"Yes, You Can Time the Market!"

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
JBTX
Posts: 5558
Joined: Wed Jul 26, 2017 12:46 pm

Re: "Yes, You Can Time the Market!"

Post by JBTX » Fri Nov 16, 2018 10:53 am

Ben Stein was the son of Herbert Stein, who was a noted economist in the 70's and 80's.

Ben Stein is obviously a smart guy, but he occasionally goes off course, such as in this example. He also did a documentary that dealt in political / religious issues that was outright offensive, but we can't go there.

Greenman72
Posts: 359
Joined: Fri Nov 01, 2013 2:17 pm

Re: "Yes, You Can Time the Market!"

Post by Greenman72 » Fri Nov 16, 2018 11:10 am

Homer, it is pretty obvious by your responses that you have either not read the book, or you have chosen to deliberately obfuscate the points made in the book. Either discuss the points made in the book or don't. But please don't put words in the authors' mouths.

Now, if you have an intelligent response to the points made in the book, I would love to hear them.

User avatar
Taylor Larimore
Advisory Board
Posts: 28830
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: "Yes, you can supercharge your portfolio"

Post by Taylor Larimore » Fri Nov 16, 2018 5:39 pm

Bogleheads:

Stein and DeMuth wrote an earler book in 2008, I added it to my Investment Gems:

Yes, you can supercharge your portfolio

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

Starfish
Posts: 1465
Joined: Wed Aug 15, 2018 6:33 pm

Re: "Yes, You Can Time the Market!"

Post by Starfish » Fri Nov 16, 2018 7:01 pm

HomerJ wrote:
Thu Nov 15, 2018 6:02 pm
Starfish wrote:
Thu Nov 15, 2018 5:46 pm
Even re-balancing is timing the market. Dollar cost averaging is timing the market. Changing allocation with age is timing the market. It's just done automatically but is similar.
I disagree.

Of course, you and I probably would argue about the proper definition of "market-timing",

Switching from 100% stocks to 100% cash because you heard a prediction about what the market is going to do in the future is indeed market timing. We'd probably both agree on that.

Changing your allocation to reduce risk because you plan to retire in 5 years, REGARDLESS of what the market is doing at the time, is not market-timing, in my mind.
The fact that you have an automated algorithm for it doesn't make it less market timing.
When you rebalance your portfolio or dollar average you make a judgement that the price of an index is cheap or expensive. That is market timing.
There are some accepted algorithms for automated market timing, and some not (emotional, subjective). But there might exists some fancier and better algorithms more efficient than the simplest one.

User avatar
HomerJ
Posts: 13416
Joined: Fri Jun 06, 2008 12:50 pm

Re: "Yes, You Can Time the Market!"

Post by HomerJ » Sat Nov 17, 2018 12:59 am

Starfish wrote:
Fri Nov 16, 2018 7:01 pm
When you rebalance your portfolio or dollar average you make a judgement that the price of an index is cheap or expensive.
This is incorrect. Rebalancing has nothing to do with determining if the price of an index is cheap or expensive.

Same with changing your allocation when nearing retirement. People change their risk profile without determining if the price of an index is cheap or expensive.

I'm assuming you are making serious statements. Can you explain your thought process further?
The J stands for Jay

Starfish
Posts: 1465
Joined: Wed Aug 15, 2018 6:33 pm

Re: "Yes, You Can Time the Market!"

Post by Starfish » Sat Nov 17, 2018 2:56 am

HomerJ wrote:
Sat Nov 17, 2018 12:59 am
Starfish wrote:
Fri Nov 16, 2018 7:01 pm
When you rebalance your portfolio or dollar average you make a judgement that the price of an index is cheap or expensive.
This is incorrect. Rebalancing has nothing to do with determining if the price of an index is cheap or expensive.

Same with changing your allocation when nearing retirement. People change their risk profile without determining if the price of an index is cheap or expensive.

I'm assuming you are making serious statements. Can you explain your thought process further?


I thought is obvious. You move money from one stable asset (bonds) to volatile asset (stocks) when the volatile asset is cheap and vice versa.
Same with dollar cost averaging. You buy more when is cheap. You make a judgement.
It's exactly the same if you wait to buy when the market tanks and sell ("manually") when the market is high. It's called market timing.

longinvest
Posts: 3985
Joined: Sat Aug 11, 2012 8:44 am

Re: "Yes, You Can Time the Market!"

Post by longinvest » Sat Nov 17, 2018 6:44 am

Starfish wrote:
Sat Nov 17, 2018 2:56 am
I thought is obvious. You move money from one stable asset (bonds) to volatile asset (stocks) when the volatile asset is cheap and vice versa.
Same with dollar cost averaging. You buy more when is cheap. You make a judgement.
It's exactly the same if you wait to buy when the market tanks and sell ("manually") when the market is high. It's called market timing.
No, it isn't. Here's how market timing is generally defined:

https://en.m.wikipedia.org/wiki/Market_timing
Market timing is the strategy of making buy or sell decisions of financial assets (often stocks) by attempting to predict future market price movements.
Market timing involves predicting future returns; rebalancing doesn't. Rebalancing is strictly reactive; it involves bringing back the allocation to its chosen target after markets have moved the allocation off target.

Rebalancing is usually done to manage risk, often at the cost of lowering long-term returns. Market timing generally aims to increase returns (or, sometimes, to increase risk-adjusted returns by avoiding drawdowns).

Market timing based on moving averages, while reactive, is based on a belief that it allows to get into and out of stocks at the right moment to catch up markets and avoid down markets. It's a belief that moving averages predict future market movements.
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

magneto
Posts: 1012
Joined: Sun Dec 19, 2010 10:57 am
Location: On Chesil Beach

Re: "Yes, You Can Time the Market!"

Post by magneto » Sat Nov 17, 2018 10:41 am

As someone who looks at price, or more correctly $ per lb when shopping; found the book unsurprising and logical.
When Cabbages are expensive buy Brussel Sprouts.
The problem with Variable Ratio Value Investing or Dynamic Asset Allocation (DAA) arises when enthusiastically embraced by novices starting out in investment. Most here are quite rightly as noted above, quite content with "good enough", rather than chasing elusive outperformance, which might in turn lead to disaster.
A better case for DAA might be made for the 'Defensive Investor', to reduce risk exposure when valuations are flashing 'red'.
Before someone chips in to say valuations have been flashing 'red' for years; the traditional measures are likened to a ship swinging at anchor, where from time to time the anchor drags. It therefore is quite difficult to assess the implications of valuations, which is why the Constant Ratio is a so much safer route.
Stein asked about the direction of markets, would be better advised to say "I don't know", joining the rest of us.
'There is a tide in the affairs of men ...', Brutus (Market Timer)

User avatar
HomerJ
Posts: 13416
Joined: Fri Jun 06, 2008 12:50 pm

Re: "Yes, You Can Time the Market!"

Post by HomerJ » Sat Nov 17, 2018 3:01 pm

Starfish wrote:
Sat Nov 17, 2018 2:56 am
HomerJ wrote:
Sat Nov 17, 2018 12:59 am
Starfish wrote:
Fri Nov 16, 2018 7:01 pm
When you rebalance your portfolio or dollar average you make a judgement that the price of an index is cheap or expensive.
This is incorrect. Rebalancing has nothing to do with determining if the price of an index is cheap or expensive.

Same with changing your allocation when nearing retirement. People change their risk profile without determining if the price of an index is cheap or expensive.

I'm assuming you are making serious statements. Can you explain your thought process further?


I thought is obvious. You move money from one stable asset (bonds) to volatile asset (stocks) when the volatile asset is cheap and vice versa.
Same with dollar cost averaging. You buy more when is cheap. You make a judgement.
Sorry, there is no judgement. There is no valuing either asset as "cheap" or "expensive".

Rebalancing back to 50/50 is just maintaining the same risk profile.

If stocks go up, I don't sell because I think they are "expensive". I sell because I have too much in stocks, and need to get back to 50/50. This is true regardless of any metrics normally used to value stocks.

If I change my allocation to 30/70 two years from retirement, I do it no matter what stocks are doing. I don't make any judgement on "cheap" or "expensive". I don't care about valuations or any other popular metrics. If valuations were low, I'd still change to 30/70. If valuations were high, I'd still change to 30/70. Changing allocation before retirement is about managing risk. The risk is never zero.

I make the same change in all market situations.

The market timer absolutely makes different changes depending on the market situation at that time.

If I'm making a change because I'm retiring in 2 years, I'm NOT making the change based on the market. I make that allocation change REGARDLESS of what the market is doing.
The J stands for Jay

Starfish
Posts: 1465
Joined: Wed Aug 15, 2018 6:33 pm

Re: "Yes, You Can Time the Market!"

Post by Starfish » Sun Nov 18, 2018 10:40 pm

longinvest wrote:
Sat Nov 17, 2018 6:44 am
Starfish wrote:
Sat Nov 17, 2018 2:56 am
I thought is obvious. You move money from one stable asset (bonds) to volatile asset (stocks) when the volatile asset is cheap and vice versa.
Same with dollar cost averaging. You buy more when is cheap. You make a judgement.
It's exactly the same if you wait to buy when the market tanks and sell ("manually") when the market is high. It's called market timing.
No, it isn't. Here's how market timing is generally defined:

https://en.m.wikipedia.org/wiki/Market_timing
Market timing is the strategy of making buy or sell decisions of financial assets (often stocks) by attempting to predict future market price movements.
Market timing involves predicting future returns; rebalancing doesn't. Rebalancing is strictly reactive; it involves bringing back the allocation to its chosen target after markets have moved the allocation off target.

Rebalancing is usually done to manage risk, often at the cost of lowering long-term returns. Market timing generally aims to increase returns (or, sometimes, to increase risk-adjusted returns by avoiding drawdowns).

Market timing based on moving averages, while reactive, is based on a belief that it allows to get into and out of stocks at the right moment to catch up markets and avoid down markets. It's a belief that moving averages predict future market movements.

Rebalancing makes you buy more from the asset perceived as "cheap" and the target is to increase returns. It's just a simple attempt at buying low and selling high. It obviously tries to predict the future market movements by assuming that the asset you buy low now will increase.
You could make a computer algorithm that busy when the market is low (by a certain criteria) and sells when is high. Actually that is the target of a lot of trading algorithms. Rebalacing and dollar cost averaging are very simple trading algorithms.

For example a successful market timer would have sold in 2007 at the peak and bought back in 2008 at the bottom. Exactly the same as rebalancing! How can it not be the same when the outcome is exactly the same actions?

longinvest
Posts: 3985
Joined: Sat Aug 11, 2012 8:44 am

Re: "Yes, You Can Time the Market!"

Post by longinvest » Sun Nov 18, 2018 11:49 pm

Starfish wrote:
Sun Nov 18, 2018 10:40 pm
Thanks for your reply.
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

Akiva
Posts: 536
Joined: Tue Feb 15, 2011 2:33 pm

Re: "Yes, You Can Time the Market!"

Post by Akiva » Tue Jul 30, 2019 6:09 am

There's a lot to unpack here. "Market timing" has a technical econometric definition and it means that your returns are asset specific and exclusively rely on prediction about that asset's price level.

This is overly narrow. E.g. Much of technical analysis relies in predicting things like the volitility of prices. But because momentum is a thing, you have to adjust for that.

More or less, the claim is that you aren't adding anything beyond what we know in general about behavior overall.

Rebalancing works because it keeps your allocation effective by keeping you from ending up with risk exposure you can't tolerate. (And because it reduces risk, it increases returns indirectly).

My "ideal" portfolio would be value averaged. (I.e. Based on retirement income goals not regularly investing the same amount.) It would account for a host of "anamolies" like value and momentum. And it would use macro economic methods that reliably predict long run returns combined with methods that predict asset class volitility to adjust allocation optimally and then use futures to leverage back up to the appropriate risk/return level.

It would have global coverage of stocks and bonds. And about 10% would be in a "good" derivatives portfolio that did spread trades and otherwise gave you sane exposure to something that does actually benefit you. ("Commodities" include things like futures on interest-rates for example.)

User avatar
HomerJ
Posts: 13416
Joined: Fri Jun 06, 2008 12:50 pm

Re: "Yes, You Can Time the Market!"

Post by HomerJ » Tue Jul 30, 2019 12:30 pm

HomerJ wrote:
Fri Nov 16, 2018 10:42 am
Greenman72 wrote:
Fri Nov 16, 2018 8:57 am
Indeed. Ben Stein was valedictorian of his class....at Yale Law School.

Edit - and that was after he graduated with honors from Columbia, where he majored in Economics.
And yet he was unable to time the 2008-2009 crash.

What is the logical conclusion from those sets of facts?

Is it "Yes, anyone can time the market!"

Or is it "Wow, it's hard even for really smart Economic major Yale Law School valedictorians who have written numerous finance books to time the market!"
I am so proud of this quip I have to quote myself again :)
The J stands for Jay

User avatar
nedsaid
Posts: 12802
Joined: Fri Nov 23, 2012 12:33 pm

Re: "Yes, You Can Time the Market!"

Post by nedsaid » Tue Jul 30, 2019 12:50 pm

There is a continuum with market timing. There is rebalancing at one end and following a system where you buy and sell according to indicators. I think of Elaine Garzarelli, who correctly foretold the 1987 market crash but was wrong afterwards. She used something like 22 indicators. Also think of Bob Brinker, who had a radio show and also a market timing newsletter. As I recall, he had something like 4 main indicators. He put a "sell" on the US Stock Market and International Markets in late 1999 or early 2000. It was a correct call. Then he made the disastrous QQQ call and you didn't here much about his market timing much after that. I think of Dick Fabian who used a 200 day moving average.

I am not a classic market timer. Most of what I have done is mild tactical reallocation or overbalancing. Also have been doing classic rebalancing. Mostly what I do (or attempt to do) is sell expensive assets to buy cheap assets. For me, it has been more about controlling risk than boosting returns. Whatever I have done has been with valuations in mind but I don't have magic timing signals.

If markets get into euphoria and valuations get extremely high, in my view that is where you can take some off the top of your stock market gains. Conversely, extreme pessimism and very low valuations are a great buying opportunity for stocks. But since it is impossible to time this exactly right, you might be mostly just controlling risk. Markets will do what markets will do.

Shoot, John Bogle even market timed and told a Morningstar Conference about it. In fairness, there were other factors involved like failing health, he wasn't sure he was going to make it.
A fool and his money are good for business.

User avatar
Portfolio7
Posts: 668
Joined: Tue Aug 02, 2016 3:53 am

Re: "Yes, You Can Time the Market!"

Post by Portfolio7 » Tue Jul 30, 2019 4:28 pm

nedsaid wrote:
Tue Jul 30, 2019 12:50 pm
I am not a classic market timer. Most of what I have done is mild tactical reallocation or overbalancing. Also have been doing classic rebalancing. Mostly what I do (or attempt to do) is sell expensive assets to buy cheap assets. For me, it has been more about controlling risk than boosting returns. Whatever I have done has been with valuations in mind but I don't have magic timing signals.

If markets get into euphoria and valuations get extremely high, in my view that is where you can take some off the top of your stock market gains. Conversely, extreme pessimism and very low valuations are a great buying opportunity for stocks. But since it is impossible to time this exactly right, you might be mostly just controlling risk. Markets will do what markets will do.
I do something similar to manage volatility. I have strict limits on the timing and size of transactions. It's just a 50 day / 200 Day moving average compare to price, and then an unemployment rate trigger. It's all in 401k funds, so no transaction fees (I re-allocate all my investments once per month with no direct transaction costs.) The goal is to always own a portfolio that I'm willing to take through a long recession (especially if I'm overwhelmed with life and not paying attention to my investments at the moment), but hopefully provide downside protection in big drops. As best I can tell it has helped improve returns slightly, but that's not the purpose, and I think that outcome is serendipitous... I don't expect that to happen all the time. The design is really to moderate volatility during large drops of perhaps 25% or more. It has offered only marginal protection in the dips of the past few years, which I think is appropriate.
"An investment in knowledge pays the best interest" - Benjamin Franklin

User avatar
nedsaid
Posts: 12802
Joined: Fri Nov 23, 2012 12:33 pm

Re: "Yes, You Can Time the Market!"

Post by nedsaid » Tue Jul 30, 2019 5:00 pm

Portfolio7 wrote:
Tue Jul 30, 2019 4:28 pm
nedsaid wrote:
Tue Jul 30, 2019 12:50 pm
I am not a classic market timer. Most of what I have done is mild tactical reallocation or overbalancing. Also have been doing classic rebalancing. Mostly what I do (or attempt to do) is sell expensive assets to buy cheap assets. For me, it has been more about controlling risk than boosting returns. Whatever I have done has been with valuations in mind but I don't have magic timing signals.

If markets get into euphoria and valuations get extremely high, in my view that is where you can take some off the top of your stock market gains. Conversely, extreme pessimism and very low valuations are a great buying opportunity for stocks. But since it is impossible to time this exactly right, you might be mostly just controlling risk. Markets will do what markets will do.
I do something similar to manage volatility. I have strict limits on the timing and size of transactions. It's just a 50 day / 200 Day moving average compare to price, and then an unemployment rate trigger. It's all in 401k funds, so no transaction fees (I re-allocate all my investments once per month with no direct transaction costs.) The goal is to always own a portfolio that I'm willing to take through a long recession (especially if I'm overwhelmed with life and not paying attention to my investments at the moment), but hopefully provide downside protection in big drops. As best I can tell it has helped improve returns slightly, but that's not the purpose, and I think that outcome is serendipitous... I don't expect that to happen all the time. The design is really to moderate volatility during large drops of perhaps 25% or more. It has offered only marginal protection in the dips of the past few years, which I think is appropriate.
Keep in mind my moves are pretty rare. In early 2000, sold 15% of my stocks and took it to cash. In 2005, took that cash to bonds. In 2007-2008, reduced stake in individual stocks a bit and bought US Small Value, US Micro-Cap, International Mid/Small-Cap, and more REITs per recommendations from Paul Merriman. In 2009, took 100% of my new monies for investment to stocks for about a year and then went back to investing new monies at 60% stocks/40% bonds, I did not rebalance my portfolio. In 2013, with the "taper tantrum" started a Stocks to Bonds mild rebalancing program and in July 2019 started a Growth to Value rebalancing program. This is hardly wild-eyed market timing.
A fool and his money are good for business.

User avatar
Portfolio7
Posts: 668
Joined: Tue Aug 02, 2016 3:53 am

Re: "Yes, You Can Time the Market!"

Post by Portfolio7 » Tue Jul 30, 2019 6:28 pm

nedsaid wrote:
Tue Jul 30, 2019 5:00 pm
Portfolio7 wrote:
Tue Jul 30, 2019 4:28 pm
nedsaid wrote:
Tue Jul 30, 2019 12:50 pm
I am not a classic market timer. Most of what I have done is mild tactical reallocation or overbalancing. Also have been doing classic rebalancing. Mostly what I do (or attempt to do) is sell expensive assets to buy cheap assets. For me, it has been more about controlling risk than boosting returns. Whatever I have done has been with valuations in mind but I don't have magic timing signals.

If markets get into euphoria and valuations get extremely high, in my view that is where you can take some off the top of your stock market gains. Conversely, extreme pessimism and very low valuations are a great buying opportunity for stocks. But since it is impossible to time this exactly right, you might be mostly just controlling risk. Markets will do what markets will do.
I do something similar to manage volatility. I have strict limits on the timing and size of transactions. It's just a 50 day / 200 Day moving average compare to price, and then an unemployment rate trigger. It's all in 401k funds, so no transaction fees (I re-allocate all my investments once per month with no direct transaction costs.) The goal is to always own a portfolio that I'm willing to take through a long recession (especially if I'm overwhelmed with life and not paying attention to my investments at the moment), but hopefully provide downside protection in big drops. As best I can tell it has helped improve returns slightly, but that's not the purpose, and I think that outcome is serendipitous... I don't expect that to happen all the time. The design is really to moderate volatility during large drops of perhaps 25% or more. It has offered only marginal protection in the dips of the past few years, which I think is appropriate.
Keep in mind my moves are pretty rare. In early 2000, sold 15% of my stocks and took it to cash. In 2005, took that cash to bonds. In 2007-2008, reduced stake in individual stocks a bit and bought US Small Value, US Micro-Cap, International Mid/Small-Cap, and more REITs per recommendations from Paul Merriman. In 2009, took 100% of my new monies for investment to stocks for about a year and then went back to investing new monies at 60% stocks/40% bonds, I did not rebalance my portfolio. In 2013, with the "taper tantrum" started a Stocks to Bonds mild rebalancing program and in July 2019 started a Growth to Value rebalancing program. This is hardly wild-eyed market timing.
I get it, and agree. There is a big difference between performance chasing vs trying to adapt to opportunities the market presents. I was buy and hold for 1994 through 2007, though I overweighted REITs in 2004-2007. I believe that the prime risk ratio is equity vs fixed income, so while I'm against performance chasing, I will move a few percent if it seems like there is a good opportunity. That buy and hold mentality bias is still with me, despite the fact that I now I move money almost monthly: it's typically just a couple percent shifting from one asset class to another. The net difference in my portfolio is barely visible, up a percent or two in a couple funds maybe, and offset in a couple others. The equity/fixed income ratio is pretty consistent. The exception to that statement was 2008/2009 when it changed a lot (long story, not boom not bust), but since then I think twice in 2016 when I was learning more about risk management, and twice in 2018 (that was associated with figuring out how to adapt the portfolio to inclusion of the Vanguard Min Vol fund.) Those changes generally involved shifting my portfolio so that instead of a 60/40 volatility profile, I'm more like 70/30 (assuming the Min Vol fund lives up to it's past performance.)
"An investment in knowledge pays the best interest" - Benjamin Franklin

User avatar
nedsaid
Posts: 12802
Joined: Fri Nov 23, 2012 12:33 pm

Re: "Yes, You Can Time the Market!"

Post by nedsaid » Tue Jul 30, 2019 7:49 pm

Portfolio7 wrote:
Tue Jul 30, 2019 6:28 pm
nedsaid wrote:
Tue Jul 30, 2019 5:00 pm
Portfolio7 wrote:
Tue Jul 30, 2019 4:28 pm
nedsaid wrote:
Tue Jul 30, 2019 12:50 pm
I am not a classic market timer. Most of what I have done is mild tactical reallocation or overbalancing. Also have been doing classic rebalancing. Mostly what I do (or attempt to do) is sell expensive assets to buy cheap assets. For me, it has been more about controlling risk than boosting returns. Whatever I have done has been with valuations in mind but I don't have magic timing signals.

If markets get into euphoria and valuations get extremely high, in my view that is where you can take some off the top of your stock market gains. Conversely, extreme pessimism and very low valuations are a great buying opportunity for stocks. But since it is impossible to time this exactly right, you might be mostly just controlling risk. Markets will do what markets will do.
I do something similar to manage volatility. I have strict limits on the timing and size of transactions. It's just a 50 day / 200 Day moving average compare to price, and then an unemployment rate trigger. It's all in 401k funds, so no transaction fees (I re-allocate all my investments once per month with no direct transaction costs.) The goal is to always own a portfolio that I'm willing to take through a long recession (especially if I'm overwhelmed with life and not paying attention to my investments at the moment), but hopefully provide downside protection in big drops. As best I can tell it has helped improve returns slightly, but that's not the purpose, and I think that outcome is serendipitous... I don't expect that to happen all the time. The design is really to moderate volatility during large drops of perhaps 25% or more. It has offered only marginal protection in the dips of the past few years, which I think is appropriate.
Keep in mind my moves are pretty rare. In early 2000, sold 15% of my stocks and took it to cash. In 2005, took that cash to bonds. In 2007-2008, reduced stake in individual stocks a bit and bought US Small Value, US Micro-Cap, International Mid/Small-Cap, and more REITs per recommendations from Paul Merriman. In 2009, took 100% of my new monies for investment to stocks for about a year and then went back to investing new monies at 60% stocks/40% bonds, I did not rebalance my portfolio. In 2013, with the "taper tantrum" started a Stocks to Bonds mild rebalancing program and in July 2019 started a Growth to Value rebalancing program. This is hardly wild-eyed market timing.
I get it, and agree. There is a big difference between performance chasing vs trying to adapt to opportunities the market presents. I was buy and hold for 1994 through 2007, though I overweighted REITs in 2004-2007. I believe that the prime risk ratio is equity vs fixed income, so while I'm against performance chasing, I will move a few percent if it seems like there is a good opportunity. That buy and hold mentality bias is still with me, despite the fact that I now I move money almost monthly: it's typically just a couple percent shifting from one asset class to another. The net difference in my portfolio is barely visible, up a percent or two in a couple funds maybe, and offset in a couple others. The equity/fixed income ratio is pretty consistent. The exception to that statement was 2008/2009 when it changed a lot (long story, not boom not bust), but since then I think twice in 2016 when I was learning more about risk management, and twice in 2018 (that was associated with figuring out how to adapt the portfolio to inclusion of the Vanguard Min Vol fund.) Those changes generally involved shifting my portfolio so that instead of a 60/40 volatility profile, I'm more like 70/30 (assuming the Min Vol fund lives up to it's past performance.)
A couple of points, shifting to take advantage of opportunities is something that I have tried to do, problem is I might think I am right but the market does not have to agree with me. For example, I am starting a Growth to Value rebalance based upon valuation gaps between Growth and Value looking a lot like 1999, I am looking for market leadership to change from Growth to Value, but the Growth trend in the market could last longer than I think. This is the being right too early problem.

Also, I think investors should be wary of Low Volatility here. Now these stocks will continue to be Low Volatility but they, in my view, will underperform the market. Reason being, lots of Low Vol stocks are priced like Growth stocks. Have you looked at Consumer Staples? Those are pretty expensive stocks, you are paying in many cases a higher than market P/E for what are essentially slow growth stocks. I got clued into this when I bought shares of Coke, I thought it was an expensive stock but I held my nose and bought anyways. My very foggy memory banks recall that Low Vol outperforms the market when they are Value stocks but underperform when they are Growth stocks.
A fool and his money are good for business.

User avatar
unclescrooge
Posts: 3994
Joined: Thu Jun 07, 2012 7:00 pm

Re: "Yes, You Can Time the Market!"

Post by unclescrooge » Tue Jul 30, 2019 8:59 pm

HomerJ wrote:
Fri Nov 16, 2018 10:42 am
Greenman72 wrote:
Fri Nov 16, 2018 8:57 am
Indeed. Ben Stein was valedictorian of his class....at Yale Law School.

Edit - and that was after he graduated with honors from Columbia, where he majored in Economics.
And yet he was unable to time the 2008-2009 crash.

What is the logical conclusion from those sets of facts?

Is it "Yes, anyone can time the market!"

Or is it "Wow, it's hard even for really smart Economic major Yale Law School valedictorians who have written numerous finance books to time the market!"
I had an interview for b-school in April 2008 and I heard him on the radio. He was advising people to buy XLF - the financial sector ETF. I was actually short the ETF, based on my knowledge of how Countrywide was going BK and the "never one cockroach" rule.

I thought that if he was long, I shouldn't be short. So I exited my position. We all know how that turned out. :annoyed

At least I learned a valuable lesson.

Post Reply