is this market timing? or better

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k1982
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is this market timing? or better

Post by k1982 »

throwing money into short term bond index (VBIRX) weekly/monthly and then whenever stocks that a hit (3-5% dip) exchange those funds into (VFIAX) that day.
am I playing with fire ? or is this smart move?

i'm 38 years old currently 100% VFIAX
ChinchillaWhiplash
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Re: is this market timing? or better

Post by ChinchillaWhiplash »

It is market timing. Short term treasuries is a safer place to park money short term. Less likely to go down with a market crash. Might work, might not. You won’t be out anything other than some gains in equities if it doesn’t work.
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JoMoney
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Re: is this market timing? or better

Post by JoMoney »

Historically speaking, there are a few periods where stocks had a prolonged dip and delaying investment paid off, but most of the time you would have been better off investing the money as soon as you can rather than waiting... Which I think makes sense, if you believe VFIAX (S&P 500 index) is a good investment (and I do, that's what I use for the bulk of my investment)...

If you believed it was going to drop in value, you probably shouldn't be buying it at all... That said, you should expect that from time to time they will drop in value, and it's good to have some short-term money set aside so you're not concerned about selling any time soon to pay your bills or make some near-term planned purchase.

A short-term bond fund will likely have a 'duration' of about 2.5 years. I wouldn't put money in a portfolio of bonds with that duration unless my need for the money was close to (or longer) than that.
Last edited by JoMoney on Mon Sep 28, 2020 1:24 pm, edited 1 time in total.
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csmath
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Re: is this market timing? or better

Post by csmath »

k1982 wrote: Mon Sep 28, 2020 1:08 pm throwing money into short term bond index (VBIRX) weekly/monthly and then whenever stocks that a hit (3-5% dip) exchange those funds into (VFIAX) that day.
am I playing with fire ? or is this smart move?

i'm 38 years old currently 100% VFIAX
It will feel like you're being smart but statistically it isn't optimal. "Buying the Dips" as you are proposing under performs just buying when you have the money to invest. "Time in the Market" is better than trying to time the market the majority of the time. I'm sure several other forum members have charts and stats and all the bells and whistles that demonstrate this if you need them. Some people stay out of the market and miss massive run-ups just waiting for that one good dip so that they can feel good about their timing when if they only would have invested when they had the money, they would have received the gains the whole time they were waiting for a measly dip.
Topic Author
k1982
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Re: is this market timing? or better

Post by k1982 »

whatever money I have invested in VFIAX I will never touch until I retire hopefully in 20 years. I'm a boglehead in heart and believe in Vanguard philosophy - long term investing.

I just hate buying at all time highs :(

I'm still trying to figure out how I'm making money this year even though i bought most of the VFIAX fund in January lol (all time highs)

ok ok i'll tell you a secret.. i had a little left sitting in the bank and took advantage of the huge dip in March and bought some more

first time investor since January 2020 @ 38 years old
so far i enjoy the ride

-----never sell VFIAX ----
----- buy the dips ------
----stay the course and don't get tricky with single stocks -----
---- live below your means-----
and invest ---always invest
CanaBogle24
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Re: is this market timing? or better

Post by CanaBogle24 »

Everyone says they "hate buying at all time highs" - but if you look back at long term market peformance, it spends most of its time at all time highs. That's why the Boglehead philosophy works. Just ride the wave.

If you didn't want to buy at all time highs, you could've found yourself on the sidelines from most of 2009 - 2020 "waiting" for a big correction while all-time highs continued to make way for new all-time highs. :happy
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k1982
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Re: is this market timing? or better

Post by k1982 »

very true...don't want to be sitting on sidelines while all time highs stay there for 10 years or more building on top of each other...
csmath
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Re: is this market timing? or better

Post by csmath »

k1982 wrote: Mon Sep 28, 2020 1:38 pm I just hate buying at all time highs :(
Take at look at the performance of the total market for as far back as you can. How many days in the past do you think the market was at or very near the all time high? The answer is, most of the time. It only feels high when you're there.

The market value is expected in increase over time, not just fluctuate around an equilibrium point. People that talk as though the market being at an all time high increases the chance of a crash don't know what they are talking about and listen to the sensational media far too much. Tune out the noise and keep a consistent contribution schedule the best you can.
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k1982
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Re: is this market timing? or better

Post by k1982 »

"tune out the noise and be consistent in investing"

good thinking!
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David Jay
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Re: is this market timing? or better

Post by David Jay »

k1982 wrote: Mon Sep 28, 2020 1:38 pmI just hate buying at all time highs :(
As others have said, this thinking is the root of your problem.

An analogy can be made to taking a cross country trip (let's say from NY to CA). Every minute you drive, you are further west than you ever have been. Should you go back to NY and start over because you are at "all time high" west longitude? Of course not.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
UpperNwGuy
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Re: is this market timing? or better

Post by UpperNwGuy »

Why do you hate buying at all time highs? The market keeps surpassing every single previous all time high.
alex_686
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Re: is this market timing? or better

Post by alex_686 »

Another vote of market timing.

You reasons might make psychological sense but not rational sense. The market is a random walk so you are basically buying the market at random times when it has fallen.

The better choice would be to invest in the market when you have the cash and then not look to see if it has gone up or down.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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dogagility
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Re: is this market timing? or better

Post by dogagility »

k1982 wrote: Mon Sep 28, 2020 1:38 pm I just hate buying at all time highs :(
My suggestion:

Find a log-based graph of the US stock market since 1871 (like my avatar). The trajectory is up... the market is typically at "an all time high", and the fluctuations in the graph can't be consistently predicted... that's why market timing doesn't work consistently.
All children spill milk. Learn to smile and wipe it up. -- A Farmer's Wife
bloom2708
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Re: is this market timing? or better

Post by bloom2708 »

I hope I spend my last 10-15 years working buying at "all time highs".

If the market is going up, you are very frequently buying at all time highs. If not, we are all in trouble. The markets make new highs often.

Buy more S&P 500 index when you have the money. Keep short term money safe, keep long term money invested.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
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1789
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Re: is this market timing? or better

Post by 1789 »

k1982 wrote: Mon Sep 28, 2020 1:08 pm throwing money into short term bond index (VBIRX) weekly/monthly and then whenever stocks that a hit (3-5% dip) exchange those funds into (VFIAX) that day.
am I playing with fire ? or is this smart move?

i'm 38 years old currently 100% VFIAX
If VFIAX goes up 10% in two months and then have a decrease of 3-5% dip in a day you would better off if you were bought it two months ago rather than that day.
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mistermojorizin
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Re: is this market timing? or better

Post by mistermojorizin »

when you are in a bull market, they say buy the dip (which is what you're describing). but when you're in a bear market, they say sell the rip (sell vfiax as soon as it goes up a certain percentage).

The big question is are we still in a bull market? I prefer to just use asset allocation and re-balance once it's off by 5% or more. That way, if VFIAX goes up, I sell, if it goes down, I buy. But I try to keep my allocation consistent for a few years.
WhiteMaxima
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Re: is this market timing? or better

Post by WhiteMaxima »

We are nor in a bull or bear maket. We are in a distorted market due to zero interest. Actually, the real return of holding cash is negative. Only equity will give you real positive return.
ivgrivchuck
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Re: is this market timing? or better

Post by ivgrivchuck »

Market timing. And you are likely to lose a significant of money in the long run.
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Ed 2
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Re: is this market timing? or better

Post by Ed 2 »

k1982 wrote: Mon Sep 28, 2020 1:08 pm throwing money into short term bond index (VBIRX) weekly/monthly and then whenever stocks that a hit (3-5% dip) exchange those funds into (VFIAX) that day.
am I playing with fire ? or is this smart move?

i'm 38 years old currently 100% VFIAX
Gush! You are 38 years young! What is your worry? Are you terminally ill? What is your AA? You may have 45+ years of investing if you are healthy. You fret over 3-5 % short term market change? Give us your total situation before you may get an worthy answers
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
tibbitts
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Re: is this market timing? or better

Post by tibbitts »

WhiteMaxima wrote: Mon Sep 28, 2020 5:28 pm We are nor in a bull or bear maket. We are in a distorted market due to zero interest. Actually, the real return of holding cash is negative. Only equity will give you real positive return.
You might mean have a chance of giving you real return. It's not guaranteed that any asset class will give you real return, even for an extended period of time.
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Third Son
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Re: is this market timing? or better

Post by Third Son »

k1982 wrote: Mon Sep 28, 2020 1:38 pm
I just hate buying at all time highs :(

I'm still trying to figure out how I'm making money this year even though i bought most of the VFIAX fund in January lol (all time highs)

I have never understood this statement. We are usually at all time highs
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Third Son
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Re: is this market timing? or better

Post by Third Son »

k1982 wrote: Mon Sep 28, 2020 1:52 pm very true...don't want to be sitting on sidelines while all time highs stay there for 10 years or more building on top of each other...
Then "invest you must".
"A part of all you earn is yours to keep" | | -The Richest Man in Babylon
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Re: is this market timing? or better

Post by CyclingDuo »

k1982 wrote: Mon Sep 28, 2020 1:08 pm throwing money into short term bond index (VBIRX) weekly/monthly and then whenever stocks that a hit (3-5% dip) exchange those funds into (VFIAX) that day.
am I playing with fire ? or is this smart move?

i'm 38 years old currently 100% VFIAX
Decide if you want to be Sarah, or Tiffany, or Brittany...

https://imgur.com/gallery/BlK4jzM
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ruralavalon
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Re: is this market timing? or better

Post by ruralavalon »

k1982 wrote: Mon Sep 28, 2020 1:08 pm throwing money into short term bond index (VBIRX) weekly/monthly and then whenever stocks that a hit (3-5% dip) exchange those funds into (VFIAX) that day.
am I playing with fire ? or is this smart move?

i'm 38 years old currently 100% VFIAX
k1982 wrote: Mon Sep 28, 2020 1:38 pm whatever money I have invested in VFIAX I will never touch until I retire hopefully in 20 years. I'm a boglehead in heart and believe in Vanguard philosophy - long term investing.

I just hate buying at all time highs :(

I'm still trying to figure out how I'm making money this year even though i bought most of the VFIAX fund in January lol (all time highs)

ok ok i'll tell you a secret.. i had a little left sitting in the bank and took advantage of the huge dip in March and bought some more

first time investor since January 2020 @ 38 years old
so far i enjoy the ride

-----never sell VFIAX ----
----- buy the dips ------
----stay the course and don't get tricky with single stocks -----
---- live below your means-----
and invest ---always invest
k1982 wrote: Mon Sep 28, 2020 1:52 pm very true...don't want to be sitting on sidelines while all time highs stay there for 10 years or more building on top of each other...
My suggestion is to invest whenever you have money available to invest :) .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
DoTheMath
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Re: is this market timing? or better

Post by DoTheMath »

Of course it is market timing and historically what you're doing leaves you worse off than just putting it into the market straightaway.

At the very least you should calculate for yourself if this has been better or worse than the alternative. When each dollar hit your investment account, you had a choice of putting it into VFIAX immediately (as is generally advised) or doing what you did. The data is available and it isn't hard to calculate what would have happened in the alternate universe where you put it all in VFIAX.

At a minimum you should at least know the outcome of your strategy and how it compares to the alternative. Of course, this won't say if it was a good strategy or not (one should never confuse the outcome with the soundness of a strategy). As others here will confirm, history shows that, long term, "buying the dips" is a worse strategy than buying as soon as you can, regardless of the price.

After all, the reason we all invest is that the market tends to go up in the long run. That means the dips are generally less than the rises, which in turn means that often tomorrow's dip isn't as low as today's all-time high.
“I am losing precious days. I am degenerating into a machine for making money. I am learning nothing in this trivial world of men. I must break away and get out into the mountains...” -- John Muir
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