 2:54 pm

I find that my method adheres to "don't time the market". I'm in the middle of an upcoming transaction right now. I made the order to ACH money from my credit union to my new, shiny TDAmeritrade account. Once the money settles in that account and becomes available for trading, I'll be using it all to buy VTI at market. After that, I might check the market to see what it's doing.
Bogle: Smart Beta is stupid

SGM
Posts: 2095
Joined: Wed Mar 23, 2011 4:46 am

Re: "Don't time the market" vs. "Buy low, sell high"

Postby SGM » Wed Mar 15, 2017 3:04 pm

I have never been out of the market in 35+ years of investing. I may have put a little more in one month vs. another, but I steadily invested with every paycheck. Buy low and sell high I interpreted as not selling during a market downturn. Selling is more difficult. If the market was down I might have tax loss harvested putting the proceeds in a similar investment.

vicp88
Posts: 10
Joined: Sat Mar 11, 2017 1:29 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby vicp88 » Wed Mar 15, 2017 3:15 pm

MotoTrojan wrote:This exert from Random Walk is what would keep me from doing this:

"Because there is a long-term uptrend in the stock market, it can be very risky to be in cash. An investor who frequently carries a large cash position to avoid periods of market decline is very likely to be out of the market during some periods where it rallies smartly. Professor H. Negat Seybun of the University of Michigan found that 95 percent of the significant market gains over a thirty-year period came on 90 of the roughly 7,500 trading days. If you happened to miss those 90 days, just over 1 percent of the total, the generous long-run stock-market returns of the period would have been wiped out... Laszlo Birinyi... has calculated that a buy-and-hold investor would have seen one dollar invested in the DJIA in 1900 grow to $290 by the start of 2013. Had that investor missed the best 5 days each year, however, that dollar investment would have been worth less than a penny in 2013."



Thank you. I haven't read that book, but have seen it recommended many times. This quote will serve as a nice reminder for my investing going forward.

Da5id
Posts: 961
Joined: Fri Feb 26, 2016 8:20 am

Re: "Don't time the market" vs. "Buy low, sell high"

Postby Da5id » Wed Mar 15, 2017 3:16 pm

It is important to remember that

Haste makes waste
Time is money

A penny saved is a penny earned
Penny wise, pound foolish

Look before you leap
He who hesitates is lost

There are lots of conflicting sayings out there.

Sounds like for OP, best choice is to dollar cost average in. Not my chosen way of getting to my asset allocation, but if it makes him get started rather than sit and be paralyzed with fear of the "impending crash", it is as good a method as any.

livesoft
Posts: 53233
Joined: Thu Mar 01, 2007 8:00 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby livesoft » Wed Mar 15, 2017 3:17 pm

vicp88 wrote:Thank you. I haven't read that book, but have seen it recommended many times. This quote will serve as a nice reminder for my investing going forward.

I remember reading that quote years ago, then I investigated it. The quote only tells about half the story. The other half is quite interesting as well, but I will let you discover the other half on your own.
This signature message sponsored by sscritic: Learn to fish.

vicp88
Posts: 10
Joined: Sat Mar 11, 2017 1:29 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby vicp88 » Wed Mar 15, 2017 3:18 pm

SGM wrote:I have never been out of the market in 35+ years of investing. I may have put a little more in one month vs. another, but I steadily invested with every paycheck. Buy low and sell high I interpreted as not selling during a market downturn. Selling is more difficult. If the market was down I might have tax loss harvested putting the proceeds in a similar investment.


"Buy low and sell high I interpreted as not selling during a market downturn." I have failed miserably here in the past while doing some short-term individual stock trading. I learned a lot about myself while reflecting on this. Going forward I know this will be one of the most important pieces of advice to follow.

vicp88
Posts: 10
Joined: Sat Mar 11, 2017 1:29 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby vicp88 » Wed Mar 15, 2017 3:19 pm

livesoft wrote:
vicp88 wrote:Thank you. I haven't read that book, but have seen it recommended many times. This quote will serve as a nice reminder for my investing going forward.

I remember reading that quote years ago, then I investigated it. The quote only tells about half the story. The other half is quite interesting as well, but I will let you discover the other half on your own.


Will I find the other half in the book?

vicp88
Posts: 10
Joined: Sat Mar 11, 2017 1:29 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby vicp88 » Wed Mar 15, 2017 3:24 pm

Da5id wrote:It is important to remember that

Haste makes waste
Time is money

A penny saved is a penny earned
Penny wise, pound foolish

Look before you leap
He who hesitates is lost

There are lots of conflicting sayings out there.

Sounds like for OP, best choice is to dollar cost average in. Not my chosen way of getting to my asset allocation, but if it makes him get started rather than sit and be paralyzed with fear of the "impending crash", it is as good a method as any.


Most recommendations advise going all in at once. But you are right that DCA might be a better option for me. It is better than completely sitting out. I am thinking of going all in with monthly contributions over the course of one year.

livesoft
Posts: 53233
Joined: Thu Mar 01, 2007 8:00 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby livesoft » Wed Mar 15, 2017 3:25 pm

vicp88 wrote:Will I find the other half in the book?

No, you won't.
This signature message sponsored by sscritic: Learn to fish.

User avatar
Vulcan
Posts: 71
Joined: Sat Apr 05, 2014 11:43 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby Vulcan » Wed Mar 15, 2017 3:31 pm

livesoft wrote:
vicp88 wrote:Will I find the other half in the book?

No, you won't.

That biggest share of declines also happens on just a few market days, I presume. Which only further shows how pointless it is to sell after a big sell-off.

solar99999
Posts: 37
Joined: Fri Mar 03, 2017 7:32 am

Re: "Don't time the market" vs. "Buy low, sell high"

Postby solar99999 » Wed Mar 15, 2017 3:32 pm

I think it's much easier to time an individual stock or a sector than the entire market.

If your investment strategy is to buy the market, then don't time it and go in when you can.

If your investment strategy is to buy an individual stock or sector and you've done all your research, then by all means go ahead and time it.
- Buffetthead | | "[Cash is] thought of as “safe.” In truth they are among the most dangerous of assets." | | http://fortune.com/2012/02/09/warren-buffett-why-stocks-beat-gold-and-bonds/

Stan Dup
Posts: 761
Joined: Fri May 10, 2013 10:25 am

Re: "Don't time the market" vs. "Buy low, sell high"

Postby Stan Dup » Wed Mar 15, 2017 3:34 pm

"The tyranny of compounding expenses is the eighth deadly sin." - George Sisti

vicp88
Posts: 10
Joined: Sat Mar 11, 2017 1:29 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby vicp88 » Wed Mar 15, 2017 3:48 pm

Stan Dup wrote:This is worth reading:
http://awealthofcommonsense.com/2014/02 ... ket-timer/


This was great. Thank you!

jayhawkerbeef
Posts: 186
Joined: Tue Jul 22, 2014 11:10 am

Re: "Don't time the market" vs. "Buy low, sell high"

Postby jayhawkerbeef » Wed Mar 15, 2017 3:48 pm

You have to play to win.

avalpert
Posts: 4421
Joined: Sat Mar 22, 2008 4:58 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby avalpert » Wed Mar 15, 2017 3:59 pm

My favorite is "don't invest based on sound bytes".

MoonOrb
Posts: 714
Joined: Thu Jan 24, 2013 6:58 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby MoonOrb » Wed Mar 15, 2017 4:11 pm

I think of this as reflecting--very generally--two things.

First, that over time, the market is expected to rise. Thus, if you buy and hold you will tend to, as a general statement, buy low and sell high.

Second, that when you sell as part of rebalancing to stick to your desired asset allocation, you often will be buying low (ish) and selling high (ish) as a normal part of that process.

Dandy
Posts: 4469
Joined: Sun Apr 25, 2010 7:42 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby Dandy » Wed Mar 15, 2017 4:58 pm

Ah, trying to run things based on sayings. My favorite is familiarity breed contempt but absence makes the heart grow fonder. Some truth in both. I guess the idea is don't get too close for too long or be absent for too long. Or how about nothing ventured nothing gained vs slow and steady wins the race.

There is some truth in don't try to time the market and buy when others are selling and sell when others are buying.

In investments the idea of rebalancing is one way to implement a buy low and sell high idea. Many would suggest it is really sell now and buy higher later(since equities usually go up over time).

My approach is not to make drastic moves, not to make many moves and I'd rather sell a little when the market is on the high side (like it is now, in my opinion) and risk losing some of the upside. But I let my idea of having between 40 and 45% in equities be a check on my emotions. As long as I stay within those percentages I feel free to take some money off the table or add some money to the table.

For example when there is a series of really bad days I might buy some and if there is a series of really good days I might sell some. It happens maybe once a year. So far this has kept me from being too confused by the seemingly contradiction of the sayings you quoted. It should be noted that I am retired and have capital preservation as my investment objective. To be fair I took some money out of equities about two weeks ago and missed today's run up. But, got my equity allocation closer to the middle of my acceptable range.

I'll add what I think is another investment saying - the first objective is not to lose money.

pkcrafter
Posts: 11200
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: "Don't time the market" vs. "Buy low, sell high"

Postby pkcrafter » Wed Mar 15, 2017 6:02 pm

vic, I'm not sure if you are intending to invest new money or you are simply switching to a new strategy from what you used to do. If you are simply switching, then it's a sideways move and you should be right back in with the new strategy at your intended AA (70/30?). I'm also not sure what your trepidation is about. Yes, the market may drop in the near future, but so what? If you didn't believe the market will rise over time you would not invest at all. So, you can wait and maybe miss the next drop, but you will encounter others. It's just not a problem as long as you are not close to actually needing the money.

If it makes you feel better, go half in now and add the remainder incrementally for however many months suits you. I'd call it dollar cost averaging, but that relates to investing new money.

Make a plan and then follow it.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Fallible
Posts: 5776
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: "Don't time the market" vs. "Buy low, sell high"

Postby Fallible » Wed Mar 15, 2017 6:27 pm

vicp88 wrote:
SGM wrote:I have never been out of the market in 35+ years of investing. I may have put a little more in one month vs. another, but I steadily invested with every paycheck. Buy low and sell high I interpreted as not selling during a market downturn. Selling is more difficult. If the market was down I might have tax loss harvested putting the proceeds in a similar investment.


"Buy low and sell high I interpreted as not selling during a market downturn." I have failed miserably here in the past while doing some short-term individual stock trading. I learned a lot about myself while reflecting on this. Going forward I know this will be one of the most important pieces of advice to follow.


OP, if I understand this correctly, your comment about stock trading makes me think you may be confused about the difference between the market-timing, buy low-sell-high that is short-term trading. and the buy low-sell high, stay-the-course over a lifetime that is long-term investing, which you're now wisely getting into. Thus, you now want to create an AA that reflects not what you predict the market will do, but one based on your life goals, time horizon, financial capacity, and tolerance for risk. If the plan you posted about in your previous thread is what you have in mind, you should be off to a good start.
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

RetiredinKaty
Posts: 105
Joined: Mon Sep 09, 2013 6:52 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby RetiredinKaty » Wed Mar 15, 2017 6:39 pm

Disciplined rebalancing is contrarian, “buy low, sell high” in practice. Maintaining a fixed allocation is “don’t time the market”. No conflict in this for me.

I have long experienced cognitive dissonance over “Stay the course” and “Age – x in bonds”. I don’t automatically glide any more.

User avatar
Toons
Posts: 11503
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: "Don't time the market" vs. "Buy low, sell high"

Postby Toons » Wed Mar 15, 2017 7:07 pm

Invest as soon as you have the money to do so. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

User avatar
nedsaid
Posts: 6782
Joined: Fri Nov 23, 2012 12:33 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby nedsaid » Wed Mar 15, 2017 7:59 pm

vicp88 wrote:These two proverbs are ubiquitous in the world of investing, but they seem mutually exclusive to me. How can you know whether you are "buying low" or "selling high" without timing the market?

Here is a quote by Warren Buffet: "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."
I don't think this is part of the quote, but it was in the same article where I found it - Be prepared to invest in a down market and to "get out" in a soaring market.

I remember the market crash in 2009, and it was obvious then that people were fearful. But are people "greedy" today?

I am stuck between my intellect (Don't time the market. Stay disciplined and stick to your plan), and my intuition (Buy low, sell high. The market is high. People are greedy. There will be a correction). But I question this intuition. I am by no means a financial expert. And my intuitions have been wrong many times before. Where does this intuition come from? Albert Einstein has said, "intuition is nothing but the outcome of earlier intellectual experience."

I have been obsessively reading and researching in hopes of making an investment plan I can simply stick to in the long term (I recently made my first Bogleheads post asking for advice viewtopic.php?p=3277674#p3279652). But I have cold feet and can't get myself to take the plunge. And perhaps I am suffering from paralysis by analysis. I've been ready to invest since December, but was naively waiting for a market correction that never happened (stupid market timing). Intellectually, I knew it probably wouldn't happen. As Murphy's law would have it, the market correction won't happen until I jump into the market.

From everything I have seen, this forum has been full of wisdom and positive reinforcements. So I would like to thank you all in advance for your time and your thoughts.


Don't lock yourself into "either or" thinking. You don't have to be a "buy and hold or bust" type of thinker who ignores market valuation and market sentiment. If you see market euphoria and extreme valuations, it would be prudent to take some off the top. The market can get into panic buying as well as panic selling. You can react to market extremes without being a market timer. I see market timing as buying and selling based upon pre-set indicators and I see market timing as a shorter term phenomenon.

True euphoria and true panic just don't happen that often. In my lifetime of 57 years, I have seen three 50% down bear markets. One in 1973-74, another in 2000-2002, and the last one in 2008-2009. The market experienced euphoria in the later 1960's and again in the late 1990's. What I am advocating is not jumping in and out of the market based upon some moving average.

You don't have to be heroic and drive flying over a canyon if you see that the bridge that was supposed to be in front of you is out. "Stay the course" regardless of consequences is pretty reckless thinking. If the bridge is out, it is okay to put on the brakes. Even, "Mr. Stay The Course" himself, Mr. John Bogle considered selling all of his stocks in the late 1990's. He didn't follow through with comments that he was going to reduce his stocks to 20% of his portfolio but in interviews he did talk about this. As I recall, he reduced his stock allocation by much less than what he said he would do and did it over a two year period.
A fool and his money are good for business.

selters
Posts: 294
Joined: Thu Feb 27, 2014 9:26 am

Re: "Don't time the market" vs. "Buy low, sell high"

Postby selters » Wed Mar 15, 2017 9:00 pm

"Buy low, sell high" is trader talk. It is not a tenet of the Bogleheads investment philosophy.

malabargold
Posts: 365
Joined: Fri Aug 08, 2014 8:16 am

Re: "Don't time the market" vs. "Buy low, sell high"

Postby malabargold » Wed Mar 15, 2017 9:02 pm

Of course they are anything BUT mutually
exclusive.

I am quite confident that one day, the stock shares
I've owned since the 1960's will one day be sold
at a great profit, ditto the 1970's, etc., etc.

"Not timing the market" implies long-term stock ownership,
and it is exactly that very long holding period is the nearest thing any investor can have to a "sure thing"

inbox788
Posts: 3441
Joined: Thu Mar 15, 2012 5:24 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby inbox788 » Wed Mar 15, 2017 9:05 pm

vicp88 wrote:These two proverbs are ubiquitous in the world of investing, but they seem mutually exclusive to me. How can you know whether you are "buying low" or "selling high" without timing the market?

Traders have some sayings too, like "Never try to catch a falling knife". The mantra of momentum investors is "Buy high, sell higher".

The conclusion is not to buy when the market is going down or falling, but to buy when it's going up up and away.

In any case, you shouldn't base your investing philosophy simply on a few proverbs.

User avatar
arcticpineapplecorp.
Posts: 1665
Joined: Tue Mar 06, 2012 9:22 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby arcticpineapplecorp. » Wed Mar 15, 2017 9:15 pm

vicp88 wrote:
MotoTrojan wrote:This exert from Random Walk is what would keep me from doing this:

"Because there is a long-term uptrend in the stock market, it can be very risky to be in cash. An investor who frequently carries a large cash position to avoid periods of market decline is very likely to be out of the market during some periods where it rallies smartly. Professor H. Negat Seybun of the University of Michigan found that 95 percent of the significant market gains over a thirty-year period came on 90 of the roughly 7,500 trading days. If you happened to miss those 90 days, just over 1 percent of the total, the generous long-run stock-market returns of the period would have been wiped out... Laszlo Birinyi... has calculated that a buy-and-hold investor would have seen one dollar invested in the DJIA in 1900 grow to $290 by the start of 2013. Had that investor missed the best 5 days each year, however, that dollar investment would have been worth less than a penny in 2013."



Thank you. I haven't read that book, but have seen it recommended many times. This quote will serve as a nice reminder for my investing going forward.

To get a sense of this visually speaking, check out the following:
http://www.businessinsider.com/cost-of- ... 500-2015-3
https://www.google.com/url?sa=t&rct=j&q ... DcDTas0X2g
https://www.google.com/url?sa=t&rct=j&q ... 9sNTnuuerA
https://www.google.com/url?sa=t&rct=j&q ... qjxxm96_1w

Remember it's time in the market, not timing the market that matters.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

User avatar
blaugranamd
Posts: 335
Joined: Wed Apr 11, 2012 1:57 pm
Location: D-lux apt in the sky

Re: "Don't time the market" vs. "Buy low, sell high"

Postby blaugranamd » Wed Mar 15, 2017 10:33 pm

"Buy low, sell high" is the foolish mantra of market timing and the antithesis of Boglehead investing philosophy. Get it out of your head and replace it with the following: "Invest we must, invest early and often, don't time the market, keep costs low, stay the course"
-- Don't mistake more funds for more diversity: Total Int'l + Total Market = 7k to 10k stocks -- | -- Market return does NOT = average nor 50th percentile, rather 80-90th percentile long term ---

TropikThunder
Posts: 300
Joined: Sun Apr 03, 2016 5:41 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby TropikThunder » Wed Mar 15, 2017 11:43 pm

vicp88 wrote:These two proverbs are ubiquitous in the world of investing, but they seem mutually exclusive to me. How can you know whether you are "buying low" or "selling high" without timing the market?

Attempted oversimplification:
Timing the market is making a buy/sell decision on something you think might happen, whether you have any special information or not: "I'm selling my stock because I think the wrong person is going to win the election"; "I'm waiting to buy bonds until after interest rates stop rising"; "I'm going to sit in cash until the next correction".

Buy low/sell high is making a buy/sell decision on something that did happen. Most will point out this is not really BH-style thinking, but one could think of it as rebalancing of a sort. If your stocks/bonds allocation is 70/30, and an equity run takes you to 75/25, then you would rebalance by selling high (stocks) and buying low (bonds) to get back to 70/30. The problem is when people blend the concepts into thinking they can buy a stock or sector when it's low, and then sell when it's high, as if they can reliably identify which stocks, which sectors, when to buy, and when to sell, etc - better then everyone else in the market.

vicp88
Posts: 10
Joined: Sat Mar 11, 2017 1:29 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby vicp88 » Thu Mar 16, 2017 12:09 am

RetiredinKaty wrote:Disciplined rebalancing is contrarian, “buy low, sell high” in practice. Maintaining a fixed allocation is “don’t time the market”. No conflict in this for me.


Good point.

User avatar
nedsaid
Posts: 6782
Joined: Fri Nov 23, 2012 12:33 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby nedsaid » Fri Mar 17, 2017 8:03 am

blaugranamd wrote:"Buy low, sell high" is the foolish mantra of market timing and the antithesis of Boglehead investing philosophy. Get it out of your head and replace it with the following: "Invest we must, invest early and often, don't time the market, keep costs low, stay the course"


No. Buy low, sell high is a reminder not to performance chase. Isn't buy low, sell high what rebalancing does? I can't tell you all the lectures I got around here when I mentioned that my attitude towards rebalancing was rather relaxed. Buy low, sell high is also a reminder to pay attention to valuation. Mr. Bogle talks about valuation all the time and has a model for predicting returns for the next 10 years for both stocks and bonds.
A fool and his money are good for business.

User avatar
blaugranamd
Posts: 335
Joined: Wed Apr 11, 2012 1:57 pm
Location: D-lux apt in the sky

Re: "Don't time the market" vs. "Buy low, sell high"

Postby blaugranamd » Fri Mar 17, 2017 8:33 am

nedsaid wrote:
blaugranamd wrote:"Buy low, sell high" is the foolish mantra of market timing and the antithesis of Boglehead investing philosophy. Get it out of your head and replace it with the following: "Invest we must, invest early and often, don't time the market, keep costs low, stay the course"


No. Buy low, sell high is a reminder not to performance chase. Isn't buy low, sell high what rebalancing does? I can't tell you all the lectures I got around here when I mentioned that my attitude towards rebalancing was rather relaxed. Buy low, sell high is also a reminder to pay attention to valuation. Mr. Bogle talks about valuation all the time and has a model for predicting returns for the next 10 years for both stocks and bonds.


That may be how folks around here interpret and implement it but the majority of people I know use it to justify market timing habits like not buying stocks that are at an "all time high" right now or "waiting for the drop/bubble to burst/etc". Sure rebalancing is buying high and selling low in a technical sense but I think you would be hard pressed to see the average investor using that colloquialism to reference strict adherence to rebalancing bands over market timing.
-- Don't mistake more funds for more diversity: Total Int'l + Total Market = 7k to 10k stocks -- | -- Market return does NOT = average nor 50th percentile, rather 80-90th percentile long term ---

User avatar
nedsaid
Posts: 6782
Joined: Fri Nov 23, 2012 12:33 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby nedsaid » Fri Mar 17, 2017 8:49 am

blaugranamd wrote:
nedsaid wrote:
blaugranamd wrote:"Buy low, sell high" is the foolish mantra of market timing and the antithesis of Boglehead investing philosophy. Get it out of your head and replace it with the following: "Invest we must, invest early and often, don't time the market, keep costs low, stay the course"


No. Buy low, sell high is a reminder not to performance chase. Isn't buy low, sell high what rebalancing does? I can't tell you all the lectures I got around here when I mentioned that my attitude towards rebalancing was rather relaxed. Buy low, sell high is also a reminder to pay attention to valuation. Mr. Bogle talks about valuation all the time and has a model for predicting returns for the next 10 years for both stocks and bonds.


That may be how some around here interpret and implement it but the majority of folks I know use it to justify market timing habits like not buying stocks that are at an "all time high" right now or "waiting for the drop/bubble to burst/etc". Sure rebalancing is buying high and selling low in a technical sense but I think you would be hard pressed to see the average investor using that colloquialism to reference rebalancing bands over market timing.


I am long term in my outlook. I am not a trader. That being said, I do stay on the lookout for genuine opportunities. A few times, I have done reallocation of funds based upon perceived opportunity, which is buying something cheap.

Buy low, sell high is the precise opposite of what many investors do. They performance chase and when their investments turn cold, they sell. They wonder why investing never works out for them. They are buying high and selling low and that is not a prescription for investing success.

This is why knowledge of market history is important. People forget that all time highs are normal market behavior and that stocks always look expensive in a bull market. We are not anywhere near euphoria and talk of new paradigms that we had in the late 1990's. Investors are also better served by optimism rather than pessimism over the long run.

Certainly, I have not advocated market timing or lots of trading. Research shows that neither works very well.
A fool and his money are good for business.

workerbeeengineer
Posts: 17
Joined: Thu Jun 02, 2016 12:22 am

Re: "Don't time the market" vs. "Buy low, sell high"

Postby workerbeeengineer » Fri Mar 17, 2017 9:29 am

Certainly not pure BH view, but imo If we are talking about taking profit on an individual stock (your "mad money" as Jim Cramer calls it) , then hey...why not ring the register. However, for mutual funds in main or core part of a portfolio, then agree with others here on taking long view. Gets a bit grey to me however on when tweaking a portfolio asset allocation becomes market-timing. I would not view throttling back on stock mutual fund allocation and increasing (or starting) the allocation for a bond fund as one nears retirement as market-timing.

User avatar
blaugranamd
Posts: 335
Joined: Wed Apr 11, 2012 1:57 pm
Location: D-lux apt in the sky

Re: "Don't time the market" vs. "Buy low, sell high"

Postby blaugranamd » Fri Mar 17, 2017 9:41 am

nedsaid wrote:
blaugranamd wrote:
nedsaid wrote:
blaugranamd wrote:"Buy low, sell high" is the foolish mantra of market timing and the antithesis of Boglehead investing philosophy. Get it out of your head and replace it with the following: "Invest we must, invest early and often, don't time the market, keep costs low, stay the course"


No. Buy low, sell high is a reminder not to performance chase. Isn't buy low, sell high what rebalancing does? I can't tell you all the lectures I got around here when I mentioned that my attitude towards rebalancing was rather relaxed. Buy low, sell high is also a reminder to pay attention to valuation. Mr. Bogle talks about valuation all the time and has a model for predicting returns for the next 10 years for both stocks and bonds.


That may be how some around here interpret and implement it but the majority of folks I know use it to justify market timing habits like not buying stocks that are at an "all time high" right now or "waiting for the drop/bubble to burst/etc". Sure rebalancing is buying high and selling low in a technical sense but I think you would be hard pressed to see the average investor using that colloquialism to reference rebalancing bands over market timing.


I am long term in my outlook. I am not a trader. That being said, I do stay on the lookout for genuine opportunities. A few times, I have done reallocation of funds based upon perceived opportunity, which is buying something cheap.

Buy low, sell high is the precise opposite of what many investors do. They performance chase and when their investments turn cold, they sell. They wonder why investing never works out for them. They are buying high and selling low and that is not a prescription for investing success.

This is why knowledge of market history is important. People forget that all time highs are normal market behavior and that stocks always look expensive in a bull market. We are not anywhere near euphoria and talk of new paradigms that we had in the late 1990's. Investors are also better served by optimism rather than pessimism over the long run.

Certainly, I have not advocated market timing or lots of trading. Research shows that neither works very well.


Don't misunderstand me, I know you can interpret that phrase appropriately. :P But to the new investors, including many of my friends, use this to justify not buying stocks right now. It can be very dangerous in the wrong context. That's my only point.
-- Don't mistake more funds for more diversity: Total Int'l + Total Market = 7k to 10k stocks -- | -- Market return does NOT = average nor 50th percentile, rather 80-90th percentile long term ---

avalpert
Posts: 4421
Joined: Sat Mar 22, 2008 4:58 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby avalpert » Fri Mar 17, 2017 10:30 am

nedsaid wrote:
blaugranamd wrote:"Buy low, sell high" is the foolish mantra of market timing and the antithesis of Boglehead investing philosophy. Get it out of your head and replace it with the following: "Invest we must, invest early and often, don't time the market, keep costs low, stay the course"


No. Buy low, sell high is a reminder not to performance chase. Isn't buy low, sell high what rebalancing does?


No, it isn't necessarily what rebalancing does. Most of the time when I rebalance I am selling equities (that have appreciated) and buying fixed income vehicles (that have also appreciated) - i.e. buying high and selling high. Even within equity classes, more often than not I am selling riskier asset class that are high an buying less risky asset classes that are also high. Sometimes I'm selling less risky asset classes that have declined less than my riskier ones - i.e. buying low and selling low. Rebalancing includes buy low, buying high, selling low and selling high at different times.

This isn't a trivial point - if one thinks rebalancing is really about buying low or selling high (as opposed to maintaining a fixed risk/return profile) they may not do it consistently. That is fine as long as it is intentional with a full understanding of the implications - but for most people who are acting off of sound bytes I doubt they have that.

MotoTrojan
Posts: 88
Joined: Wed Feb 01, 2017 8:39 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby MotoTrojan » Fri Mar 17, 2017 10:46 am

avalpert wrote:
nedsaid wrote:
blaugranamd wrote:"Buy low, sell high" is the foolish mantra of market timing and the antithesis of Boglehead investing philosophy. Get it out of your head and replace it with the following: "Invest we must, invest early and often, don't time the market, keep costs low, stay the course"


No. Buy low, sell high is a reminder not to performance chase. Isn't buy low, sell high what rebalancing does?


No, it isn't necessarily what rebalancing does. Most of the time when I rebalance I am selling equities (that have appreciated) and buying fixed income vehicles (that have also appreciated) - i.e. buying high and selling high. Even within equity classes, more often than not I am selling riskier asset class that are high an buying less risky asset classes that are also high. Sometimes I'm selling less risky asset classes that have declined less than my riskier ones - i.e. buying low and selling low. Rebalancing includes buy low, buying high, selling low and selling high at different times.

This isn't a trivial point - if one thinks rebalancing is really about buying low or selling high (as opposed to maintaining a fixed risk/return profile) they may not do it consistently. That is fine as long as it is intentional with a full understanding of the implications - but for most people who are acting off of sound bytes I doubt they have that.


Interesting point. With this logic it may actually make more sense (more likely to cause buy low, sell high) when rebalancing between equities, or any asset classes that have similar expected long-term returns. If you have 2 equity funds that have an expected return of 8% for example, and rebalance them, overtime would you not in effect be buying low and selling high, relative to the mean trajectory of the funds?

avalpert
Posts: 4421
Joined: Sat Mar 22, 2008 4:58 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby avalpert » Fri Mar 17, 2017 11:29 am

MotoTrojan wrote:
avalpert wrote:
nedsaid wrote:
blaugranamd wrote:"Buy low, sell high" is the foolish mantra of market timing and the antithesis of Boglehead investing philosophy. Get it out of your head and replace it with the following: "Invest we must, invest early and often, don't time the market, keep costs low, stay the course"


No. Buy low, sell high is a reminder not to performance chase. Isn't buy low, sell high what rebalancing does?


No, it isn't necessarily what rebalancing does. Most of the time when I rebalance I am selling equities (that have appreciated) and buying fixed income vehicles (that have also appreciated) - i.e. buying high and selling high. Even within equity classes, more often than not I am selling riskier asset class that are high an buying less risky asset classes that are also high. Sometimes I'm selling less risky asset classes that have declined less than my riskier ones - i.e. buying low and selling low. Rebalancing includes buy low, buying high, selling low and selling high at different times.

This isn't a trivial point - if one thinks rebalancing is really about buying low or selling high (as opposed to maintaining a fixed risk/return profile) they may not do it consistently. That is fine as long as it is intentional with a full understanding of the implications - but for most people who are acting off of sound bytes I doubt they have that.


Interesting point. With this logic it may actually make more sense (more likely to cause buy low, sell high) when rebalancing between equities, or any asset classes that have similar expected long-term returns. If you have 2 equity funds that have an expected return of 8% for example, and rebalance them, overtime would you not in effect be buying low and selling high, relative to the mean trajectory of the funds?


It will depend on how correlated the asset classes are - that is why, when talking about diversification of asset classes in a portfolio, so much attention is given to the correlation matrix across the portfolio.

TonyDAntonio
Posts: 254
Joined: Thu Mar 03, 2016 8:32 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby TonyDAntonio » Fri Mar 17, 2017 12:53 pm

Da5id wrote:It is important to remember that

Haste makes waste
Time is money

A penny saved is a penny earned
Penny wise, pound foolish

Look before you leap
He who hesitates is lost

There are lots of conflicting sayings out there.

Sounds like for OP, best choice is to dollar cost average in. Not my chosen way of getting to my asset allocation, but if it makes him get started rather than sit and be paralyzed with fear of the "impending crash", it is as good a method as any.


I like this money diddy: if time is money and money is the root of all evil then time is the root of all evil.

:D

KeithZz
Posts: 15
Joined: Sun Feb 19, 2017 1:00 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby KeithZz » Fri Mar 17, 2017 1:14 pm

if you have steady paycheck contribution every month and rebanlcing on the way. then you already did buy low, sell high under certain time. But if you only have set of money in investment and no new money will go in anymore. You should be more active. Even long term investment king Jack bogle sold 50 percent of his stock on 2008.

avalpert
Posts: 4421
Joined: Sat Mar 22, 2008 4:58 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby avalpert » Fri Mar 17, 2017 1:35 pm

KeithZz wrote: Even long term investment king Jack bogle sold 50 percent of his stock on 2008.

Do you have citation for that?

kolea
Posts: 1165
Joined: Fri Jul 11, 2014 5:30 pm
Location: Maui and Columbia River Gorge

Re: "Don't time the market" vs. "Buy low, sell high"

Postby kolea » Fri Mar 17, 2017 1:42 pm

"Don't time the market" is at odds with "Buy low, sell high" but not around here since I cannot ever remember seeing the latter given out as advice here. Despite the popularity of "Don't time the market" within boglehead practices, there does seem to be a tendency to disregard it.
Kolea (pron. ko-lay-uh). Golden plover.

User avatar
nedsaid
Posts: 6782
Joined: Fri Nov 23, 2012 12:33 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby nedsaid » Fri Mar 17, 2017 10:03 pm

Wow. I thought "buy low, sell high" was pretty fundamental to investing. Silly me.

If it makes you feel better, perhaps I should be passionately advocating for "buy high, sell low" as the preferred investing strategy. Buy what is hot and performance chase to your heart's content. Follow recently popular investment strategies. Change your portfolio with every new investment book you read. I am feeling it now, I could be a very successful investment advisor! Thanks for setting me straight.
A fool and his money are good for business.

KeithZz
Posts: 15
Joined: Sun Feb 19, 2017 1:00 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby KeithZz » Fri Mar 17, 2017 10:50 pm

avalpert wrote:
KeithZz wrote: Even long term investment king Jack bogle sold 50 percent of his stock on 2008.

Do you have citation for that?


I made a mistake, it was 1999, not 2008. From interview below.
https://www.youtube.com/watch?v=6Qg959oYCxU

avalpert
Posts: 4421
Joined: Sat Mar 22, 2008 4:58 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby avalpert » Fri Mar 17, 2017 11:15 pm

nedsaid wrote:Wow. I thought "buy low, sell high" was pretty fundamental to investing. Silly me.

It is silly you. Buy low, sell high is fundamental to investing in a trite content-less cliched way just like 'never lose money'. When people take that triteness and try to make it actionable they are likely to make mistakes - particularly they will be prone to try to guess whether we are high or low today relative to tomorrow, something people tend to not be very good about guessing.

At the end of the day, what should really be advocated is buy when funds are available and sell when funds are needed - because over time we expect positive returns so the more time you are invested the better off you will be.

User avatar
blaugranamd
Posts: 335
Joined: Wed Apr 11, 2012 1:57 pm
Location: D-lux apt in the sky

Re: "Don't time the market" vs. "Buy low, sell high"

Postby blaugranamd » Sat Mar 18, 2017 8:33 am

nedsaid wrote:Wow. I thought "buy low, sell high" was pretty fundamental to investing. Silly me.

If it makes you feel better, perhaps I should be passionately advocating for "buy high, sell low" as the preferred investing strategy. Buy what is hot and performance chase to your heart's content. Follow recently popular investment strategies. Change your portfolio with every new investment book you read. I am feeling it now, I could be a very successful investment advisor! Thanks for setting me straight.


Please don't misunderstand me, the ultimate goal is buy low, sell high. By definition it's now you make any money. There's the Boglehead view of BL,SH that involves rebalance bands to sell off high performers and buy low performers or investing new money into a lagging asset class with the goal being to return to a predetermined AA and risk tolerance that has been diverged from due to market movements. This is BL,SH in Boglehead land. My contention is that colloquially BL,SH is used​ to justify market timing: to be in cash during drops (sell high) and load up on equity at the bottom (buy low) OR to try and identify undervalued and overvalued stocks and swap in and out of them for quick profits. This is the antithesis of Boglehead philosophy and a great way to underperform.
-- Don't mistake more funds for more diversity: Total Int'l + Total Market = 7k to 10k stocks -- | -- Market return does NOT = average nor 50th percentile, rather 80-90th percentile long term ---

User avatar
Peter Foley
Posts: 3757
Joined: Fri Nov 23, 2007 10:34 am
Location: Lake Wobegon

Re: "Don't time the market" vs. "Buy low, sell high"

Postby Peter Foley » Sat Mar 18, 2017 11:59 am

RetiredinKaty wrote:

Disciplined rebalancing is contrarian, “buy low, sell high” in practice. Maintaining a fixed allocation is “don’t time the market”. No conflict in this for me.

I have long experienced cognitive dissonance over “Stay the course” and “Age – x in bonds”. I don’t automatically glide any more.


I hope I am not misinterpreting this. Broadly speaking I agree.

My personal opinion is that it is easier to following all of these when one is in the accumulation stage and time is on your side. It is relatively easy to redirect future contributions. Once you are in the withdrawal stage, usually with much more at risk, it may become harder emotionally to follow these adages/guidelines.

"Stay the course" is a basic Boglehead principle. The implication is that you have a well thought out plan. That plan likely includes rebalancing, or age in bonds, or some other AA metric. I personally find "Don't time the market" to be problematic - perhaps a character flaw on my part. It is certainly possible for someone to "win the game" during an extended bull market rally. I would certainly not fault anyone for revising their IPS/plan at that point in time to take a more conservative approach.

As RetiredinKaty implied, context is important.

User avatar
nedsaid
Posts: 6782
Joined: Fri Nov 23, 2012 12:33 pm

Re: "Don't time the market" vs. "Buy low, sell high"

Postby nedsaid » Sun Mar 19, 2017 9:54 am

blaugranamd wrote:
nedsaid wrote:Wow. I thought "buy low, sell high" was pretty fundamental to investing. Silly me.

If it makes you feel better, perhaps I should be passionately advocating for "buy high, sell low" as the preferred investing strategy. Buy what is hot and performance chase to your heart's content. Follow recently popular investment strategies. Change your portfolio with every new investment book you read. I am feeling it now, I could be a very successful investment advisor! Thanks for setting me straight.


Please don't misunderstand me, the ultimate goal is buy low, sell high. By definition it's now you make any money. There's the Boglehead view of BL,SH that involves rebalance bands to sell off high performers and buy low performers or investing new money into a lagging asset class with the goal being to return to a predetermined AA and risk tolerance that has been diverged from due to market movements. This is BL,SH in Boglehead land. My contention is that colloquially BL,SH is used​ to justify market timing: to be in cash during drops (sell high) and load up on equity at the bottom (buy low) OR to try and identify undervalued and overvalued stocks and swap in and out of them for quick profits. This is the antithesis of Boglehead philosophy and a great way to underperform.


My gosh, we are all grown adults around here. I could care less what phrases that traders use to justify their activity. Have I ever encouraged an active trading strategy on this forum? My holding periods on my investments are pretty long. I still own the first mutual fund I purchased on July 16, 1984. That is hardly active trading. Do what you want with your own portfolio and contend all you want and whatever you want. I get your point but people will say whatever they want to justify their behavior. Buy low, sell high has worked pretty well for me.
A fool and his money are good for business.


Return to “Investing - Help with Personal Investments”

Who is online

Users browsing this forum: aristotelian, Google [Bot], gus1961, radiowave, sixty40, Traveller, TropikThunder and 49 guests