Attitude to drops in market

masonic

adindas said:

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

I'd love to see the data around this. While it is true that all other things being equal, traders benefit from lower cost trades, so their net returns will be higher to the extent that they've saved money, there may be other factors at play. For one, the lower barrier to entry (no need to trade in the £1000s to make the fixed trading fee cost effective) and lack of penalty for switching between investments (barring things like spread and stamp duty) means there is less demand for investors to plan and research carefully.

Historically, based the results share trading competitions such as UK StockChallenge, the average underperformance was about 4% vs the market with 70% failing to beat the market, and this was a group heavily biased towards experienced investors. Since this was virtual money, I don't believe any fees were deducted. The Motley Fool (around a decade ago, just before it sold out to share-tipping) conducted some research that was net of fees and came out with a much worse result, understandably. So I could certainly get on board with the notion that zero trading apps have improved things from Motley Fool levels to trading competition levels.

I haven't seen any research post-zero investment trading apps, but I doubt much has changed. There is perhaps better access to information, but retail investors will always lag institutional investors, and I'm not convinced many retail investors are able to use the information at their fingertips effectively.

That said, a "reasonable number" probably can beat the market, it's just that they are diluted to homeopathic levels by the masses of other retail investors who can't.

masonic

Bemr said:

The ability of a select few professional investors is of no relevance to the typical reader of this forum. 

I think it does have some relevance, although perhaps not for the reason it was brought up. Necessarily, trying to beat the market is a zero sum game. For each pound made in excess of the market return, there must be a corresponding loss among other market participants. Therefore, if we can point to highly successful professionals that are able to generate high returns while managing huge pools of capital, then that puts retail investors at a greater disadvantage. There are studies showing that trades involving private investors have a tendency to transfer wealth from them to the professionals.

coastline

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.

Investors are beginning to hoard cash on recession fears: BofA (yahoo.com)

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There should be a markets thread really where we can post daily then everyone can learn from each other. 

Bobziz

coastline said:

Investors are beginning to hoard cash on recession fears: BofA (yahoo.com)

FN6qOdVVQAA0wc1 (900×513) (twimg.com)

FN6wLhLaQAQ_5Cs (900×575) (twimg.com)

There should be a markets thread really where we can post daily then everyone can learn from each other. 

Fascinating, thanks. Looks like lots went to cash when the horse had already bolted after the GFC and COVID events. More moving to cash now anticipating a tough period ahead. Lots of false dawns to come or has the horse already bolted once again?I'm leaning towards the former at the moment.

Steve182

adindas said:

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.

I tailor my portfolio to take into account where I think we are in the economic cycle, along with geopolitical considerations. I predicted the decline in Nasdaq/S & P one year early, so started moving out of US stocks in Jan 21. This error in my timing cost me a fair bit of growth last year, but having invested this money largely in metals, mining and gas, my portfolio has been largely insulated from the recent market turmoil.

I also decided war was inevitable 1 week before the invasion and sold out much of my remaining holding in growth stocks to hold some cash.

You win some, you lose some. 

lozzy1965

adindas said:
"... there are reasonable number of retailer investors are beating the market by timing the market...."

The trouble with statements like this, is that there are a lot of retail investors.
If you have millions of people making a decisions on whether and what to buy and sell all the time, there will be a 'reasonable number' who are correct more than 50% of the time.  Those people will have 'beaten the market'.  The longer the timespan the fewer the number of people who beat the market

Malthusian

adindas said:

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

If you have evidence that the "reasonable number" is significantly more than 50% the asset management industry will make you richer than God.

adindas

Malthusian said:

adindas said:

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

If you have evidence that the "reasonable number" is significantly more than 50% the asset management industry will make you richer than God.

Let me correct it using the general truth. Noone is richer than God

Beating the market does not mean you will need to be a multi millionaire.  If it is that simple without skills and taking some level of calculated risk that you might also lose your money noone would want to do a menial job, like you see in the movie "The Wolf of Wallstreet". Hedge funds are trading multi millions, some of them are successfully beating the market some of them are not.

What about drip feeding as low as $50 or even $10 ?? Do you even know that many retailer trader do trade as low as $50 or even $10 and it cost almost nothing nowadays. Now Do your math ....

The original question in this thread is about "Attitude to drops in market" My original comment, in the bear market (not bull market) is that you could get a better by refining it by a selective drip feeding during the red days rather than blindly, randomly throw your money into the den and the following week is only been swallowed by price getting leg further down.  There are some of news, indicators easily available. I myself have tested this strategy with SMT (Scottish Mortgage Trust). For your information SMT is not VLS, because it is a highly concentrated fund containing many high growth stocks . People are getting panic because their  SMT holdings are down 30% are even more since January 2022. There are a few threads in this MSEs covering SMT, if you search it. Like this for example

https://forums.moneysavingexpert.com/discussion/6328835/scottish-mortgage-trust-a-buy-or-a-trap/p1

I just down 3.07% using this strategy only dripfeeding during the red days, not blindly buying it any time as soon as I have cash even the price is in the high swing. Keep in mind we are currently still in the bear market.

Also, in this thread alone you see some people tend to keep their money in cash keeping their dry powder for the next year, It is not my suggestion though.

Although The original question is about "Attitude to drops in market"but it is dragged to professional and timing the market, to get richer than God. Because  you divert the issue saying that NOONE could time the market, consistently beat the market. I show you examples that everyone could easily search and find it, in the previous post.

lozzy1965

I would say everyone is richer than God already!  I'm not sure he/she/it/they actually need or use money