Why is 'Timing' the market bad ?

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  • Pincher
    Pincher Posts: 6,552
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    You should know what you are playing with.

    I have been looking at ORPEA

    https://www.bloomberg.com/quote/ORP:FP

    They build 5 star retirement facilities, in anticipation of rich baby boomers. I was thinking that was a good idea for years, but the UK scene is so depressing.

    With steady growth like that, why bother timing it?

    Whereas stocks that go up and down like a yoyo, like Lloyds, I just buy some when it dips, and sell when it fizzes. Need to do it inside an S&S ISA, otherwise the CGT calculation is a nightmare.
  • coyrls
    coyrls Posts: 2,423
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    SteveG787 wrote: »
    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.

    The problem with the mechanism that you want to use is that it won’t work. It certainly won’t work for a fund, as you don’t know the price at which you are going to sell or buy but even with something that is market traded such as an ETF or Invesment Trusts or individual shares, you don’t get to set the price at which you buy or sell, the market does. Sure you can have automatic or manual triggers but that doesn’t mean you can trade at the trigger price. When the market is dropping or rising rapidly, you can be more than your 10% off in the price that you can actually buy and sell at. You are at a further disadvantage as a retail investor because you’re not going to be at the front of the queue for trades.
  • kidmugsy
    kidmugsy Posts: 12,709
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    Free the dunston one next time too.
  • bigadaj
    bigadaj Posts: 11,531
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    jamesd wrote: »
    Congratulations. I hope that you sustain that during the next 45% equity drop.
    It's a reasonable example of what it set out to be. A portfolio of trackers with medium-high volatility that so far has not lived through a period of substantial bull market. If you want to beat it you might consider swapping out some of the fixed interest for some P2P and maybe considering whether it has an appropriate asset mix for the current situation.

    I stopped giving substantial descriptions of my whole investment mixtures quite some time ago for a range of reasons including:

    1. People showing signs of copying me, when I have a volatility and risk tolerance well above average, so that is something I think I need to discourage by making it hard to do.
    2. A material proportion of what I now do is in opportunities that could vanish if they became too well known. To protect my own returns I need to avoid saying things that can point people to what I do in those areas.
    3. I don't want to do the work.

    I've a high P2P weighting and a global tracker is my largest equity holding, with the same one also the largest Slow and Steady holding. My actual P2P return in recent years is higher than the return of the Slow and Steady portfolio and its fixed interest part, with far lower volatility in both that and my overall mixture.

    James, what's your current percentage split between p2p, equities, cash, bonds, properties etc?
  • grey_gym_sock
    grey_gym_sock Posts: 4,508 Forumite
    edited 16 March 2017 at 1:23AM
    kidmugsy wrote: »

    are you kidding? hussman has been giving these dire warnings for many years; he will eventually be "timely", like the stopped clock.

    the performance of hussman's funds has been absolutely dreadful. some have actually lost money overall over the last 10 years - an incredibly bad performance, given the large positive returns from both equities and bonds over that period.

    it's a great example of what can go wrong when you attempt to time the market.
  • AnotherJoe
    AnotherJoe Posts: 19,622
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    Yes, look at what this gurus fund has done.
    20% loss in the last year inspite of a huge market rise.


    1 Year -20.19%
    3 Year -10.98%
    5 Year -9.31%
    10 Year -5.66%
  • ChesterDog
    ChesterDog Posts: 1,106
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    I like the irony of the fact that the article criticises those who believe they know what markets are going to do and state their case loudly, before it goes on to do exactly the same thing.

    Hubris at its best.
    I am one of the Dogs of the Index.
  • jamesd
    jamesd Posts: 26,103
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    edited 16 March 2017 at 8:44AM
    bigadaj wrote: »
    James, what's your current percentage split between p2p, equities, cash, bonds, properties etc?
    Current one is useless due to temporary effects. The more useful non-transient one is a frustratingly low around a third in P2P and around two thirds in equities. Barring unpredictable factors that will change to around fifty percent in each early in the 2018-19 tax year. If I find a useful way to get pension money into directly held P2P it will change to around 75% P2P, which is where I want to be at the moment.

    Transient effects include these that require cash or money market holdings:

    1. A pension pending transfer held in a money market account.
    2. ISA money in P2P that I have to sell to return the money to the flexible ISA before the end of the tax year or lose ISA wrapper amount. Then back out of cash and into P2P again in the new tax year.
    3. Pension contributions below minimum wage that I'll have in cash for a little while and money in bank accounts before cheques get cashed for other investments.

    All of those transient effects mean that for a few weeks I'm at around forty percent in cash and money market holdings. Don't do that unless you're experiencing the same transient things.

    Still, I can hope for a nice fifty percent equity crash over the next few weeks... :) If that was to happen I'd probably lever up to around 150% equities. :)

    Once the transient stuff is over with I'm considering something like a third P2P and one hundred percent equities for a while as a Trump/US momentum play, using doubly leveraged long trackers for that part. If I knew of a leveraged S&P500 put write strategy ETF I might use that, it looks like an interesting tool.
  • jdw2000
    jdw2000 Posts: 418
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    AnotherJoe wrote: »
    Yes, look at what this gurus fund has done.
    20% loss in the last year inspite of a huge market rise.


    1 Year -20.19%
    3 Year -10.98%
    5 Year -9.31%
    10 Year -5.66%

    Whose fund is that?
  • jdw2000
    jdw2000 Posts: 418
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    edited 16 March 2017 at 9:12AM
    jamesd wrote: »
    Congratulations. I hope that you sustain that during the next 45% equity drop.
    It's a reasonable example of what it set out to be. A portfolio of trackers with medium-high volatility that so far has not lived through a period of substantial bear market. If you want to beat it you might consider swapping out some of the fixed interest for some P2P and maybe considering whether it has an appropriate asset mix for the current situation.

    I stopped giving substantial descriptions of my whole investment mixtures quite some time ago for a range of reasons including:

    1. People showing signs of copying me, when I have a volatility and risk tolerance well above average, so that is something I think I need to discourage by making it hard to do.
    2. A material proportion of what I now do is in opportunities that could vanish if they became too well known. To protect my own returns I need to avoid saying things that can point people to what I do in those areas.
    3. I don't want to do the work.

    I've a high P2P weighting and a global tracker is my largest equity holding, with the same one also the largest Slow and Steady holding. My actual P2P return in recent years is higher than the return of the Slow and Steady portfolio and its fixed interest part, with far lower volatility in both that and my overall mixture.

    Nobody is suggesting that the Slow and Steady portfolio is a world beater. The clue is in the title "Slow and steady".

    Suggesting ways it can make more money is not the point. The point is that it is a low cost, low hassle, transparent, for-beginners way of making money from the stock market over the long term. It does the same thing that VLS does.
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