Why is 'Timing' the market bad ?

OldMusicGuy · 14 March 2017 at 8:28PM

Thrugelmir wrote: »

In investment parlance it's referred to as self-serving attribution bias. Then there's illusion of control when people believe that they believe they have more influence than they actually do over a random or partially random event.

Good point. I have been congratulating myself that I "timed" the market in 2015 and 2016 because I spent too much time reading MoneyWeek and other harbingers of doom and went fully into cash in early 2015, convinced the "big correction" was looming. I avoided the China drop and the Brexit drop and came back into the market in the second half of 2016, since when my overall gain is about 8%. Good on me I thought when I saw this thread. So I checked what my funds had done in the 2015/16 period and overall if I had stayed invested I would have made a gain!

Jon_W · 14 March 2017 at 8:43PM

I guess that if it's one of the things you can do well it's a very good thing indeed!

Audaxer · 14 March 2017 at 8:52PM

I don't think timing the market is a 'bad thing', it's just extremely difficult or impossible to get right as others above are saying. However I agree with the post above by OldMusicGuy that you are asking about protecting your gains. I don't see anything wrong about cashing in your profit if you need the funds for something else in your life. That is what investment is for after all.

If say, all my funds were in equities and I had made a 40% gain, I would be tempted to move it to a less riskier investment where it wasn't all equities. I could make more if I leave it longer, but if it drops 10% or more quickly I might be disappointed that I didn't protect my 40% gain.

SteveG787 · 14 March 2017 at 9:00PM

Wow.

That's unanimous then, it's definitely a bad thing.

Just to clarify, I'm not trying to predict, it's based on what has already happened. Also I'm not trying to beat the market, I know this will cost money in the long run over holding. The advantage to me (that I'm willing to pay for) is rather than go all the way to the bottom and back I kop out on the way down and go back in on the way up.

Anyway, lots of food for thought, and thanks for all the above. Now I'm going to go and play with the Vanguard graph mentioned above.

LHW99 · 14 March 2017 at 9:33PM

If your happen to make a decision based on how you are managing your portfolio eg moving into cash ready to transfer providers in August 1998 just before the Russian financial crisis and buying back just after - you do well and think you've "timed the market".
If you want to increase your exposure to financial stocks and buy into Lloyds and RBS at the beginning of 2007 and then hold - everything goes **** up and you know timing the market is a rubbish idea!

grey_gym_sock · 14 March 2017 at 9:34PM

SteveG787 wrote: »

I'm not trying to beat the market, I know this will cost money in the long run over holding. The advantage to me (that I'm willing to pay for) is rather than go all the way to the bottom and back I kop out on the way down and go back in on the way up.

well, if you want the falls in the value of your investments to be shallower, and are prepared to accept lower returns to achieve that, the more obvious approach is to reduce the percentage you're holding in equities.

longleggedhair · 14 March 2017 at 9:49PM

I think it's a personal thing, and what you feel most comfortable with. I have been steadily investing since 2009, and have easily doubled my money, it's been a great period to invest.

I sold 80% of my holdings in February and to lock in those gains I've invested into a with-profits bond (against the advice of many here) which is investment linked and has a minimum guarantee of 103% of my initial investment at the end of the five year term.

I'm more than happy with the level of gains I have made and now I've locked those gains in with a link to the potential upside in the market. At the end of the period I may drip the money back into the market or I may not. And I'm going to continue drip feeding money into my investment trusts once again.

I personally feel at the moment there is very little upside in the market currently but plenty of downside, but I could be wrong. It's all about what your circumstances are and what you feel comfortable with.

Ray_Singh-Blue · 14 March 2017 at 10:41PM

I don't think trying to time the market is a bad thing. If you get it right, it's a great thing. Trouble is, when you throw the dice, you are as likely to land on a snake as on a ladder.

I wonder how many people here genuinely do not throw any dice with their investments. Unless an investor is going to stick with a completely passive approach, they are going to have to make some investment calls. These might involve choice of funds, choice of companies, choice of geographies, choice of asset classes, choice of sectors.... or choice of entry and exit points.

My "discipline" is to throw no more than one dice per month, and in fact this month my choice was to move a chunk of money from VWRL to cash. Only time will tell if that was a good call- every trade has a winner and loser.

jimjames · 14 March 2017 at 10:41PM

OldMusicGuy wrote: »

I avoided the China drop and the Brexit drop and came back into the market in the second half of 2016, since when my overall gain is about 8%. Good on me I thought when I saw this thread. So I checked what my funds had done in the 2015/16 period and overall if I had stayed invested I would have made a gain!

Why didn't you buy back into the markets in early 2016 when they dropped a lot (25% or so)? By not doing so you missed out and your reasoning might help the OP understand why it doesn't happen like they think.

Ray_Singh-Blue wrote: »

I wonder how many people here genuinely do not throw any dice with their investments. Unless an investor is going to stick with a completely passive approach, they are going to have to make some investment calls. These might involve choice of funds, choice of companies, choice of geographies, choice of asset classes, choice of sectors.... or choice of entry and exit points.

Maybe it's a strange way of me timing but I would say that if there is a big drop I tend to move more into equities to get bargains. I do think that's different to actively selling up, it just means my cash funds get reduced for a period of time because I added more into shares.

bigadaj · 14 March 2017 at 10:50PM

longleggedhair wrote: »

I think it's a personal thing, and what you feel most comfortable with. I have been steadily investing since 2009, and have easily doubled my money, it's been a great period to invest.

I sold 80% of my holdings in February and to lock in those gains I've invested into a with-profits bond (against the advice of many here) which is investment linked and has a minimum guarantee of 103% of my initial investment at the end of the five year term.

I'm more than happy with the level of gains I have made and now I've locked those gains in with a link to the potential upside in the market. At the end of the period I may drip the money back into the market or I may not. And I'm going to continue drip feeding money into my investment trusts once again.

I personally feel at the moment there is very little upside in the market currently but plenty of downside, but I could be wrong. It's all about what your circumstances are and what you feel comfortable with.

What's the with profits bond and who is it with?

Who are the counter parties to any guarantees?

Why is 'Timing' the market bad ?

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