It's tough to time the market, I like the concept if done at the right time...
Lock in your gain..
See what happens.. it's like turning your bets off at the table.
401ks kind of BLOW any ways in comparison to individual equities without their management fee.
Don't like paying gains when I sell my gainers.
I try not to hold too many CRAZY overnight positions in my brokerage account on fliers I take a shot on.
Gl
Hope you are wrong..
Lock in your gain..
See what happens.. it's like turning your bets off at the table.
401ks kind of BLOW any ways in comparison to individual equities without their management fee.
Don't like paying gains when I sell my gainers.
I try not to hold too many CRAZY overnight positions in my brokerage account on fliers I take a shot on.
Gl
Hope you are wrong..
i'll say with confidence that 2 things can lead to a significant correction of the market;
1. war . quite a bit of volatile chaps in power nowadays, can happen.
2. A Trump impeachment. He is on pace to have significant gains for his first 100 days as Chief, to add to the massive gains after election. The market reacted positively when he got elected because of anticipated ' growth ' policy changes. Needless to say if Mr Trump is tossed out, look out below
ever wonder why Warren Buffet is ALWAYS in the market, changing only cash position? Other than family, is dividends his greatest love?
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn't … pays it.”A Einstein
pity that a 'savings account ' at a local bank doesnt even cover the rate of inflation. Sad. Times have changed
.............
copy and pasting. Here's one chaps opinion. He does provide a study and an enlightening chart
- its institutional, no conflict of interest.
..........
Brad Barber and Terrance Odean. Know of them? Perhaps not, but you should.
Mr. Barber and Mr. Odean were researchers at the University of California who conducted a landmark study of investor behaviour during the 1990s. They looked at the trading activity of roughly 78,000 households at a large US discount brokerage over a six-year period. What they discovered was revealing.
Households that traded their stock portfolios the most had, by far, the worst performance. The highest turnover portfolios had an average annualized return of 11.4%, but the lowest turnover portfolios had a significantly better return of 18.5%. (If these returns seem impressive, it’s because it was the bull-market years of the 1990s.) The annualized blended-benchmark return (buy and hold) was roughly 18%. A conservative stock portfolio might have annual turnover of 20%—the highest turnover portfolios in the Barber and Odean study were realizing this every MONTH.
So what were these frequent traders doing wrong? The mistakes were numerous. Certainly overestimating their ability to determine market direction, an enormously complex task, was a key factor in their underperformance. Overconfidence led them astray, essentially. But there were other errors. They also traded emotionally. For instance, they held stocks that had recently underperformed the market and sold their winners, which was “consistent with the evidence that individual investors tend to hold their losers and sell their winning investments”. Our experience with our own clients is similar. When a client wants to raise money from their portfolio, often they suggest selling only the positions that have performed well, ignoring the fact that positive fundamentals are likely the reason for the strong performance and that it could easily continue. Repeatedly selling your winners usually only serves to blunt momentum.
Another amazing revelation of the Barber and Odean study was how poorly diversified most of these stock portfolios were. The mean household in their study held only 4.3 stocks! Recall the blog post I wrote a few months ago (http://www.greaterfool.ca/?s=hail+marys) highlighting that the odds of any one stock suffering a catastrophic loss (a 70% drop) is about 40%. If you have only a four-stock portfolio, you’re living dangerously.
Much of what Barber and Odean concluded has been supported by other analysis. For instance, Blackrock notes that you only need to miss a handful of strong market days to absolutely cripple your long-term portfolio performance (see chart). Over thousands of trading days do you believe that you’ll be able to accurately determine the few strongest market days and, by corollary, the few weakest days? Get over yourself.
[h=4]Investment of $100,000 in S&P 500 (1995-2014): Market Timing is Pointless.[/h]
[h=5]Source: Blackrock[/h]Interestingly, Barber and Odean also determined that men trade 45% more often than women. And, lo and behold, underperformed women in terms of net returns. Sadly gentlemen, overconfidence once again gets the better of us. As Barber and Odean describe it
Overconfident investors believe more strongly in their own valuations, and concern themselves less about the beliefs of others. Overconfident investors…hold unrealistic beliefs about how high their returns will be and how precisely these can be estimated.
Put another way, even though your buddies have advised you that you’re an ugly slob, you still decide to ask Scarlett Johansson out on a date. You can, of course, do this, but just be aware that she’ll tell you to get lost every time (or call the police).
I don’t highlight the Barber and Odean study to suggest that portfolios should never be traded. They should. It makes sense, for instance, to periodically rebalance your portfolio and also to subtly shift asset and geographic weightings in response to broad changes in economic conditions or interest-rate outlook. But having 200% portfolio turnover because you view yourself to be a human algorithm? This is a poor strategy.
Dial it back, flash boys.
............
of course, if you feel you are smarter than the market, or think USA is going the shits...the above is nonsense. One last thing, for heavens, at the very least , BE WELL READ in trading before you embark. Don't let random voices in your head or gut feeling dictate your future financial savings
1. war . quite a bit of volatile chaps in power nowadays, can happen.
2. A Trump impeachment. He is on pace to have significant gains for his first 100 days as Chief, to add to the massive gains after election. The market reacted positively when he got elected because of anticipated ' growth ' policy changes. Needless to say if Mr Trump is tossed out, look out below
ever wonder why Warren Buffet is ALWAYS in the market, changing only cash position? Other than family, is dividends his greatest love?
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn't … pays it.”A Einstein
pity that a 'savings account ' at a local bank doesnt even cover the rate of inflation. Sad. Times have changed
.............
copy and pasting. Here's one chaps opinion. He does provide a study and an enlightening chart
- its institutional, no conflict of interest. ..........
Brad Barber and Terrance Odean. Know of them? Perhaps not, but you should.
Mr. Barber and Mr. Odean were researchers at the University of California who conducted a landmark study of investor behaviour during the 1990s. They looked at the trading activity of roughly 78,000 households at a large US discount brokerage over a six-year period. What they discovered was revealing.
Households that traded their stock portfolios the most had, by far, the worst performance. The highest turnover portfolios had an average annualized return of 11.4%, but the lowest turnover portfolios had a significantly better return of 18.5%. (If these returns seem impressive, it’s because it was the bull-market years of the 1990s.) The annualized blended-benchmark return (buy and hold) was roughly 18%. A conservative stock portfolio might have annual turnover of 20%—the highest turnover portfolios in the Barber and Odean study were realizing this every MONTH.
So what were these frequent traders doing wrong? The mistakes were numerous. Certainly overestimating their ability to determine market direction, an enormously complex task, was a key factor in their underperformance. Overconfidence led them astray, essentially. But there were other errors. They also traded emotionally. For instance, they held stocks that had recently underperformed the market and sold their winners, which was “consistent with the evidence that individual investors tend to hold their losers and sell their winning investments”. Our experience with our own clients is similar. When a client wants to raise money from their portfolio, often they suggest selling only the positions that have performed well, ignoring the fact that positive fundamentals are likely the reason for the strong performance and that it could easily continue. Repeatedly selling your winners usually only serves to blunt momentum.
Another amazing revelation of the Barber and Odean study was how poorly diversified most of these stock portfolios were. The mean household in their study held only 4.3 stocks! Recall the blog post I wrote a few months ago (http://www.greaterfool.ca/?s=hail+marys) highlighting that the odds of any one stock suffering a catastrophic loss (a 70% drop) is about 40%. If you have only a four-stock portfolio, you’re living dangerously.
Much of what Barber and Odean concluded has been supported by other analysis. For instance, Blackrock notes that you only need to miss a handful of strong market days to absolutely cripple your long-term portfolio performance (see chart). Over thousands of trading days do you believe that you’ll be able to accurately determine the few strongest market days and, by corollary, the few weakest days? Get over yourself.
[h=4]Investment of $100,000 in S&P 500 (1995-2014): Market Timing is Pointless.[/h]
[h=5]Source: Blackrock[/h]Interestingly, Barber and Odean also determined that men trade 45% more often than women. And, lo and behold, underperformed women in terms of net returns. Sadly gentlemen, overconfidence once again gets the better of us. As Barber and Odean describe it
Overconfident investors believe more strongly in their own valuations, and concern themselves less about the beliefs of others. Overconfident investors…hold unrealistic beliefs about how high their returns will be and how precisely these can be estimated.
Put another way, even though your buddies have advised you that you’re an ugly slob, you still decide to ask Scarlett Johansson out on a date. You can, of course, do this, but just be aware that she’ll tell you to get lost every time (or call the police).
I don’t highlight the Barber and Odean study to suggest that portfolios should never be traded. They should. It makes sense, for instance, to periodically rebalance your portfolio and also to subtly shift asset and geographic weightings in response to broad changes in economic conditions or interest-rate outlook. But having 200% portfolio turnover because you view yourself to be a human algorithm? This is a poor strategy.
Dial it back, flash boys.
............
of course, if you feel you are smarter than the market, or think USA is going the shits...the above is nonsense. One last thing, for heavens, at the very least , BE WELL READ in trading before you embark. Don't let random voices in your head or gut feeling dictate your future financial savings
I think that once you get any type of legitimate headwind in the markets that you're gonna see a lot of profit taking all at once since people are sitting on some nice gains. And the psychology of 2 crashes in the 21st century will obviously accelerate that.
But when? next week? 2 years? 5 years?
Really the range of outcomes is far and wide once you begin to think about it.
But when? next week? 2 years? 5 years?
Really the range of outcomes is far and wide once you begin to think about it.
I used to try to do this. My financial adviser showed me a couple studies that illustrated that it's a losing proposition. You can't time the market.
The problem is, you might get out before a drop - but when do you get back in? The studies showed that people that tried to time the market
ended up getting out, and then missed huge upside gains when they couldn't time getting back in.
[h=1]The Stock Market Is a Guessing Game You Can’t Win[/h][h=2]It’s folly — and costly — to even try[/h]April 30, 2015 by Ric Edelman
If you’re not invested in the stock market on the days it rises the most, you’ll end up with lower profits than you otherwise would have earned.
Well, duh.
You know this, of course, and that’s why you agree to leave your money invested all the time — so you are sure to be invested on the few days each year when the stock market makes its biggest gains.
But what if you were out of the market during the worst days of a given year?
A caller to my radio show asked me that recently. It’s a fascinating question — perhaps you’ve wondered about it yourself.
My caller had attended one of our seminars just two days earlier, where he had heard us talk about the folly of attempting to time the market. Some of the examples we presented intrigued him.
Before I tell you my reply to him, let’s recap so you have the points from the seminar that prompted his call.
During the four years ending December 31, 2014, the S&P 500 stock index averaged about 13% a year. Many are astonished to hear that it did so well during that period because they still suffer emotionally from the shockingly large losses they suffered in 2008. It hasn’t fully dawned on them that the stock market has bounced back — from the Dow Jones Industrial Average’s low of 6,507 on March 9, 2009, to around 18,000 today (as of this writing). Yes, the Dow has gained almost 12,000 points in the past six years — and generated an annual gain of 13% over the past four years!
That 13% is even more amazing when you compare it to bank savings accounts, money market accounts, CDs and the like.
Over those four years, the market was open for trading on just over 1,000 days.
The point we make during the seminar is this: If you missed the best 14 days out of those 1,000, what would your average annual return have been? Obviously, it would have been less than 13% — but just how much less?
Here’s the answer that amazes many seminar attendees: Your earnings would have been exactly zero. That’s right — the entire profit of the past four years occurred during just 14 days!
The take-away message is to avoid trying to time the market. Instead, stay invested the whole time. True, there will be volatility, but if you’re willing to suffer through it you’ll reap the reward.
And that brings me to my caller’s question: How much profit would you have earned if you missed the market’s 14 worst days of the past four years?
Well, it would have been 28% per year.
As enticing as such incredible returns appear, you and I both know they are unattainable. Oh, sure, some people manage to make the right call from time to time — they get out at a market top or get in at a bottom. But there’s a big difference between doing that once and doing it repeatedly, consistently, over long periods.
The problem, of course, is that each market-timing call requires two decisions, not just one: You must know not only when to get out of the market, but also when to jump back in. And even assuming you get both calls right, you must repeat the process over and over — for just one wrong call wipes out all of your prior successes. That’s why it’s a losing proposition.
My caller admitted this made sense, but added: “I’m still tempted to try to time the market at times. When quantitative easing ends, I believe the market will drop. When that will happen, I don’t know, but I believe it will eventually go down.”
Did you notice that he admits he doesn’t know? He’s certainly not alone. It’s only because of a gut instinct, intuition, overconfidence and, yes, arrogance that many folks just like him make bets based on their feelings.
But think about it: If everybody were right, everybody would be rich. And the stock market really is composed of, well, everybody — correct?
If you are selling because you believe the market will fall, to whom are you selling? A buyer! Clearly, one of you is wrong.
Besides these problems, market timing also proves to be far more costly than simply staying invested. That’s because frequent buying and selling dramatically increases your trading costs. It also increases your taxes, because short-term profits (those of one year or less) pay higher tax rates than do profits produced over periods of more than one year.
All these factors collectively prove that market timing is a costly, losing strategy.
The problem is, you might get out before a drop - but when do you get back in? The studies showed that people that tried to time the market
ended up getting out, and then missed huge upside gains when they couldn't time getting back in.
[h=1]The Stock Market Is a Guessing Game You Can’t Win[/h][h=2]It’s folly — and costly — to even try[/h]April 30, 2015 by Ric Edelman
If you’re not invested in the stock market on the days it rises the most, you’ll end up with lower profits than you otherwise would have earned.
Well, duh.
You know this, of course, and that’s why you agree to leave your money invested all the time — so you are sure to be invested on the few days each year when the stock market makes its biggest gains.
But what if you were out of the market during the worst days of a given year?
A caller to my radio show asked me that recently. It’s a fascinating question — perhaps you’ve wondered about it yourself.
My caller had attended one of our seminars just two days earlier, where he had heard us talk about the folly of attempting to time the market. Some of the examples we presented intrigued him.
Before I tell you my reply to him, let’s recap so you have the points from the seminar that prompted his call.
During the four years ending December 31, 2014, the S&P 500 stock index averaged about 13% a year. Many are astonished to hear that it did so well during that period because they still suffer emotionally from the shockingly large losses they suffered in 2008. It hasn’t fully dawned on them that the stock market has bounced back — from the Dow Jones Industrial Average’s low of 6,507 on March 9, 2009, to around 18,000 today (as of this writing). Yes, the Dow has gained almost 12,000 points in the past six years — and generated an annual gain of 13% over the past four years!
That 13% is even more amazing when you compare it to bank savings accounts, money market accounts, CDs and the like.
Over those four years, the market was open for trading on just over 1,000 days.
The point we make during the seminar is this: If you missed the best 14 days out of those 1,000, what would your average annual return have been? Obviously, it would have been less than 13% — but just how much less?
Here’s the answer that amazes many seminar attendees: Your earnings would have been exactly zero. That’s right — the entire profit of the past four years occurred during just 14 days!
The take-away message is to avoid trying to time the market. Instead, stay invested the whole time. True, there will be volatility, but if you’re willing to suffer through it you’ll reap the reward.
And that brings me to my caller’s question: How much profit would you have earned if you missed the market’s 14 worst days of the past four years?
Well, it would have been 28% per year.
As enticing as such incredible returns appear, you and I both know they are unattainable. Oh, sure, some people manage to make the right call from time to time — they get out at a market top or get in at a bottom. But there’s a big difference between doing that once and doing it repeatedly, consistently, over long periods.
The problem, of course, is that each market-timing call requires two decisions, not just one: You must know not only when to get out of the market, but also when to jump back in. And even assuming you get both calls right, you must repeat the process over and over — for just one wrong call wipes out all of your prior successes. That’s why it’s a losing proposition.
My caller admitted this made sense, but added: “I’m still tempted to try to time the market at times. When quantitative easing ends, I believe the market will drop. When that will happen, I don’t know, but I believe it will eventually go down.”
Did you notice that he admits he doesn’t know? He’s certainly not alone. It’s only because of a gut instinct, intuition, overconfidence and, yes, arrogance that many folks just like him make bets based on their feelings.
But think about it: If everybody were right, everybody would be rich. And the stock market really is composed of, well, everybody — correct?
If you are selling because you believe the market will fall, to whom are you selling? A buyer! Clearly, one of you is wrong.
Besides these problems, market timing also proves to be far more costly than simply staying invested. That’s because frequent buying and selling dramatically increases your trading costs. It also increases your taxes, because short-term profits (those of one year or less) pay higher tax rates than do profits produced over periods of more than one year.
All these factors collectively prove that market timing is a costly, losing strategy.
in addition to the Barber/Odean here's another one. It's from Fidelity (NOT institutional, has merit none the less)...findings are rather amusing...
http://theconservativeincomeinvestor.com/2015/05/26/fidelitys-best-investors-are-dead/
[h=1]Fidelity’s Best Investors Are Dead[/h]
[FONT="]A news item that has gotten a lot of attention recently concerned an internal performance review of Fidelity accounts to determine which type of investors received the best returns between 2003 and 2013. The customer account audit revealed that the best investors were either dead or inactive—the people who switched jobs and “forgot” about an old 401(k) leaving the current options in place, or the people who died and the assets were frozen while the estate handled the assets
so, the odds are against us to outperform dead people and folks with Alzheiners? ........but what about bullish engulfing patterns on high volume? ...[/FONT]
http://theconservativeincomeinvestor.com/2015/05/26/fidelitys-best-investors-are-dead/
[h=1]Fidelity’s Best Investors Are Dead[/h]
[FONT="]A news item that has gotten a lot of attention recently concerned an internal performance review of Fidelity accounts to determine which type of investors received the best returns between 2003 and 2013. The customer account audit revealed that the best investors were either dead or inactive—the people who switched jobs and “forgot” about an old 401(k) leaving the current options in place, or the people who died and the assets were frozen while the estate handled the assets
so, the odds are against us to outperform dead people and folks with Alzheiners? ........but what about bullish engulfing patterns on high volume? ...
[/FONT]
I wish I never sold any stock I ever owned, and I haven't sold anything in years.
I can say this with absolute certainty. Traders lose money long term, without exception. The wealthiest people buy and hold.
That's my first hand observation
I've seen every investment strategy, and I have several brokers / advisors for clients
I can say this with absolute certainty. Traders lose money long term, without exception. The wealthiest people buy and hold.
That's my first hand observation
I've seen every investment strategy, and I have several brokers / advisors for clients
"Traders lose money long term, without exception."
Willie, there are no similarities between traders and investors. If an investor tries to be a trader, then yes he will lose his ass. But your statement is categorically wrong. It's like saying that nobody beats sportsbetting, without exception.
Willie, there are no similarities between traders and investors. If an investor tries to be a trader, then yes he will lose his ass. But your statement is categorically wrong. It's like saying that nobody beats sportsbetting, without exception.
I'm not saying buy and hold isn't good advice but what do people do if they got a mill in the market and it is 1/2 their life savings and it goes down 20% in 2 months and another 30-40% seems possible? All the research and historical data in the world is going to make holding through a storm like that tough.
And this has happened 2x this century. Yeah, you can say just roll with it but it is a lot easier to tout passive investing in good times.
example may be a bit extreme but you get the idea
And this has happened 2x this century. Yeah, you can say just roll with it but it is a lot easier to tout passive investing in good times.
example may be a bit extreme but you get the idea
it's NOT extreme. AND, a 30-40% correction WILL happen AGAIN. History shows us this.
It's about setting a portfolio (equities/fixed income) SUITABLE FOR YOUR RISK TOLERANCE. Certainly various factors affect this. Age (years to retirement), are u in retirement, previous experience in the market , those with significant scars ?...may choose 100% fixed income, no market exposure, choose real estate/private equity) .....Your ISP.
as an example ;
a 20 yr old's (having a time horizon of min 35 years to retirement ) portfolio SHOULD LOOK WAY different than a 63 yr olds in retirement. The 20 yr old in 100% equities (compounding returns, he'll be sitting pretty come age 55/60 ) but the retired 63 yr old in 100% equities ? an INSANE allocation. As you say, if he had a $1,000,000 portfolio with 100% equities and the market corrects 45%, he'l likely have to dip into capital ., ie., selling low. In addition to buying benzos to sleep well night. He was poorly set-up and that's on him. NO SANE advisor would have him in that allocation
a globally diversified portfolio took just two yrs to get back to even after 2008. Anyone smart enough to have an emergency fund likely never had to sell low.
the point people were saying is that market timing has been shown to be a VERY POOR STRATEGY. Sure, there are outliers, but for most-- a shit show,
