Is there harm in market timing TLH?

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STC
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Is there harm in market timing TLH?

Post by STC » Mon Dec 17, 2012 2:16 pm

I know some here have bands for TLH, or do it once a year etc... But I am curious if there is harm in trying to time a TLH bottom? Worst case seems to me to be the transaction costs and the 30-day wait period before you could TLH again without a wash sale. Am I missing something?

sport
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Re: Is there harm in market timing TLH?

Post by sport » Mon Dec 17, 2012 2:26 pm

While you are waiting for the stock to bottom out, it could go up instead. This would reduce the value of your harvest.

Jeff

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STC
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Re: Is there harm in market timing TLH?

Post by STC » Mon Dec 17, 2012 2:27 pm

jsl11 wrote:While you are waiting for the stock to bottom out, it could go up instead. This would reduce the value of your harvest.

Jeff
Or it could keep going down, increasing the value of the harvest. So how do you pick the arbitrary point at which you pull the trigger?

livesoft
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Re: Is there harm in market timing TLH?

Post by livesoft » Mon Dec 17, 2012 2:28 pm

Of course one should market time TLH:

1. On any RBD, look for losers to TLH.
2. For EVERY position in taxable, sell losers before they go long-term.
3. Look for losers after Thanksgiving and sell them before year-end, unless you need to sell in January for some special reason.

Avoid loss aversion, sell those losers.

At this point in time, almost no one should have losers because there were RBDs back in May-June. Also an RBD in small-cap value happened in November (remember the election?).
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FillorKill
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Re: Is there harm in market timing TLH?

Post by FillorKill » Mon Dec 17, 2012 2:32 pm

STC wrote:
jsl11 wrote:While you are waiting for the stock to bottom out, it could go up instead. This would reduce the value of your harvest.

Jeff
Or it could keep going down, increasing the value of the harvest. So how do you pick the arbitrary point at which you pull the trigger?
Pick a value [of the TLH] at which you consider it worthwhile to do - add it to your IPS and wait. :happy

Trying to pick bottoms is as futile as trying to pick tops. You just need to decide when it is worthwhile for you to execute TLH and use that as your decision rule.

EDIT: Had I known livesoft was going to show up here with the usual sage advice I would have stayed out of it.... :D

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Jerilynn
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Re: Is there harm in market timing TLH?

Post by Jerilynn » Mon Dec 17, 2012 3:27 pm

1. On any RBD,
What does RBD stand for?
Cordially, Jeri . . . 100% all natural asset allocation. (no supernatural methods used)

Xanadu
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Re: Is there harm in market timing TLH?

Post by Xanadu » Mon Dec 17, 2012 3:33 pm

Jerilynn wrote:
1. On any RBD,
What does RBD stand for?
Really bad day

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mhc
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Re: Is there harm in market timing TLH?

Post by mhc » Mon Dec 17, 2012 3:33 pm

Jerilynn wrote:
1. On any RBD,
What does RBD stand for?
Really Bad Day.

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Jerilynn
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Re: Is there harm in market timing TLH?

Post by Jerilynn » Mon Dec 17, 2012 11:20 pm

mhc wrote:
Jerilynn wrote:
1. On any RBD,
What does RBD stand for?
Really Bad Day.
:oops: I *knew* that. Just couldn't remember that I knew that. It's a drag to get old.
Cordially, Jeri . . . 100% all natural asset allocation. (no supernatural methods used)

bdpb
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Re: Is there harm in market timing TLH?

Post by bdpb » Tue Dec 18, 2012 8:52 am

STC wrote:
jsl11 wrote:While you are waiting for the stock to bottom out, it could go up instead. This would reduce the value of your harvest.

Jeff
Or it could keep going down, increasing the value of the harvest. So how do you pick the arbitrary point at which you pull the trigger?
You can always TLH again.

sscritic
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Re: Is there harm in market timing TLH?

Post by sscritic » Tue Dec 18, 2012 8:54 am

Jerilynn wrote:
1. On any RBD,
What does RBD stand for?
May I please pile on? Try the search box. :)

livesoft
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Re: Is there harm in market timing TLH?

Post by livesoft » Tue Dec 18, 2012 8:56 am

sscritic wrote:May I please pile on? Try the search box. :)
Only if you tell us what "TLH" means please.
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Re: Is there harm in market timing TLH?

Post by sscritic » Tue Dec 18, 2012 8:58 am

STC wrote:Worst case seems to me to be the transaction costs and the 30-day wait period before you could TLH again without a wash sale.
When you sell shares at a loss, you can't buy the same shares back without there being a wash sale, so let's assume you buy something else at the back end of your TLH. You can TLH those new shares the next day if they drop 20%; there is no 30 day waiting period before your next TLH.

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STC
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Re: Is there harm in market timing TLH?

Post by STC » Tue Dec 18, 2012 9:05 am

sscritic wrote:
STC wrote:Worst case seems to me to be the transaction costs and the 30-day wait period before you could TLH again without a wash sale.
When you sell shares at a loss, you can't buy the same shares back without there being a wash sale, so let's assume you buy something else at the back end of your TLH. You can TLH those new shares the next day if they drop 20%; there is no 30 day waiting period before your next TLH.
And that works with things like a Russell 3000 index, where there are many options that are nearly identical (except for ER). But some of the more slice and dice areas like international small caps, emerging markets, small value... Only have 2 options with sufficient liquidity (talking efts here) to make them suitable. So you swap between two option, meaning after the first leg of the swap you need to wait 30 days to swap back to avoid the wash sale.

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