I'm timing the market - who's in?

Audaxer

NedS said:

I've been out of the market for the last month plus, but have still been receiving 4% yield on those funds. Still playing the waiting game, looking for a more attractive price / opportunity to put my capital at risk.

Just out of interest, if there was an equity crash and you bought back CTY at say, a 6% yield, would you continue to hold after the market recovered as you would still be getting 6% yield on your purchase, or would you sell and wait for the next crash?

mark5

I would always drip feed a lump sum in personally more so with current market conditions. 

I would much rather lose out on some possible extra gains I never had than see money I did have lose value because I paid it all in as a lump sum for fear of missing out on bigger gains. 

NedS

Audaxer said:

NedS said:

I've been out of the market for the last month plus, but have still been receiving 4% yield on those funds. Still playing the waiting game, looking for a more attractive price / opportunity to put my capital at risk.

Just out of interest, if there was an equity crash and you bought back CTY at say, a 6% yield, would you continue to hold after the market recovered as you would still be getting 6% yield on your purchase, or would you sell and wait for the next crash?

As I said above, for me it's all about risk vs reward. With the risk free rate currently being 4%, I'd prefer considerable downside protection to consider putting capital at risk.

I don't think it's relevant that the investment was on a 6% yield when purchased - I think you have to look at the current price and yield, and compare that against the yields you can get elsewhere. If the price drops to 333p putting CTY on a 6% yield, then I'd be a buyer - the 2% spread over the current risk free rate combined with reduced downside risk makes that trade worthwhile in my opinion. If price then recovers, I'd be taking profits and reducing risk as yields narrow and downside risk increases.

Audaxer

NedS said:

Audaxer said:

NedS said:

I've been out of the market for the last month plus, but have still been receiving 4% yield on those funds. Still playing the waiting game, looking for a more attractive price / opportunity to put my capital at risk.

Just out of interest, if there was an equity crash and you bought back CTY at say, a 6% yield, would you continue to hold after the market recovered as you would still be getting 6% yield on your purchase, or would you sell and wait for the next crash?

As I said above, for me it's all about risk vs reward. With the risk free rate currently being 4%, I'd prefer considerable downside protection to consider putting capital at risk.

I don't think it's relevant that the investment was on a 6% yield when purchased - I think you have to look at the current price and yield, and compare that against the yields you can get elsewhere. If the price drops to 333p putting CTY on a 6% yield, then I'd be a buyer - the 2% spread over the current risk free rate combined with reduced downside risk makes that trade worthwhile in my opinion. If price then recovers, I'd be taking profits and reducing risk as yields narrow and downside risk increases.

I think it is relevant but I agree that you have to consider the current price as well. Thanks, as you have gone on to answer my question, i.e. that you would buy CTY at a 6% yield (meaning the price had dropped to 333p), and then sell when it recovers and take the profits. That's fine - that's all I was wondering. 

NedS

Audaxer said:

NedS said:

Audaxer said:

NedS said:

I've been out of the market for the last month plus, but have still been receiving 4% yield on those funds. Still playing the waiting game, looking for a more attractive price / opportunity to put my capital at risk.

Just out of interest, if there was an equity crash and you bought back CTY at say, a 6% yield, would you continue to hold after the market recovered as you would still be getting 6% yield on your purchase, or would you sell and wait for the next crash?

As I said above, for me it's all about risk vs reward. With the risk free rate currently being 4%, I'd prefer considerable downside protection to consider putting capital at risk.

I don't think it's relevant that the investment was on a 6% yield when purchased - I think you have to look at the current price and yield, and compare that against the yields you can get elsewhere. If the price drops to 333p putting CTY on a 6% yield, then I'd be a buyer - the 2% spread over the current risk free rate combined with reduced downside risk makes that trade worthwhile in my opinion. If price then recovers, I'd be taking profits and reducing risk as yields narrow and downside risk increases.

I think it is relevant but I agree that you have to consider the current price as well. Thanks, as you have gone on to answer my question, i.e. that you would buy CTY at a 6% yield (meaning the price had dropped to 333p), and then sell when it recovers and take the profits. That's fine - that's all I was wondering. 

I think when buying any investment you should have a clear idea exactly why you are buying it. For me, that means what price would I buy it at and what price would I sell it at. Obviously things change all the time so we should be consistently re-evaluating our holdings and deciding, based on what we know today (which may be significantly different from what we knew at the time of purchase) whether that holding is still meeting the purpose for which we originally purchased it, and if there are better opportunities available elsewhere in the market.

A good example of me not doing that, which later cost me dearly, was my purchase of DLG last year - I bought it for it's dividend at the time (may have been 6 or 7%). Within a couple of weeks the share price was up ~12% - I should have taken profits instantly and banked two years worth of income, but I didn't, Now I'm left nursing a 30% loss and the dividend has been axed. I remember thinking at the time, if it hits an 18% gain, I'll sell. Maybe I was too greedy. Lesson learnt. Today I must take a view if I think the SP can recover 6% in the next 12 months, or if I'm better selling now and reinvesting that cash into something that will give me a solid 6% dividend.

Having bought CTY at an average price of ~349p, once the price hit 420p (20% capital gain plus the dividend income) and the FTSE100 was nearing an all time high after a good run, I decided the downside risks were more than the potential upside gains, combined with the fact that (as mentioned above) the risk free rate increased significantly narrowing the spread and diminishing risk adjusted rewards.

Swipe

mark5 said:

I would always drip feed a lump sum in personally more so with current market conditions. 

I would much rather lose out on some possible extra gains I never had than see money I did have lose value because I paid it all in as a lump sum for fear of missing out on bigger gains. 

For me, it would be the frustration of having no money left to invest if the price continued dropping.

NedS

Swipe said:

mark5 said:

I would always drip feed a lump sum in personally more so with current market conditions. 

I would much rather lose out on some possible extra gains I never had than see money I did have lose value because I paid it all in as a lump sum for fear of missing out on bigger gains. 

For me, it would be the frustration of having no money left to invest if the price continued dropping.

So how do you plan to cope with a 30 or 40 year retirement where you will be unlikely to have money to invest and will more likely be spending your investments?

Swipe

NedS said:

Swipe said:

mark5 said:

I would always drip feed a lump sum in personally more so with current market conditions. 

I would much rather lose out on some possible extra gains I never had than see money I did have lose value because I paid it all in as a lump sum for fear of missing out on bigger gains. 

For me, it would be the frustration of having no money left to invest if the price continued dropping.

So how do you plan to cope with a 30 or 40 year retirement where you will be unlikely to have money to invest and will more likely be spending your investments?

I was referring to investing a lump sum

london21

It is easier to look back and say should have done this and that.

I have already invested all of my ISA for 2022/2023 so come April will re-strategize. 

adindas

london21 said:

It is easier to look back and say should have done this and that.

Absolutely. But that is not the point for people who use historical data to predict / forecast the direction of particular assets in question, who want to time the market.
In many aspects in life not just the stock market people could forecast/predict the future by looking back and predict what might happen in the future. In maths for instance building a regression model followed by extrapolation. 

In many thing in life you also rely on prediction/forecasting. For instance, weather forecast. Economics predict recession in The US by looking into the inverted yield curve. The business forecast revenue, the stocks to order using predictive model.
How accurate the prediction is, it will depend on the accuracy of the model and the historical data. Like hearsay "History Doesn't Repeat Itself, but It Often Rhyme"s.
Certainly no Model, Method that could predict the future with certainty (100% probability). If there was such thing exist, everyone could easily  become a multi millionaires. But keep in mind you just need 50%+ (arguably 60%+) right to get a better result then the other alternatives. It is about risk vs reward and probability the thing will happen based on what you are expecting to happen in your favour.