Time in the market vs Timing the market

[Squirrel]

Hi

I couldn’t find a similar thread on this so starting one for discussion sake.

Had an interesting discussion with ghchua in the Samudera Shipping thread on this and felt that probably wasn’t the place to carry on this.

As I had mentioned in that thread, I am very bad at timing markets and had tried to time (with not much success) and later held through bear markets. In this current market I had set aside 40% into cash late last year and started buying stuff again as things went down (YZJ FH and tech, ouch). I was asked why not short the market or hold 100% cash? And I had responded that I was at an interesting juncture of my personal life. I had finally pulled the trigger to step back, slow down and explore other interests for a while.

Background information done with, would like to hear whether the rest of you would be more of “Time in the market” camp or the “Timing the market” camp. What’s your portfolio make up at the moment?

[sgmystique]

I have been investing for more than two decades now and having tried a whole variety of things in this duration (More wrongs than rights I should say), I have found that it is impossible to predict what tomorrow will bring. So timing the market is absolutely out of question for me. I have zero skills in it....

Considering that we cannot predict the future, I have found that the best I can do is make investments that I feel are good value, irrespective of how the market is behaving at that point in time. Does this ensure that I don't make losses (on paper)....absolutely not. But if the operating performance of the companies that I am invested in continues to be good enough for me to see value in them, I will be ready to invest more in them at lower prices. Have bought a fair bit as prices have fallen in recent days.

What I have been bad at is booking losses in scrips where my thought process has been wrong. Will need to focus on that. But thankfully, I have learnt to stop averaging down on losers....

[¯|_(ツ)_/¯]

Let  me chip in a bit and I would like to stress that it's not an advise nor a conclusion on which is better 

but purely based on my thinking process and experience.

My sensing is most of our valuebuddies would advocate time in the market... don't believe me, just watch this space.

I'm - for sure - also advocate time in the market too - as this is proven again and again.

So, why the topics of Time in the market vs Timing the market brought up?

For very simple reason, we are human being and Timing the market is part of our instinct.  It's such a powerful force that drive us into thinking to buy/sell when the market is going up ferociously, it drive us into thinking buying/selling when the market is going down 
and it also drive us into thinking buy/sell when the market is volatile. 

I repeat - I'm definitely for Time in the market - except when my human instinct kick in and then driving me into Timing the market. 

So, the part on Time in the market won't need deep explanation. Basically, as a valuebuddy, you buy when you have some spare cash - into any mechanism that you felt with large enough MOS.

The part on Timing the market is the one need deeper dive.

I think that everyone (valuebuddies included too) has different temperament, different cash holding, different ability to generate new income, etc aka everyone facing different circumstance and hence won't be able to generalised.

For me, Timing the market is rather simple (to execute).

I had enough cash and cash flow.

The current volatility played directly into my hand and it's something that I'm taking advantage of.

Says for example, YZJFH - a stock that I'm vested.

As I am holding cash, I could afford to buy YZJFH (more of it I meant) but I choose not to.  Is YZJFH met my MOS - definitely yes.  Why I didn't buy more? 
I'm Timing the market - I think.

I sense that more volatility is coming and my instinct had over-taken and despite buying more (as it had fallen to my MOS), I waited out for a PERFECT STORM to be build up - when YZJFH stopped buy-back.  

Will this day happen? I'm not sure but my instinct had over-taken and I'm in the mood of Timing the market.

Other than YZJFH, there are a lot of other opportunities that appears just 2 days ago.  I'm not exactly sure why, but quite a few of my watchlist just dropped to my buy price and I scooped up more.



Credit:https://financialhorse.com/china-tech-crackdown-explained-will-i-buy-chinese-tech-stocks-after-the-plunge/

[¯|_(ツ)_/¯]

Valuebuddies, indulge me.  Allow me to share my thought and my experience.

Regarding a common technique of Timing the market - catching a fallen knife..... pause.... pause.... pause.... danger spotted ahead...



Valuebuddies buy shares based on MOS.  The lower the price, the better the MOS. The better the MOS, the more valuebuddies buy.

This should be the SOP 

As a valubuddies, we must have the courage to pick up a under-value scrips - especially, when the MOS getting better.  Otherwise, it' would be meaningless practicing value investing - own view.

---

Obviously, everyone had different temperament and circumstances and my situation (and hence my thought process and experience) likely would be different from you.

Related to catching a falling knife (or knives), the number one concern that I had would be how familiar I'm with the business.  If the business fall right into my industry/domain, then catching a falling knife would be a very easy decision.

If it's not within my industry/domain, then catching a falling knife would be purely counting on luck.  

In both cases, I am very mindful that luck does not come often and hence seldom practice "catching a falling knife". Very very seldom.  

One of the rare practice was actually on BTC.  I am fully aware that virtual currency is worth virtually nothing.  I am also fully aware that BTC is nothing but a string of digits created based on computer algorithm.  I am exposed to BTC when it germane ... a piece of Pizza costing few BTC.  I don't know other crypto currencies but I know exactly why people wanted BTC - even as we speak...

Credit: https://medium.com/hackernoon/blockchain...6d85916314

When I was re-introduced to BTC, it was about $800. Within a short  timeline, it climbed to $8000 (roughly) which I first vested.  And, then it zoomed to $25000 so fast that it crash back to $8000.  When that happened, I was catching the falling knife.  Guess what, before I realised, BTC zoomed passed $80000.  Now, at $27000, I'm not sure whether it will crash back to $8000.  If it does, wish me luck. 

---

Gratitude!

[¯|_(ツ)_/¯]

Once Again.

My gameplan for YZJFH is to wait till it stopped it's buy-back and wait patiently for the price to drop.

My gameplan for BTC is do nothing, unless it dropped bellow $8k again.

As for Singapore Stocks, most are still holding on steadily, not much excitement. 

US and China Tech stocks dropped significantly and especially last week, the fall is significant and I couldn't help but brought some using $$$ that I don't need for the next 10 years.  However, this time round, instead of picking up individual company, I thought of buying the ETF would make more sense to me.  

Granted, the volatility of individual Tech stock is more violent than ETF and rightfully investing in individual Tech stock would be the more logical way out.  However, after I read thru "Red Roulette", I need more time to dig in.  Moving forward, I need to ensure that my Tech company need to be align with CCP - FULL STOP! 

Meanwhile, with the volatile market - presenting such a great opportunity, I couldn't resist myself to compulsory take some actions.  Instead of individual stock, I quickly brought HS TECH ETF.

Tell you what. When I buy, I always place a few orders in the queue at the same time.  On Friday, my punched in my orders (queue) all the way from $0.614 down to $0.600.  The hit was rather fast and all the way down to $0.604 before rebouncing back to closed at $0.613.

Shiok!

I'm quite sure that market volatility will continue and I will continue to take advantage of Mr Market's offer.

Wish me luck!

Gratitude!

[weijian]

Background information done with, would like to hear whether the rest of you would be more of “Time in the market” camp or the “Timing the market” camp. What’s your portfolio make up at the moment?

Hi Squirrel,

Interesting question. But somehow, I have a feeling that the motivation/context behind asking the question is actually more interesting

i hope this is not a case of "looking for affirmation" when things are not smooth sailing. Anyways in investing, there is always discomfort and any time we feel comfortable, probably something is wrong.

I subscribe to neither camp. I feel putting on identities make me dumb (and I am already very dumb to start with). For the majority of my efforts, I try to stay consistent in each investment thesis, while the thesis itself is been constantly updated through a "learn-feedback" cycle. It can be "time in the market" and it can be "timing the market". Both are simply tools for me to use according to the "seasons".

I guess I am simply a short term pessimist (so I time the market) but long time optimist (so I spend time in the market).

[Squirrel]

Background information done with, would like to hear whether the rest of you would be more of “Time in the market” camp or the “Timing the market” camp. What’s your portfolio make up at the moment?

Hi Squirrel,

Interesting question. But somehow, I have a feeling that the motivation/context behind asking the question is actually more interesting

i hope this is not a case of "looking for affirmation" when things are not smooth sailing. Anyways in investing, there is always discomfort and any time we feel comfortable, probably something is wrong.

I subscribe to neither camp. I feel putting on identities make me dumb (and I am already very dumb to start with). For the majority of my efforts, I try to stay consistent in each investment thesis, while the thesis itself is been constantly updated through a "learn-feedback" cycle. It can be "time in the market" and it can be "timing the market". Both are simply tools for me to use according to the "seasons".

I guess I am simply a short term pessimist (so I time the market) but long time optimist (so I spend time in the market).

Actually it’s more of an unofficial poll of how much money is sidelined. Somehow I feel that matters historically. When most people around me are in cash, feels the bottom is near. All masked in a which camp are you in question.

[Squirrel]

Anyway, part of me wants to buy more. But part of me wants to time the market. It’s a dilemma!

[gzbkel]

I am currently 50% cash 50% equities. Will be increasing equities allocation if market continues to go down

[weijian]

Actually it’s more of an unofficial poll of how much money is sidelined. Somehow I feel that matters historically. When most people around me are in cash, feels the bottom is near. All masked in a which camp are you in question.

Hi Squirrel.
Thanks for your clarification.

My experience on VB.com tells me this anecdotal method may not be useful. It will be clouded by biases.

For example on how it can be clouded by biases: In a market crash, people who are underweight in cash are not encouraged to respond (I mean who will respond that they are wrong in a public forum?). So you get more responses from people who are generally overweight in cash.

In addition to biases, it is also good to remember the sample size on VB.com is limited.

That said, I still regard forums and blogs having value to gauging market cycles, not from the quantitative/qualitative aspect but more from the psychological perspective - like the frequency and tone of responses, and also type of posts been made (for example, I try to understand the background/context of why such posts are made)