Bad time to buy stock?

DrSyn

Uriziel said:

Today I put £50k on "iShare Silver" which was being very volatile. Right after I bought this it went up and I sold it again for £200 return. I am convinced I could have repeated this as it was going up and done frequently.

Can you explain why doing this is bad or too risky?

Putting money into the markets is gambling.

Putting money into the markets for the short term is called "Timing the markets or  "Speculation"
(a) Odds of winning are low.
(b) Odds of losing are high

Putting money into the markets for the long term is called "Investing"
(a) Odds of winning  are high
(b) Odds of losing are low

You are trying to "time the market", that's why what you are doing is risky.

The above are hard facts. 

What you are convinced of is not a fact but a guess.

Alexland

Uriziel said:

I am convinced I could have repeated this as it was going up and done frequently.

The market is great at teaching the wrong lessons.

The biggest risk with investment is ourselves.

Studies of investment accounts show the best performing investors were dead because they never trade and are at no risk of making all the classic behavioural errors. On average investors only capture around 50% of the market long term returns because they do too much messing around.

eskbanker

Alexland said:
Studies of investment accounts show the best performing investors were dead because they never trade and are at no risk of making all the classic behavioural errors. On average investors only capture around 50% of the market long term returns because they do too much messing around.

That latter stat surprises me - too much messing around is undoubtedly bad news but the extent of it seems more than I'd have thought, do you have links to the relevant studies?

Alexland

eskbanker said:

Alexland said:
Studies of investment accounts show the best performing investors were dead because they never trade and are at no risk of making all the classic behavioural errors. On average investors only capture around 50% of the market long term returns because they do too much messing around.

That latter stat surprises me - too much messing around is undoubtedly bad news but the extent of it seems more than I'd have thought, do you have links to the relevant studies?

The utter hopelessness of average investors to capture long term market return was (is?) reported annually in the Dalbar Quantitative Analysis of Investor Behavior (QAIB). I believe they only look at US investor accounts. It's a commercial report that you need to pay for access but I have seen full copes in the past that found their way onto the open web. Sometimes other companies summarise the Dalbar findings in their own materials here are a couple I found from a quick google search.

https://memphisadvisory.com/wp-content/uploads/2017/04/InvestorPortfolioPerformance.pdf

https://darnallsikeswealth.com/wp-content/uploads/2022/07/DSWP-The-Behavioral-Effect-on-Investor-Returns-2022.pdf 

I suspect the surprisingly (if you didn't already know) high impact to average annual returns is caused by the long term compounding of the impact of messing around, the negative returns from those that like to buy high / sell low and high charges.

Ultimately the market returns are still made so I guess they get siphoned off by asset manager fees, market makers on the spread and hedge funds but not most individual investors.

PixelPound

Hammer56 said:

Uriziel said:

Today I put £50k on "iShare Silver" which was being very volatile. Right after I bought this it went up and I sold it again for £200 return. I am convinced I could have repeated this as it was going up and done frequently.
The risk is low because silver is always going to be going up over time like gold. It's not like a stock that can crash and stay down due to the company going out of business.
There are no fees since the currency was already in GBP.

Can you explain why doing this is bad or too risky?

£50k was a big bet for a small return. If you can guarantee it every time and do it every day, then fine, but you can't be sure, can you. You don't know the silver market any better than professional commodity traders, and the price varies constantly based on intel the big traders get well before it is known by inexperienced retail investors like yourself. You will always be lagging behind the market movements. You are guessing and relying on past performance. People have lost a lot of money that way. If you like a gamble and can take the loss if there is a sharp fall then go for it, but you need to acknowledge you are gambling if you are relying on single commoties or equities rather than tracker funds and ETFs or a very diverse bunch of stocks.

If you think the market is a bit 'peaky' and you want to wait for a drop, that is a judgement call that any of us might make. I feel the same and am not putting new money in right now.  All I would say is whatever you do invest, don't go 'all in' at one moment in time.

Such as T212 give you practice accounts, so you can use £50k pretend money to see how it works without risking real money. Maybe that's what he did and ergo because it happened once.... 

Eyeful

PixelPound said:

Hammer56 said:

Uriziel said:

Today I put £50k on "iShare Silver" which was being very volatile. Right after I bought this it went up and I sold it again for £200 return. I am convinced I could have repeated this as it was going up and done frequently.
The risk is low because silver is always going to be going up over time like gold. It's not like a stock that can crash and stay down due to the company going out of business.
There are no fees since the currency was already in GBP.

Can you explain why doing this is bad or too risky?

£50k was a big bet for a small return. If you can guarantee it every time and do it every day, then fine, but you can't be sure, can you. You don't know the silver market any better than professional commodity traders, and the price varies constantly based on intel the big traders get well before it is known by inexperienced retail investors like yourself. You will always be lagging behind the market movements. You are guessing and relying on past performance. People have lost a lot of money that way. If you like a gamble and can take the loss if there is a sharp fall then go for it, but you need to acknowledge you are gambling if you are relying on single commoties or equities rather than tracker funds and ETFs or a very diverse bunch of stocks.

If you think the market is a bit 'peaky' and you want to wait for a drop, that is a judgement call that any of us might make. I feel the same and am not putting new money in right now.  All I would say is whatever you do invest, don't go 'all in' at one moment in time.

Such as T212 give you practice accounts, so you can use £50k pretend money to see how it works without risking real money. Maybe that's what he did and ergo because it happened once.... 

Using "real money" when speculating is a lot different from using "pretend money"! 

OldScientist

Alexland said:

Uriziel said:

I am convinced I could have repeated this as it was going up and done frequently.

The market is great at teaching the wrong lessons.

The biggest risk with investment is ourselves.

Studies of investment accounts show the best performing investors were dead because they never trade and are at no risk of making all the classic behavioural errors. On average investors only capture around 50% of the market long term returns because they do too much messing around.

There is some doubt about whether the original Fidelity study that supposedly originated this concept actually existed (and if it did may have referred to 'inactive' accounts rather than dead people). Assuming equity growth higher than fixed income, inactive accounts will gradually become equity heavy. By comparison, well disciplined investors who rebalance their portfolio are not strictly speaking 'buy and hold' investors and will receive less than equity market returns.

I've never seen a full Dalbar QAIB report - it is difficult to understand the methodology from the qualitative descriptions and exactly what an 'average' investor is.

Zekko

Time in the market > Timing the market

Alexland

OldScientist said:

I've never seen a full Dalbar QAIB report - it is difficult to understand the methodology from the qualitative descriptions and exactly what an 'average' investor is.

Below is how Dalbar define Average Investor from a recent report not that it adds much detail I presume they mean they looked at the investment performance of all accounts and took an average.

"The Average Investor refers to the universe of all mutual fund investors whose actions and financial results are restated to represent a single investor. This approach allows the entire universe of mutual fund investors to be used as the statistical sample, ensuring ultimate reliability."

OldScientist

Alexland said:

OldScientist said:

I've never seen a full Dalbar QAIB report - it is difficult to understand the methodology from the qualitative descriptions and exactly what an 'average' investor is.

Below is how Dalbar define Average Investor from a recent report not that it adds much detail I presume they mean they looked at the investment performance of all accounts and took an average.

"The Average Investor refers to the universe of all mutual fund investors whose actions and financial results are restated to represent a single investor. This approach allows the entire universe of mutual fund investors to be used as the statistical sample, ensuring ultimate reliability."

Yes, that's the qualitative description I meant - it is as essentially meaningless as referring to the 'average person' - e.g., do you mean average by height, age, weight, income, etc. There is some further info that suggests that in the Dalbar reports the average is related in some way to the amount of selling and swapping of assets (but not buying?) undertaken.