Market Timing - A fool's game?

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cj2018
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Market Timing - A fool's game?

Post by cj2018 » Tue Jul 10, 2018 2:58 pm

I have to confess something...i'm in charge of deploying my wife and my savings and for our monthly contribution to taxable account (VFIAX), I've always noticed "bad habit dies hard" because i can't help but wanting to "optimize" my entry into the market on a daily basis depending on which direction the wind blows. Luckily, i'm disciplined and educated enough to know it won't matter in the long run so i've always been able to eventually pull the trigger and deploy the cash within a week from when my last paycheck is deposited (could be a lump sum or DCA, depends on how "smart" i'm feeling...). Nonetheless, the little market timer in me just can't help it!

Anyhow, since beginning of July, the market has been swinging in 1 direction (up) and it's been more than a week since we received our last paychecks, and i found myself in the situation of failing to hit the buy button since the genius in me always think it will drop for at least a day or two and that's when i should get in!

Anyhow, just curious to know for those in accumulation stage or retirement, how do/did you go about making your regular contribution to taxable account? Do you have automatic transfer setup or just lump sum as soon as it's deposited in your checking or like me trying to "optimize" the timing but knowing that it won't matter in the long run? How do you resist the little "micro market timer" inside you?

PS: i found this on Jim Collin's site and thought this is pretty funny and rather accurate portray of most people's mindset, probably.

Image
Credit: jlcollinsnh.com

balbrec2
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Re: Martket Timing - A fool's game?

Post by balbrec2 » Tue Jul 10, 2018 3:12 pm

Actually, the best market timers use things like moving averages
rather than pure guess work. Some use other various technical indicators.
If you want to spend all of your time trying to outsmart the market, go ahead.
I prefer to buy and hold, rebalance yearly, go live my life! The results will
be as good but with less stress. 8-)

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willthrill81
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Re: Market Timing - A fool's game?

Post by willthrill81 » Tue Jul 10, 2018 3:12 pm

The problem is that there are very different types of market timing. The one that I think that almost everyone here agrees is that subjective, emotional driven market timing is a very poor strategy. And this is the type of market timing done by most who aren't buy-and-holders and clearly what Collins graphic is depicting.

The other type is objective, rules-based market timing, better known as trend following. It is certainly a controversial topic around here, but it's not held in nearly the same level of disdain by most as the other type.

I am a trend follower. I have clearly laid out, objective rules for when and what I will trade, and I follow them. It is 'mechanical'; no subjectivity or even 'following the markets' is required. I trade no more than once per month at the end of the month, and determining whether and what I need to trade takes under two minutes. No muss, no fuss, no stress. I suspect that I'm actually less concerned about the markets than many, perhaps most, buy-and-holders.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

gmaynardkrebs
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Re: Martket Timing - A fool's game?

Post by gmaynardkrebs » Tue Jul 10, 2018 3:23 pm

I feel the same way as you right now. I'm not pulling money out of equities, but I'm not putting new money in, and I'm no longer reinvesting the dividends. Fact: I am 68. Makes a difference.

UniversityEmployee9
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Re: Market Timing - A fool's game?

Post by UniversityEmployee9 » Tue Jul 10, 2018 3:34 pm

willthrill81 wrote:
Tue Jul 10, 2018 3:12 pm
The problem is that there are very different types of market timing. The one that I think that almost everyone here agrees is that subjective, emotional driven market timing is a very poor strategy. And this is the type of market timing done by most who aren't buy-and-holders and clearly what Collins graphic is depicting.

The other type is objective, rules-based market timing, better known as trend following. It is certainly a controversial topic around here, but it's not held in nearly the same level of disdain by most as the other type.

I am a trend follower. I have clearly laid out, objective rules for when and what I will trade, and I follow them. It is 'mechanical'; no subjectivity or even 'following the markets' is required. I trade no more than once per month at the end of the month, and determining whether and what I need to trade takes under two minutes. No muss, no fuss, no stress. I suspect that I'm actually less concerned about the markets than many, perhaps most, buy-and-holders.
Are the rules pretty basic? Could you share them and thereby maybe educate me/others on trend-following a bit?

Thanks!

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willthrill81
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Re: Market Timing - A fool's game?

Post by willthrill81 » Tue Jul 10, 2018 3:42 pm

UniversityEmployee9 wrote:
Tue Jul 10, 2018 3:34 pm
willthrill81 wrote:
Tue Jul 10, 2018 3:12 pm
The problem is that there are very different types of market timing. The one that I think that almost everyone here agrees is that subjective, emotional driven market timing is a very poor strategy. And this is the type of market timing done by most who aren't buy-and-holders and clearly what Collins graphic is depicting.

The other type is objective, rules-based market timing, better known as trend following. It is certainly a controversial topic around here, but it's not held in nearly the same level of disdain by most as the other type.

I am a trend follower. I have clearly laid out, objective rules for when and what I will trade, and I follow them. It is 'mechanical'; no subjectivity or even 'following the markets' is required. I trade no more than once per month at the end of the month, and determining whether and what I need to trade takes under two minutes. No muss, no fuss, no stress. I suspect that I'm actually less concerned about the markets than many, perhaps most, buy-and-holders.
Are the rules pretty basic? Could you share them and thereby maybe educate me/others on trend-following a bit?

Thanks!
It's essentially the same as that laid out here: growth trend timing. It's very much 'biased' toward being long on equities. It's simple: unless both the U.S. unemployment rate is above its 12 month moving average and stocks are trading below their 7 month moving average, I remain in equities. As long as both of these criteria are met, I will be in 'safe' assets, like short-term bonds or a liquid stable value fund.

To determine which equities I invest in, I use Portfolio Visualizer to determine and select which among those I have access to in each of my accounts (HSA, IRAs, 401k, 457) has had the highest relative performance for the last 7 months. In this way, I may be in large cap growth, small cap value, emerging markets, etc. at any given point in time, but only one at a time.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Cycle
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Re: Market Timing - A fool's game?

Post by Cycle » Tue Jul 10, 2018 4:01 pm

I believe Monday is the best time to buy, so every Monday I automatically buy a couple thousand dollars worth of VTIAX.

I currently have our entire 401k portfolios in target funds, which is the vast majority of our inveatible assets (75%). This is a switch from the three fund a month ago. The target fund is still the three fund, but more expensive and immune to the market timers game.

gmaynardkrebs
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Re: Market Timing - A fool's game?

Post by gmaynardkrebs » Tue Jul 10, 2018 4:22 pm

I recommend the method of Noel Constant, the fictional character in Kurt Vonnegut’s The Sirens of Titan. Starting with just $8,200, Constant became the richest man in the world through an investment strategy using a Gideon Bible he had found in a hotel room. Starting with "In the beginning...," Coward capitalized the letters, and then divided each sentence into pairs of letters. He would then invest his money into the first company matching the pair of letters and sell it immediately once it doubled in price. He continued to do this until he reached that last book. I'm not sure if this would work as well today, because a lot of companies now have more than two letter symbols.

KlangFool
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Re: Market Timing - A fool's game?

Post by KlangFool » Tue Jul 10, 2018 4:52 pm

OP,

Why do you need to make any kind of decision? Make it fully automatic. Invest X amount every month or every 2 weeks. Then, adjust the amount (too much or too little) every 3 months. I do this for my variable electric and gas bill too. So, you could do this for your automatic investment too.

KlangFool

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HomerJ
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Re: Market Timing - A fool's game?

Post by HomerJ » Tue Jul 10, 2018 4:59 pm

willthrill81 wrote:
Tue Jul 10, 2018 3:12 pm
The other type is objective, rules-based market timing,
"Objective" and "rules-based" sure makes it sound smart! :)
The J stands for Jay

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HomerJ
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Re: Market Timing - A fool's game?

Post by HomerJ » Tue Jul 10, 2018 5:03 pm

willthrill81 wrote:
Tue Jul 10, 2018 3:42 pm
It's very much 'biased' toward being long on equities. It's simple: unless both the U.S. unemployment rate is above its 12 month moving average and stocks are trading below their 7 month moving average, I remain in equities. As long as both of these criteria are met, I will be in 'safe' assets, like short-term bonds or a liquid stable value fund.

To determine which equities I invest in, I use Portfolio Visualizer to determine and select which among those I have access to in each of my accounts (HSA, IRAs, 401k, 457) has had the highest relative performance for the last 7 months. In this way, I may be in large cap growth, small cap value, emerging markets, etc. at any given point in time, but only one at a time.
Do you really swing 100% between equities and "safe" assets?

And why 12 month moving average for unemployment and 7 month moving average for stocks? That sounds suspiciously like heavy back-testing to fit the past.

"Let's try 12 and 12" - "Yuck"
"Let's try 6 and 6" - "Yuck"
"Let's try 12 and 6" - "Better"
"Let's try 12 and 7" - "oooh, looks real good... We're totally going to get rich with low risk if the future is exactly like the past!"

(Don't take me too serious - I'm playing devils advocate here - but using 12 and 7 is indeed weird)
The J stands for Jay

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willthrill81
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Re: Market Timing - A fool's game?

Post by willthrill81 » Tue Jul 10, 2018 5:11 pm

HomerJ wrote:
Tue Jul 10, 2018 4:59 pm
willthrill81 wrote:
Tue Jul 10, 2018 3:12 pm
The other type is objective, rules-based market timing,
"Objective" and "rules-based" sure makes it sound smart! :)
I say that to differentiate it from the highly subjective market timing illustrated in the OP. They are very different.
HomerJ wrote:
Tue Jul 10, 2018 5:03 pm
willthrill81 wrote:
Tue Jul 10, 2018 3:42 pm
It's very much 'biased' toward being long on equities. It's simple: unless both the U.S. unemployment rate is above its 12 month moving average and stocks are trading below their 7 month moving average, I remain in equities. As long as both of these criteria are met, I will be in 'safe' assets, like short-term bonds or a liquid stable value fund.

To determine which equities I invest in, I use Portfolio Visualizer to determine and select which among those I have access to in each of my accounts (HSA, IRAs, 401k, 457) has had the highest relative performance for the last 7 months. In this way, I may be in large cap growth, small cap value, emerging markets, etc. at any given point in time, but only one at a time.
Do you really swing 100% between equities and "safe" assets?

And why 12 month moving average for unemployment and 7 month moving average for stocks? That sounds suspiciously like heavy back-testing to fit the past.

"Let's try 12 and 12" - "Yuck"
"Let's try 6 and 6" - "Yuck"
"Let's try 12 and 6" - "Better"
"Let's try 12 and 7" - "oooh, looks real good... We're totally going to get rich with low risk if the future is exactly like the past!"

(Don't take me too serious - I'm playing devils advocate here - but using 12 and 7 is indeed weird)
The 12 month moving average comes from the Philosophical Economics analysis I linked to above.

After examining the backtested performance of different moving averages, I 'settled' on 7 months. Anywhere from 3 months to well over a year looked fine; I would have no problem using any of them. Seven months has historically struck a balance between responding to the shifting market trend and minimizing trades that I've comfortable with.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

indexonlyplease
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Re: Market Timing - A fool's game?

Post by indexonlyplease » Tue Jul 10, 2018 5:47 pm

Question:

This type of investing is momentum investing? Defferent form factor investing? Also, is there a fund out there that follows this momemtun investing and how successful have they been?

letsgobows
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Re: Market Timing - A fool's game?

Post by letsgobows » Tue Jul 10, 2018 5:59 pm

this is killing me as well. when my 1st daughter turned 1, she received a decent amount money from family. we put that money into a 529 plan for her and its been doing decent(deposit made in 2015 + a few smaller deposits each year as she receives bday/xmas/etc). my 2nd daughter just turned 1 and received a decent amount of money from family. im hesitating putting the money into her 529 plan bc of how high the market is currently. not sure what to do.

Riley15
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Re: Market Timing - A fool's game?

Post by Riley15 » Tue Jul 10, 2018 6:34 pm

willthrill81 wrote:
Tue Jul 10, 2018 3:42 pm

To determine which equities I invest in, I use Portfolio Visualizer to determine and select which among those I have access to in each of my accounts (HSA, IRAs, 401k, 457) has had the highest relative performance for the last 7 months. In this way, I may be in large cap growth, small cap value, emerging markets, etc. at any given point in time, but only one at a time.
Can you please elaborate on this? It looks like you're saying you select the fund which has risen relatively the most in the past 7 months. So you're buying at the highest price in the past 7 months expecting it to go higher? And I am guessing this price will always be the most above the 7 month MA for whatever fund you choose. If the trend doesn't continue upward won't be you be forced to sell at a lower price?

Also it seems what fund you select is mostly irrelevant as long as it's well diversified and low cost. So questions like domestic/international/emerging are mere labels rather than tactical allocation decisions?

MIretired
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Re: Market Timing - A fool's game?

Post by MIretired » Tue Jul 10, 2018 6:40 pm

letsgobows wrote:
Tue Jul 10, 2018 5:59 pm
this is killing me as well. when my 1st daughter turned 1, she received a decent amount money from family. we put that money into a 529 plan for her and its been doing decent(deposit made in 2015 + a few smaller deposits each year as she receives bday/xmas/etc). my 2nd daughter just turned 1 and received a decent amount of money from family. im hesitating putting the money into her 529 plan bc of how high the market is currently. not sure what to do.
There's a story about 'Dan, the world's worst market timer'. He only bought on the highs of the market cycles since the '80s. Guess what happened.

gmaynardkrebs
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Re: Market Timing - A fool's game?

Post by gmaynardkrebs » Tue Jul 10, 2018 9:19 pm

MIretired wrote:
Tue Jul 10, 2018 6:40 pm
letsgobows wrote:
Tue Jul 10, 2018 5:59 pm
this is killing me as well. when my 1st daughter turned 1, she received a decent amount money from family. we put that money into a 529 plan for her and its been doing decent(deposit made in 2015 + a few smaller deposits each year as she receives bday/xmas/etc). my 2nd daughter just turned 1 and received a decent amount of money from family. im hesitating putting the money into her 529 plan bc of how high the market is currently. not sure what to do.
There's a story about 'Dan, the world's worst market timer'. He only bought on the highs of the market cycles since the '80s. Guess what happened.
What happens when Dan buys tomorrow? Obviously, you think he is destined to do just great because of what would have happened had he done so three decades ago. In retrospect, the Dan of the 1980s turned out to be a great market timer, because that turned out to be a great time to buy stocks. Maybe today is not.

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Taylor Larimore
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Re: Market Timing - A fool's game?

Post by Taylor Larimore » Tue Jul 10, 2018 9:26 pm

Bogleheads:

Market Timing? What experts say:
Advisor Perspectives (8-8-2016): "The question is whether any of these (57) tactical allocation mutual funds have shown any ability to outperform a simple, passively managed 60/40 portfolio. The answer, at least for the last five years, is a resounding “no.”

Alliance Bernstein Research: "In 2005 we interviewed more than 500 financial advisors. 83% of the advisors we polled felt that if investors had stuck to their original asset allocation plan prior to 2000, they could have cut their losses by more than half over the following few years."

Frank Armstrong, author and adviser: "Endless tinkering is unlikely to improve performance, and chasing last period's stellar achiever is a losing strategy."

David Babson, co-author of Investing for a Successful Future: "It must be apparent to intelligent investors--if anyone possessed the ability to do so (market time) he would become a billionaire quickly."

Barron's Guide to Making Investment Decisions: "If we haven't said it enough, we'll say it again: Market timing is dangerous."

Bernard Baruch, famed investor: "Only liars manage to always be "out" during bad times and "in' during good times."

Peter Bernstein, author of 10 finance books: "You have to keep reminding yourself. We don't know what's going to happen with anything, ever."

Wm. Bernstein, author and adviser: "There are two kinds of investors, be they large or small: Those who don't know where the market is headed, and those who don't know that they don't know."

Jack Bogle: "After nearly 50 years in this business, I do not know of anybody who has done market timing successfully and consistently. I don't even know anybody who knows anybody who has done it successfully and consistently."

I started the Boglehead Contest in January 2001. Of 99 Diehard guesses that year, only 11 even guessed the direction of the stock market. Boglehead forecasts were worse in 2008. Only 2 out of 284 Bogleheads guessed how low the S&P 500 Index would plunge.

Bogleheads' Guide to Investing: "No one can predict what the stock market will do or which mutual fund will outperform in the future. This is why we diversify -- so that whatever happens we will not have all our money in losing investments."

Jack Brennan, former Vanguard CEO and author of Straight Talk on Investing: "If you're determined to succeed at investing, make it your first priority to become a buy-and-hold investor."

Warren Buffet: “The only value of stock forecasters is to make fortune-tellers look good."

Ben Carlson CPA, author of A Wealth of Common Sense: "Not only is market timing hard, but you incur fees, taxes and market impact costs, as well."

CDA/Wiesenberger: "Market timing is an ineffective strategy for mutual fund investors."

Andrew Clarke, financial adviser: "A successful investor has a good knowledge base, a well-defined investment plan, and nerves of steel to stick with it."

Jonathan Clements, Wall Street Journal columnist: "Take my word for it. Buy-and-hold is still your best long-run strategy."

Consumer Reports: "Dalbar research has found that both stock and bond investors tend to overreact to events, moving money in and out of mutual funds with breathtakingly bad timing."

Dalbar research (2015) "Mutual fund investors who hold on to their investments have been more successful than those who try to time the market."

Dick Davis, publisher of Dick Davis Digest: "No one can time the market on a consistent basis."

Pat Dorsey, former Morningstar Director of Fund Analysis: "Market-timing is bunk."

David Dreman, author of Contrarian Investment Strategies: "The performance of 185 tactical asset allocation mutual funds was compared with buy-and-hold strategies and equity mutual funds over the years 1985-97. Over this period the S&P 500 Index increased 734%, average equity funds increased 598%, and tactical asset allocation funds increased 384%."

Charles Ellis, author of The Loser's Game: "Market timing is a wicked idea. Don't try it-ever."

Javier Estrada Research: "The odds against successful market timing are just staggering."

Paul Farrell, CBS MarketWatch: "Forget market timing in any form."

Rick Ferri, adviser and co-author of seven books including The Bogleheads' Guide to Retirement Planning: "The best practice for investors is to design a long-term globally diversified asset allocation plan based on present and future financial needs. Then follow that plan religiously, through all markets good and bad."

Forbes: "Benjamin Graham spent much of his career trying to devise a good formula for when to get into--and out of--the stock market. All formulas, he concluded, failed."

Fortune: "Let's say it clearly: No one knows where the market is going-experts or novices, soothsayers or astrologers. That's the simple truth."

Norman Fosback, author, researcher: "Don't sell out of fear or buy out of greed. Just keep making investments, and let the market take its course over the long-term."

John Kenneth Galbraith, economist: "The only function of economic forecasting is to make astrology look respectful."

Elaine Garzarelli, Wall Street's best known strategist until fired by Lehman Brothers: "I've learned that market timing can ruin you."

Good & Hermansen, authors of Index Your Way to Investment Success: "Staying on course may be just as difficult in bull markets as in bear markets."

Carol Gould, author & New York Times columnist: "For most investors the odds favor a buy-and-hold strategy."

Graham/Campbell Study: "From June 1980 through December 1992, 94.5% of 237 market timing investment newsletters had gone of business."

Benjamin Graham, famed investor: "If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what's going to happen to the stock market."

Louis S. Harvey, President of Dalbar Research: “When investors think short-term and try to time the market, they haven’t done very well. They have been leaving a lot of money on the table.”

Mark Hebner, financial author: "Efficient markets have no trends, so any speculation using trading systems or active investment strategies, such as stock, time, manager, or style selection, will only detract from future market returns."

Chuck Hill, Director of Research at FirstCall/Thomson Financial: "At the peak of the bull market in March of 2000 only 0.7% of all recommendations on stocks issued by Wall Street brokerages and investment banks were to sell."

Morgan Housel, Wall Street Journal and Motley Fool columnist: "The odds that you will achieve long-term success by actively trading or timing the market round to zero."

Mark Hulbert, Editor of the Hulbert Financial Digest (1-18-2001): "Among the 160 or so newsletters the HFD monitors, the market timing recommendations of only 10 have beaten the stock market over the last decade on a risk-adjusted basis."

Daniel Kahneman, Nobel Laureate: "After receiving the Nobel Prize, Daniel Kahneman, was asked by a CNBC anchorman what investment tips he had for viewers. His answer: "Buy and hold.""

Michael Leboeuf, author of The Millionaire in You : "Timing the market is for losers. Time IN the market will get you to the winner's circle, and you'll sleep better at night."

Arthur Levitt, former SEC Chairman: "No one is smart enough to time the market's ups and downs."

Jessie Livermore, famous investor: "It never was my thinking that made the big money for me. It always was my sitting."

Peter Lynch, famed mutual fund manager: "Nobody can predict interest rates, the future direction of the economy or the stock market."

Burton Malkiel, author of the classic Random Walk Down Wall Street: "Buying-and-holding a broad-based market index fund is still the only game in town."

John Markese, PhD, President, American Association of Independent Investors: "Nobody, but nobody, has consistently guessed the direction of the bond or stock market over any meaningful length of time."

Paul Merriman, author of Investing for a lifetime: "I don’t think more than perhaps one in 100 investors will be successful using timing."

Morningstar Course 106: "We're not keen on market-timing. It just doesn't work."

Motley Fools: "We've yet to find anyone who can accurately and consistently predict the market's short-term moves."

Nick Murray, author of eleven financial books: "Timing the market is a fool's game, whereas time in the market is your greatest natural advantage."

"Odean and Barber tested over 66,400 investors between 1991 and 1997. Their findings: "The most active traders earned 7% less annually than buy-and-hold investors."

Gerald Perritt, financial author: "Forget trying to time the market and do something productive instead."

Don Phillips, Managing Director of Morningstar: "I can't point to any mutual fund anywhere in the world that's produced a superior long-term record using market timing as its main investment criteria."

Mike Piper, author of The Oblivious Investor: "When market-beating strategies become known they generally stop working."

Jane Bryant Quinn author and syndicated columnist: "The market timer's Hall of Fame is an empty room."

John Rekenthaler, Vice-President of Research for Morningstar: "Market-timers are circus clowns minus the funny suits. Even when they dodge the bear market, they inevitably miss the ensuing bull. Their track record is terrible."

Mary Roland, author of Best Practices for Financial Advisors: "Countless studies have proved that no one is able to time the market effectively."

Louis Rukeyser, famous (deceased) TV host: "In the long run it doesn't matter much whether your timing is great or lousy. What matters is that you stay invested."

Richard Russell, editor of Dow Theory Letters: "There are no geniuses on Wall Street, only geniuses for a while."

Paul Samuelson, Nobel Laureate: "The evidence is overwhelming that a thousand timer's who try to buy when stocks are low, and sell when they are high, is a damnably awful record."

Jim Schmidt, Editor: "For the 10 years that ended 12-31-2000, only one newsletter out of the 112 that Timers Digest follows managed to beat the S&P 500 Benchmark."

Bill Schultheis, adviser and author of The Coffeehouse Investor : "I have learned the hard way that market timing and trying to pick a fund that will out-perform the market are both losing strategies."

Charles Schwab: "I'm a strong advocate of buying and holding."

Fred Schwed Jr., author of 'Where are the Customers' Yachts?: "It turns out that I should have just bought them (securities), and thereafter I should have just sat on them like a fat, stupid peasant. A peasant however, who is rich beyond his limited dreams of avarice."

Chandan Sengupta author of The Only Proven Road to Investment Success: "Any investment method that relies on predicting the future is doomed to fail."

Jeremy Siegel, author of Stocks for the Long Run: "Winning with stocks requires only patience, not foresight."

W. Scott Simon, author of Index Funds: "Investors should look with a jaundiced eye at any market timing system being peddled by its guru-creator."

Paul Singer, hedge fund billionaire: “The important turning points in markets are never identified with precision in advance by ‘experts’ and policymakers."

James Stewart, Smart Money columnist": It's my belief that it's a waste of time to try to time any market decline, or try to pinpoint a market bottom."

Larry Swedroe, author and adviser: "Believing in the ability of market timers is the equivalent of believing astrologers can predict the future."

David Swensen, Manager of Yale Investments: "People should stop chasing performance and just put together a sensible portfolio regardless of the ups and downs of the market."

Andrew Tobias, author of The Only Investment Guide You Will Ever Need: "Don't waste money subscribing to investment letters or expensive services.

Tweddell & Pierce, financial authors: "Trust in time and forget market timing. Allow time to work its compounding magic for you. Let market timing inflict its miseries on someone else."

Eric Tyson, author of Mutual Funds for Dummies: "No one can predict the future."

Wall Street Journal Lifetime Guide to Money: "Few if any investors manage to be consistently successful in timing markets."

John Waggoner, USA Today financial columnist: "If you're considering doing your own market timing, the best advice is this: Don't."

Jason Zweig, author and Wall Street Journal columnist: "If you buy, and then hold a total-stock-market index fund, it is mathematically certain that you will outperform the vast majority of all other investors in the long run."
Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

2pedals
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Re: Market Timing - A fool's game?

Post by 2pedals » Tue Jul 10, 2018 9:42 pm

Set you asset allocation and range. Enjoy you life, "micro market timing" :( sounds too stressful to me to be fun. :happy

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willthrill81
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Re: Market Timing - A fool's game?

Post by willthrill81 » Tue Jul 10, 2018 9:54 pm

indexonlyplease wrote:
Tue Jul 10, 2018 5:47 pm
Question:

This type of investing is momentum investing? Defferent form factor investing? Also, is there a fund out there that follows this momemtun investing and how successful have they been?
It is referred to as momentum investing or trend following. I know of no funds that use a similar system to the one I use. For analysis of how this strategy performed in the past, I refer you to the link I posted above.
Riley15 wrote:
Tue Jul 10, 2018 6:34 pm
willthrill81 wrote:
Tue Jul 10, 2018 3:42 pm

To determine which equities I invest in, I use Portfolio Visualizer to determine and select which among those I have access to in each of my accounts (HSA, IRAs, 401k, 457) has had the highest relative performance for the last 7 months. In this way, I may be in large cap growth, small cap value, emerging markets, etc. at any given point in time, but only one at a time.
Can you please elaborate on this? It looks like you're saying you select the fund which has risen relatively the most in the past 7 months. So you're buying at the highest price in the past 7 months expecting it to go higher? And I am guessing this price will always be the most above the 7 month MA for whatever fund you choose. If the trend doesn't continue upward won't be you be forced to sell at a lower price?
Selling at a lower price than you purchased in at is referred to as a whipsaw. They are bound to occur; with some trend following systems, over 50% of the trades may result in a whipsaw. But the main point of trend following isn't making money on every trade; it's avoiding the big market drops (>20%), and it's historically been effective in that regard.

More specifically, the relative strength (specific kind of momentum) approach I use builds on the idea that asset classes that have recently performed well are likely to continue to perform well in the near future. There are many instances of when this is not the case, but it is true more often than not.
Riley15 wrote:
Tue Jul 10, 2018 6:34 pm
Also it seems what fund you select is mostly irrelevant as long as it's well diversified and low cost. So questions like domestic/international/emerging are mere labels rather than tactical allocation decisions?
I only invest in low cost index funds. By being able to rotate into or out of whichever asset class has recently been performing the best, I can be completely agnostic with regard to factors such as growth/value, large/small, and U.S./international. I'm not married to any of them, which is a very freeing emotional state.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

gmaynardkrebs
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Re: Market Timing - A fool's game?

Post by gmaynardkrebs » Tue Jul 10, 2018 10:08 pm

This long list of articles cited by "Taylor" above merely makes the point that passive investing beats market timing, which is pretty well established. What they don't address is whether one should be in the market at all, which I think is the OP's question. Does it really help anyone to sleep better at night to know that if an overvalued market goes down by 50%, he'll only be down by 48% thanks to passive investing? If all you mean is that it doesn't matter, because stocks always go up if you have enough patience, I think that is fallacious.

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willthrill81
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Re: Market Timing - A fool's game?

Post by willthrill81 » Tue Jul 10, 2018 10:22 pm

gmaynardkrebs wrote:
Tue Jul 10, 2018 10:08 pm
This long list of articles cited by "Taylor" above merely makes the point that passive investing beats market timing, which is pretty well established. What they don't address is whether one should be in the market at all, which I think is the OP's question. Does it really help anyone to sleep better at night to know that if an overvalued market goes down by 50%, he'll only be down by 48% thanks to passive investing? If all you mean is that it doesn't matter, because stocks always go up if you have enough patience, I think that is fallacious.
That's true. What is almost as misleading in a discussion of market timing are statements like "If you missed the best X days in the market, your return would have been a pitiful Y." That sword cuts both ways. Very rarely do you hear people say things like "If you missed the worst X days in the market, your return would have been an incredible Z."

In reality, a comparison of risk-adjusted returns is far more revealing.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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siamond
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Re: Market Timing - A fool's game?

Post by siamond » Tue Jul 10, 2018 10:27 pm

cj2018 wrote:
Tue Jul 10, 2018 2:58 pm
PS: i found this on Jim Collin's site and thought this is pretty funny and rather accurate portray of most people's mindset, probably.
Love it! I am posting on this thread *just* to be able to easily find this drawing again! :happy

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bottlecap
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Re: Market Timing - A fool's game?

Post by bottlecap » Tue Jul 10, 2018 10:50 pm

Yes. Of course it’s a fool's game. Everyone is capable of being a fool in this game. So don’t play it.

JT

MIretired
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Re: Market Timing - A fool's game?

Post by MIretired » Tue Jul 10, 2018 10:56 pm

gmaynardkrebs wrote:
Tue Jul 10, 2018 9:19 pm
MIretired wrote:
Tue Jul 10, 2018 6:40 pm
letsgobows wrote:
Tue Jul 10, 2018 5:59 pm
this is killing me as well. when my 1st daughter turned 1, she received a decent amount money from family. we put that money into a 529 plan for her and its been doing decent(deposit made in 2015 + a few smaller deposits each year as she receives bday/xmas/etc). my 2nd daughter just turned 1 and received a decent amount of money from family. im hesitating putting the money into her 529 plan bc of how high the market is currently. not sure what to do.
There's a story about 'Dan, the world's worst market timer'. He only bought on the highs of the market cycles since the '80s. Guess what happened.
What happens when Dan buys tomorrow? Obviously, you think he is destined to do just great because of what would have happened had he done so three decades ago. In retrospect, the Dan of the 1980s turned out to be a great market timer, because that turned out to be a great time to buy stocks. Maybe today is not.
Probably a little more likely this one, in about 16 yrs. in stocks will beat bonds going forward. If they don't beat bonds it could be pretty sad.

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Re: Market Timing - A fool's game?

Post by thangngo » Tue Jul 10, 2018 10:59 pm

KlangFool wrote:
Tue Jul 10, 2018 4:52 pm
OP,

Why do you need to make any kind of decision? Make it fully automatic. Invest X amount every month or every 2 weeks. Then, adjust the amount (too much or too little) every 3 months. I do this for my variable electric and gas bill too. So, you could do this for your automatic investment too.

KlangFool
^ This. OP: if you follow this advice, it'll make your life much easier. There's so much to enjoy in life outside of doing a fool's errand.

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House Blend
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Re: Market Timing - A fool's game?

Post by House Blend » Wed Jul 11, 2018 10:25 am

cj2018 wrote:
Tue Jul 10, 2018 2:58 pm
I have to confess something...i'm in charge of deploying my wife and my savings and for our monthly contribution to taxable account (VFIAX), I've always noticed "bad habit dies hard" because i can't help but wanting to "optimize" my entry into the market on a daily basis depending on which direction the wind blows. Luckily, i'm disciplined and educated enough to know it won't matter in the long run so i've always been able to eventually pull the trigger and deploy the cash within a week from when my last paycheck is deposited (could be a lump sum or DCA, depends on how "smart" i'm feeling...). Nonetheless, the little market timer in me just can't help it!
I have no problem with that particular manifestation of market timing, as long as you do put strict limits on how long you can wait before pulling the trigger.

In fact I think it is good to have some flexibility built into investment policies in areas that can't possibly make much difference in the long run, such as investing the next increment of cash today or 5 days from now. Yes, you could miss out on some of the "best" days to invest in your lifetime, but only the ones that happen to fall during those 5 days, and only for that particular increment of cash.

View it as a sandbox where your ego can think that it is in charge, similar to giving your 4 year old a semblance of autonomy by letting him/her choose between wearing the red shirt or the blue shirt today.
Anyhow, since beginning of July, the market has been swinging in 1 direction (up) and it's been more than a week since we received our last paychecks, and i found myself in the situation of failing to hit the buy button since the genius in me always think it will drop for at least a day or two and that's when i should get in!
Sounds like you're giving your ego a bit more than the choice of a red shirt or a blue shirt.

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HomerJ
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Re: Market Timing - A fool's game?

Post by HomerJ » Wed Jul 11, 2018 10:46 am

gmaynardkrebs wrote:
Tue Jul 10, 2018 9:19 pm
MIretired wrote:
Tue Jul 10, 2018 6:40 pm
letsgobows wrote:
Tue Jul 10, 2018 5:59 pm
this is killing me as well. when my 1st daughter turned 1, she received a decent amount money from family. we put that money into a 529 plan for her and its been doing decent(deposit made in 2015 + a few smaller deposits each year as she receives bday/xmas/etc). my 2nd daughter just turned 1 and received a decent amount of money from family. im hesitating putting the money into her 529 plan bc of how high the market is currently. not sure what to do.
There's a story about 'Dan, the world's worst market timer'. He only bought on the highs of the market cycles since the '80s. Guess what happened.
What happens when Dan buys tomorrow? Obviously, you think he is destined to do just great because of what would have happened had he done so three decades ago. In retrospect, the Dan of the 1980s turned out to be a great market timer, because that turned out to be a great time to buy stocks. Maybe today is not.
The story isn't that he bought in the 80s. The story is that he bought at all the market peaks in the past SINCE the 80s (including 2000 and 2008)

Actually, I just looked it up and it's "Bob the world's worst market timer", and he started in the 1970s

http://awealthofcommonsense.com/2014/02 ... ket-timer/

He invested ONLY at the worst times, at market tops, right before 50% drops, and still ended up rich. Because, so far, the U.S. market has always gone on to new heights.

Now, does that mean the stock market will continue to do that going forward? No, but, so far, it always has.

Another wrinkle is we're talking about 529 accounts here. You can still think long-term when the kid is 1 years old, but when the kid is 10-12, one might want to start getting more conservative. So I'm not sure if Bob's story (investing over 40 years) really applies.
The J stands for Jay

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