Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

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pcsrini
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Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by pcsrini »

https://www.bloomberg.com/news/articles ... nihilation

Dramatic headline, and the article maybe behind a paywall. Summary:

1. Missing 5 of the best days in the stock market 2020 would have resulted in a 30% loss, versus a break even with staying the course
2. Investors are tempted to call the peak with the ~40% rise in the market since the March lows. Its easy to get out but difficult to know when get back in.
3. There are no signals to help decide when to get in or get out.

As is often said in this forum, staying the course is the recommendation at the end of the article.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by IndexCore »

pcsrini wrote: Fri Jul 03, 2020 12:42 pm 3. There are no signals to help decide when to get in or get out.
This line refers to one person's opinion, cited in the article:
“There were no flashing signals that those were the days that were going to see huge upside,” said Chris Gaffney, president of world markets at TIAA Bank. “If you look back, they are unexpected ..."

To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
Last edited by IndexCore on Fri Jul 03, 2020 1:09 pm, edited 1 time in total.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by nisiprius »

IndexCore wrote: Fri Jul 03, 2020 1:03 pm
pcsrini wrote: Fri Jul 03, 2020 12:42 pm 3. There are no signals to help decide when to get in or get out.
How do you prove a negative?
To be fair (but what fun is that?) the article itself doesn't say that. The closest thing is an opinion statement from someone interviewed:
“There were no flashing signals that those were the days that were going to see huge upside,” said Chris Gaffney, president of world markets at TIAA Bank. “If you look back, they are unexpected. We get some of the biggest rallies on those unexpected days and so if you’re timing the market and you’re out of them, you’ve missed out on all of the rally really.”
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by ClevrChico »

I believe it.

I rolled over an IRA in June, which required snail mailing a check, resulting in 10 days out of the market. I lost .5% due to the market moving in that short time. I count myself lucky, because it could have been several percentage points lost if processed just a day or two later. (And just as easily, I could have made money.)

I'm not sure if I'll ever roll over a large amount of money via check again.
Last edited by ClevrChico on Fri Jul 03, 2020 1:58 pm, edited 1 time in total.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by pcsrini »

IndexCore wrote: Fri Jul 03, 2020 1:03 pm
pcsrini wrote: Fri Jul 03, 2020 12:42 pm 3. There are no signals to help decide when to get in or get out.
This line refers to one person's opinion, cited in the article:
“There were no flashing signals that those were the days that were going to see huge upside,” said Chris Gaffney, president of world markets at TIAA Bank. “If you look back, they are unexpected ..."

To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.

Yes, we did have folks who quite accurately predicted the Covid-19 market reactions even on this forum. It may have been difficult for these same folks to predict the markets rise since the March lows, and there have been many threads on this disconnect. There are also other folks who believe in always "buying the dip" since the market always goes up eventually, and have so far been right this year. It will be interesting to see how this plays out for the rest of the year.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by TheDDC »

IndexCore wrote: Fri Jul 03, 2020 1:03 pm To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
Yes, but at what cost to the markets? Those were the people that would have most likely been wrong in their prediction that the markets would drop precipitously at this news. While the market did drop initially, these same people were unable to correctly predict much else after that point.

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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by livesoft »

nisiprius wrote: Fri Jul 03, 2020 1:08 pm
IndexCore wrote: Fri Jul 03, 2020 1:03 pm
pcsrini wrote: Fri Jul 03, 2020 12:42 pm 3. There are no signals to help decide when to get in or get out.
How do you prove a negative?
To be fair (but what fun is that?) the article itself doesn't say that. The closest thing is an opinion statement from someone interviewed:
“There were no flashing signals that those were the days that were going to see huge upside,” said Chris Gaffney, president of world markets at TIAA Bank. “If you look back, they are unexpected. We get some of the biggest rallies on those unexpected days and so if you’re timing the market and you’re out of them, you’ve missed out on all of the rally really.”
Of course, there are no flashing signals of when a best day will happen. However, there are tremendous flashing signals when a bad day has happened since it is all about the past. And a Really Bad Day is readily observed. All of one's money in bonds and cash on an RBD has missed out on the equity market drop that day.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by 7eight9 »

What if an investor missed the five worst days? By how much would they have beaten a buy and hold strategy?

What are the odds that an investor just happened to miss the five best days while being invested on every other day?
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by livesoft »

7eight9 wrote: Fri Jul 03, 2020 2:07 pm What if an investor missed the five worst days? By how much would they have beaten a buy and hold strategy?

What are the odds that an investor just happened to miss the five best days while being invested on every other day?
This is all old stuff. The odds of missing "just" the five best days is probably about the same as missing "just" the five worst days. There is almost no reason to discuss this.

But as I already wrote, one's bond funds have, by definition, missed the worst days. And they have missed the past best days, too.

Let's ask these questions:

Is it better to rebalance from bonds into equities at the end of a worst day or at the end of a best day?

Is it better to rebalance on a worst day that followed a best day within the past 7 days or on a worst day where the previous best day was a month or more earlier?

Is there some minimal interval between a previous best day and the current worst day that makes the current worst day a better day to rebalance from bonds into equities on than just any ol' worst day?

Finally, here is a thread where many people reported they did rebalance on a Really Bad Day March 16, 2020 and they did outperform buy-and-hold: viewtopic.php?f=10&t=311448
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by aristotelian »

7eight9 wrote: Fri Jul 03, 2020 2:07 pm What if an investor missed the five worst days? By how much would they have beaten a buy and hold strategy?

What are the odds that an investor just happened to miss the five best days while being invested on every other day?
As I recall the five worst days were much worse than the five best days were good.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by pcsrini »

livesoft wrote: Fri Jul 03, 2020 2:26 pm
7eight9 wrote: Fri Jul 03, 2020 2:07 pm What if an investor missed the five worst days? By how much would they have beaten a buy and hold strategy?

What are the odds that an investor just happened to miss the five best days while being invested on every other day?
This is all old stuff. The odds of missing "just" the five best days is probably about the same as missing "just" the five worst days. There is almost no reason to discuss this.

But as I already wrote, one's bond funds have, by definition, missed the worst days. And they have missed the past best days, too.

Let's ask these questions:

Is it better to rebalance from bonds into equities at the end of a worst day or at the end of a best day?

Is it better to rebalance on a worst day that followed a best day within the past 7 days or on a worst day where the previous best day was a month or more earlier?

Is there some minimal interval between a previous best day and the current worst day that makes the current worst day a better day to rebalance from bonds into equities on than just any ol' worst day?

Finally, here is a thread where many people reported they did rebalance on a Really Bad Day March 16, 2020 and they did outperform buy-and-hold: viewtopic.php?f=10&t=311448
Thanks, livesoft. RBD is a really great strategy for rebalancing opportunistically.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by IndexCore »

TheDDC wrote: Fri Jul 03, 2020 1:50 pm
IndexCore wrote: Fri Jul 03, 2020 1:03 pm To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
Yes, but at what cost to the markets? Those were the people that would have most likely been wrong in their prediction that the markets would drop precipitously at this news. While the market did drop initially, these same people were unable to correctly predict much else after that point.
Do you speak for everyone who predicted the first market drop?
I don't see how you can make sweeping statements about "these same people" when you have no idea what everyone did.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by TheDDC »

IndexCore wrote: Sat Jul 04, 2020 8:27 am
TheDDC wrote: Fri Jul 03, 2020 1:50 pm
IndexCore wrote: Fri Jul 03, 2020 1:03 pm To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
Yes, but at what cost to the markets? Those were the people that would have most likely been wrong in their prediction that the markets would drop precipitously at this news. While the market did drop initially, these same people were unable to correctly predict much else after that point.
Do you speak for everyone who predicted the first market drop?
I don't see how you can make sweeping statements about "these same people" when you have no idea what everyone did.
The first market drop prediction clearly had some baggage to go along with that prediction, namely that we were DOOOOOOMED!!!!!! BLACK SWAN!!!!! There was enough uncertainty among most of these prognosticators, so they were hedging their bets. In the end, market returns were not much different than average after a long bull run. So I think I can speak confidently regarding the countenance of those who claimed to have predicted the first drop at the very least. They also could not confidently advise when it is safe to buy back in.

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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by Robot Monster »

7eight9 wrote: Fri Jul 03, 2020 2:07 pm What if an investor missed the five worst days? By how much would they have beaten a buy and hold strategy?

What are the odds that an investor just happened to miss the five best days while being invested on every other day?
Excellent points, thank you. This Bloomberg article deserves a big slap across the face with a partially decomposed fish corpse.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by bligh »

IndexCore wrote: Fri Jul 03, 2020 1:03 pm
pcsrini wrote: Fri Jul 03, 2020 12:42 pm 3. There are no signals to help decide when to get in or get out.
This line refers to one person's opinion, cited in the article:
“There were no flashing signals that those were the days that were going to see huge upside,” said Chris Gaffney, president of world markets at TIAA Bank. “If you look back, they are unexpected ..."

To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
This is a sort of hindsight bias though isn’t it? There are groups of people constantly predicting multiple outcomes.

For instance, there are some who predict a major crash and a second depression due to COVID in the coming months, they will be able to claim “see this could have been predicted. It was obvious when you consider the economic damage that’s as occurring, how could you all not have seen this coming!”

There are some who predict a sharp economic rebound, after the COVID epidemic. A roaring rebound as all the pent up demand comes flooding out, all the factories and businesses start back up, all the government aid floods the markets, people go back out in droves and confidence and economic activity returns. They will be able to claim “see this could have been predicted. It was obvious when you consider that this was an artificially induced situation and that the demand was always there but just artificially curtailed. Of course there was going to be a V shaped recovery as soon as the vaccine was found. How could you not have seen this coming!”

You could then come along a few months later and make the same claim as above “many predicted this event they saw this coming”. Which, while true, doesn’t really help unless you also make the claim that going forward their other predictions will also be likelier to be true.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by JoMoney »

I am a staunch "buy and holder", but... I still hear people discussing that they expect another big drop in the near future and are holding out to get back in for that. Color me skeptical on this, but to their credit, 2020 isn't over yet, and we're still (always) in a volatile environment that's in a ballpark of standard deviation ranges where another drop could give benefit to the 'market timing' crowd.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by jjface »

IndexCore wrote: Fri Jul 03, 2020 1:03 pm To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
Just because what you predict actually happens doesn't mean it was a sure thing. There were signs but no one could know how things would pan out.

I think the reaction in the last month goes to show how covid-19 and the markets do not follow each other. The USA has been struggling with covid-19 and yet the markets have almost recovered. It would be just as easy to say a month or so ago that the end was not in sight and there was much further to go down. In fact in one of the main market timing thread the op who timed the out almost perfectly called with surety further drops the day before the markets sped to a swift recovery and hardly looked back! If they had dropped he could have said it was easy to predict. But obviously it isn't.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by Dottie57 »

pcsrini wrote: Fri Jul 03, 2020 12:42 pm https://www.bloomberg.com/news/articles ... nihilation

Dramatic headline, and the article maybe behind a paywall. Summary:

1. Missing 5 of the best days in the stock market 2020 would have resulted in a 30% loss, versus a break even with staying the course
2. Investors are tempted to call the peak with the ~40% rise in the market since the March lows. Its easy to get out but difficult to know when get back in.
3. There are no signals to help decide when to get in or get out.

As is often said in this forum, staying the course is the recommendation at the end of the article.
Poorer but not annihilation. Clickbait article headline.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by Fallible »

pcsrini wrote: Fri Jul 03, 2020 12:42 pm ...
As is often said in this forum, staying the course is the recommendation at the end of the article.
So true and, fwiw, here are other comments in this article that are often said on this forum not by market pros, but predominantly by non-pros (and by Boglehead pros via Taylor Larimore's market timing "Gems"):

-“We want to be tactical,” Yana Barton, a fund manager at Eaton Vance Management, said in an interview on Bloomberg TV. “But the problem is, it’s easy to get out and you don’t know when to get back in.”
...
-"Sell high and buy low. It’s investing 101. But an ill-timed decision to do either can open the door to career-threatening pain."
....
-“People are always hopeful that they can time the market, and most people try and time the market based on emotion rather than logic,” said Olivia Engel, chief investment officer of State Street Global Advisors’s active quantitative equity team. “From a couple of decades of investing, I would say that timing the market is just really hard and if it was easy, we’d all be very rich.”
...
-"As hard as it is, that hasn’t stopped investors from trying."
...
-"You can’t buy it one day and sell it the next and think you can outfox the market. You can’t do that,” said Gary Bradshaw, a portfolio manager at Hodges Capital Management in Dallas. “The way you make money in the market is you buy good companies and you hold on.”
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by IndexCore »

TheDDC wrote: Sat Jul 04, 2020 3:29 pm
IndexCore wrote: Sat Jul 04, 2020 8:27 am
TheDDC wrote: Fri Jul 03, 2020 1:50 pm
IndexCore wrote: Fri Jul 03, 2020 1:03 pm To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
Yes, but at what cost to the markets? Those were the people that would have most likely been wrong in their prediction that the markets would drop precipitously at this news. While the market did drop initially, these same people were unable to correctly predict much else after that point.
Do you speak for everyone who predicted the first market drop?
I don't see how you can make sweeping statements about "these same people" when you have no idea what everyone did.
The first market drop prediction clearly had some baggage to go along with that prediction, namely that we were DOOOOOOMED!!!!!! BLACK SWAN!!!!! There was enough uncertainty among most of these prognosticators, so they were hedging their bets. In the end, market returns were not much different than average after a long bull run. So I think I can speak confidently regarding the countenance of those who claimed to have predicted the first drop at the very least. They also could not confidently advise when it is safe to buy back in.
You use words like "clearly" and "speak confidently" without any data or source of information.
How can someone who buys equities near the bottom have the same performance as someone who doesn't?
What sources, outside your own head, back up your claims?
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by IndexCore »

bligh wrote: Sun Jul 05, 2020 10:30 am
IndexCore wrote: Fri Jul 03, 2020 1:03 pm
pcsrini wrote: Fri Jul 03, 2020 12:42 pm 3. There are no signals to help decide when to get in or get out.
This line refers to one person's opinion, cited in the article:
“There were no flashing signals that those were the days that were going to see huge upside,” said Chris Gaffney, president of world markets at TIAA Bank. “If you look back, they are unexpected ..."

To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
This is a sort of hindsight bias though isn’t it? There are groups of people constantly predicting multiple outcomes.

For instance, there are some who predict a major crash and a second depression due to COVID in the coming months, ...
There are some who predict a sharp economic rebound, after the COVID epidemic. ...
I'm focusing on the events of March, not speculating about the future right now.

Back in March, Korea handled the outbreak in an ideal way. Yet in one week, their cases went from 1k to 5k. Italy was considered to have handled Covid-19 poorly, and their cases also shot up by the same amount. A range of countries had the same results, making it pretty clear what was about to happen.

Most countries you can name have national health insurance - except for the U.S. At a time when people need to be tested and treated, a significant number of people will have strong incentives to spread Covid-19 by avoiding the hospital and going to work.

The Federal Reserve on March 8 signaled a massive problem. They met 3 days early, suggesting something was going on that couldn't even wait 3 days. They dropped the rates banks pay from 1% to 0%, and began a program similar to quantitative easing last seen in the 2008 crisis. In short, the Fed was signaling disaster on March 8.

Yet the stock market dropped -7% on March 9 (limit down, it hit -7% in the first few minutes of trading, and then all trading was halted for 15 minutes)... and then gained +3% the next day, pricing in the oil price war being less significant than people thought. I sold on Mar 9, 10, and 13.

One additional key point: experts agreed the situation would get far worse than people expected. So selling off early in March was in agreement with experts, despite being at odds with the overall market.

My claim is that -4% on March 10 is a ridiculous estimate of the damage from Covid-19, which had caused lock downs in country after country already, and was set to impact the U.S. where many are without health insurance.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by IndexCore »

jjface wrote: Sun Jul 05, 2020 10:52 am
IndexCore wrote: Fri Jul 03, 2020 1:03 pm To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
Just because what you predict actually happens doesn't mean it was a sure thing. There were signs but no one could know how things would pan out.

I think the reaction in the last month goes to show how covid-19 and the markets do not follow each other. The USA has been struggling with covid-19 and yet the markets have almost recovered. It would be just as easy to say a month or so ago that the end was not in sight and there was much further to go down. In fact in one of the main market timing thread the op who timed the out almost perfectly called with surety further drops the day before the markets sped to a swift recovery and hardly looked back! If they had dropped he could have said it was easy to predict. But obviously it isn't.
While not claiming it was "a sure thing", I would say it was very likely a market timing opportunity. The experts agreed, country after country went on lock down, ... and then the U.S. offered stocks at either -7% off (Mar 9) or -4% off (Mar 10). Sure, in hindsight that looks ridiculous - but even at the time, after the Fed pushed the panic button, it looked ridiculous. It looked ridiculous to someone who had already been closely following "the Wuhan virus" (it's name then, now Covid-19) that the U.S. was not reacting as if a lock down was probable.

Just because you read a market timing thread where someone screwed up the timing doesn't mean everyone who attempted market timing screwed up. I'm not even saying market timing works in general - I'm saying for Covid-19, U.S. markets were unprepared, and a market timing opportunity was available.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by TheDDC »

IndexCore wrote: Sun Jul 05, 2020 6:14 pm You use words like "clearly" and "speak confidently" without any data or source of information.
How can someone who buys equities near the bottom have the same performance as someone who doesn't?
What sources, outside your own head, back up your claims?
My point here is that there's no source to tell you how to invest, based on world events, charts, technical analysis, tea leaves, a butterfly flapping its wings, unicorn farts, etc. that I would trust other than what we already know from the BH wiki. You are expounding about things that ultimately have no impact on an individual's saving and investment plan. Market timing doesn't work and clearly investing on a random day over the last few months and making money short term has been what we call luck. Pretty much anyone can sink a few hundred bucks in and make money when markets jump 1-2% at a time as we've seen this year. 2020 would be an especially poor time to assume one is an excellent market timer.

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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by celia »

pcsrini wrote: Fri Jul 03, 2020 12:42 pm 1. Missing 5 of the best days in the stock market 2020 would have resulted in a 30% loss, versus a break even with staying the course
By my calendar, we're just a bit over half-way through 2020. So if I'm invested in those best days yet to come this year, does that mean I'll be 30% ahead?
:beer
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by shelanman »

7eight9 wrote: Fri Jul 03, 2020 2:07 pm What if an investor missed the five worst days? By how much would they have beaten a buy and hold strategy?

What are the odds that an investor just happened to miss the five best days while being invested on every other day?
If you look at the chart, you can find these 5 days. They're all during the early part of the chart, where the overall trajectory was down.

Look, I find market timing as fruitless as any BHer, but still... the odds of missing those 5 "best days" but managing to catch all of the bad days right next to them... basically zero.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by IndexCore »

TheDDC wrote: Sun Jul 05, 2020 11:24 pm
IndexCore wrote: Sun Jul 05, 2020 6:14 pm You use words like "clearly" and "speak confidently" without any data or source of information.
How can someone who buys equities near the bottom have the same performance as someone who doesn't?
What sources, outside your own head, back up your claims?
My point here is that there's no source to tell you how to invest, based on world events, charts, technical analysis, tea leaves, a butterfly flapping its wings, unicorn farts, etc. that I would trust other than what we already know from the BH wiki. You are expounding about things that ultimately have no impact on an individual's saving and investment plan. Market timing doesn't work and clearly investing on a random day over the last few months and making money short term has been what we call luck. Pretty much anyone can sink a few hundred bucks in and make money when markets jump 1-2% at a time as we've seen this year. 2020 would be an especially poor time to assume one is an excellent market timer.

-TheDDC
Here's what I posted originally. Most of your post has nothing to do with what I said.
IndexCore wrote: Fri Jul 03, 2020 1:03 pm To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by mrspock »

IndexCore wrote: Fri Jul 03, 2020 1:03 pm
pcsrini wrote: Fri Jul 03, 2020 12:42 pm 3. There are no signals to help decide when to get in or get out.
This line refers to one person's opinion, cited in the article:
“There were no flashing signals that those were the days that were going to see huge upside,” said Chris Gaffney, president of world markets at TIAA Bank. “If you look back, they are unexpected ..."

To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
Big deal. They need to get the timing right TWICE. How many of these prophets got the timing right to get back in? The answer? Not many, in fact often the logic which led them to sell in Jan/Feb, kept them out of the market in March/April making the entire endeavor pointless. You would have had to predict the market was going to tank due to the virus (plausible), and then somehow predict it would have a massive V shape recovery in the the face of soaring infections & deaths (very unlikely).

The folks who managed this feat, we will probably be able to count on one hand when the dust settles.
IndexCore
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by IndexCore »

mrspock wrote: Mon Jul 06, 2020 5:33 am
IndexCore wrote: Fri Jul 03, 2020 1:03 pm
pcsrini wrote: Fri Jul 03, 2020 12:42 pm 3. There are no signals to help decide when to get in or get out.
This line refers to one person's opinion, cited in the article:
“There were no flashing signals that those were the days that were going to see huge upside,” said Chris Gaffney, president of world markets at TIAA Bank. “If you look back, they are unexpected ..."

To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
Big deal. They need to get the timing right TWICE. How many of these prophets got the timing right to get back in? The answer? Not many, in fact often the logic which led them to sell in Jan/Feb, kept them out of the market in March/April making the entire endeavor pointless. You would have had to predict the market was going to tank due to the virus (plausible), and then somehow predict it would have a massive V shape recovery in the the face of soaring infections & deaths (very unlikely).

The folks who managed this feat, we will probably be able to count on one hand when the dust settles.
Someone who sold in Feb is still ahead of the stock market today - the later in Feb, the more they're still ahead. If they buy in right now, they still have a profit. So more accurately, someone who sold in Feb could have bought in April, May, June or now and still been ahead of the stock market (as measured by VTI, Vanguard Total Stock Market ETF).
bondsr4me
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by bondsr4me »

pcsrini wrote: Fri Jul 03, 2020 12:42 pm https://www.bloomberg.com/news/articles ... nihilation

Dramatic headline, and the article maybe behind a paywall. Summary:

1. Missing 5 of the best days in the stock market 2020 would have resulted in a 30% loss, versus a break even with staying the course
2. Investors are tempted to call the peak with the ~40% rise in the market since the March lows. Its easy to get out but difficult to know when get back in.
3. There are no signals to help decide when to get in or get out.

As is often said in this forum, staying the course is the recommendation at the end of the article.
just curious....wonder what performance would have been if you could have avoided the 5 WORST days.
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Devil's Advocate
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by Devil's Advocate »

bondsr4me wrote: Mon Jul 06, 2020 7:48 am
pcsrini wrote: Fri Jul 03, 2020 12:42 pm https://www.bloomberg.com/news/articles ... nihilation

Dramatic headline, and the article maybe behind a paywall. Summary:

1. Missing 5 of the best days in the stock market 2020 would have resulted in a 30% loss, versus a break even with staying the course
2. Investors are tempted to call the peak with the ~40% rise in the market since the March lows. Its easy to get out but difficult to know when get back in.
3. There are no signals to help decide when to get in or get out.

As is often said in this forum, staying the course is the recommendation at the end of the article.
just curious....wonder what performance would have been if you could have avoided the 5 WORST days.
I don't know what would have happened if you avoided the 5 worst days.

However due to my company's moving from one custodian to another my funds were sold on Feb 28ish and I bought back in around 3 weeks later. I ratcheted down equity exposure at that time, from Vanguard Target Date 2035 to 2030 and I am up 18%. Dumb luck for sure. I could have been on the other side of that coin.

DA
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by mrspock »

IndexCore wrote: Mon Jul 06, 2020 6:22 am
mrspock wrote: Mon Jul 06, 2020 5:33 am
IndexCore wrote: Fri Jul 03, 2020 1:03 pm
pcsrini wrote: Fri Jul 03, 2020 12:42 pm 3. There are no signals to help decide when to get in or get out.
This line refers to one person's opinion, cited in the article:
“There were no flashing signals that those were the days that were going to see huge upside,” said Chris Gaffney, president of world markets at TIAA Bank. “If you look back, they are unexpected ..."

To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
Big deal. They need to get the timing right TWICE. How many of these prophets got the timing right to get back in? The answer? Not many, in fact often the logic which led them to sell in Jan/Feb, kept them out of the market in March/April making the entire endeavor pointless. You would have had to predict the market was going to tank due to the virus (plausible), and then somehow predict it would have a massive V shape recovery in the the face of soaring infections & deaths (very unlikely).

The folks who managed this feat, we will probably be able to count on one hand when the dust settles.
Someone who sold in Feb is still ahead of the stock market today - the later in Feb, the more they're still ahead. If they buy in right now, they still have a profit. So more accurately, someone who sold in Feb could have bought in April, May, June or now and still been ahead of the stock market (as measured by VTI, Vanguard Total Stock Market ETF).
Sure if they timed it perfectly, which they probably didn’t. Secondly, I guarantee you that the vast majority of people will still have not bought back on. Why? Because the brain doesn’t “see” that they will have still profited, assuming they timed it perfectly — the brain is telling them they “lost” money because they didn’t buy back in when the market was down over 30%. So what do people do? They tell themselves fairytales that the market will retrace the lows again, and they will buy back in around 4k or so once FOMO pain exceeds what they can bear.
columbia
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by columbia »

An impressive number of posters here have the ability to read the minds of others.
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mrspock
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by mrspock »

columbia wrote: Mon Jul 06, 2020 11:40 am An impressive number of posters here have the ability to read the minds of others.
No, it’s call brain science, psychology and statistics. To some, it might seem like mind reading though.... I get that.
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pcsrini
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by pcsrini »

Fallible wrote: Sun Jul 05, 2020 4:20 pm
pcsrini wrote: Fri Jul 03, 2020 12:42 pm ...
As is often said in this forum, staying the course is the recommendation at the end of the article.
So true and, fwiw, here are other comments in this article that are often said on this forum not by market pros, but predominantly by non-pros (and by Boglehead pros via Taylor Larimore's market timing "Gems"):

-“We want to be tactical,” Yana Barton, a fund manager at Eaton Vance Management, said in an interview on Bloomberg TV. “But the problem is, it’s easy to get out and you don’t know when to get back in.”
...
-"Sell high and buy low. It’s investing 101. But an ill-timed decision to do either can open the door to career-threatening pain."
....
-“People are always hopeful that they can time the market, and most people try and time the market based on emotion rather than logic,” said Olivia Engel, chief investment officer of State Street Global Advisors’s active quantitative equity team. “From a couple of decades of investing, I would say that timing the market is just really hard and if it was easy, we’d all be very rich.”
...
-"As hard as it is, that hasn’t stopped investors from trying."
...
-"You can’t buy it one day and sell it the next and think you can outfox the market. You can’t do that,” said Gary Bradshaw, a portfolio manager at Hodges Capital Management in Dallas. “The way you make money in the market is you buy good companies and you hold on.”
Thanks, Fallible. In spite of the clickbait headline, the article mainly espouses Bogleheads way of thinking. It is nice to read even mainstream publications like Barrons echoing these principles. Taylor, Mel and others have been such a big and important influence.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by hnd »

ClevrChico wrote: Fri Jul 03, 2020 1:33 pm I believe it.

I rolled over an IRA in June, which required snail mailing a check, resulting in 10 days out of the market. I lost .5% due to the market moving in that short time. I count myself lucky, because it could have been several percentage points lost if processed just a day or two later. (And just as easily, I could have made money.)

I'm not sure if I'll ever roll over a large amount of money via check again.
Same here. I lost 1% because of snail mail in May.
IndexCore
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by IndexCore »

mrspock wrote: Mon Jul 06, 2020 11:34 am
IndexCore wrote: Mon Jul 06, 2020 6:22 am
mrspock wrote: Mon Jul 06, 2020 5:33 am
IndexCore wrote: Fri Jul 03, 2020 1:03 pm
pcsrini wrote: Fri Jul 03, 2020 12:42 pm 3. There are no signals to help decide when to get in or get out.
This line refers to one person's opinion, cited in the article:
“There were no flashing signals that those were the days that were going to see huge upside,” said Chris Gaffney, president of world markets at TIAA Bank. “If you look back, they are unexpected ..."

To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
Big deal. They need to get the timing right TWICE. How many of these prophets got the timing right to get back in? The answer? Not many, in fact often the logic which led them to sell in Jan/Feb, kept them out of the market in March/April making the entire endeavor pointless. You would have had to predict the market was going to tank due to the virus (plausible), and then somehow predict it would have a massive V shape recovery in the the face of soaring infections & deaths (very unlikely).

The folks who managed this feat, we will probably be able to count on one hand when the dust settles.
Someone who sold in Feb is still ahead of the stock market today - the later in Feb, the more they're still ahead. If they buy in right now, they still have a profit. So more accurately, someone who sold in Feb could have bought in April, May, June or now and still been ahead of the stock market (as measured by VTI, Vanguard Total Stock Market ETF).
Sure if they timed it perfectly, which they probably didn’t. Secondly, I guarantee you that the vast majority of people will still have not bought back on. Why? Because the brain doesn’t “see” that they will have still profited, assuming they timed it perfectly — the brain is telling them they “lost” money because they didn’t buy back in when the market was down over 30%. So what do people do? They tell themselves fairytales that the market will retrace the lows again, and they will buy back in around 4k or so once FOMO pain exceeds what they can bear.
How is an entire month "timing it perfectly"?
You originally claimed someone selling in Feb and buying in May or June would have no benefit, which is incorrect.

I don't agree with your "guarantee" about "the vast majority of people". You are simultaneously claiming that markets have gone up and recovered, and also that nobody is buying. When nobody is buying, markets drop for lack of demand. The fact markets have gone up a lot since the March lows suggests there are plenty of people buying.
rockstar
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by rockstar »

Good article.

I can't time tops, and I sure can't figure out bottoms. But I also don't like to lose money. I sold when the market (S&P500) hits its 300 day moving average, and I bought back in when the market hit a PE of 20x. I'm up 13% YTD ignoring the market's move today. I didn't sell at the top, and I didn't buy at the very bottom. But it still worked out okay since I followed a plan. This also resulted in a lot of wash sales, but I don't invest to lose money, so I feel okay about it.

I'm hoping the market doesn't breach through the 300 day moving average for a while now. I don't like trading if I can avoid it.
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by deltaneutral83 »

ClevrChico wrote: Fri Jul 03, 2020 1:33 pm I believe it.

I rolled over an IRA in June, which required snail mailing a check, resulting in 10 days out of the market. I lost .5% due to the market moving in that short time. I count myself lucky, because it could have been several percentage points lost if processed just a day or two later. (And just as easily, I could have made money.)

I'm not sure if I'll ever roll over a large amount of money via check again.
Without knowing the details, the only way I'd be rolling over into an IRA after mid Feb and the official announcements would be through a court order. Absolutely no way I'm taking that kind of risk. Although, if you have bonds in other accounts, there are methods to hedge, but if you're 100% equities, then I don't think there is a way. Nonetheless, I wouldn't bother until we get 3-4 months of low volatility. Looking at the charts, the market was really only bad for a month, 2/20-3/23. If you have rolled a 401k since, odds are you took a nice haircut, there have only been a handful of days to the contrary since March 23 that would have worked out, June 8th most notably. Just think if you initiate a roll over, and then the next day a vaccine is approved. I'd have to think that will happen over the next 3-6 months. Not necessarily that it will be distributed, but just the announcement.
Last edited by deltaneutral83 on Tue Jul 07, 2020 7:30 am, edited 1 time in total.
Durzo
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by Durzo »

IndexCore wrote: Fri Jul 03, 2020 1:03 pm
pcsrini wrote: Fri Jul 03, 2020 12:42 pm 3. There are no signals to help decide when to get in or get out.
This line refers to one person's opinion, cited in the article:
“There were no flashing signals that those were the days that were going to see huge upside,” said Chris Gaffney, president of world markets at TIAA Bank. “If you look back, they are unexpected ..."

To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
On a macro level you are correct. However, on a practical level who called the days on which to buy and sell correctly? I think that's the takeaway for Bogleheads. So what if people saw it coming and predicted there would be huge shutdowns and economic consequences. How does that translate to flashing signals on which days with upside or downside?
IndexCore
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Re: Bloomberg: The Cost of Bad Market Timing Decisions in 2020 Was Annihilation

Post by IndexCore »

Durzo wrote: Tue Jul 07, 2020 7:30 am
IndexCore wrote: Fri Jul 03, 2020 1:03 pm
pcsrini wrote: Fri Jul 03, 2020 12:42 pm 3. There are no signals to help decide when to get in or get out.
This line refers to one person's opinion, cited in the article:
“There were no flashing signals that those were the days that were going to see huge upside,” said Chris Gaffney, president of world markets at TIAA Bank. “If you look back, they are unexpected ..."

To be clear, after watching country after country fail to contain Covid-19, and lock down... this article claims nobody could predict if the same thing would happen in the U.S. I disagree - some people did.
On a macro level you are correct. However, on a practical level who called the days on which to buy and sell correctly? I think that's the takeaway for Bogleheads. So what if people saw it coming and predicted there would be huge shutdowns and economic consequences. How does that translate to flashing signals on which days with upside or downside?
The Fed cut interest rates to zero (from 1%) on March 8, while beginning quantitative easing (like in the 2008 crisis). Are you saying that's not a "flashing signal"? Markets opened limit down (-7%) the next day, on March 9. Is that a flashing signal? All of these events made headlines, signaling a big problem was unfolding.

Why are you replying if you see a -22% drop and literally say "so what"? Either a lock down of the U.S. economy doesn't matter at all to you ("so what"), or it's worth discussing and not writing it off. The U.S. stock market was down just -4% on March 10. Did that accurately price in the risk of a lock down in the U.S.? Even without knowing a -22% drop would occur between March 10 open and the March 23 open, a -4% is a ridiculous response to the very high risk of a lock down.

What I think happened is that normally U.S. markets are very efficient, and people should normally not time the market. But exponential disease spread hasn't been a factor in markets for investors and media in so long a time, there's no understanding of it. So when it happened, too few people studied it, and too few reacted with the speed that exponential spread demands. That's why the U.S. stock market was mispriced on March 10, even after the Fed signaled as strong an alarm as it could. But the facts were available for someone who choose to sell before markets understood Covid-19, and buy back in later.
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