Reverse Market Timing (RMT)

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sauron22333
Posts: 21
Joined: Fri Jul 22, 2016 5:08 pm

Reverse Market Timing (RMT)

Post by sauron22333 »

Hello Everyone,

Firs of all let me start by saying - you all are awesome.

I know that the Boglehead philosophy is “hold the course” but if I have some discretionary cash lying around, should I not try and take the opportunity for this flash sale in stocks?

I usually invest every week (automated investment at Vanguard) for my taxable account. This would just mean that I pull forward some of those weekly investments.
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Pajamas
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Re: Reverse Market Timing (RMT)

Post by Pajamas »

It is very possible that stocks will be much cheaper in two weeks than they are now. You just don't know.

Besides, despite all the chatter about really bad days and huge losses, the market action over the past few days has not been particularly impressive. The quick plunge yesterday afternoon was interesting to watch but not unprecedented.

Also, I'm not sure what "reverse market timing" is. It just sounds like market timing to me.
bgf
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Re: Reverse Market Timing (RMT)

Post by bgf »

i agree with pajamas take. as for what you should do, just keep doing what you've been doing. do you pay any transaction costs on those weekly purchases? if so, you might not need to make so many... once a month is probably plenty.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
Topic Author
sauron22333
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Joined: Fri Jul 22, 2016 5:08 pm

Re: Reverse Market Timing (RMT)

Post by sauron22333 »

bgf wrote: Tue Feb 06, 2018 9:25 am i agree with pajamas take. as for what you should do, just keep doing what you've been doing. do you pay any transaction costs on those weekly purchases? if so, you might not need to make so many... once a month is probably plenty.
Ok great. That’s what I thought. I will hold the course. I don’t pay any transaction costs as weekly investments are in Vanguard index and mutual funds. Weekly investments help me align my cash inflow and outflow better. This is a long topic for another day.

Thanks a lot.
wolf359
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Re: Reverse Market Timing (RMT)

Post by wolf359 »

I know that the Boglehead philosophy is “hold the course” but if I have some discretionary cash lying around, should I not try and take the opportunity for this flash sale in stocks?

I usually invest every week (automated investment at Vanguard) for my taxable account. This would just mean that I pull forward some of those weekly investments.
These two statements are not the same thing. If you have discretionary cash lying around, it absolutely makes sense to throw it into the market when it's down. However, if the discretionary cash is from your regularly weekly investments, then it isn't extra cash, is it? Stick to the schedule and invest regularly. Fully automating your investments and leaving your decision-making skills out of it is the best way to outperform in the long term. You should be investing as soon as the funds are available. I invest with each paycheck, rather than weekly.

I would define extra discretionary cash as money that was outside your budget. For example, if you underspend a budget item, or get an unexpected bonus, or sell something on e-bay, then that's money you can try to time the market with. That extra money you usually feel better if you invest on a down day. It doesn't impact your investment plan if you try to buy as low as possible.

Over time, I discovered that I can't predict the market accurately, I just throw that money into the market when it becomes available. Still, it feels better to buy on a down day.

My version of market timing is to keep a spending budget with luxuries over the long term. (It's also the best way to sustain a high savings rate with my wife if she doesn't feel like we're sacrificing all the time.) If the market tanks, we start cutting the fat out of our budget and saving more. I'm not living off my portfolio, but this increases my savings rate when the market is down. It also feels right, because if we lose our jobs during a down economy, it increases the surplus we have available.
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sauron22333
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Joined: Fri Jul 22, 2016 5:08 pm

Re: Reverse Market Timing (RMT)

Post by sauron22333 »

wolf359 wrote: Tue Feb 06, 2018 9:53 am
I know that the Boglehead philosophy is “hold the course” but if I have some discretionary cash lying around, should I not try and take the opportunity for this flash sale in stocks?

I usually invest every week (automated investment at Vanguard) for my taxable account. This would just mean that I pull forward some of those weekly investments.
These two statements are not the same thing. If you have discretionary cash lying around, it absolutely makes sense to throw it into the market when it's down. However, if the discretionary cash is from your regularly weekly investments, then it isn't extra cash, is it? Stick to the schedule and invest regularly. Fully automating your investments and leaving your decision-making skills out of it is the best way to outperform in the long term. You should be investing as soon as the funds are available. I invest with each paycheck, rather than weekly.

I would define extra discretionary cash as money that was outside your budget. For example, if you underspend a budget item, or get an unexpected bonus, or sell something on e-bay, then that's money you can try to time the market with. That extra money you usually feel better if you invest on a down day. It doesn't impact your investment plan if you try to buy as low as possible.

Over time, I discovered that I can't predict the market accurately, I just throw that money into the market when it becomes available. Still, it feels better to buy on a down day.

My version of market timing is to keep a spending budget with luxuries over the long term. (It's also the best way to sustain a high savings rate with my wife if she doesn't feel like we're sacrificing all the time.) If the market tanks, we start cutting the fat out of our budget and saving more. I'm not living off my portfolio, but this increases my savings rate when the market is down. It also feels right, because if we lose our jobs during a down economy, it increases the surplus we have available.
Actually, I do have some extra cash because I underspent over the last two months. It’s not a lot but I can either keep it as a buffer for future unforeseen expenses (in addition to six months emergency cash) or invest it. I was thinking of bringing forward next two weeks of weekly investments and together would have around 10K to invest today. Just being a little bit greedy. I don’t think this will materially impact my long term plan for automated investments.
Fundhunter
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Location: Atlanta

Re: Reverse Market Timing (RMT)

Post by Fundhunter »

If you want to gamble (and that is exactly what that is), go to Vegas- at least you can see a good show!
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