Why is 'Timing' the market bad ?
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The life of professional investors is dominated by fear of falling behind their competitors, so they are reluctant to be out of the market at all. They don't mind losing money as long as all the other professionals have lost too.
There's no earthly reason why personal investors must copy them.Free the dunston one next time too.0 -
Recently I've read threads here and elsewhere of individuals determined to time the market.
Two examples spring to mind, one person selling up 22/06/16 and wallowing in his apparently successful market timing a few days later. Wonder if he's bought back in since?
Another who sold a large portion of funds late Dec 16 convinced the market was in peak territory.
While potentially locking in profits, assuming neither have bought back in they've missed approx 15-20% and 5-10% additional gains respectively.0 -
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How does a 40% rise over 3 years in 100% equities put him "behind the curve"?
Yeh, that's what I thought. I went into this expecting to average very roughly 7% a year in the long term, that's the curve I meant.
More counterpoints coming through now, what's apparent is that there's a lot of different ideas of what "Timing" means, probably all valid. What I meant was much more specific and rigid, the 10% change was just an example number but it will be big enough distinguish a downturn from noise. There would be no element of choice, if the fund (and its a tracker fund that I am considering for this) dropped 10% from a peak I would sell, if it rose 10% from a low I would buy. I have run this manually and very roughly on a test fund from 2007 to now and I would have had less than 10 periods out of the market with the only long one being 2008/9. I need to download some data and do this properly but roughly it would have chopped my gains by 20% or so but the drop in 2008/9 would have been 10% and not the 40% the fund showed.
I'm aware that looking backwards is not the same and there's all sorts of caveats to this but it seems to me that particularly with tracker funds staying invested through a large downturn is unnecessarily risky.
People readjust their portfolios all the time for any number of reasons, this is just a more mechanical way of doing that.0 -
If it was as easy as you think, don't you imagine the institutions with millions of pounds of computing equipment and the best mathematical minds and data mining techniques out there would perhaps exceed your efforts with excel and an unrepresentative data set and have already sorted this out and be offering funds that beat trackers hands down?
The fact they haven't might make you perhaps give pause as to the fact it isn't that simple, indeed it's not doable. Indeed you can find numerous studies that show using data going back 100+ years, staying invested beats market timing, however simplicities or sophisticated your algorithm is.
But, if you don't believe anyone here, feel free, put say £10k of your own money in and let us know how you do. Monthly reports perhaps ?
Though I'd be intrigued if you do that, after it's fallen 10%, so you sell, how do you then establish if its a low so you buy ? Were you perhaps cheating in your back testing and looking at the chart for the future ? You'll find when doing it for real, that chart doesn't exist
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longleggedhair wrote: »Sheffield Mutual. Guaranteed by the FSCS.
Fair enough, so losing 2% to inflation, locked in for five years and not large amounts given the fscs cover, not an option I'd consider but we're all different.0 -
Prices are being driven by politics - in the case of housing by restricting the supply with planning constraints whilst stimulating the demand with taxpayers money through so called 'Help to Buy', Housing Benefit, etc. Equity prices are being driven by politics too - QE, and wherever politicians are going to throw taxpayers money. If you know in advance what politicians are going to do you can make big money.
This has not been lost on the big investors and fund management companies who have taken to hiring 'self-employed' Tory MPs.
But the rest of us being treated like mushrooms (kept in the dark and fed b*llshit) are safer sticking with index funds and not attempting to time the market.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
One of the reasons I like to use the Monevator site, and listen to what they say, is that they are transparent and tell you EXACTLY how to make money out of investing.
Monevator don't simply say "we're brilliant and make loads of money... read our obscure articles, buy our snake oil, and you too can be rich like us..."
Have a a read of their "Slow and Steady" passive investment series. It has been going on for years and it's updated every quarter (next update is due at the start of April 2017). This series tells you exactly which funds they are invested in, how much money is invested, detailed spreadsheets on how much it has grown/lost, details of how to re-balance, details of asset allocation, a plan for the future (ie, future asset allocation). Or if you can't even be bothered mirroring what they show you exactly to do, then they simply suggest buying a VLS product which they say does exactly the same job.
Monevator could not possibly be any more helpful than that. They don't pretend that followers of 'Slow and Steady' will make more money than a top investor, but for a new investor with limited knowledge it is all you need. And you'll probably make more money than most/many "knowledgeable" investors. (They'd never admit that, of course... but neither will they share the details of their portfolio with you like 'Slow and Steady' do).0
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