Timing the market

MK62

BritishInvestor said:

MK62 said:

BritishInvestor said:

Prism said:

BritishInvestor said:

Prism said:

I doubt any of us expect the 39% annual returns of the quant driven medallion fund. My aims of outperformance are far more modest - maybe 2-3% per year with lower volatility.

Compare the returns of Medallion with their funds that take positions over the longer term. It gives you an idea of how much harder it seems to be to outperform using strategies that have a reasonable holding period.

https://www.institutionalinvestor.com/article/b1q3fndg77d0tg/Renaissance-s-Medallion-Fund-Surged-76-in-2020-But-Funds-Open-to-Outsiders-Tanked

Perhaps you should email RenTech and offer some advice

Maybe they should stop trading and start investing

A good quote here

"The more I learn about finance and investing and markets, the more I realize how little I really know. And I’ve seen people who are wildly smarter than me, they’ve dedicated their entire lives, every sinew, every iota of their being to beating the market, delivering the fabled alpha, and they still struggle."

https://qz.com/2093749/how-index-funds-humbled-the-financial-masters-of-the-universe/

(But ignore the title and first sentence, it's rubbish).

I've read this claim numerous times, but, as I see things, its not supported by the evidence. If true, you'd expect index funds to be at or near the top of their sectors, especially over the longer term, but in most cases they aren't........why is that?
I'm not bashing index funds, I invest in a few myself........but the thread has sidetracked from "timing the market", which you can do (or attempt to do if you prefer) with either active or passive index funds, to another "active v passive" debate......
My own view is that "timing the market" is possible, but does carry some risk.....very unlikely you'd get it right every time either, but then do you need to?
You also need to define exactly what "timing the market" means to you (imho there are different degrees of this), and you also need to define success and failure, and thats not as easy as it sounds either...if I "time the market" and sell some assets, which then go on to rise 5%, is that a failure?.....what if the assets I bought with the proceeds make 10% over the same period?.....of course, the reverse is also possible....there's that risk again. All that said, what is the alternative?.....ignore everything, and throw money into the market randomly?....or as soon as you have it available?.....how do you then decide when to sell or switch, should you feel the need?
Ultimately, every investor times the market anyway, whether consciously or not.....if I decided, for example, that the timing was right to invest in a certain fund, and at the same time another investor did the same, but took no view on the timing, the end result is the same....

"I've read this claim numerous times, but, as I see things, its not supported by the evidence. If true, you'd expect index funds to be at or near the top of their sectors, especially over the longer term, but in most cases they aren't........why is that?"

Can you pick a particular example and we'll compare it against published data - obviously we'd have to adjust for index fund tracking error.

https://www.spglobal.com/spdji/en/research-insights/spiva/

"My own view is that "timing the market" is possible"
I know a number of people that would pay good money for your skills. 

Ah....the old SPIVA report again.....

Just look at Trustnet or Morningstar over 5 or 10 years.......see where the index funds are in the performance tables....

Nobody is denying that there are not some poor active funds out there, whether because the manager isn't very good, they are really closet trackers, the charges are too high etc etc, but then inferring that for all active funds is just daft tbh. True, you might need need to avoid those "dog" funds (assuming they aren't deliberately cautious by design of course) but personally I haven't found that to be too hard.......and there is no special skill involved really, just a willingness to do some research, create a shortlist, and dig deeper into those before picking one (or more if you fancy and they are sufficiently different.......if still unsure, you could always hedge your bets and put half in a tracker and half in the active fund of choice)

As to your second point, I'd just ask once again, how do you decide when to buy or sell, or do you just decide on a random whim?

BritishInvestor

MK62 said:

BritishInvestor said:

MK62 said:

BritishInvestor said:

Prism said:

BritishInvestor said:

Prism said:

I doubt any of us expect the 39% annual returns of the quant driven medallion fund. My aims of outperformance are far more modest - maybe 2-3% per year with lower volatility.

Compare the returns of Medallion with their funds that take positions over the longer term. It gives you an idea of how much harder it seems to be to outperform using strategies that have a reasonable holding period.

https://www.institutionalinvestor.com/article/b1q3fndg77d0tg/Renaissance-s-Medallion-Fund-Surged-76-in-2020-But-Funds-Open-to-Outsiders-Tanked

Perhaps you should email RenTech and offer some advice

Maybe they should stop trading and start investing

A good quote here

"The more I learn about finance and investing and markets, the more I realize how little I really know. And I’ve seen people who are wildly smarter than me, they’ve dedicated their entire lives, every sinew, every iota of their being to beating the market, delivering the fabled alpha, and they still struggle."

https://qz.com/2093749/how-index-funds-humbled-the-financial-masters-of-the-universe/

(But ignore the title and first sentence, it's rubbish).

I've read this claim numerous times, but, as I see things, its not supported by the evidence. If true, you'd expect index funds to be at or near the top of their sectors, especially over the longer term, but in most cases they aren't........why is that?
I'm not bashing index funds, I invest in a few myself........but the thread has sidetracked from "timing the market", which you can do (or attempt to do if you prefer) with either active or passive index funds, to another "active v passive" debate......
My own view is that "timing the market" is possible, but does carry some risk.....very unlikely you'd get it right every time either, but then do you need to?
You also need to define exactly what "timing the market" means to you (imho there are different degrees of this), and you also need to define success and failure, and thats not as easy as it sounds either...if I "time the market" and sell some assets, which then go on to rise 5%, is that a failure?.....what if the assets I bought with the proceeds make 10% over the same period?.....of course, the reverse is also possible....there's that risk again. All that said, what is the alternative?.....ignore everything, and throw money into the market randomly?....or as soon as you have it available?.....how do you then decide when to sell or switch, should you feel the need?
Ultimately, every investor times the market anyway, whether consciously or not.....if I decided, for example, that the timing was right to invest in a certain fund, and at the same time another investor did the same, but took no view on the timing, the end result is the same....

"I've read this claim numerous times, but, as I see things, its not supported by the evidence. If true, you'd expect index funds to be at or near the top of their sectors, especially over the longer term, but in most cases they aren't........why is that?"

Can you pick a particular example and we'll compare it against published data - obviously we'd have to adjust for index fund tracking error.

https://www.spglobal.com/spdji/en/research-insights/spiva/

"My own view is that "timing the market" is possible"
I know a number of people that would pay good money for your skills. 

Ah....the old SPIVA report again.....

Just look at Trustnet or Morningstar over 5 or 10 years.......see where the index funds are in the performance tables....

Nobody is denying that there are not some poor active funds out there, whether because the manager isn't very good, they are really closet trackers, the charges are too high etc etc, but then inferring that for all active funds is just daft tbh. True, you might need need to avoid those "dog" funds (assuming they aren't deliberately cautious by design of course) but personally I haven't found that to be too hard.......and there is no special skill involved really, just a willingness to do some research, create a shortlist, and dig deeper into those before picking one (or more if you fancy and they are sufficiently different.......if still unsure, you could always hedge your bets and put half in a tracker and half in the active fund of choice)

As to your second point, I'd just ask once again, how do you decide when to buy or sell, or do you just decide on a random whim?

"Ah....the old SPIVA report again..... "

What do you see as the flaws in their logic?

"Just look at Trustnet or Morningstar over 5 or 10 years.......see where the index funds are in the performance tables...."

Based on the SPIVA data, somewhere around top quartile when measured over long enough periods?

"As to your second point, I'd just ask once again, how do you decide when to buy or sell, or do you just decide on a random whim?"

I don't have an edge, unfortunately, so drip feed into a low-cost, globally diversified portfolio. Not very exciting I admit

Prism

Market timing isn't always about holding cash and trying to predict some form of up turn. It can be paying attention to valuations and growth estimates and then reacting appropriately. 

MK62

Prism said:

Market timing isn't always about holding cash and trying to predict some form of up turn. It can be paying attention to valuations and growth estimates and then reacting appropriately. 

Yes.....it can take various forms tbh......and to various degrees.
Most of us buy with the expectation, over time, of a rise in value of the assets purchased.....is that market timing? (obviously that's not true for for those involved in shorting....but that level of market timing involves high risk....too high for me)

Thrugelmir

Prism said:

Market timing isn't always about holding cash and trying to predict some form of up turn. It can be paying attention to valuations and growth estimates and then reacting appropriately. 

Easy to invest with hindsight.  As an investor there's only 2 prices that matter. The one you buy at and the one you sell at. Fund managers have no influence or control over the market in which their investment remit lies. No fund manager gets paid to hold excessive levels of cash. All the smoke signals that existed in the run up to the correction in March 2000 exist today.  Going to come as a shock to a generation of investors when there's a major reallocation of funds to different market segments. 

MK62

BritishInvestor said:

MK62 said:

BritishInvestor said:

MK62 said:

BritishInvestor said:

Prism said:

BritishInvestor said:

Prism said:

I doubt any of us expect the 39% annual returns of the quant driven medallion fund. My aims of outperformance are far more modest - maybe 2-3% per year with lower volatility.

Compare the returns of Medallion with their funds that take positions over the longer term. It gives you an idea of how much harder it seems to be to outperform using strategies that have a reasonable holding period.

https://www.institutionalinvestor.com/article/b1q3fndg77d0tg/Renaissance-s-Medallion-Fund-Surged-76-in-2020-But-Funds-Open-to-Outsiders-Tanked

Perhaps you should email RenTech and offer some advice

Maybe they should stop trading and start investing

A good quote here

"The more I learn about finance and investing and markets, the more I realize how little I really know. And I’ve seen people who are wildly smarter than me, they’ve dedicated their entire lives, every sinew, every iota of their being to beating the market, delivering the fabled alpha, and they still struggle."

https://qz.com/2093749/how-index-funds-humbled-the-financial-masters-of-the-universe/

(But ignore the title and first sentence, it's rubbish).

I've read this claim numerous times, but, as I see things, its not supported by the evidence. If true, you'd expect index funds to be at or near the top of their sectors, especially over the longer term, but in most cases they aren't........why is that?
I'm not bashing index funds, I invest in a few myself........but the thread has sidetracked from "timing the market", which you can do (or attempt to do if you prefer) with either active or passive index funds, to another "active v passive" debate......
My own view is that "timing the market" is possible, but does carry some risk.....very unlikely you'd get it right every time either, but then do you need to?
You also need to define exactly what "timing the market" means to you (imho there are different degrees of this), and you also need to define success and failure, and thats not as easy as it sounds either...if I "time the market" and sell some assets, which then go on to rise 5%, is that a failure?.....what if the assets I bought with the proceeds make 10% over the same period?.....of course, the reverse is also possible....there's that risk again. All that said, what is the alternative?.....ignore everything, and throw money into the market randomly?....or as soon as you have it available?.....how do you then decide when to sell or switch, should you feel the need?
Ultimately, every investor times the market anyway, whether consciously or not.....if I decided, for example, that the timing was right to invest in a certain fund, and at the same time another investor did the same, but took no view on the timing, the end result is the same....

"I've read this claim numerous times, but, as I see things, its not supported by the evidence. If true, you'd expect index funds to be at or near the top of their sectors, especially over the longer term, but in most cases they aren't........why is that?"

Can you pick a particular example and we'll compare it against published data - obviously we'd have to adjust for index fund tracking error.

https://www.spglobal.com/spdji/en/research-insights/spiva/

"My own view is that "timing the market" is possible"
I know a number of people that would pay good money for your skills. 

Ah....the old SPIVA report again.....

Just look at Trustnet or Morningstar over 5 or 10 years.......see where the index funds are in the performance tables....

Nobody is denying that there are not some poor active funds out there, whether because the manager isn't very good, they are really closet trackers, the charges are too high etc etc, but then inferring that for all active funds is just daft tbh. True, you might need need to avoid those "dog" funds (assuming they aren't deliberately cautious by design of course) but personally I haven't found that to be too hard.......and there is no special skill involved really, just a willingness to do some research, create a shortlist, and dig deeper into those before picking one (or more if you fancy and they are sufficiently different.......if still unsure, you could always hedge your bets and put half in a tracker and half in the active fund of choice)

As to your second point, I'd just ask once again, how do you decide when to buy or sell, or do you just decide on a random whim?

"Ah....the old SPIVA report again..... "

What do you see as the flaws in their logic?

"Just look at Trustnet or Morningstar over 5 or 10 years.......see where the index funds are in the performance tables...."

Based on the SPIVA data, somewhere around top quartile when measured over long enough periods?

"As to your second point, I'd just ask once again, how do you decide when to buy or sell, or do you just decide on a random whim?"

I don't have an edge, unfortunately, so drip feed into a low-cost, globally diversified portfolio. Not very exciting I admit

Much of my investing over the years was done similarly, through regular monthly pension contributions, but we do have a couple of ISAs, where the investing was more directly my choice.
With the exception of a cash buffer, my money is all committed now, so, for me, decisions on "market timing" are more around when to sell and possibly when to switch......however, I certainly don't just sell my annual withdrawal's worth of assets on April 6th each year, regardless, and tbh I'd be a little surprised if many on here followed that approach.

Audaxer

MK62 said:

Prism said:

Market timing isn't always about holding cash and trying to predict some form of up turn. It can be paying attention to valuations and growth estimates and then reacting appropriately. 

Yes.....it can take various forms tbh......and to various degrees.
Most of us buy with the expectation, over time, of a rise in value of the assets purchased.....is that market timing? 

No, that's not market timing. If we were not buying with the expectation, over time, of a rise in value, why would we be investing?

MK62

BritishInvestor said:

MK62 said:

BritishInvestor said:

MK62 said:

BritishInvestor said:

Prism said:

BritishInvestor said:

Prism said:

I doubt any of us expect the 39% annual returns of the quant driven medallion fund. My aims of outperformance are far more modest - maybe 2-3% per year with lower volatility.

Compare the returns of Medallion with their funds that take positions over the longer term. It gives you an idea of how much harder it seems to be to outperform using strategies that have a reasonable holding period.

https://www.institutionalinvestor.com/article/b1q3fndg77d0tg/Renaissance-s-Medallion-Fund-Surged-76-in-2020-But-Funds-Open-to-Outsiders-Tanked

Perhaps you should email RenTech and offer some advice

Maybe they should stop trading and start investing

A good quote here

"The more I learn about finance and investing and markets, the more I realize how little I really know. And I’ve seen people who are wildly smarter than me, they’ve dedicated their entire lives, every sinew, every iota of their being to beating the market, delivering the fabled alpha, and they still struggle."

https://qz.com/2093749/how-index-funds-humbled-the-financial-masters-of-the-universe/

(But ignore the title and first sentence, it's rubbish).

I've read this claim numerous times, but, as I see things, its not supported by the evidence. If true, you'd expect index funds to be at or near the top of their sectors, especially over the longer term, but in most cases they aren't........why is that?
I'm not bashing index funds, I invest in a few myself........but the thread has sidetracked from "timing the market", which you can do (or attempt to do if you prefer) with either active or passive index funds, to another "active v passive" debate......
My own view is that "timing the market" is possible, but does carry some risk.....very unlikely you'd get it right every time either, but then do you need to?
You also need to define exactly what "timing the market" means to you (imho there are different degrees of this), and you also need to define success and failure, and thats not as easy as it sounds either...if I "time the market" and sell some assets, which then go on to rise 5%, is that a failure?.....what if the assets I bought with the proceeds make 10% over the same period?.....of course, the reverse is also possible....there's that risk again. All that said, what is the alternative?.....ignore everything, and throw money into the market randomly?....or as soon as you have it available?.....how do you then decide when to sell or switch, should you feel the need?
Ultimately, every investor times the market anyway, whether consciously or not.....if I decided, for example, that the timing was right to invest in a certain fund, and at the same time another investor did the same, but took no view on the timing, the end result is the same....

"I've read this claim numerous times, but, as I see things, its not supported by the evidence. If true, you'd expect index funds to be at or near the top of their sectors, especially over the longer term, but in most cases they aren't........why is that?"

Can you pick a particular example and we'll compare it against published data - obviously we'd have to adjust for index fund tracking error.

https://www.spglobal.com/spdji/en/research-insights/spiva/

"My own view is that "timing the market" is possible"
I know a number of people that would pay good money for your skills. 

Ah....the old SPIVA report again.....

Just look at Trustnet or Morningstar over 5 or 10 years.......see where the index funds are in the performance tables....

Nobody is denying that there are not some poor active funds out there, whether because the manager isn't very good, they are really closet trackers, the charges are too high etc etc, but then inferring that for all active funds is just daft tbh. True, you might need need to avoid those "dog" funds (assuming they aren't deliberately cautious by design of course) but personally I haven't found that to be too hard.......and there is no special skill involved really, just a willingness to do some research, create a shortlist, and dig deeper into those before picking one (or more if you fancy and they are sufficiently different.......if still unsure, you could always hedge your bets and put half in a tracker and half in the active fund of choice)

As to your second point, I'd just ask once again, how do you decide when to buy or sell, or do you just decide on a random whim?

"Ah....the old SPIVA report again..... "

What do you see as the flaws in their logic?

Well, I think some of their methodology is questionable.....but I suppose that's a matter of opinion.....but in 2020 they said

"While the turmoil and disruption caused by the pandemic should have offered numerous opportunities for outperformance (by active managers), 57% of domestic equity funds lagged the S&P Composite 1500 index during the one-year period ended Dec. 31, 2020."

It's one year....but even then it means 43% did not.....hardly decisive imho, especially once you discount the "dross"....

As to some of the methodology.....people would need to read it all (it's quite involved) and form their own view, but some of the biases they are trying to address would appear to create their own new biases. For instance, only including one share class of a fund, even if that's not the one people are buying now.......as an example, take Jupiter European (arguably one of the better active funds in that sector).......the fees vary from 0.75% to 1.5% (or 0.89% to 1.74% OCF), and that will make quite a difference......which class did SPIVA use?

True, sometimes the financial services industry is it's own worst enemy, and the more lucrative habits of their past often die hard, but the new share classes are probably more representative now, driven into existence by regulation, and in a large part, by competition from much cheaper passive index trackers........but this is a digression on the market timing theme of this thread. (PS I'm more than happy to debate this in a thread dedicated to the active v passive debate, but I'm not starting one.... )

BritishInvestor said:

"Just look at Trustnet or Morningstar over 5 or 10 years.......see where the index funds are in the performance tables...."

Based on the SPIVA data, somewhere around top quartile when measured over long enough periods?

Well, just look at the tables and see how many index funds made top quartile in their sectors over 10 years.....

BritishInvestor

MK62 said:

BritishInvestor said:

MK62 said:

BritishInvestor said:

MK62 said:

BritishInvestor said:

Prism said:

BritishInvestor said:

Prism said:

I doubt any of us expect the 39% annual returns of the quant driven medallion fund. My aims of outperformance are far more modest - maybe 2-3% per year with lower volatility.

Compare the returns of Medallion with their funds that take positions over the longer term. It gives you an idea of how much harder it seems to be to outperform using strategies that have a reasonable holding period.

https://www.institutionalinvestor.com/article/b1q3fndg77d0tg/Renaissance-s-Medallion-Fund-Surged-76-in-2020-But-Funds-Open-to-Outsiders-Tanked

Perhaps you should email RenTech and offer some advice

Maybe they should stop trading and start investing

A good quote here

"The more I learn about finance and investing and markets, the more I realize how little I really know. And I’ve seen people who are wildly smarter than me, they’ve dedicated their entire lives, every sinew, every iota of their being to beating the market, delivering the fabled alpha, and they still struggle."

https://qz.com/2093749/how-index-funds-humbled-the-financial-masters-of-the-universe/

(But ignore the title and first sentence, it's rubbish).

I've read this claim numerous times, but, as I see things, its not supported by the evidence. If true, you'd expect index funds to be at or near the top of their sectors, especially over the longer term, but in most cases they aren't........why is that?
I'm not bashing index funds, I invest in a few myself........but the thread has sidetracked from "timing the market", which you can do (or attempt to do if you prefer) with either active or passive index funds, to another "active v passive" debate......
My own view is that "timing the market" is possible, but does carry some risk.....very unlikely you'd get it right every time either, but then do you need to?
You also need to define exactly what "timing the market" means to you (imho there are different degrees of this), and you also need to define success and failure, and thats not as easy as it sounds either...if I "time the market" and sell some assets, which then go on to rise 5%, is that a failure?.....what if the assets I bought with the proceeds make 10% over the same period?.....of course, the reverse is also possible....there's that risk again. All that said, what is the alternative?.....ignore everything, and throw money into the market randomly?....or as soon as you have it available?.....how do you then decide when to sell or switch, should you feel the need?
Ultimately, every investor times the market anyway, whether consciously or not.....if I decided, for example, that the timing was right to invest in a certain fund, and at the same time another investor did the same, but took no view on the timing, the end result is the same....

"I've read this claim numerous times, but, as I see things, its not supported by the evidence. If true, you'd expect index funds to be at or near the top of their sectors, especially over the longer term, but in most cases they aren't........why is that?"

Can you pick a particular example and we'll compare it against published data - obviously we'd have to adjust for index fund tracking error.

https://www.spglobal.com/spdji/en/research-insights/spiva/

"My own view is that "timing the market" is possible"
I know a number of people that would pay good money for your skills. 

Ah....the old SPIVA report again.....

Just look at Trustnet or Morningstar over 5 or 10 years.......see where the index funds are in the performance tables....

Nobody is denying that there are not some poor active funds out there, whether because the manager isn't very good, they are really closet trackers, the charges are too high etc etc, but then inferring that for all active funds is just daft tbh. True, you might need need to avoid those "dog" funds (assuming they aren't deliberately cautious by design of course) but personally I haven't found that to be too hard.......and there is no special skill involved really, just a willingness to do some research, create a shortlist, and dig deeper into those before picking one (or more if you fancy and they are sufficiently different.......if still unsure, you could always hedge your bets and put half in a tracker and half in the active fund of choice)

As to your second point, I'd just ask once again, how do you decide when to buy or sell, or do you just decide on a random whim?

"Ah....the old SPIVA report again..... "

What do you see as the flaws in their logic?

Well, I think some of their methodology is questionable.....but I suppose that's a matter of opinion.....but in 2020 they said

"While the turmoil and disruption caused by the pandemic should have offered numerous opportunities for outperformance (by active managers), 57% of domestic equity funds lagged the S&P Composite 1500 index during the one-year period ended Dec. 31, 2020."

It's one year....but even then it means 43% did not.....hardly decisive imho, especially once you discount the "dross"....

As to some of the methodology.....people would need to read it all (it's quite involved) and form their own view, but some of the biases they are trying to address would appear to create their own new biases. For instance, only including one share class of a fund, even if that's not the one people are buying now.......as an example, take Jupiter European (arguably one of the better active funds in that sector).......the fees vary from 0.75% to 1.5% (or 0.89% to 1.74% OCF), and that will make quite a difference......which class did SPIVA use?

True, sometimes the financial services industry is it's own worst enemy, and the more lucrative habits of their past often die hard, but the new share classes are probably more representative now, driven into existence by regulation, and in a large part, by competition from much cheaper passive index trackers........but this is a digression on the market timing theme of this thread. (PS I'm more than happy to debate this in a thread dedicated to the active v passive debate, but I'm not starting one.... )

BritishInvestor said:

"Just look at Trustnet or Morningstar over 5 or 10 years.......see where the index funds are in the performance tables...."

Based on the SPIVA data, somewhere around top quartile when measured over long enough periods?

Well, just look at the tables and see how many index funds made top quartile in their sectors over 10 years.....

"but I'm not starting one....  "

Nor me

Thrugelmir

Benchmarks are arbitary. How many retail investors got caught in the hype surrounding INRG in the past 12 months..........