What is the chance of a purchase decreasing in value at some point?

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fctu
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What is the chance of a purchase decreasing in value at some point?

Post by fctu » Sun Mar 25, 2018 2:20 pm

I feel slightly dissapointed when I purchase shares of an index mutual fund, and then it decreases in value the next day, or the next week, or at some other point. It would be better if I had waited, but of course I had no way of knowing.

What is the chance of making a purchase on a date where the fund never decreases below the initial purchase value? I am guessing that a large percentage of purchase dates are not at such an optimal point in time, and that knowing this fact would be in some way reassuring when the value decreases.

Has anyone seen this figure calculated?

livesoft
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Re: What is the chance of a purchase decreasing in value at some point?

Post by livesoft » Sun Mar 25, 2018 2:25 pm

I would guess that it is at least 33% or so. I say this because LS investing is better than DCA only about two-thirds of the time.
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mega317
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Re: What is the chance of a purchase decreasing in value at some point?

Post by mega317 » Sun Mar 25, 2018 2:33 pm

fctu wrote:
Sun Mar 25, 2018 2:20 pm
I am guessing that a large percentage of purchase dates are not at such an optimal point in time, and that knowing this fact would be in some way reassuring when the value decreases.
You are twisting yourself up for no reason in order to get reassurance. Prices go up and they go down. If you can't just be happy with losing some money sometimes then you need to either learn more about investing or reconsider your strategy. Probably both.

123
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Re: What is the chance of a purchase decreasing in value at some point?

Post by 123 » Sun Mar 25, 2018 2:38 pm

If you only want to see upward movement in your purchase's value you need to restrict yourself to CD's at FDIC insured banks. Investment implies "risk". Risk means that you could "lose" something.
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Helo80
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Re: What is the chance of a purchase decreasing in value at some point?

Post by Helo80 » Sun Mar 25, 2018 2:48 pm

IMHO -- you're crying over spilled milk. Once you rip off the band-aid a few times and move large sums of money into the market (your personal belief of what "large sum" is)... you kind of forget what you bought said stocks for and how much it moves in the next 3, 5, 10, 20, and 30 days. Imagine if you moved $10 million dollars into S&P500 or TSM 2 weeks ago... you'd have lost probably hundreds of thousands of dollars (off the top of my head without math)... but 10-15 years from now... our collective BH hope is that such noise would be no big deal and you're better off from having invested said monies.

RRAAYY3
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Re: What is the chance of a purchase decreasing in value at some point?

Post by RRAAYY3 » Sun Mar 25, 2018 3:02 pm

Don’t sell ... the “loss” is irrelevant - until you click the button and make it a reality. Markets go down? Cool, buy more for cheaper and lower your cost basis. Markets go up? Cool your money made money.

Don’t invest what you’ll need in the next 5 years, CDs / high yield savings instead

oh, and stop checking

delamer
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Re: What is the chance of a purchase decreasing in value at some point?

Post by delamer » Sun Mar 25, 2018 4:44 pm

Is there any stock that has maintained a consistently upward trajectory — or at least consistently not downward one — throughout its trading history?

My guess is no. So every stock that has ever been sold has had someone who bought it and then had its price decline.

SlowMovingInvestor
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Re: What is the chance of a purchase decreasing in value at some point?

Post by SlowMovingInvestor » Sun Mar 25, 2018 4:50 pm

On a whim, I decided to check SPY back to its inception in 1999. That encompasses the dotcom bust and the 2008 crisis. Note that I can't find data on SPY's Adjusted Close (now that Yahoo's historical data API is gone), so I can't take dividends into account.

Without taking dividends into acccount, you would end up with at least 1 down day 96% of the time
A very rough estimate of dividends (2.5% annually, compounded daily) gives me at least 1 down day 95% of the time.

But this is not really useful or actionable in any way :)

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telemark
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Re: What is the chance of a purchase decreasing in value at some point?

Post by telemark » Sun Mar 25, 2018 10:21 pm

It gets worse. If you buy ETFs, you can watch the value decline on the *same* day.

Maybe adjust your time frame and stop checking your investments so often?

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Oicuryy
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Re: What is the chance of a purchase decreasing in value at some point?

Post by Oicuryy » Sun Mar 25, 2018 10:40 pm

Using Yahoo's adjusted closing price for VFINX, 628 of the last 9641 prices, 6.5%, have not yet seen a lower price.

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PFInterest
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Re: What is the chance of a purchase decreasing in value at some point?

Post by PFInterest » Sun Mar 25, 2018 10:46 pm

fctu wrote:
Sun Mar 25, 2018 2:20 pm
I feel slightly dissapointed when I purchase shares of an index mutual fund, and then it decreases in value the next day, or the next week, or at some other point. It would be better if I had waited, but of course I had no way of knowing.

What is the chance of making a purchase on a date where the fund never decreases below the initial purchase value? I am guessing that a large percentage of purchase dates are not at such an optimal point in time, and that knowing this fact would be in some way reassuring when the value decreases.

Has anyone seen this figure calculated?
I only try and buy on down days. You're doing it wrong.

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