Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • SteveG787
    • By SteveG787 14th Mar 17, 4:58 PM
    • 36Posts
    • 4Thanks
    SteveG787
    Why is 'Timing' the market bad ?
    • #1
    • 14th Mar 17, 4:58 PM
    Why is 'Timing' the market bad ? 14th Mar 17 at 4:58 PM
    Like many people I have made a pretty good gain in my funds over the last few years and have been looking at ways of protecting that gain when the market inevitably turns. On this forum and in other places people say 'Timing the Market' is a "bad" thing, but I am not sure why. As a former engineer my method would be a simple mechanical buy and sell process applied to each fund, if it drops from its top price by more than say 10% then sell, when it rises more than a similar amount above it's low price then buy.
    As far as I can see the only problem with this would be if the market turned just after I'd bought or sold in which case I would be left behind and catching up would cost more money.
    Obviously this would cost money while in cash and if catching up is required, but I am starting in the position of already being well ahead of the curve (about 40% gain in 3 years).
    The intention of this is to protect capital while holding on to much of the gain already made.

    Please poke holes and rip to shreds. I realise this is more than likely a bad thing but I'm not seeing it.
Page 4
    • jimjames
    • By jimjames 16th Mar 17, 12:12 PM
    • 12,183 Posts
    • 10,702 Thanks
    jimjames
    And in 1999 he was spot on, predicting the 2000 dotcom crash. Were you?
    Originally posted by kidmugsy
    So was Woodford. Which has done better over the last 25 years?
    Remember the saying: if it looks too good to be true it almost certainly is.
    • kidmugsy
    • By kidmugsy 16th Mar 17, 1:12 PM
    • 9,841 Posts
    • 6,636 Thanks
    kidmugsy
    So was Woodford. Which has done better over the last 25 years?
    Originally posted by jimjames
    What has that got to do with the issue? Hussmann makes a perfectly sensible case for a market bust in the near future. If you don't like his argument just show us the flaws.
    • sorcerer
    • By sorcerer 16th Mar 17, 1:16 PM
    • 814 Posts
    • 390 Thanks
    sorcerer
    whenever I am thinking of selling a stock, I think to myself, why am I selling it? and what I am going to do with the money?


    If I can't answer those two question I leave it where it is.
    • Linton
    • By Linton 16th Mar 17, 1:30 PM
    • 8,490 Posts
    • 8,428 Thanks
    Linton
    ......
    Or perhaps that a switch from 100% tracker to 50% doubly leveraged tracker and 50% fixed interest won't roughly match or beat the former but with lower volatility?
    Originally posted by jamesd
    Do you do this? A quick Google comes up with lots of references showing that long term holding of leveraged funds is a seriously bad idea and wont do what one may think it would.

    http://www.etf.com/etf-education-center/21044-leveraged-and-inverse-etfs-why-2x-is-not-the-2x-you-think.html

    http://finance.yahoo.com/news/7-mistakes-avoid-trading-leveraged-130053722.html


    Are they wrong? If so why?
    • Malthusian
    • By Malthusian 16th Mar 17, 4:58 PM
    • 3,291 Posts
    • 5,000 Thanks
    Malthusian
    What has that got to do with the issue? Hussmann makes a perfectly sensible case for a market bust in the near future. If you don't like his argument just show us the flaws.
    Originally posted by kidmugsy
    It's not so much that his argument has flaws but that his argument would have been equally valid in every single one of the last 5 years.

    The headline ("When Speculators Prosper Through Ignorance") says it all. I'd rather be ignorant and prosperous (along with all the other sheeple who invest for the long term through both downs and ups) than clever and poor, thank you.
    • ChesterDog
    • By ChesterDog 16th Mar 17, 5:53 PM
    • 800 Posts
    • 1,444 Thanks
    ChesterDog
    People can - and often do - make a perfectly sensible case for what the market will do.

    Hussmann himself uses examples (subsequently proved wrong) at the beginning of the article.

    The problem is that (as his own cited examples show), no matter how well-reasoned and thorough the assessment of the economic environment, and no matter how well thought-out the consequent prediction of what will happen to the market as a result, the market may not be listening, and probably isn't.
    I am one of the "Dogs of the Index".
    • jdw2000
    • By jdw2000 16th Mar 17, 6:16 PM
    • 415 Posts
    • 109 Thanks
    jdw2000
    Even if there is an equity drop of 30%-50%, they will go back up again.
    • JohnRo
    • By JohnRo 16th Mar 17, 6:24 PM
    • 2,458 Posts
    • 2,213 Thanks
    JohnRo
    That's easy to say now...

    ..not so easy when you've never experienced that sort of stock market carnage, the sky is falling in, walls are shaking, the ten o'clock news is wall to wall doom and gloom every night, your portfolio is many thousands in the red and everyone is predicting a long grinding road back.

    You can hardly sleep with worry about how long it might take to recover this time as the losses mount and you start debating whether it's better to get out now before it sinks another five or ten grand then you can always buy back in when it does.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • jdw2000
    • By jdw2000 16th Mar 17, 9:49 PM
    • 415 Posts
    • 109 Thanks
    jdw2000
    That's easy to say now...

    ..not so easy when you've never experienced that sort of stock market carnage, the sky is falling in, walls are shaking, the ten o'clock news is wall to wall doom and gloom every night, your portfolio is many thousands in the red and everyone is predicting a long grinding road back.

    You can hardly sleep with worry about how long it might take to recover this time as the losses mount and you start debating whether it's better to get out now before it sinks another five or ten grand then you can always buy back in when it does.
    Originally posted by JohnRo

    The worst thing you can possibly do is sell. So "getting out now" is not an option.

    After the last crash in 2007/8 or whenever it was, my house in London went down in value 40% (or so I heard). I had people whistling when I told them. They thought it was serious and a real loss.

    It made absolutely no odds to me. I had no intention of selling, and I KNEW it would go back up in value and exceed where it had been. I know that in the future my house will be worth double, or triple what it is today. It's just a matter of time.

    Stocks are exactly the same.
    • JohnRo
    • By JohnRo 16th Mar 17, 10:08 PM
    • 2,458 Posts
    • 2,213 Thanks
    JohnRo
    That's fine then, I'm just offering some food for thought to other readers who've perhaps only experienced recent year on year gains of some magnitude and aren't prepared for gut wrenching valuations when it all starts to kick off.
    Stocks are exactly the same.
    They're quite clearly not.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • jdw2000
    • By jdw2000 16th Mar 17, 10:14 PM
    • 415 Posts
    • 109 Thanks
    jdw2000
    That's fine then, I'm just offering some food for thought to other readers who've perhaps only experienced recent year on year gains of some magnitude and aren't prepared for gut wrenching valuations when it all starts to kick off.


    They're quite clearly not.
    Originally posted by JohnRo
    House prices have gone up broadly in line with stocks over the years.
    • jimjames
    • By jimjames 16th Mar 17, 11:29 PM
    • 12,183 Posts
    • 10,702 Thanks
    jimjames
    House prices have gone up broadly in line with stocks over the years.
    Originally posted by jdw2000
    People don't see the value of their house shown changing every day on the news though
    Remember the saying: if it looks too good to be true it almost certainly is.
    • economic
    • By economic 16th Mar 17, 11:37 PM
    • 1,882 Posts
    • 1,029 Thanks
    economic
    House prices have gone up broadly in line with stocks over the years.
    Originally posted by jdw2000
    they have but stocks are way more volatile.

    also past does not indicate the future. theres no certainty stocks will be higher in 10 or even 20 years compared to now (at least in real terms but maybe in nominal terms too).
    • economic
    • By economic 16th Mar 17, 11:37 PM
    • 1,882 Posts
    • 1,029 Thanks
    economic
    People don't see the value of their house shown changing every day on the news though
    Originally posted by jimjames
    you can now using zoopla
    • jdw2000
    • By jdw2000 16th Mar 17, 11:45 PM
    • 415 Posts
    • 109 Thanks
    jdw2000
    they have but stocks are way more volatile.

    also past does not indicate the future. theres no certainty stocks will be higher in 10 or even 20 years compared to now (at least in real terms but maybe in nominal terms too).
    Originally posted by economic
    There's no certainly earth will exist in 20 years. Or that you are I will be alive to see it if it does.

    The only certainty is that everything will end. You, me, the earth, and everything on it.
    • Thrugelmir
    • By Thrugelmir 16th Mar 17, 11:49 PM
    • 55,864 Posts
    • 49,236 Thanks
    Thrugelmir
    And in 1999 he was spot on, predicting the 2000 dotcom crash. Were you?
    Originally posted by kidmugsy
    Wasn't rocket science with regards to LastMinute.Com. Anybody with any iota of business sense would have questioned valuing a company at £523 million. That only had a turnover of £3 million and never previously made a profit. Nothing like hype to suck mugs in with the expectation of quick and easy profit. Meanwhile the founders were made for life. Without ever having been successful. Other than having a good basic idea.
    "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
    • economic
    • By economic 16th Mar 17, 11:51 PM
    • 1,882 Posts
    • 1,029 Thanks
    economic
    There's no certainly earth will exist in 20 years. Or that you are I will be alive to see it if it does.

    The only certainty is that everything will end. You, me, the earth, and everything on it.
    Originally posted by jdw2000
    there is that saying in the long run we are all dead. by keynes.
    • grey gym sock
    • By grey gym sock 17th Mar 17, 1:02 AM
    • 4,130 Posts
    • 3,633 Thanks
    grey gym sock
    And in 1999 he was spot on, predicting the 2000 dotcom crash. Were you?
    Originally posted by kidmugsy
    a strange response.

    i've never put myself forward as somebody who can give useful advice about timing the market. (i have suggested that it's not necessary, and probably a bad idea, even to try timing the market.)

    you have put hussman forward in that role. we've now established that sometimes his advice has been accurate, at other times very inaccurate. that makes it unreliable. so why do you suggest paying any attention to his advice?

    a persistent doomster does not become right - not in any useful sense - the next time there is a big market crash. and there always will be another big market crash - we just don't know when. after the next crash, are you going to be saying "hussman was right after all!", ignoring that following his advice would have given disastrous results, compared to the alternative of making no attempt to call the next crash, and just holding a steady mixed-asset portfolio throughout.
    • AnotherJoe
    • By AnotherJoe 17th Mar 17, 7:11 AM
    • 7,583 Posts
    • 8,183 Thanks
    AnotherJoe
    Whose fund is that?
    Originally posted by jdw2000
    Follow the link k in post 44
    • AnotherJoe
    • By AnotherJoe 17th Mar 17, 7:19 AM
    • 7,583 Posts
    • 8,183 Thanks
    AnotherJoe
    What has that got to do with the issue? Hussmann makes a perfectly sensible case for a market bust in the near future. If you don't like his argument just show us the flaws.
    Originally posted by kidmugsy
    The flaw is he makes that argument consistently so it's useless, it's like me saying "in an hours time it will be 1pm," every five minutes. The second flaw is the performance of the funds which implement his beliefs whichbremarably have incurred large losses despite a large stock market rise.

    Can't recall the name, in the same vein, there was a respected economics professor, won all sorts of awards, very credible theories, you read them and though "that makes sense" he then started a fund based on his theories. Lost a boatload of money and shut the funds down very recently.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

1,750Posts Today

8,245Users online

Martin's Twitter