Timing the market

BritishInvestor

Prism said:

BritishInvestor said:

fancible said:

Thoughts?

 

Out of the thousands of funds available, why do the same funds always pop up?

Because in general maybe they are the good ones?

No idea what "good" means or how you define it. 

sevenhills

Deleted_User said:

I am with you.  One reason: corrections happen every other year, on average. Sometimes several times a year.  Your gut is predicting normal market behaviour. 

The FTSE 250 has gone up 22% this year, but that is a low increase compared to ...

As the following chart shows, all three major U.S. stock market indices bottomed out on March 23, 2020. Since then, the Dow Jones, S&P 500 and Nasdaq have soared 76%, 76% and 95%, respectively, making the past 12 months one of the best 365-day stretches since World War II.

https://www.statista.com/chart/20939/year-to-date-performance-of-major-us-stock-market-indices/

Thrugelmir

Prism said:

BritishInvestor said:

fancible said:

Thoughts?

 

Out of the thousands of funds available, why do the same funds always pop up?

Because in general maybe they are the good ones?

People forget that once Woodford was the star. There'll always be somebody that made the right call well before anybody else . As a consequence they are put on a pedestal. Following up with another investment such as Tesla is unlikely in our lifetimes. 

Prism

BritishInvestor said:

Prism said:

BritishInvestor said:

fancible said:

Thoughts?

 

Out of the thousands of funds available, why do the same funds always pop up?

Because in general maybe they are the good ones?

No idea what "good" means or how you define it. 

Well me neither really but the ones that people mention a lot have done what they were supposed to over fairly long periods of time. Whether that be growth at all costs, quality buy and hold or simply a fund that is designed to protect against inflation. Those ones pop up because they have reliably performed well and as expected.

Secret2ndAccount

MegaCaps	Biggest % Drop during 2021
Apple	13.7
Amazon	14.0
Tesla	34.0
Fundsmith Top Holdings
Paypal	32.6
Meta (Facebook)	14.6
L'Oréal	13.0
IDEXX	12.7
Intuit	12.4
Philip Morris	11.7
Novo Nordisk	10.1
Estée Lauder	9.2
Microsoft	8.8

My point is that most stocks experience a >10% drop most years. These are the word's biggest companies. Add in the Quantumscapes and Twillios and the drops are much bigger.
So most stocks have corrected or crashed this year. They just all did it at different times, so the indices have held up well.

I don't see any reason why next year should be so bad. Post pandemic, most families have more money in the bank than they did before (majority continued to receive income, but had nowhere to go to spend). They are spending that money now, and company profits are up.  P/E ratios are lower than at start of year. Limit to profits right now is supply issues, not demand, so next year should be better, as supply improves. Interest rates remain low, and central banks are clearly telegraphing their plans to raise them gradually over a period of years. Vaccination rates are high, and we have effective theraputics on the way, so the reopening continues.
Bull markets don't die of old age, and crashes never arrive on time.

Prism

Thrugelmir said:

Prism said:

BritishInvestor said:

fancible said:

Thoughts?

 

Out of the thousands of funds available, why do the same funds always pop up?

Because in general maybe they are the good ones?

People forget that once Woodford was the star. There'll always be somebody that made the right call well before anybody else . As a consequence they are put on a pedestal. Following up with another investment such as Tesla is unlikely in our lifetimes. 

Lots of people made lots of money with Woodford and at the end a few lost a little bit.

Although Tesla had an effect on Scottish Mortgage they had numerous other stocks that have done very well or even better. Nio was up 2000% at one point in the last couple of years. They have held Amazon pretty much all of the way up. I haven't owned SMT myself for a few years (a bit to exciting for me) but they seem to be fine investors and I doubt many are unhappy with their returns - which is why they get recommendations.

Thrugelmir

Secret2ndAccount said:

Bull markets don't die of old age, and crashes never arrive on time.

To quote Sir John Templeton.

"Bull markets are born on pessimism, grown on scepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell".

NedS

I would say if you are going to be a market timer, you need to have a very clearly defined plan. How much do you think the market will drop? What will you buy? At what price will you buy it? Will you average in (if so, what quantities and what prices) or hold out and go all in at what you think will be the bottom?

If you don't have a clearly defined plan, you are unlikely to execute well, especially in the midst of a crisis when everyone else around you is panicking and telling you the world is about to end. It will be difficult to think rationally (emotion clouds judgement), so accept that you may not and just stick to executing your plan.

[Deleted User]

fancible said:

Deleted_User said:

my gut feeling is that for various reasons a major correction is more likely to happen in the next 12 to 18 months than not.

I am with you.  One reason: corrections happen every other year, on average. Sometimes several times a year.  Your gut is predicting normal market behaviour. 

Linton gave you good advice re market timing.  Stop guessing and messing and follow an appropriate allocation. 

“Wealth preservation” is a marketing gimmick.  Go for it if it makes you feel better

Sure there are corrections every year, I'm talking about major corrections like 2008 and 2020. They certainly don't happen every year. But I don't have a crystal ball and maybe I am just being over cautious in my old age 🤷 Linton has given me some sound advice which I will seriously consider.
Not sure about wealth preservation funds being a gimmick however. Ruffer was only down 0.7% in the first quarter of 2020 year (compare that to other funds) and also finished the year 17% up 🤷

Neither 2008 nor 2020 was a correction. That’s bear market territory.  Bears are rare. Basing your plans on having one next year is very likely to be counterproductive.  People who wait for bear markets to invest don’t actually invest when the headlines are screaming that the world is ending and talking heads on TV are going through ways of jumping off skyscrapers 1930-s style. 

Its irrelevant what a particular fund did last year. What matters is what it will do next year.  A fund which does well usually attracts more money than it can handle, so investment style usually changes.  And managers get so filthy rich, they either retire or become too cocky.  Funds which do well in one decade invariably end up at the bottom of all the charts in the next decade.  

Calling the fund “wealth preservation” and aiming for “no loss” is smart.  Bernie Madoff used the same tactics.  Not to say its a Ponzi scheme. They are certainly taking major bets though. UK is the largest allocation.  Japan second.  Very small  US holding.  Seem to be very secretive; investing in own funds so can’t tell what is their actual asset allocation.  I wouldn’t touch a closed fund like this but thats just my opinion. 

jamesd

Secret2ndAccount said:

I don't see any reason why next year should be so bad. ... Interest rates remain low, and central banks are clearly telegraphing their plans to raise them gradually over a period of years. Vaccination rates are high, and we have effective theraputics on the way, so the reopening continues.
Bull markets don't die of old age, and crashes never arrive on time.

One thing that feeds bull markets and inhibits bear ones is cheap money. That's because it's used to invest among other things. There's still very cheap money but the cheapness is to be reduced. Tantrums and maybe a crash can be expected if that isn't executed extremely well. The good news is that central bankers in major economise have been tending to do a very good job since 2008, when we were very fortunate to have an expert on the Great Depression as chair of the Federal Reserve.

Rising mortgage interest rates will decrease available consumer cash, though not quickly. But compared to half a percent the commonplace five percent plus mortgage rate that was around in 2007 can be quite a shock as it gradually arrives.

Developed country vaccination rates are high. That's not true in lots of other places that are customers of firms prominent in major stock markets. There remains considerable potential for that to lead to major infection levels and mutations of the virus into forms that are more resistant to current vaccine types.

Then there's the unknown. Perhaps terrorists finding a way to rapidly demolish the World Trade Center... oops, been done, but it has a replacement a few hundred meters from Wall Street.

Combine a few of those things and it's easy enough to have a bad year without foreknowledge of its happening. What's harder to expect is central banks screwing up and not injecting large amounts of cash to stimulate the economy. China was the big driver of that back in 2008 though Congress was persuaded to help quite a bit.