Market Timing

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Dillinger
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Market Timing

Post by Dillinger » Tue Feb 06, 2018 1:36 am

It is generally held that you cannot beat the market by timing it. Based on my studies, this appears to be true. That being said, it seems to me that market timing (using a double moving average cross-over system) is worthwhile on a risk-adjusted basis. Below is a back test I conducted on SPY (the S&P 500 Index ETF) for a 20 year period (April 1993 to April 2013). (I started with an initial investment of $10,000 and ended-up with $68,929.81. This is based on the employment of two moving averages - a 50 day moving average and a 200 day moving average. A buy signal occured when the 50 day moving average crossed above the 200 day moving average. A sell signal is occurred when the 50 day moving average crossed below the 200 day moving average. It should be noted that I employed a 1% interest paying money market fund during the time when I was out of the market. While this is very a high rate by today's standards, it would have been low during the 90s and most of the 00s.)


The Long Transactions Listing Including Interest for Stock SPY:

04-14-1993 Go Long 320 SPY @ 31.23; $9,993.60; leftover = $6.67
05-10-1994 Cl Long 320 SPY @ 31.68; $10,144.27
06-02-1994 Go Long 310 SPY @ 32.73; $10,146.30; leftover = $2.40
07-12-1994 Cl Long 310 SPY @ 32.02; $9,928.60
07-20-1994 Go Long 305 SPY @ 32.48; $9,906.40; leftover = $23.82
10-08-1998 Cl Long 305 SPY @ 73.30; $22,380.32
10-27-1998 Go Long 266 SPY @ 84.06; $22,359.96; leftover = $28.29
10-26-2000 Cl Long 266 SPY @ 108.57; $28,907.91
05-28-2003 Go Long 374 SPY @ 78.57; $29,385.18; leftover = $35.53
01-16-2008 Cl Long 374 SPY @ 122.64; $45,902.89
08-06-2009 Go Long 496 SPY @ 93.40; $46,326.40; leftover = $69.66
09-01-2010 Cl Long 496 SPY @ 100.78; $50,056.54
09-07-2010 Go Long 480 SPY @ 104.22; $50,025.60; leftover = $35.03
08-22-2011 Cl Long 480 SPY @ 110.85; $53,243.03
12-27-2011 Go Long 434 SPY @ 122.85; $53,316.90; leftover = $54.01

The Current Total on 04-11-2013 equals $68,929.81

The Compound Annual Rate of Return equals 10.14%

The Total Rate of Return equals 689.30%

The Standard Deviation equals 13.60
Last edited by Dillinger on Tue Feb 06, 2018 11:41 am, edited 1 time in total.

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Noobvestor
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Re: Market Timing

Post by Noobvestor » Tue Feb 06, 2018 1:48 am

Dillinger wrote:
Tue Feb 06, 2018 1:36 am
It is generally held that you cannot beat the market by timing it. Based on my studies, this appears to be true.
Congrats! Good thing to realize.
Dillinger wrote:
Tue Feb 06, 2018 1:36 am
That being said,
Uh oh.
Dillinger wrote:
Tue Feb 06, 2018 1:36 am
it seems to me that market timing (using a double moving average cross-over system) is worthwhile on a risk-adjusted basis.
Yawn.
Dillinger wrote:
Tue Feb 06, 2018 1:36 am
Below is a back test I conducted
Congrats! All you need now is a time machine.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

daveydoo
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Re: Market Timing

Post by daveydoo » Tue Feb 06, 2018 2:01 am

Dillinger wrote:
Tue Feb 06, 2018 1:36 am
...That being said, it seems to me that market timing (using a double moving average cross-over system) is worthwhile on a risk-adjusted basis.
You seem surprised that you could create an algorithm that would "beat the market" in retrospect. You have fooled yourself into thinking that this is somehow predictive. I only buy in months that end in "y" and in months when the average local (but not national) rainfall is above average. This has been highly effective, in retrospect, over the past four years, so I just started doing this for 2018. Pretty sure I'll get tired of winning.
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

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JoMoney
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Re: Market Timing

Post by JoMoney » Tue Feb 06, 2018 2:19 am

Current Total on 04-11-2013 equals $68,929.81
Uhh.... 4-11-2013 is not "current", why did you stop there?
Why note compare it to a constant mix stock-bond portfolio with an equivalent standard deviation or market exposure?
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

Dillinger
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Re: Market Timing

Post by Dillinger » Tue Feb 06, 2018 11:11 am

daveydoo wrote:
Tue Feb 06, 2018 2:01 am
You seem surprised that you could create an algorithm that would "beat the market" in retrospect. You have fooled yourself into thinking that this is somehow predictive. I only buy in months that end in "y" and in months when the average local (but not national) rainfall is above average. This has been highly effective, in retrospect, over the past four years, so I just started doing this for 2018. Pretty sure I'll get tired of winning.
Apparently, you misread my original post. I never claimed to have beaten the market. BTW, the 50 day and 200 day are the traditional standard moving averages.

chevca
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Re: Market Timing

Post by chevca » Tue Feb 06, 2018 11:18 am

What are the totals and returns for $10k just invested and left in there over the same time period?

Dillinger
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Re: Market Timing

Post by Dillinger » Tue Feb 06, 2018 11:19 am

JoMoney wrote:
Tue Feb 06, 2018 2:19 am
Current Total on 04-11-2013 equals $68,929.81
Uhh.... 4-11-2013 is not "current", why did you stop there?
Why note compare it to a constant mix stock-bond portfolio with an equivalent standard deviation or market exposure?
I conducted this study five years ago. But, just eyeballing the moving averages on "BigChatrts," if I would extended this strategy until the present day, I would have more than double my end result. IOW, I would have ended up with about $140,000. And if the 50 day moving average were to fall below the 200 day moving average in the coming year(s), I will avoid the next bear market.

chevca
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Re: Market Timing

Post by chevca » Tue Feb 06, 2018 11:25 am

You will? So, do you employ this strategy?

Dillinger
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Re: Market Timing

Post by Dillinger » Tue Feb 06, 2018 11:44 am

Noobvestor wrote:
Tue Feb 06, 2018 1:48 am
Congrats! All you need now is a time machine.
Not a time machine, just a double moving average crossover system.

Dillinger
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Re: Market Timing

Post by Dillinger » Tue Feb 06, 2018 11:46 am

chevca wrote:
Tue Feb 06, 2018 11:25 am
You will? So, do you employ this strategy?
I will in one of my nontaxable accounts.

Dillinger
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Re: Market Timing

Post by Dillinger » Tue Feb 06, 2018 11:58 am

chevca wrote:
Tue Feb 06, 2018 11:18 am
What are the totals and returns for $10k just invested and left in there over the same time period?
I had to review my input data, because I didn't calculate that comparison for my output report in my program(s). It turns out to be $52,532.79. So, I guess I did beat the market (at least on this score).

CantPassAgain
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Re: Market Timing

Post by CantPassAgain » Tue Feb 06, 2018 12:11 pm

Bogleheads.org
"Investing Advice Inspired By John Bogle"

The Bogleheads® Philosophy
Develop a workable plan
Invest early and often
Never bear too much or too little risk
Never try to time the market
Use index funds when possible
Keep costs low
Diversify
Minimize taxes
Keep it simple
Stay the course

It's all right there in Getting Started:
https://www.bogleheads.org/wiki/Getting_started

Fundhunter
Posts: 170
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Re: Market Timing

Post by Fundhunter » Tue Feb 06, 2018 12:22 pm

All I need to know is that if market timing worked, then the richest people in the world would be market timers, not business tycoons.

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Toons
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Re: Market Timing

Post by Toons » Tue Feb 06, 2018 12:33 pm

Market timing?
Save Your Precious Time & Energy,
For Something Enoyable or Productive :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Taylor Larimore
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Re: Market Timing--What Experts Say

Post by Taylor Larimore » Tue Feb 06, 2018 12:37 pm

Dillinger:

Read what experts say about market-timing:

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

Da5id
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Re: Market Timing

Post by Da5id » Tue Feb 06, 2018 12:41 pm

Fundhunter wrote:
Tue Feb 06, 2018 12:22 pm
All I need to know is that if market timing worked, then the richest people in the world would be market timers, not business tycoons.
It is possible that at various points there MAY have been some viable market timing strategies. May still be some. Who knows. Once they become known I'd imagine they'd be arbitraged away. And it is hard to know if one has figured out such a strategy or not prospectively...

tarmangani
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Re: Market Timing

Post by tarmangani » Tue Feb 06, 2018 12:44 pm

There's a reason this forum doesn't respect market timing. It doesn't work. Well, let me rephrase that. Maybe it does work. Maybe some people can pull it off. I'm willing to allow for the possibility that some investors can "beat" the market, over and above taxes and fees, even without insider trading or manipulation. That's probably not you, some random retail investor hawking a super simplistic algorithm. You didn't answer daveydoo's actual point. Anyone can backtest winners. Data dredge long enough and patterns emerge. It's not hard. The challenge involves making winning predictions that beat Buy and Hold consistently.

If you really believe in this system, then you should leverage the heck out of your positions and make millions. Once you've done that, you could return and people might listen. Operative word is "might," of course, but you'd have a better shot than you do now, as no one knows who you are and you've cited a backtest you personally conducted on a single ETF. Taylor just quoted a ton of financial authorities claiming that market timing doesn't work or that it's not worth doing. In arguments of credibility, which is what you've essentially proposed in the OP, you're not going to win.

PVW
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Re: Market Timing

Post by PVW » Tue Feb 06, 2018 12:59 pm

Dillinger wrote:
Tue Feb 06, 2018 1:36 am
It is generally held that you cannot beat the market by timing it. Based on my studies, this appears to be true. That being said, it seems to me [...]
Your main flaw is thinking the market is logical and you just need to choose the right indicators to predict how the market will behave. Many (many, many, many,...) other people also believe this to some extent. Part of the problem is that investors are always trying to predict what everyone else is going to do, and then beat them to it. The result is that nobody knows what is going to happen. You might win by random chance, but it's not because you out-smarted everyone else.

Fundhunter
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Location: Atlanta

Re: Market Timing

Post by Fundhunter » Tue Feb 06, 2018 1:02 pm

tarmangani wrote:
Tue Feb 06, 2018 12:44 pm
There's a reason this forum doesn't respect market timing. It doesn't work. Well, let me rephrase that. Maybe it does work. Maybe some people can pull it off. I'm willing to allow for the possibility that some investors can "beat" the market, over and above taxes and fees, even without insider trading or manipulation. That's probably not you, some random retail investor hawking a super simplistic algorithm. You didn't answer daveydoo's actual point. Anyone can backtest winners. Data dredge long enough and patterns emerge. It's not hard. The challenge involves making winning predictions that beat Buy and Hold consistently.

If you really believe in this system, then you should leverage the heck out of your positions and make millions. Once you've done that, you could return and people might listen. Operative word is "might," of course, but you'd have a better shot than you do now, as no one knows who you are and you've cited a backtest you personally conducted on a single ETF. Taylor just quoted a ton of financial authorities claiming that market timing doesn't work or that it's not worth doing. In arguments of credibility, which is what you've essentially proposed in the OP, you're not going to win.
"Maybe some people can pull it off"???

Well show me just ONE person listed in the Forbes 400 (richest people in the world) who has made their money by timing the market. I think if I had a time machine and a few years, I could be on the list pretty quickly. #3 on the list is Warren Buffett who says: "The only value of stock forecasters is to make fortune tellers look good."

chevca
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Re: Market Timing

Post by chevca » Tue Feb 06, 2018 1:08 pm

The thing to remember, OP, is, if you're sitting at home doing this, don't you think the people doing this for a living day in, day out have thought of this and tried it.... why isn't everyone doing it?

tarmangani
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Re: Market Timing

Post by tarmangani » Tue Feb 06, 2018 1:12 pm

Fundhunter wrote:
Tue Feb 06, 2018 1:02 pm
tarmangani wrote:
Tue Feb 06, 2018 12:44 pm
There's a reason this forum doesn't respect market timing. It doesn't work. Well, let me rephrase that. Maybe it does work. Maybe some people can pull it off. I'm willing to allow for the possibility that some investors can "beat" the market, over and above taxes and fees, even without insider trading or manipulation. That's probably not you, some random retail investor hawking a super simplistic algorithm. You didn't answer daveydoo's actual point. Anyone can backtest winners. Data dredge long enough and patterns emerge. It's not hard. The challenge involves making winning predictions that beat Buy and Hold consistently.

If you really believe in this system, then you should leverage the heck out of your positions and make millions. Once you've done that, you could return and people might listen. Operative word is "might," of course, but you'd have a better shot than you do now, as no one knows who you are and you've cited a backtest you personally conducted on a single ETF. Taylor just quoted a ton of financial authorities claiming that market timing doesn't work or that it's not worth doing. In arguments of credibility, which is what you've essentially proposed in the OP, you're not going to win.
"Maybe some people can pull it off"???

Well show me just ONE person listed in the Forbes 400 (richest people in the world) who has made their money by timing the market. I think if I had a time machine and a few years, I could be on the list pretty quickly. #3 on the list is Warren Buffett who says: "The only value of stock forecasters is to make fortune tellers look good."
There's considerable money and talent in the financial industry. I don't think it's outrageous to assume that someone somewhere MIGHT be able to pull off some manner of market timing. If they're doing it, they probably won't tell you or me about it.

Tom_T
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Re: Market Timing

Post by Tom_T » Tue Feb 06, 2018 1:20 pm

Fall 2008: Dow drops from ~11,000 to ~8,800 in the span of under four months, with many wild swings along the way.
March 2009: Dow bottoms out at 6,594.
July 2009: Dow hits 9,093.
Dec 2009: Dow closes at 10,430.

Jan 26, 2018: Dow hits a high of 26,616.
Feb 5, 2018: Seven trading days later, Dow drops to 24,345.

I'd like to know what methodology would have told me when to buy and when to sell during this time. :)

PVW
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Re: Market Timing

Post by PVW » Tue Feb 06, 2018 1:20 pm

Dillinger wrote:
Tue Feb 06, 2018 1:36 am
A buy signal occured when the 50 day moving average crossed above the 200 day moving average. A sell signal is occurred when the 50 day moving average crossed below the 200 day moving average.
This is the basic idea behind momentum investing. Apparently there is some reward to be had from going along with the crowd. Lots of info in this forum and on the internet. A good article is posted in the link below about the reality of momentum investing.

viewtopic.php?f=10&t=235062

Fallible
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Re: Market Timing

Post by Fallible » Tue Feb 06, 2018 1:22 pm

CantPassAgain wrote:
Tue Feb 06, 2018 12:11 pm
Bogleheads.org
"Investing Advice Inspired By John Bogle"

The Bogleheads® Philosophy
Develop a workable plan
Invest early and often
Never bear too much or too little risk
Never try to time the market
Use index funds when possible
Keep costs low
Diversify
Minimize taxes
Keep it simple
Stay the course

It's all right there in Getting Started:
https://www.bogleheads.org/wiki/Gettinmg_starte
And right here in the wiki (boldface mine):
Some investors, especially academics, believe it is impossible to time the market. Other investors, notably active traders, believe strongly in market timing. Thus, whether market timing is possible is really a matter of opinion. What we can say with certainty is that it's very difficult to be successful at market timing continuously over the long-run. For the average investor who doesn't have the time (or desire) to watch the market on a daily basis, there are good reasons to avoid market timing and focus on investing for the long-run.
https://www.bogleheads.org/wiki/Market_timing
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

bgf
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Re: Market Timing

Post by bgf » Tue Feb 06, 2018 1:23 pm

decades ago, hedge funds with massive computing power and far better data than you were using black boxes, genetic algorithms, and all kinds of crap that you can't even read about yet to find patterns in securities returns across world markets. these are highly competitive with each other and highly secretive. they employ the smartest PhDs coming out of many fields of study.

When DE Shaw was interviewed for Lo's book "Adaptive Markets," he said that he could actually guess someone's strategy based just on their returns and securities. He would then explain to THEM, the people trying to sell him their strategy, what the strategy was, what their data set was, what the inaccuracies in their data set were, and why their strategy would not actually make money in real time. smart dude.

back testing is a completely pointless exercise. 100% totally pointless.

or but yea, just go on portfoliovisualizer or whatever and backtest your way to :moneybag :moneybag :moneybag
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

CantPassAgain
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Re: Market Timing

Post by CantPassAgain » Tue Feb 06, 2018 1:25 pm

Fallible wrote:
Tue Feb 06, 2018 1:22 pm
CantPassAgain wrote:
Tue Feb 06, 2018 12:11 pm
Bogleheads.org
"Investing Advice Inspired By John Bogle"

The Bogleheads® Philosophy
Develop a workable plan
Invest early and often
Never bear too much or too little risk
Never try to time the market
Use index funds when possible
Keep costs low
Diversify
Minimize taxes
Keep it simple
Stay the course

It's all right there in Getting Started:
https://www.bogleheads.org/wiki/Gettinmg_starte
And right here in the wiki (boldface mine):
Some investors, especially academics, believe it is impossible to time the market. Other investors, notably active traders, believe strongly in market timing. Thus, whether market timing is possible is really a matter of opinion. What we can say with certainty is that it's very difficult to be successful at market timing continuously over the long-run. For the average investor who doesn't have the time (or desire) to watch the market on a daily basis, there are good reasons to avoid market timing and focus on investing for the long-run.
https://www.bogleheads.org/wiki/Market_timing
I expect the usual suspects will be along any minute to promote their interest in trend following/momentum strategies and before you know it the thread will be 6 pages long and you'll think this is hotstockmarket.com

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bottlecap
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Re: Market Timing

Post by bottlecap » Tue Feb 06, 2018 1:30 pm

Noobvestor wrote:
Tue Feb 06, 2018 1:48 am
Dillinger wrote:
Tue Feb 06, 2018 1:36 am
It is generally held that you cannot beat the market by timing it. Based on my studies, this appears to be true.
Congrats! Good thing to realize.
Dillinger wrote:
Tue Feb 06, 2018 1:36 am
That being said,
Uh oh.
Dillinger wrote:
Tue Feb 06, 2018 1:36 am
it seems to me that market timing (using a double moving average cross-over system) is worthwhile on a risk-adjusted basis.
Yawn.
Dillinger wrote:
Tue Feb 06, 2018 1:36 am
Below is a back test I conducted
Congrats! All you need now is a time machine.
This is a classic, and correct, response. It is exactly what I was thinking as I read it.

Computers, algorithms, and backtesting have been available and easy to do for decades. Yet no one has figured out how to predict the future.

And the fact that anyone with an internet connection can do them now makes it less likely that anything that worked once in the past will work again.

JT

Fallible
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Re: Market Timing

Post by Fallible » Tue Feb 06, 2018 2:59 pm

bottlecap wrote:
Tue Feb 06, 2018 1:30 pm
Noobvestor wrote:
Tue Feb 06, 2018 1:48 am
Dillinger wrote:
Tue Feb 06, 2018 1:36 am
It is generally held that you cannot beat the market by timing it. Based on my studies, this appears to be true.
Congrats! Good thing to realize.
Dillinger wrote:
Tue Feb 06, 2018 1:36 am
That being said,
Uh oh.
Dillinger wrote:
Tue Feb 06, 2018 1:36 am
it seems to me that market timing (using a double moving average cross-over system) is worthwhile on a risk-adjusted basis.
Yawn.
Dillinger wrote:
Tue Feb 06, 2018 1:36 am
Below is a back test I conducted
Congrats! All you need now is a time machine.
This is a classic, and correct, response. It is exactly what I was thinking as I read it.

Computers, algorithms, and backtesting have been available and easy to do for decades. Yet no one has figured out how to predict the future. ...
JT


In his book, The Devil's Financial Dictionary, WSJ columnist Jason Zweig says backtesting can provide important information on how an investment approach worked in the past, but that too often it is "designed to find any technique ... that beat the market over some period, no matter how unusual the circumstances." Here's his overall advice to investors, in particular those presented with backtesting results from their financial advisors: "If you don't ask tough questions about performance that was plucked out of the past, you are likely to end up blindsided by the returns you get in the future."

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willthrill81
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Re: Market Timing

Post by willthrill81 » Tue Feb 06, 2018 3:26 pm

Fundhunter wrote:
Tue Feb 06, 2018 12:22 pm
All I need to know is that if market timing worked, then the richest people in the world would be market timers, not business tycoons.
You mean like Warren Buffet?

Seriously, you're arguing that if an investor was able to achieve returns over the long-term that were at all higher than buy-and-hold that they would be among the richest people in the world? Clearly, that makes no sense.
Da5id wrote:
Tue Feb 06, 2018 12:41 pm
It is possible that at various points there MAY have been some viable market timing strategies. May still be some. Who knows. Once they become known I'd imagine they'd be arbitraged away. And it is hard to know if one has figured out such a strategy or not prospectively...
It's hard to "arbitrage away" human behavior, which is argued some academics to be potential reasons why market timing can and has been successful in certain ways.
chevca wrote:
Tue Feb 06, 2018 1:08 pm
The thing to remember, OP, is, if you're sitting at home doing this, don't you think the people doing this for a living day in, day out have thought of this and tried it.... why isn't everyone doing it?
One, because investors have been told that it is a fruitless endeavor and haven't researched it thoroughly for themselves, but the bigger reason is because most investors aren't willing to underperform the market for consecutive years. Since 2009, almost every 'reasonable' market timing system I've seen has underperformed buy-and-hold. And historically, that's to be expected. Where market timing has paid in the past is in its ability to avoid the deep drawdowns that inevitably occur with buy-and-hold.
Tom_T wrote:
Tue Feb 06, 2018 1:20 pm
Fall 2008: Dow drops from ~11,000 to ~8,800 in the span of under four months, with many wild swings along the way.
March 2009: Dow bottoms out at 6,594.
July 2009: Dow hits 9,093.
Dec 2009: Dow closes at 10,430.

Jan 26, 2018: Dow hits a high of 26,616.
Feb 5, 2018: Seven trading days later, Dow drops to 24,345.

I'd like to know what methodology would have told me when to buy and when to sell during this time. :)
The most widely publicized market timing approach out there is probably the '200 day moving average' method, whereby stocks are held above that point and sold below it. Using this approach, you would have sold TSM in Dec. of 2007 and not re-entered until Jul. of 2009. That's not 'perfect' (which is impossible to achieve consistently), but it was far better than buy-and-hold.
bgf wrote:
Tue Feb 06, 2018 1:23 pm
back testing is a completely pointless exercise. 100% totally pointless.
So how do you determine how much you need to save to achieve your investment goals (e.g. retirement)? Without at least an estimate of returns, it's impossible to determine this. And every estimate of returns is based on backtested data.
“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

Da5id
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Re: Market Timing

Post by Da5id » Tue Feb 06, 2018 3:32 pm

willthrill81 wrote:
Tue Feb 06, 2018 3:26 pm
Da5id wrote:
Tue Feb 06, 2018 12:41 pm
It is possible that at various points there MAY have been some viable market timing strategies. May still be some. Who knows. Once they become known I'd imagine they'd be arbitraged away. And it is hard to know if one has figured out such a strategy or not prospectively...
It's hard to "arbitrage away" human behavior, which is argued some academics to be potential reasons why market timing can and has been successful in certain ways.
OK, I'll bite. Define market timing and tell me what studies? We aren't talking factors here, we are talking jumping in and out of the market in response to knowledge/belief about future returns, right?

CantPassAgain
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Re: Market Timing

Post by CantPassAgain » Tue Feb 06, 2018 3:35 pm

CantPassAgain wrote:
Tue Feb 06, 2018 1:25 pm
I expect the usual suspects will be along any minute to promote their interest in trend following/momentum strategies and before you know it the thread will be 6 pages long and you'll think this is hotstockmarket.com
willthrill81 wrote:
Tue Feb 06, 2018 3:26 pm
Fundhunter wrote:
Tue Feb 06, 2018 12:22 pm
All I need to know is that if market timing worked, then the richest people in the world would be market timers, not business tycoons.
You mean like Warren Buffet?

Seriously, you're arguing that if an investor was able to achieve returns over the long-term that were at all higher than buy-and-hold that they would be among the richest people in the world? Clearly, that makes no sense.
Da5id wrote:
Tue Feb 06, 2018 12:41 pm
It is possible that at various points there MAY have been some viable market timing strategies. May still be some. Who knows. Once they become known I'd imagine they'd be arbitraged away. And it is hard to know if one has figured out such a strategy or not prospectively...
It's hard to "arbitrage away" human behavior, which is argued some academics to be potential reasons why market timing can and has been successful in certain ways.
chevca wrote:
Tue Feb 06, 2018 1:08 pm
The thing to remember, OP, is, if you're sitting at home doing this, don't you think the people doing this for a living day in, day out have thought of this and tried it.... why isn't everyone doing it?
One, because investors have been told that it is a fruitless endeavor and haven't researched it thoroughly for themselves, but the bigger reason is because most investors aren't willing to underperform the market for consecutive years. Since 2009, almost every 'reasonable' market timing system I've seen has underperformed buy-and-hold. And historically, that's to be expected. Where market timing has paid in the past is in its ability to avoid the deep drawdowns that inevitably occur with buy-and-hold.
Tom_T wrote:
Tue Feb 06, 2018 1:20 pm
Fall 2008: Dow drops from ~11,000 to ~8,800 in the span of under four months, with many wild swings along the way.
March 2009: Dow bottoms out at 6,594.
July 2009: Dow hits 9,093.
Dec 2009: Dow closes at 10,430.

Jan 26, 2018: Dow hits a high of 26,616.
Feb 5, 2018: Seven trading days later, Dow drops to 24,345.

I'd like to know what methodology would have told me when to buy and when to sell during this time. :)
The most widely publicized market timing approach out there is probably the '200 day moving average' method, whereby stocks are held above that point and sold below it. Using this approach, you would have sold TSM in Dec. of 2007 and not re-entered until Jul. of 2009. That's not 'perfect' (which is impossible to achieve consistently), but it was far better than buy-and-hold.
bgf wrote:
Tue Feb 06, 2018 1:23 pm
back testing is a completely pointless exercise. 100% totally pointless.
So how do you determine how much you need to save to achieve your investment goals (e.g. retirement)? Without at least an estimate of returns, it's impossible to determine this. And every estimate of returns is based on backtested data.
Yep, now it starts.

Willthrill31, I have followed your posts for a while with interest (which I am sure you are delighted to hear). This is a remarkable change in tone from your posts just a month or so ago. Hardly any post will go by without you declaring this self professed trend following, which is I think most would agree is most decidedly not a boglehead thing to do. Can you share with us what has caused this 180 degree about face? It seems like there is something missing from the story...

Fundhunter
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Re: Market Timing

Post by Fundhunter » Tue Feb 06, 2018 3:45 pm

willthrill81 wrote:
Tue Feb 06, 2018 3:26 pm
Fundhunter wrote:
Tue Feb 06, 2018 12:22 pm
All I need to know is that if market timing worked, then the richest people in the world would be market timers, not business tycoons.
You mean like Warren Buffet?

Seriously, you're arguing that if an investor was able to achieve returns over the long-term that were at all higher than buy-and-hold that they would be among the richest people in the world? Clearly, that makes no sense.

That is not what I said. A "market timer" who somehow had it figured out could presumably trade in and out of the market, using leverage and options, and make a lot of money in a short time. Can you imagine what could have been done today if you predicted the swings up and down that we have seen all day? Or if you think that is too unrealistic, go month by month. A person who tries this, and comes out a little bit ahead is like a person who goes to Vegas and comes home a little ahead.

Coming out "at all higher" than buy-and-hold can just a easily be attributed to luck, like the gambler who walks away from the table a winner. If a bunch of people try market timing strategies over a long period, undoubtedly a few will come out ahead of buy-and-hold. It proves nothing.

eli80
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Re: Market Timing

Post by eli80 » Tue Feb 06, 2018 3:54 pm

Does market timing have to be an all or nothing proposition?

Can't it be like tax diversification with investing in both Roth and tax deferred IRA/401ks?

Would it ever make sense to take a portion of ones portfolio and invest a piece in a more typical AA and take the balance and try to sell before the absolute peak and get back in before the bottom?

Dillinger
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Re: Market Timing

Post by Dillinger » Tue Feb 06, 2018 4:10 pm

eli80 wrote:
Tue Feb 06, 2018 3:54 pm
Does market timing have to be an all or nothing proposition?
No, of course not. You can designate half of your portfolio to stocks/bonds asset allocation mix (e.g. 75% VTI and 25% BND) and half to market timing VTI using a double moving average strategy. In fact, I have two separate (nontaxable) accounts. And that's what I will be doing.

Dillinger
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Re: Market Timing--What Experts Say

Post by Dillinger » Tue Feb 06, 2018 4:19 pm

Taylor Larimore wrote:
Tue Feb 06, 2018 12:37 pm
Dillinger:

Read what experts say about market-timing:
I have personally studied this issue. I downloaded my own data, I coded my own programs, and I back tested my simple system. A simple double moving average crossover system works. And the reason it works is because it reflects market psychology (which consistently repeats itself).

bgf
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Re: Market Timing

Post by bgf » Tue Feb 06, 2018 4:20 pm

willthrill81 wrote:
Tue Feb 06, 2018 3:26 pm
bgf wrote:
Tue Feb 06, 2018 1:23 pm
back testing is a completely pointless exercise. 100% totally pointless.
So how do you determine how much you need to save to achieve your investment goals (e.g. retirement)? Without at least an estimate of returns, it's impossible to determine this. And every estimate of returns is based on backtested data.
you're right. it is impossible. and so i don't know how much i will need 20 or 30 years from now. but that does not keep me from saving and investing today.

also, not every estimate of returns is based on backtested data. if you were so inclined, you could use only future estimates to determine expected returns.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

bgf
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Re: Market Timing--What Experts Say

Post by bgf » Tue Feb 06, 2018 4:23 pm

Dillinger wrote:
Tue Feb 06, 2018 4:19 pm
Taylor Larimore wrote:
Tue Feb 06, 2018 12:37 pm
Dillinger:

Read what experts say about market-timing:
I have personally studied this issue. I downloaded my own data, I coded my own programs, and I back tested my simple system. A simple double moving average crossover system works. And the reason it works is because it reflects market psychology (which consistently repeats itself).
it worked for your data set. that and nothing more.

sounds like there is little point in discussing it. go forth and make your money.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

Finridge
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Re: Market Timing

Post by Finridge » Tue Feb 06, 2018 4:28 pm

Double Moving Average Cross-over (DMAC) systems have been around for a while. If they worked well, we'd all be in funds using them. But they don't and we're not.

Dillinger
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Re: Market Timing--What Experts Say

Post by Dillinger » Tue Feb 06, 2018 4:29 pm

bgf wrote:
Tue Feb 06, 2018 4:23 pm
it worked for your data set. that and nothing more.

sounds like there is little point in discussing it. go forth and make your money.
It's not my "data." It's the data for S&P 500 Index (which is probably the most followed index of the U.S. stock market).

Dillinger
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Re: Market Timing

Post by Dillinger » Tue Feb 06, 2018 4:35 pm

Fundhunter wrote:
Tue Feb 06, 2018 12:22 pm
All I need to know is that if market timing worked, then the richest people in the world would be market timers, not business tycoons.
You're missing the point. The point is whether a simple market-timing strategy based on moving averages might prove better than a simple rebalancing strategy based on two negatively correlated assets such as a stock index and an intermediate bond index.

BTW, some of the most-successful traders are "trend followers" (which is exactly what traders who employ a moving average attempt to do).

https://www.amazon.com/Trend-Following- ... hael+covel

Dillinger
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Re: Market Timing

Post by Dillinger » Tue Feb 06, 2018 4:44 pm

tarmangani wrote:
Tue Feb 06, 2018 12:44 pm
There's a reason this forum doesn't respect market timing. It doesn't work. Well, let me rephrase that. Maybe it does work. Maybe some people can pull it off. I'm willing to allow for the possibility that some investors can "beat" the market, over and above taxes and fees, even without insider trading or manipulation. That's probably not you, some random retail investor hawking a super simplistic algorithm. You didn't answer daveydoo's actual point. Anyone can backtest winners. Data dredge long enough and patterns emerge. It's not hard. The challenge involves making winning predictions that beat Buy and Hold consistently.
What you're failing to understand that no one who employed a simple stock index/bond index rebalancing strategy beat the market. (BTW, the system I put forth in the OP actually did beat the market for that time period.)

Dillinger
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Re: Market Timing

Post by Dillinger » Tue Feb 06, 2018 4:45 pm

Toons wrote:
Tue Feb 06, 2018 12:33 pm
Market timing?
Save Your Precious Time & Energy,
For Something Enoyable or Productive :happy
I find making money to be enjoyable.

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willthrill81
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Re: Market Timing

Post by willthrill81 » Tue Feb 06, 2018 4:48 pm

Da5id wrote:
Tue Feb 06, 2018 3:32 pm
willthrill81 wrote:
Tue Feb 06, 2018 3:26 pm
Da5id wrote:
Tue Feb 06, 2018 12:41 pm
It is possible that at various points there MAY have been some viable market timing strategies. May still be some. Who knows. Once they become known I'd imagine they'd be arbitraged away. And it is hard to know if one has figured out such a strategy or not prospectively...
It's hard to "arbitrage away" human behavior, which is argued some academics to be potential reasons why market timing can and has been successful in certain ways.
OK, I'll bite. Define market timing and tell me what studies? We aren't talking factors here, we are talking jumping in and out of the market in response to knowledge/belief about future returns, right?
Most Bogleheads would agree that market timing is making buy/sell decisions in direct response to market performance. It need not necessarily be driven by a belief about future returns going one way or the other. For instance, those engaged in rules-based trend following can expect to make many trades, probably more than 50%, that will ultimately generate a lower return than buying-and-holding. But the end goal isn't to make the majority of your trades profitable compared to BAH; rather, it's to minimize downside risk, and the historical data on the topic show that that has indeed been the case.

I actually don't expect to generate higher absolute returns than BAH over the long-term, but I certainly expect to have similar absolute returns and substantially higher risk-adjusted returns to BAH. Even Larry Swedroe has said that he believes that trend following may generate better risk-adjusted returns than BAH.

Here are some of the peer-reviewed papers in the field. There are others.

https://papers.ssrn.com/sol3/papers.cfm ... id=2126478

https://papers.ssrn.com/sol3/papers.cfm ... id=2764933

http://mebfaber.com/wp-content/uploads/ ... 962461.pdf
“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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DanMahowny
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Re: Market Timing

Post by DanMahowny » Tue Feb 06, 2018 4:49 pm

Dillinger wrote:
Tue Feb 06, 2018 4:45 pm
I find making money to be enjoyable.
Me too, brother. Me too.

Each morning I stroll into my home office in my pj's and say to myself, "How can I make money today?"
Funding secured

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willthrill81
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Re: Market Timing

Post by willthrill81 » Tue Feb 06, 2018 4:53 pm

CantPassAgain wrote:
Tue Feb 06, 2018 3:35 pm
Willthrill31, I have followed your posts for a while with interest (which I am sure you are delighted to hear). This is a remarkable change in tone from your posts just a month or so ago. Hardly any post will go by without you declaring this self professed trend following, which is I think most would agree is most decidedly not a boglehead thing to do. Can you share with us what has caused this 180 degree about face? It seems like there is something missing from the story...
Once I began reviewing the research into trend following with an open mind, I saw the benefits it could offer. As I've said before, I don't expect to generate higher absolute returns than buy-and-hold going forward, but I expect that they'll be similar. I do strongly believe that the simple trend following method I use will generate higher absolute returns than a balanced portfolio with a commensurate amount of volatility and maximum drawdown.

I'm a researcher by trade, and when I find something a logical solution to a problem that is backed by extensive data, I usually find it compelling.
“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

Dillinger
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Re: Market Timing

Post by Dillinger » Tue Feb 06, 2018 4:54 pm

PVW wrote:
Tue Feb 06, 2018 12:59 pm
Your main flaw is thinking the market is logical and you just need to choose the right indicators to predict how the market will behave. Many (many, many, many,...) other people also believe this to some extent. Part of the problem is that investors are always trying to predict what everyone else is going to do, and then beat them to it. The result is that nobody knows what is going to happen. You might win by random chance, but it's not because you out-smarted everyone else.
A double, moving-average crossover system is actually more reactive than predictive. That being said, moving averages work. And the reason moving averages work is because they reflect the market psychological components of fear and greed which do repeatedly play themselves out in the market.

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willthrill81
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Re: Market Timing

Post by willthrill81 » Tue Feb 06, 2018 4:55 pm

Fundhunter wrote:
Tue Feb 06, 2018 3:45 pm
willthrill81 wrote:
Tue Feb 06, 2018 3:26 pm
Fundhunter wrote:
Tue Feb 06, 2018 12:22 pm
All I need to know is that if market timing worked, then the richest people in the world would be market timers, not business tycoons.
You mean like Warren Buffet?

Seriously, you're arguing that if an investor was able to achieve returns over the long-term that were at all higher than buy-and-hold that they would be among the richest people in the world? Clearly, that makes no sense.

That is not what I said. A "market timer" who somehow had it figured out could presumably trade in and out of the market, using leverage and options, and make a lot of money in a short time. Can you imagine what could have been done today if you predicted the swings up and down that we have seen all day? Or if you think that is too unrealistic, go month by month. A person who tries this, and comes out a little bit ahead is like a person who goes to Vegas and comes home a little ahead.

Coming out "at all higher" than buy-and-hold can just a easily be attributed to luck, like the gambler who walks away from the table a winner. If a bunch of people try market timing strategies over a long period, undoubtedly a few will come out ahead of buy-and-hold. It proves nothing.
You're still making the same basic claim. Even if one was able to consistently outperform the market, even an extra 1-2% annually, that would not be nearly enough to make them uber-rich.
“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

Dillinger
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Re: Market Timing

Post by Dillinger » Tue Feb 06, 2018 4:57 pm

chevca wrote:
Tue Feb 06, 2018 1:08 pm
The thing to remember, OP, is, if you're sitting at home doing this, don't you think the people doing this for a living day in, day out have thought of this and tried it.... why isn't everyone doing it?
My strategy is a long-term strategy. That being said, professional traders most certainly employ moving averages.

wrongfunds
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Re: Market Timing

Post by wrongfunds » Tue Feb 06, 2018 5:01 pm

assuming market timing actually works, don't you still need to account for the time delta and the price differential between making the decision and executing the trade? once your algorithm decides to take the action on specific price point, the trade itself most likely does not execute at that exact price point.

if you are going to do backtesting, at least account for this and see if the numbers remain similar or not.

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willthrill81
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Re: Market Timing

Post by willthrill81 » Tue Feb 06, 2018 5:02 pm

Dillinger wrote:
Tue Feb 06, 2018 4:10 pm
eli80 wrote:
Tue Feb 06, 2018 3:54 pm
Does market timing have to be an all or nothing proposition?
No, of course not. You can designate half of your portfolio to stocks/bonds asset allocation mix (e.g. 75% VTI and 25% BND) and half to market timing VTI using a double moving average strategy. In fact, I have two separate (nontaxable) accounts. And that's what I will be doing.
Both Paul Merriman and Meb Faber do this. Half of their portfolios are buy-and-hold and half are trend following.

Logically, this makes some sense because it is hedging the bet. Historically, buy-and-hold does better in bull markets, and trend following does better in bear markets. Over the long-term, both can be expected to have similar returns (apart from taxes, fees, etc.), so this strategy seems plausible to me. If nothing else, it may reduce the 'fear of missing out' in the good times and the panic of the bad times.

FWIW, Merriman has been a trend follower since the 1980s and reports similar results to what buy-and-hold would have achieved but with less volatility.
“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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