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Is cost averaging the way to go at this stage?
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There's a great article here about Bob, the World's worst market timer. Essentially, time in the market beats timing the market.....
https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/0 -
Choosing to cost-average, rather than investing regularly because money's only available regularly, just amounts to postponing the risk. Rather it sounds like 100% equities isn't for you, although the alternative doesn't have to be 100% cash. The only people who consistently outperform by buying market dips or bottoms are liars, so would instead focus on allocations you're comfortable with.0
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Manesova83 wrote: »I get that market timing is best left for professional traders. And I don't proclaim to know anything that others do not. The only reason I am thinking about this is because we are currently in a record-breakingly long bull market, suggesting the next downturn is probably not too far away.
Certainly as far as UK markets are concerned. Historically the majority of investment returns are generated from income reinvestment. Not capital growth.
The wall of money pumped into the global financial system needs a home. As a result the valuation of company shares could be regarded as toppy. Doesn't just require a downturn turn a correction would suffice. If investors decide to lock in profits.
In the first quarter of 2019. Profit warnings were at their highest in the UK since 2008. Dampening down analysts expectations.0 -
Come up with a portfolio that has a good historical probability of getting you to your financial goal. Then invest your money in it for 30 or 40 years. If there are significant ups and downs in the markets then do some asset rebalancing in response. Timing the market will work sometimes and fail sometimes. Don't gamble.....have a plan and stick to it.
Once you stop worrying about valuations and market indexes you actually have a good chance of success and your blood pressure will be a lot lower.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
The only people who consistently outperform by buying market dips or bottoms are liars, so would instead focus on allocations you're comfortable with.
I always hear this. But say you cost average with a proportion of the money you have left each month, while keeping some behind for downturns, surely it's not that hard to improve your returns compared to those who avoid market timing altogether. While it's virtually impossible to time the bottom perfectly, it's not hard to buy the dip at some point.
One could have a rule, for example, when they invest half their free money each month and keep half behind. Then when the market drops, say, 30%, stick in whatever has been kept behind over the preceding months or years.0 -
Manesova83 wrote: »I always hear this. But say you cost average with a proportion of the money you have left each month, while keeping some behind for downturns, surely it's not that hard to improve your returns compared to those who avoid market timing altogether. While it's virtually impossible to time the bottom perfectly, it's not hard to buy the dip at some point.
One could have a rule, for example, when they invest half their free money each month and keep half behind. Then when the market drops, say, 30%, stick in whatever has been kept behind over the preceding months or years.
You are not the first one to think this. You are trying to hit a moving target....the thing is you don't know where it's going so you can't lead it like a clay pigeon. Seriously, once you stop chasing Alpha you have a good chance of success and an even better chance of less worry in your life. So take a Zen approach, dollar cost average into your asset allocation and have a margarita on the porch.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
Looking at this list of US bear markets since the Wall Street Crash, you'd have been waiting for a fall of 30%
https://pensionpartners.com/bear-markets-and-recessions/
from 1942 - 1968
from 1974 - 1987
from 1987 - 2000
from 2009 to date
That's an awful lot of missed compounding0 -
Manesova83 wrote: »I always hear this. But say you cost average with a proportion of the money you have left each month, while keeping some behind for downturns, surely it's not that hard to improve your returns compared to those who avoid market timing altogether. While it's virtually impossible to time the bottom perfectly, it's not hard to buy the dip at some point.
One could have a rule, for example, when they invest half their free money each month and keep half behind. Then when the market drops, say, 30%, stick in whatever has been kept behind over the preceding months or years.
Given it's so easy, how come you aren't a multimillionaire already, and come to that, since its so simple, why isn't everyone else doing ut as well?
Despite you professing several times you "understand" about market timing, , you clearly dont.0 -
AnotherJoe wrote: »Given it's so easy, how come you aren't a multimillionaire already, and come to that, since its so simple, why isn't everyone else doing ut as well?
Despite you professing several times you "understand" about market timing, , you clearly dont.
Your first question is nonsensical, so I won't reply to that.
As for the second point, I understand that markets go up and down cyclically, and that stocks are better value during a recession than towards the end of a bull market. I didn't 'profess' to know any more than that, and was merely after a bit of advice.
So it looks like the consensus is to cost average all the way rather than waiting for a right moment that may never come. That's what I was after, so thanks everyone!0 -
The time to invest in the market is right now!
Also please note just because a stock is cheap doesn't mean it will go up in price. I should know I own Lloyds shares.0
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