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

eskbanker

So out of nearly 14 years since March 2009, just over six months are considered to be bear markets according to that analysis*?  Seems a bit of a waste of time to repeatedly make such a song and dance about how best to invest during bear markets if it's such a niche pursuit....

* 'that analysis' refers to a listing of bear markets in the previous post, before it was edited out!

coastline

Buy the dip and drip feeding. Waiting for a specific drop eg 10% before buying won't work as you could be waiting too long to enter .What if the market only drops 3-5% in that time period. Anyway here's a video.

Don't Buy The Dip! - YouTube

Drip feeding and DCA.

Timing The Market Vs Dollar Cost Averaging (Drip Feeding) - YouTube

This is why I use momentum indicators as the decision is taken away from you. I do use a bit of gut feel but that's when the chart's and indicators are at extremes eg overbought 90 or oversold 15 on the 80/20 guidelines. Basically markets could make any percentage move eg 1%-15% and I'd still make the trade. As I've said not the best of charts and set ups but the general picture is below. Indicators breaking from high and now below stop loss / moving average. See you at the bottom for the next move. 

iShares Core FTSE 100 UCITS ETF, UK:ISF Advanced Chart - (LON) UK:ISF, iShares Core FTSE 100 UCITS ETF Stock Price - BigCharts.com (marketwatch.com)

zagfles

eskbanker said:

So out of nearly 14 years since March 2009, just over six months are considered to be bear markets according to that analysis*?  Seems a bit of a waste of time to repeatedly make such a song and dance about how best to invest during bear markets if it's such a niche pursuit....

* 'that analysis' refers to a listing of bear markets in the previous post, before it was edited out!

That's a shame, I could have tested it on those periods

But I've just tried it using just bear market periods, defined as when the market is 20% below the 52 week high, and the results are even worse! Again shows very slight gains at a lower fall target, but worse at higher targets, anything over 5%

MK62

zagfles said:

MK62 said:

adindas said:.

There has not been any research like what you are proposing to split money into 2-3 big chunks (or whatever) waiting for a price to reach lower than the A-day price. The risk here is also the same with what previously mentioned, you might not get price lower than the A-day price you are expecting.

You may not, and that's a risk, but what do you think the odds were of that if investing, for example, in the S&P500 or the FTSE All Share over the last 23 years?

As for research, you may be right........but it's not that hard to do your own if you can find the data you want and are handy with spreadsheets........

I happen to have a spreadsheet of the Dow from 1985 to 2021 with month start/high/low figures, which I used in a previous market timing discussion with jamesd. Was easy to amend to test this sort of thing.

First test:

Compare investing £100 every month at the start of every month (A-day) with waiting for a target market drop of %x and then investing, or never investing if the target isn't hit.

If the market does drop by x%, then you win, you've bought cheaper and got 100/(100-x) shares, eg if x is 10% then you've got 111.1% of the shares you would have got had you invested on A-day.

If you lose, ie the market is never 10% lower, the loss is far greater, you have [A-day price]/[price now]% of the share value you would have had, "now" being July 2021 as that's when my data goes up to.

I averaged this for every month between 1985 and 2021 with various values for x. Obviously if x is low eg 1%, then you win most of the time, but the gain is only just over 1%, so the gain is small, but when you lose, you lose far bigger. If you set x bigger eg 20% the the gain is bigger when you win but of course you win far less of the time.

Results are pretty conclusive, if you wait for a drop of 5% you'll get 87% of what you would have got without market  timing. A drop of 10%, you get 73%, And it gets worse with bigger values for x. The only value that wins is 1%, and that was trivial, 100.06%

Second test: Probably more realistic, as mentioned above cut losses after 12 months if target drop isn't hit and buy then.

So here, the upside is as before, ie 100/(100-x)% if the target is hit.

Downside if target isn't hit is [A-day price]/[price 12 months after A-day]%

Here, waiting for a 5% drop averages 98%, 10% averages 95%, then it stays around 92-95% whatever values you use. So smaller losses, but still losses. Using very small values for x there's a very slight average gain, 1% is 100.63% 2% is 100.7%, 3% is 100.28%. But probably not worth daily price monitoring for a 2% drop to make on average 0.63% more!

Interesting.......I have one for the S&P500 TR index (does anyone invest in the DOW... ), adjusted to GBP, from Jan 2000 to now.....in the 23.x years, just under 95% of all trading days saw a lower price within 12 months.

For a 3% lower price, it's about 70%........and for 5% it's about 55%. It would seem different periods show different results....no surprise there I suppose......however, I didn't test for cost averaging by investing at the start of every month and I didn't test 1985-2021....I tested investing a whole lump sum on A-day versus investing part of that lump sum on A-day, and then simply waiting up to 12 months for a lower price to invest the rest, between 2000-2023....and during that period, there was a <6% chance that a lower price would not come along within those 12 months.......

In the end, like NedS, if I came into £100k tonight, it wouldn't be thrown into the market tomorrow in a single lump sum.......but fair enough, others might take a different view.

zagfles

MK62 said:

zagfles said:

MK62 said:

adindas said:.

There has not been any research like what you are proposing to split money into 2-3 big chunks (or whatever) waiting for a price to reach lower than the A-day price. The risk here is also the same with what previously mentioned, you might not get price lower than the A-day price you are expecting.

You may not, and that's a risk, but what do you think the odds were of that if investing, for example, in the S&P500 or the FTSE All Share over the last 23 years?

As for research, you may be right........but it's not that hard to do your own if you can find the data you want and are handy with spreadsheets........

I happen to have a spreadsheet of the Dow from 1985 to 2021 with month start/high/low figures, which I used in a previous market timing discussion with jamesd. Was easy to amend to test this sort of thing.

First test:

Compare investing £100 every month at the start of every month (A-day) with waiting for a target market drop of %x and then investing, or never investing if the target isn't hit.

If the market does drop by x%, then you win, you've bought cheaper and got 100/(100-x) shares, eg if x is 10% then you've got 111.1% of the shares you would have got had you invested on A-day.

If you lose, ie the market is never 10% lower, the loss is far greater, you have [A-day price]/[price now]% of the share value you would have had, "now" being July 2021 as that's when my data goes up to.

I averaged this for every month between 1985 and 2021 with various values for x. Obviously if x is low eg 1%, then you win most of the time, but the gain is only just over 1%, so the gain is small, but when you lose, you lose far bigger. If you set x bigger eg 20% the the gain is bigger when you win but of course you win far less of the time.

Results are pretty conclusive, if you wait for a drop of 5% you'll get 87% of what you would have got without market  timing. A drop of 10%, you get 73%, And it gets worse with bigger values for x. The only value that wins is 1%, and that was trivial, 100.06%

Second test: Probably more realistic, as mentioned above cut losses after 12 months if target drop isn't hit and buy then.

So here, the upside is as before, ie 100/(100-x)% if the target is hit.

Downside if target isn't hit is [A-day price]/[price 12 months after A-day]%

Here, waiting for a 5% drop averages 98%, 10% averages 95%, then it stays around 92-95% whatever values you use. So smaller losses, but still losses. Using very small values for x there's a very slight average gain, 1% is 100.63% 2% is 100.7%, 3% is 100.28%. But probably not worth daily price monitoring for a 2% drop to make on average 0.63% more!

Interesting.......I have one for the S&P500 TR index (does anyone invest in the DOW... ), adjusted to GBP, from Jan 2000 to now.....in the 23.x years, just under 95% of all trading days saw a lower price within 12 months.

For a 3% lower price, it's about 70%........and for 5% it's about 55%. It would seem different periods show different results....no surprise there I suppose......however, I didn't test for cost averaging by investing at the start of every month and I didn't test 1985-2021....I tested investing a whole lump sum on A-day versus investing part of that lump sum on A-day, and then simply waiting up to 12 months for a lower price to invest the rest, between 2000-2023....and during that period, there was a <6% chance that a lower price would not come along within those 12 months.......

In the end, like NedS, if I came into £100k tonight, it wouldn't be thrown into the market tomorrow in a single lump sum.......but fair enough, others might take a different view.

I found similar, but you're missing the point. Yes a lower price in the next 12 months is very likely. But a slighty lower price doesn't gain you much if you buy then, and you could lose a lot if it doesn't happen.

A significantly lower price does gain you a lot, but is far less likely.

If you're looking to buy at a lower price, you need to set a target. Otherwise how do you know when to buy, and when to wait for it to drop further.

If the target drop is low eg 1% you win most of the time but the win is trivial, just over 1%, and when you lose you lose bigger. According to my analysis it cancels on average, you end up with about the same.

If you set a high target then you lose most of the time but when you win you win big. But on average you lose more.

It's pointless just looking at how often the market is down by x% over the next n months. You need to look at how much you'd gain if that happens, and how much you'd lose if it doesn't.

eskbanker

zagfles said:

eskbanker said:

So out of nearly 14 years since March 2009, just over six months are considered to be bear markets according to that analysis*?  Seems a bit of a waste of time to repeatedly make such a song and dance about how best to invest during bear markets if it's such a niche pursuit....

* 'that analysis' refers to a listing of bear markets in the previous post, before it was edited out!

That's a shame, I could have tested it on those periods

But I've just tried it using just bear market periods, defined as when the market is 20% below the 52 week high, and the results are even worse! Again shows very slight gains at a lower fall target, but worse at higher targets, anything over 5%

I've just had a quick rummage around and found it (at https://www.mymoneyblog.com/sp-500-bear-bull-market-historical-list.html ):

NedS

zagfles said:

MK62 said:

zagfles said:

MK62 said:

adindas said:.

There has not been any research like what you are proposing to split money into 2-3 big chunks (or whatever) waiting for a price to reach lower than the A-day price. The risk here is also the same with what previously mentioned, you might not get price lower than the A-day price you are expecting.

You may not, and that's a risk, but what do you think the odds were of that if investing, for example, in the S&P500 or the FTSE All Share over the last 23 years?

As for research, you may be right........but it's not that hard to do your own if you can find the data you want and are handy with spreadsheets........

I happen to have a spreadsheet of the Dow from 1985 to 2021 with month start/high/low figures, which I used in a previous market timing discussion with jamesd. Was easy to amend to test this sort of thing.

First test:

Compare investing £100 every month at the start of every month (A-day) with waiting for a target market drop of %x and then investing, or never investing if the target isn't hit.

If the market does drop by x%, then you win, you've bought cheaper and got 100/(100-x) shares, eg if x is 10% then you've got 111.1% of the shares you would have got had you invested on A-day.

If you lose, ie the market is never 10% lower, the loss is far greater, you have [A-day price]/[price now]% of the share value you would have had, "now" being July 2021 as that's when my data goes up to.

I averaged this for every month between 1985 and 2021 with various values for x. Obviously if x is low eg 1%, then you win most of the time, but the gain is only just over 1%, so the gain is small, but when you lose, you lose far bigger. If you set x bigger eg 20% the the gain is bigger when you win but of course you win far less of the time.

Results are pretty conclusive, if you wait for a drop of 5% you'll get 87% of what you would have got without market  timing. A drop of 10%, you get 73%, And it gets worse with bigger values for x. The only value that wins is 1%, and that was trivial, 100.06%

Second test: Probably more realistic, as mentioned above cut losses after 12 months if target drop isn't hit and buy then.

So here, the upside is as before, ie 100/(100-x)% if the target is hit.

Downside if target isn't hit is [A-day price]/[price 12 months after A-day]%

Here, waiting for a 5% drop averages 98%, 10% averages 95%, then it stays around 92-95% whatever values you use. So smaller losses, but still losses. Using very small values for x there's a very slight average gain, 1% is 100.63% 2% is 100.7%, 3% is 100.28%. But probably not worth daily price monitoring for a 2% drop to make on average 0.63% more!

Interesting.......I have one for the S&P500 TR index (does anyone invest in the DOW... ), adjusted to GBP, from Jan 2000 to now.....in the 23.x years, just under 95% of all trading days saw a lower price within 12 months.

For a 3% lower price, it's about 70%........and for 5% it's about 55%. It would seem different periods show different results....no surprise there I suppose......however, I didn't test for cost averaging by investing at the start of every month and I didn't test 1985-2021....I tested investing a whole lump sum on A-day versus investing part of that lump sum on A-day, and then simply waiting up to 12 months for a lower price to invest the rest, between 2000-2023....and during that period, there was a <6% chance that a lower price would not come along within those 12 months.......

In the end, like NedS, if I came into £100k tonight, it wouldn't be thrown into the market tomorrow in a single lump sum.......but fair enough, others might take a different view.

I found similar, but you're missing the point. Yes a lower price in the next 12 months is very likely. But a slighty lower price doesn't gain you much if you buy then, and you could lose a lot if it doesn't happen.

A significantly lower price does gain you a lot, but is far less likely.

If you're looking to buy at a lower price, you need to set a target. Otherwise how do you know when to buy, and when to wait for it to drop further.

If the target drop is low eg 1% you win most of the time but the win is trivial, just over 1%, and when you lose you lose bigger. According to my analysis it cancels on average, you end up with about the same.

If you set a high target then you lose most of the time but when you win you win big. But on average you lose more.

It's pointless just looking at how often the market is down by x% over the next n months. You need to look at how much you'd gain if that happens, and how much you'd lose if it doesn't.

Agreed that you need to set your goals.

Bringing us back to the topic of this thread, and CTY. I own it because it gives me 5% dividend income, and maybe a small amount of capital growth. But I own it for the income and I'm happy with a 5-6% return per year with a rising dividend. Many in retirement are looking to drawdown of 4% per year, and many consider that optimistic. So if we captured an extra 4% per year (say 4 trades per year, 1% each time), we would make enough to fund a 4% drawdown strategy without ever having to sell any equity. If I can capture 5% per year on CTY, I've doubled my annual income. I don't need to capture huge gains. Volatility is our friend. The FTSE100 regularly sees swings of 10-15% and we just need to capture some of those swings. Prior to this, my last trade was June last year where I captured 4.4% on CTY so nearly doubled my annual income in 2 weeks on a single trade (I bought back the same number of shares and booked the profit as extra income, reinvested elsewhere).

If you are young, have a 50 year investment horizon and are all out for growth in accumulation, then I completely understand why chipping away at low single digit gains is not a game for you. You will want those huge 20-50% gains (and losses) of high growth stocks, but there comes a time where you have accumulated all you reasonably need and the game them becomes about preserving what you have whilst eking out a 4% return each year to live off.

zagfles

NedS said:

zagfles said:

MK62 said:

zagfles said:

MK62 said:

adindas said:.

There has not been any research like what you are proposing to split money into 2-3 big chunks (or whatever) waiting for a price to reach lower than the A-day price. The risk here is also the same with what previously mentioned, you might not get price lower than the A-day price you are expecting.

You may not, and that's a risk, but what do you think the odds were of that if investing, for example, in the S&P500 or the FTSE All Share over the last 23 years?

As for research, you may be right........but it's not that hard to do your own if you can find the data you want and are handy with spreadsheets........

I happen to have a spreadsheet of the Dow from 1985 to 2021 with month start/high/low figures, which I used in a previous market timing discussion with jamesd. Was easy to amend to test this sort of thing.

First test:

Compare investing £100 every month at the start of every month (A-day) with waiting for a target market drop of %x and then investing, or never investing if the target isn't hit.

If the market does drop by x%, then you win, you've bought cheaper and got 100/(100-x) shares, eg if x is 10% then you've got 111.1% of the shares you would have got had you invested on A-day.

If you lose, ie the market is never 10% lower, the loss is far greater, you have [A-day price]/[price now]% of the share value you would have had, "now" being July 2021 as that's when my data goes up to.

I averaged this for every month between 1985 and 2021 with various values for x. Obviously if x is low eg 1%, then you win most of the time, but the gain is only just over 1%, so the gain is small, but when you lose, you lose far bigger. If you set x bigger eg 20% the the gain is bigger when you win but of course you win far less of the time.

Results are pretty conclusive, if you wait for a drop of 5% you'll get 87% of what you would have got without market  timing. A drop of 10%, you get 73%, And it gets worse with bigger values for x. The only value that wins is 1%, and that was trivial, 100.06%

Second test: Probably more realistic, as mentioned above cut losses after 12 months if target drop isn't hit and buy then.

So here, the upside is as before, ie 100/(100-x)% if the target is hit.

Downside if target isn't hit is [A-day price]/[price 12 months after A-day]%

Here, waiting for a 5% drop averages 98%, 10% averages 95%, then it stays around 92-95% whatever values you use. So smaller losses, but still losses. Using very small values for x there's a very slight average gain, 1% is 100.63% 2% is 100.7%, 3% is 100.28%. But probably not worth daily price monitoring for a 2% drop to make on average 0.63% more!

Interesting.......I have one for the S&P500 TR index (does anyone invest in the DOW... ), adjusted to GBP, from Jan 2000 to now.....in the 23.x years, just under 95% of all trading days saw a lower price within 12 months.

For a 3% lower price, it's about 70%........and for 5% it's about 55%. It would seem different periods show different results....no surprise there I suppose......however, I didn't test for cost averaging by investing at the start of every month and I didn't test 1985-2021....I tested investing a whole lump sum on A-day versus investing part of that lump sum on A-day, and then simply waiting up to 12 months for a lower price to invest the rest, between 2000-2023....and during that period, there was a <6% chance that a lower price would not come along within those 12 months.......

In the end, like NedS, if I came into £100k tonight, it wouldn't be thrown into the market tomorrow in a single lump sum.......but fair enough, others might take a different view.

I found similar, but you're missing the point. Yes a lower price in the next 12 months is very likely. But a slighty lower price doesn't gain you much if you buy then, and you could lose a lot if it doesn't happen.

A significantly lower price does gain you a lot, but is far less likely.

If you're looking to buy at a lower price, you need to set a target. Otherwise how do you know when to buy, and when to wait for it to drop further.

If the target drop is low eg 1% you win most of the time but the win is trivial, just over 1%, and when you lose you lose bigger. According to my analysis it cancels on average, you end up with about the same.

If you set a high target then you lose most of the time but when you win you win big. But on average you lose more.

It's pointless just looking at how often the market is down by x% over the next n months. You need to look at how much you'd gain if that happens, and how much you'd lose if it doesn't.

Agreed that you need to set your goals.

Bringing us back to the topic of this thread, and CTY. I own it because it gives me 5% dividend income, and maybe a small amount of capital growth. But I own it for the income and I'm happy with a 5-6% return per year with a rising dividend. Many in retirement are looking to drawdown of 4% per year, and many consider that optimistic. So if we captured an extra 4% per year (say 4 trades per year, 1% each time), we would make enough to fund a 4% drawdown strategy without ever having to sell any equity. If I can capture 5% per year on CTY, I've doubled my annual income. I don't need to capture huge gains. Volatility is our friend. The FTSE100 regularly sees swings of 10-15% and we just need to capture some of those swings. Prior to this, my last trade was June last year where I captured 4.4% on CTY so nearly doubled my annual income in 2 weeks on a single trade (I bought back the same number of shares and booked the profit as extra income, reinvested elsewhere).

If you are young, have a 50 year investment horizon and are all out for growth in accumulation, then I completely understand why chipping away at low single digit gains is not a game for you. You will want those huge 20-50% gains (and losses) of high growth stocks, but there comes a time where you have accumulated all you reasonably need and the game them becomes about preserving what you have whilst eking out a 4% return each year to live off.

I really don't think you get it. Volatility is your friend that will sometimes abandon you and leave you in the lurch! If you're out of the market and your target fall never happens, that loses you far more than you gain when you do hit the target. If you set a low target then you win most of the time, but when you lose you lose big.  You might make a 4% gain for 4 years then a 20% loss.

If it were really easy to take advantage of volatility to beat the market, all the well resourced active fund managers and institutional investment companies would be doing it and all be posting marking beating performance!

MK62

zagfles said:

I really don't think you get it. Volatility is your friend that will sometimes abandon you and leave you in the lurch! If you're out of the market and your target fall never happens, that loses you far more than you gain when you do hit the target. If you set a low target then you win most of the time, but when you lose you lose big.  You might make a 4% gain for 4 years then a 20% loss.

If it were really easy to take advantage of volatility to beat the market, all the well resourced active fund managers and institutional investment companies would be doing it and all be posting marking beating performance!

....so is the "smarter" alternative then to simply throw money at the market as soon as you get it and just hope for the best?....

zagfles

MK62 said:

zagfles said:

I really don't think you get it. Volatility is your friend that will sometimes abandon you and leave you in the lurch! If you're out of the market and your target fall never happens, that loses you far more than you gain when you do hit the target. If you set a low target then you win most of the time, but when you lose you lose big.  You might make a 4% gain for 4 years then a 20% loss.

If it were really easy to take advantage of volatility to beat the market, all the well resourced active fund managers and institutional investment companies would be doing it and all be posting marking beating performance!

....so is the "smarter" alternative then to simply throw money at the market as soon as you get it and just hope for the best?....

It would seem so Feel free to analyse using different indices/shares/ETFs, different techniques etc eg using a 6 month/2 year backstop, but don't just account for the win percentage, account for the relative gain when you win and loss when you lose.

Personally it's obvious to me that there won't be any techique in an efficient market, as if there was, it'd have been exploited out by professionals with billions behind them. 

Reminds me of someone explaining their sure fire way of winning on the roulette table. Gamble 1 chip on red. If that loses, gamble 2 on red. If that loses, gamble 4 on red, If that loses, gamble 8 etc. You'll almost certainly win a chip. Then once you've won, repeat, back to 1 on red etc. The problem with it is that occasionally you'll lose, either because you run out of chips/money, or you hit the table limit. The loss will be massive, and on average the massive loss will be greater than the sum of the small wins, as anyone who understands probability will be able to work out.