Timing the market

[Deleted User]

JohnWinder said:

Deleted_User said:

JohnWinder said:

I know time in the market is more important than timing the market,

Secondly, you'd be unlikely to get better returns by trying to time the market, but you could 100% successfully reduce your risk by timing the market now, so just be a bit careful with that 'you can't time the market' aphorism too.

Really?   He has investment horizon of 5 years and plans to invest over 18 months.  Does not sound like risk reduction. 

Quite right. My original wording was sloppy, as I was generalising rather than commenting on an 18 month pound cost averaging approach or whatever was suggested. I meant to propose that choosing to be out of the market (with some or all of ones assets, and for a longer or shorter time) based on an attempt to time the market, would expose you to less risk than being in the market. It's not a profound insight, but it cuts across the 'can't time the market' idea, and might give comfort to someone who feels their situation is too risky, could reasonably reduce that risk by deciding 'this is the time to get out of the market', but now must deal with the widely held view that 'you can't time the market'.

Sorry, not persuaded.  

Firstly, staying out of the market carries a major risk of ending up with too little.  People who get burned during a crash often follow this approach and its the “staying” out that ultimately destroys their financial  security rather than the crash itself. 

Secondly, one can stay out of stocks and reduce volatility but that does not translate to “I consistently timed the market well”.  

Thrugelmir

coastline said:

Thrugelmir said:

coastline said:

Thrugelmir said:

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".

So he'd be selling today or not ?  Nobody knows until after the event although it's not a bad idea to fill your boots after a crash that's if you have the spare cash.

Stick around long enough as an investor and you'll witness the cycles first hand.  Much depends of your personal time horizon as to you position your portfolio and your choice of investments. When corrections occur calling the bottom is no easy task. Most likely you'd miss it. 

I'm in my 4th decade of investing and I know what can happen. What was he saying ? When was he calling these tops and bottoms.? Any links ? I'm in and out of the markets but that's my preference. I don't know what will happen next .

I'm not interested in playing top trumps. Though surprised after 4 decades you haven't read up on the great investors of the past. Much of their wisdom is as relevant today as it was in the era they were investing. 

Audaxer

Deleted_User said:

JohnWinder said:

Deleted_User said:

JohnWinder said:

I know time in the market is more important than timing the market,

Secondly, you'd be unlikely to get better returns by trying to time the market, but you could 100% successfully reduce your risk by timing the market now, so just be a bit careful with that 'you can't time the market' aphorism too.

Really?   He has investment horizon of 5 years and plans to invest over 18 months.  Does not sound like risk reduction. 

Quite right. My original wording was sloppy, as I was generalising rather than commenting on an 18 month pound cost averaging approach or whatever was suggested. I meant to propose that choosing to be out of the market (with some or all of ones assets, and for a longer or shorter time) based on an attempt to time the market, would expose you to less risk than being in the market. It's not a profound insight, but it cuts across the 'can't time the market' idea, and might give comfort to someone who feels their situation is too risky, could reasonably reduce that risk by deciding 'this is the time to get out of the market', but now must deal with the widely held view that 'you can't time the market'.

Sorry, not persuaded.  

Firstly, staying out of the market carries a major risk of ending up with too little.  People who get burned during a crash often follow this approach and its the “staying” out that ultimately destroys their financial  security rather than the crash itself. 

Looking at what the OP has said, he is not staying out of the market, just deciding to invest in lower risk Wealth Preservation funds/ITs. It may be that he already has enough in his pension already and does not need to take any more risk than that for financial security. If that is the case I don't see a problem investing in lower risk funds/ITs at present, and being tempted to move to some higher risk funds to take advantage of a correction if it happens. It depends on his overall financial circumstances, but I agree it is a risky strategy if he definitely needs the growth that he could be missing out on waiting on a correction.

MarkCarnage

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. 

On the assumption that it's Ruffer you are talking about, I don't think that they, or the other WP funds, expect 'no loss' over all and any time periods. If you want that, buy Premium Bonds. What they do show is smaller and shorter drawdowns, less volatility and a desire to preserve capital. 

Comparing Ruffer or other mainstream WP funds with Madoff is egregious and misleading. Closed end funds can't pay new investors with other people's money for a start. 

I don't think that having the UK as the largest allocation is a 'major bet' for this type of fund. It reduces currency risk. Much of it is in IL Gilts or Treasury Bills. Japan is 7% of the fund. 

The investment in own funds is fact, though not sure that makes it secretive per se. The asset allocation does include option strategies which are designed to mitigate credit risk, interest rate/duration risk. 

It did briefly include Bitcoin, which I fundamentally and strongly disagreed with. Glad they sold it. 

I hold several WP funds. They are all there for a purpose in a larger, more equity based portfolio. I'm not under any illusions that they will outperform equity funds long term, or for that matter have 'no loss' in a time of general market stress. However, longer term they have tended to do what they say on the tin. 

MarkCarnage

waveydavey48 said:

Is it impossible to time the market? Wiser heads than mine say yes but I said on the forum when the Covid crisis struck and markets were way down that as soon as the new tax year started I would whack my ISA allowance into VLS60. I did so, buying at £180.94. The price has risen steadily and today is £236.66. Doubtless it could crash tomorrow of course.

We invest on the basis that the market will increase in the long term so it seems to me that if there is a sudden drop the chances are that buying at that point is wise, provided you are in for the long haul.   

But is it wise to wait several years for that fall, which will very probably not be to levels when you started waiting? Yes, if there is a sharp fall (most are, or start that way) then in most circumstances it's better to buy but not always (Japan early 90s being one). 

I think that the well known joke about economists having predicted 12 of the last 3 recessions is also relevant here...

[Deleted User]

Audaxer said:

Deleted_User said:

JohnWinder said:

Deleted_User said:

JohnWinder said:

I know time in the market is more important than timing the market,

Secondly, you'd be unlikely to get better returns by trying to time the market, but you could 100% successfully reduce your risk by timing the market now, so just be a bit careful with that 'you can't time the market' aphorism too.

Really?   He has investment horizon of 5 years and plans to invest over 18 months.  Does not sound like risk reduction. 

Quite right. My original wording was sloppy, as I was generalising rather than commenting on an 18 month pound cost averaging approach or whatever was suggested. I meant to propose that choosing to be out of the market (with some or all of ones assets, and for a longer or shorter time) based on an attempt to time the market, would expose you to less risk than being in the market. It's not a profound insight, but it cuts across the 'can't time the market' idea, and might give comfort to someone who feels their situation is too risky, could reasonably reduce that risk by deciding 'this is the time to get out of the market', but now must deal with the widely held view that 'you can't time the market'.

Sorry, not persuaded.  

Firstly, staying out of the market carries a major risk of ending up with too little.  People who get burned during a crash often follow this approach and its the “staying” out that ultimately destroys their financial  security rather than the crash itself. 

Looking at what the OP has said, he is not staying out of the market, just deciding to invest in lower risk Wealth Preservation funds/ITs. It may be that he already has enough in his pension already and does not need to take any more risk than that for financial security. If that is the case I don't see a problem investing in lower risk funds/ITs at present, and being tempted to move to some higher risk funds to take advantage of a correction if it happens. It depends on his overall financial circumstances, but I agree it is a risky strategy if he definitely needs the growth that he could be missing out on waiting on a correction.

That’s not how I read his post. He seems to be in bonds (at least the portion he is talking about) and plans to drip money into “wealth preservation” funds slowly while waiting for a correction (or a bear?) So, he does want to shoft his asset allocation to equities but only after a major drop.  He is timing. 

[Deleted User]

MarkCarnage said:

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. 

On the assumption that it's Ruffer you are talking about, I don't think that they, or the other WP funds, expect 'no loss' over all and any time periods. If you want that, buy Premium Bonds. What they do show is smaller and shorter drawdowns, less volatility and a desire to preserve capital. 

Comparing Ruffer or other mainstream WP funds with Madoff is egregious and misleading. Closed end funds can't pay new investors with other people's money for a start. 

I don't think that having the UK as the largest allocation is a 'major bet' for this type of fund. It reduces currency risk. Much of it is in IL Gilts or Treasury Bills. Japan is 7% of the fund. 

The investment in own funds is fact, though not sure that makes it secretive per se. The asset allocation does include option strategies which are designed to mitigate credit risk, interest rate/duration risk. 

It did briefly include Bitcoin, which I fundamentally and strongly disagreed with. Glad they sold it. 

I hold several WP funds. They are all there for a purpose in a larger, more equity based portfolio. I'm not under any illusions that they will outperform equity funds long term, or for that matter have 'no loss' in a time of general market stress. However, longer term they have tended to do what they say on the tin. 

Every fund manager and every investor has a desire to preserve capital. At least I never heard one claim they want yo lose capital.  Thats not a distinguishing feature. They use a marketing technique which is reminiscent of Medoff’s, playing on human psyche, but like I say, its not a Ponzi.  

On a side note, they have so much in government bonds that the chance of losing capital (in real terms over lng term) has to be high. 

They have UK as the number 1 allocation for equities.  Thats a huge bet.  What does UK make? 6% of the market?  Limits the types of companies too. Investing in UK stocks does not reduce currency risk.  If pound goes up, costs increase while exports drop, so company becomes less valuable in real terms. Its a risk. 

 

JohnWinder

Deleted_User said:

Sorry, not persuaded.  

Firstly, staying out of the market carries a major risk of ending up with too little.  People who get burned during a crash often follow this approach and its the “staying” out that ultimately destroys their financial  security rather than the crash itself. 

Secondly, one can stay out of stocks and reduce volatility but that does not translate to “I consistently timed the market well”.  

Sorry, more slops on my part. I was thinking of risk in terms of volatility, picking up the original concern about markets about to collapse. I should have made clear my 'risk reduction' was about volatility reduction, not about failing to accumulate enough.

But to be fair, I didn't suggest staying out of the market; simply that getting out reduces risk (there I go again), so that market timing isn't unalloyed evil. Not that I'm advocating it.

And yes, 'well' does go a bit far if we're saying one can 'time the market' to reduce risk, as that's only part of the investment conundrum along side returns. Must be why books run to hundreds of pages.

IvanOpinion

fancible 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 have been hearing that statement now for the past 4-5 years (possibly even longer), from amateurs and professionals alike, and I am sure that I will continue to hear it until there is actually a correction - but that does not mean anybody predicted anything.

In 2002 a friend of mine was so convinced there would be a serious correction to the housing market that he sold his house and went into rented accommodation - then every time you talked to him he said it was coming, while rest of us saw house prices rising. By 2006 he could not have afforded to buy his own house back, even with the correction he still lost money. But if you talk to him today he still claims he correctly predicted the housing crash - crazy dude - he takes a lot of stick for it!!

MarkCarnage

Deleted_User said:

MarkCarnage said:

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. 

On the assumption that it's Ruffer you are talking about, I don't think that they, or the other WP funds, expect 'no loss' over all and any time periods. If you want that, buy Premium Bonds. What they do show is smaller and shorter drawdowns, less volatility and a desire to preserve capital. 

Comparing Ruffer or other mainstream WP funds with Madoff is egregious and misleading. Closed end funds can't pay new investors with other people's money for a start. 

I don't think that having the UK as the largest allocation is a 'major bet' for this type of fund. It reduces currency risk. Much of it is in IL Gilts or Treasury Bills. Japan is 7% of the fund. 

The investment in own funds is fact, though not sure that makes it secretive per se. The asset allocation does include option strategies which are designed to mitigate credit risk, interest rate/duration risk. 

It did briefly include Bitcoin, which I fundamentally and strongly disagreed with. Glad they sold it. 

I hold several WP funds. They are all there for a purpose in a larger, more equity based portfolio. I'm not under any illusions that they will outperform equity funds long term, or for that matter have 'no loss' in a time of general market stress. However, longer term they have tended to do what they say on the tin. 

Every fund manager and every investor has a desire to preserve capital. At least I never heard one claim they want yo lose capital.  Thats not a distinguishing feature. They use a marketing technique which is reminiscent of Medoff’s, playing on human psyche, but like I say, its not a Ponzi.  

On a side note, they have so much in government bonds that the chance of losing capital (in real terms over lng term) has to be high. 

They have UK as the number 1 allocation for equities.  Thats a huge bet.  What does UK make? 6% of the market?  Limits the types of companies too. Investing in UK stocks does not reduce currency risk.  If pound goes up, costs increase while exports drop, so company becomes less valuable in real terms. Its a risk. 

 

Most indeed I would suggest all, equity managers prioritise long term growth over short/medium term capital preservation. Of course none say they want to lose capital, but they accept, implicitly if not explicitly, that volatility is a risk.....which is somewhat different from 'losing capital'. Losing capital for me is crystallised losses, whether by holdings going bust or bad timing of withdrawal by investors. Therefore I think it is at least in part a distinguishing feature.

All the WP funds hold Government bonds to a significant degree. Currently, they are overwhelmingly in IL Bonds (inflation hedge) or T Bills (cash essentially). Some holds TIPS in preference to UK Linkers, some have derivative overlays to hedge duration/rate risk etc. Yes, there is a chance of losing capital in real terms, whether that chance is 'high' is subjective I suggest, and depends on manager skill in asset allocation changes, hedging these risks effectively etc.

Ruffer currently have UK listed equities as the major allocation within equities, it's 20% of the total fund or so. However, their largest holdings are by no means all plays on the UK economy, though might be challenged on ESG grounds in a couple of cases. You fail your own argument by saying that there is a currency risk, which there is, because most of these holdings generate significant revenue and profits outside the UK. Other  WP funds, e.g. PAT have a more global listed equity portfolio. 

You clearly don't like them, but to compare them to Madoff is I think just wrong.