Attitude to drops in market

Shocking_Blue

Thrugelmir said:

Shocking_Blue said:

Wondered if members had any opinions on SSON & Fundsmith (topping up now)?

Thanks.

Volatility will remain until there's stability and the fog has lifted. 

coastline said:

Shocking_Blue said:

Wondered if members had any opinions on SSON & Fundsmith (topping up now)?

Thanks.

Fundsmith still outperforming the world index over 5 years but in recent years not so. Interesting addition to the chart is the 5 year performance of the Ishares Momentum Factor ETF. Early days as it's a new ETF but Fundsmith might have competition.?

Chart Tool | Trustnet

Regarding the drop in the market .

Market Perspective Is Important To Avoid Mistakes - RIA (realinvestmentadvice.com)

Thanks, both.

Thrugelmir

vacheron said:

By the time the rest of us get to see a pattern, the smart money has already been and gone and we are simply reacting to the wake, not the ship.

As far as the US is concerned. Retail money is buying the dips. Institutional investors are holding increasing amounts of cash and sitting on the sidelines. 

Exodi

anonmoose said:

I have been trying to pick my days at the moment for drip feeds as adindas says but with Vanguard it seems to take a couple of days sometimes for the transaction to process for the LS funds.  As it is so volatile day to day it can be annoying that you don't always get the price you think you will get.  Still probably doesn't make a massive difference over the long term.

At least in my experience, it is faster to invest into a Vanguard fund on HL, than it is on Vanguard Invester.

Exodi

adindas said:

In your case you are lucky as you drip feeding it during the COVID19 FUD, presumably Around March 2020.  The 2020 until third quarter of 2021 is one of the best bull years in the stock market.

Unfortunately I fear there will be a slew of overconfident investors who bought in during the pandemic, made unprecendented returns, and now believe they are Warren Buffett's successor.

But as they say, easy come, easy go...

adindas

Malthusian said:

It is not the best strategy, imo in the bear market. In the bear market, the price of the funds/stocks tend to move zigzag within a channel. It is going up a little bit for a few days and then suddenly leg drop further down reaching a new low consolidating around this area. It could be refined and higher chance to get a better result by drip-feeding it just by buying them on selective days during the red days in this bear market.

If you have a monthly investment due to go into the market on the 15th and you instead hold off in the hope of selecting a day on which the market is lower, there is just as much chance that the market will go up instead and you miss out on gains.

What if you wait a whole month and the market still hasn't dipped below the level it was at one month ago, and you now have two contributions stuck in a queue waiting for you to select the right day?

There is no evidence that anyone can consistently time the market.

A bull market is the worst time to pursue a drip-feeding strategy as you get fewer units for your buck with each month that passes. However this is only a bad thing if you are drip-feeding a lump sum of available cash that you could put into the market all at once if you chose. If you are drip-feeding a regular source of income, then that's just life, and not being able to invest money you haven't got yet. (Unless you gear up, but that's a whole other story...)

Well, I  am talking about the bear market.

Everyone sensible person could easily see that even a monkey will always make money by blindly drip feeding it to a fund which has a history of always go up in the bull market in the long run.

In the  bear market is in different. In the bear market, the price of the funds/stocks tend to move zigzag within a channel. It is going up a little bit for a few days and then suddenly leg drop further down reaching a new low consolidating around this area.

If you just buy it in the red days in this bear market you will be better than people who blindly buying it, they buy it even they are in the high swing and the following week drop again to a new low.

It is a fallacy to thing that you have to spend the money for the same investment. What preventing people to keep in cash waiting for another dip or diverting it and drip feeding it to other funds which is currently in the red zone. In the bull market there is always be a niche bear market. Similarly in the bear market there is always be a niche bull market. So you could either keep your dry powder waiting for another dip and the price moving in the sideline or diverting it to another investment that currently making a dip.

And about the one who constantly make money by timing the market. Try to google Jim Simons, Peter Lynch.

Based on Efficient Market Hypotheses (EMH) in the long run noone could beat the market by timing the market given that the hypothesis that "the stock market is efficient hold true". But in reality the market is far from efficient.

All of the contrarian strategists are timing the market. The contrarian strategist are waiting the good time until there is bloodbath before they strike. "the time to buy is when there's blood in the streets."  “fearful when others are greedy, and greedy when others are fearful. They time the market by waiting until other people are fearful and selling their stocks and there is a sell off the market, bloodbath, waiting for the catalysts, the news, the  waiting the short squeeze.

Hedge fund managers are timing the market by keeping dry powder cash in the sideline during the bear market, traders are timing the market all the time by doing trading in both direction, going long and short. But these people have a sophisticated analytical tools and  technical ability. If they do not consistently making money, why do you think they keep doing this for more than a decade if the other alternatives is easier and more profitable.

Since the proliferation of near zero investment apps, there are reasonable number of retailer investors are beating the market by timing the market.

Bobziz

Thrugelmir said:

vacheron said:

By the time the rest of us get to see a pattern, the smart money has already been and gone and we are simply reacting to the wake, not the ship.

As far as the US is concerned. Retail money is buying the dips. Institutional investors are holding increasing amounts of cash and sitting on the sidelines. 

How do you know this ? Thanks.

Thrugelmir

Bobziz said:

Thrugelmir said:

vacheron said:

By the time the rest of us get to see a pattern, the smart money has already been and gone and we are simply reacting to the wake, not the ship.

As far as the US is concerned. Retail money is buying the dips. Institutional investors are holding increasing amounts of cash and sitting on the sidelines. 

How do you know this ? Thanks.

Something I read on one of the more respected US stock market coverage websites. Always have a browse late evening UK time once the US markets have closed. Usefull to get a feel of what's happening at the macro level. 

sevenhills

anonmoose said:

Or how do you get through periods of uncertainty without making emotional decisions? Just wondering what the smart money does?

I am not sure who are the smart ones on this forum, certainly not me. It's all a gamble. I recently declined a recommendation to buy Evraz, too risky with Roman Abramovich as owner.

If I buy 100 different shareholdings over my lifetime, is that really so risky? I do not sell on a downturn, very rarely.

anonmoose

Thrugelmir said:

Bobziz said:

Thrugelmir said:

vacheron said:

By the time the rest of us get to see a pattern, the smart money has already been and gone and we are simply reacting to the wake, not the ship.

As far as the US is concerned. Retail money is buying the dips. Institutional investors are holding increasing amounts of cash and sitting on the sidelines. 

How do you know this ? Thanks.

Something I read on one of the more respected US stock market coverage websites. Always have a browse late evening UK time once the US markets have closed. Usefull to get a feel of what's happening at the macro level. 

I had read it too so I am obviously better informed than I realise 

adindas

Bemr said:

The bull and bear markets are not 2 different markets.  They are the same market at different times.  In order to follow your proposed strategy one would need to identify the transition between bull and bear markets.  If you’re able to do that reliably then why bother drip feeding at all, just buy at the end of the bear/start of the bull.

I am not convinced that an abundance of free trading apps makes their user base any more successful at market timing.

The existence of a few successful professional investors with quotable sound bytes is irrelevant.

Not true  In the bull market there is always be a niche bear market. Similarly in the bear market there is always be a niche bull market. For Example: Until recently last week, bear market in general especially high growth stocks. But there is bull market e.g oils, gold and other commodities, etc.

You could also see it in the different sectors in the industry. Currently staples, bankings are in bull run due to interest rate hike. People who understand about the sector rotation are making money.

Similarly, if you see in the micro level, in general many stocks prices are dropping but there will always be a few stocks fund are rising due to catalysts, news, politics,  sentiments, etc. Examples of catalyst that could drive the price significantly is successful drug trials, beating earning expectation unexpectedly, new contracts, etc.

Someone is saying this "There is no evidence that anyone can consistently time the market". The reason why professional investors is relevant to be mentioned here. Also, Since the proliferation of near zero investment apps, there are reasonable number of retailer investors are beating the market by timing the market.

Keep in mind you don't need to beat the market in every single trade in order to beat the market.

Based on Efficient Market Hypotheses (EMH) in the long run noone could beat the market by timing the market given that the hypothesis that "the stock market is efficient hold true". But in reality the market is far from efficient. Thus, people exploit the market inefficiency to beat the market.