Timing the market

[Life is a game]

I can only say that everywhere I go now and talk to people. They are saying bull for 2018. Confirm won't crash in 2018 and super bull run coming even from value buddies friends haha.

They may be right but I like to be contrarian.

Btw the more liquidity, the harder and faster the crash. Money effects are normally multiplied and business owners can create money out of thin air. But where is the real money and where it is sitting is normally overlooked.

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[Temperament]

Excerpt of a book.

Assets allocation & Purchase price entry level:-

There’s nothing you can do better to control Risks and generate Profit by proper Allocation of Assets and buying those assets at the Right Price.

Right Price:-
“When” is more important than “What”.

In most cases, when you buy is more important than what you buy. You can make money on the most marginal company if you buy it at the right time; you can lose money in the bluest of blue chips if you buy it at the wrong time.
The right time is when a stock is selling reasonably near the low end of its trading range or at a historically low price/earnings multiple, or when any trustworthy guideline indicates a sharp reduction in risk. This low entry level provides a safety net dangerously missing at higher prices.
The wrong time to buy for a long-term investor is when a stock is selling near the high end of its trading range. Everything depends on the price you pay, regardless how gilt-edge the stock.

3) When to Sell

Perhaps the most difficult of market skill is to know when to sell. There is no one definitive answer, no formula that applies in all situations. To sell within a reasonable distance of the high is probably the best we can hope for, and even that is easier said than done. Since we already know that, invariably, stocks go higher after we sell, it makes sense not to sell all our shares at once. It doesn’t always work and it takes longer, but the odds favour a higher average price if sales are spread out. The most common mistake is selling winners too soon and holding on to losers too long."

Unquote:

Aren't the above we all keep on trying? - Market Timing? No?

And i agree (for me) selling is the hardest as i still making stupid mistakes of selling way too early after buying a "goldmine".

What i sold last year, i would have made at least 20 K+ more if i sell this year. - just one counter only.

But since Loss Aversion is twice as powerful as the pleasure of gaining, and since people are more willing to take risks to avoid a loss, - that's describing me lol even after 30 years. Sad!

Of course if the market crashes just after i sold last year, then i think i am GOD BLESS or "brilliant" lol.

That is investing for me.

Still don't use trailing stop like a short term trader.

i think we all use Timing & Time In The Market in our own ways.

[psslo]

I have tried market timing & it did not pan out for me.

I now try to be an all-weather investor. Instead of being distracted by all the opinions around me, I find it easier (and less stressful) to just focus on hunting & buying quality value (asset & not earnings based) stocks.

As the market turns over euphoric, the number of value buys will start falling off and stock selling will increase as my target prices are reached. Consequentially, my stock portfolio should shrink & my cash holdings should increase. When the market does crash (and it may take some time still), I am still in a good position to take advantage of the situation. 

Too often with market timing, we sell too early in anticipation of disaster and buy too late (eg fear of missing out) to fully capitalise on price recovery. In that sense, time in the market is more important than timing the market.

[BlueKelah]

[@Life is a game Haha Bro Blue. How many percent cash now? I'm 70 into cash already. 
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I am over 70% cash already.

Overall the ratio is not changing much as dividend income adding to cash is being balanced by value of stocks rising.

Still have a couple counter not gone up yet might be moving soon with Sti chionging every week and on a bull run, should be 80% cash in a few months time if STI hit 3800 or 4000

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[psslo]

Interesting article - the author categorised the bear markets into 3 types: cyclical, event driven & structural. For the next cyclical bear, he thinks the missing ingredient is rising inflation.

https://www.ft.com/content/1c682a84-a8db...8314d2c72c

Excerpt
"Should investors take cover and reduce risk now for fear of an imminent bear market? Probably not, according to the lessons history offers for identifying signals of the next downturn. Selling too early can be as costly as being late. An investor who sells the equity market just three months before its peak misses about the same amount (roughly 7 per cent on average) as an investor would lose in the first three months of a bear market. Recognising the conditions that change the longer trend of returns is more important than trying to time the peak."

[weijian]

Excerpt of a book.

hi Temperament,
would you mind to quote the book title/author to give credits? Thanks in advance.

Moderator

[Temperament]

Hi WJ,

This is the full extract i have:-

{Part One: Deepest Convictions about Successful Investing after 40 Years on wall Street

A: The three best things to have before starting to invest.
They are Luck (rather God’s Blessings), Longevity & Deep Pockets.
B: Six Absolutes.
1) Nobody knows the answers.
2) There’s always an exact opposite opinion
3) We’re predisposed to fail, but not predestined
4) There is symmetry in the market
5) The market is king—News is mostly irrelevant
6) The durability of Major trends is underestimated
C: Seven Core Convictions
1) Assets allocation is the key to managing risk.
2) Proper entry level is crucial
3) Be aware of negatives: There’s always a column A and a column B.
4) The best you can do is put the odds in your favour
5) The worst you can do is be totally and instantly informed (A critique of CNBC)
6) Many strategies can work - The key is consistency
D: Nuggets
1) A sure thing if you have the patient.
2) No single stock has to be bought
3) The sticky question of when to sell
4) When is more important than what

Below are some elaborations of the above.

1) We’re predisposed to failed, but not predestined.
To summarize, to this point: We’ve said the three best things the investor can have going for him are Luck (God’s Blessings), a long life and deep pockets. We’ve also recognized that investors operate in a world where absolutely no one knows the answers consistently and where there is always directly opposite, compelling opinion.
There is another obstacle the investor has to deal with. By temperament, most of us are predisposed to making the wrong moves in the market. If that were not true, we’d all be rich.
Powerful, deep seated emotions like fear and greed motivate many of our decisions. Such feelings work against us because, for the most part, investment success requires our being fearful when we feel greedy and greedy when we feel fearful. Acting contrary to human nature takes practice and great discipline. It can be done and, in fact is done all the time, but not by many. The herd instinct is overpowering. We all take psychological comfort in knowing that what we do, everybody else is doing. But what everybody is doing is usually (not always) wrong. So, motivated by greed, we end up buying near tops, triggered by fear, selling near bottoms. It’s hardly the formula for success.
There’s another reason why even the most disciplined, dispassionate professional can be wrong. When fear or greed takes over and the fever is in the air (mostly near bottoms and tops) the market (or a stock) always goes lower or higher than the fundamentals justify. This excess move is triggered strictly by emotions (hope, despair, etc.), and there’s absolutely no way to know how far it will carry. Stock analysts routinely underestimate the emotional component of stock prices.
2) Assets allocation & Purchase price entry level
There’s nothing you can do better to control Risks and generate Profit by proper Allocation of Assets and buying those assets at the Right Price.
Right Price
“When” is more important than “What”.
In most cases, when you buy is more important than what you buy. You can make money on the most marginal company if you buy it at the right time; you can lose money in the bluest of blue chips if you buy it at the wrong time.
The right time is when a stock is selling reasonably near the low end of its trading range or at a historically low price/earnings multiple, or when any trustworthy guideline indicates a sharp reduction in risk. This low entry level provides a safety net dangerously missing at higher prices.
The wrong time to buy for a long-term investor is when a stock is selling near the high end of its trading range. Everything depends on the price you pay, regardless how gilt-edge the stock.
3) When to Sell
Perhaps the most difficult of market skill is to know when to sell. There is no one definitive answer, no formula that applies in all situations. To sell within a reasonable distance of the high is probably the best we can hope for, and even that is easier said than done. Since we already know that, invariably, stocks go higher after we sell, it makes sense not to sell all our shares at once. It doesn’t always work and it takes longer, but the odds favour a higher average price if sales are spread out. The most common mistake is selling winners too soon and holding on to losers too long.
Investors sell stocks for many different reasons. Here are some that make good sense.
1) The stock has reached your price objective, adjusted as company fundamentals evolve.
2) The stock is selling at the high end of its historic P/E
3) You need the money (Chiat Luck)
4) The original reason for purchase no longer applies.
5) There exists a threat of major, new competition.
6) You want to take some money off the table. Securing a partial profit reduces risk of loss.
7) ETC.

Unquote:-

The author is DICK DAVIS.
Title should be Dividend.....
Should be FOC @ NLB (That's where i have FOC books).

[specuvestor]

IMHO timing the long term trend is part of execution. In my experience it can also give psychological comfort.

Timing a short term move is foolhardy. Thats where the misunderstanding about market timing comes about.

I think the psychological problem is people think binary. Either in or out.

Like I always say, Mr market never require us to be binary. It is our delusional desire to pick bottom or top that is the problem. Picking top and bottom is "cocktail talk" to impress... you dont have to do that to make money.

Those who been through bear markets will know why timing a trend ie asset allocation is important.

30 % of cash in the market & 70 % of cash in the bank, and when the market crashes U lost 50% of portfolio is actually U lost 15 % of cash only.

It seems logical but then???

If U read my post closely, then the 70 % of cash would buy from 2008 to 2009 March(bottom).

Then stop buying and hold. Chicken out already.

From 2009 to 2010 or even 2011, the portfolio lost to the tune of ?% in the worst case.

So 30 % of cash already in the market before the market crashes, and then 70 % of cash buying in the Bear Market, will this portfolio loses more then 50 % or less?

Hi Temperament

I think I mentioned this before somewhere: Assume you get to roll a dice every year and then take a bet with your year long accumulated savings. You win if the next year number is higher and you can take money out and put in this accumulation waiting for the next roll

If you roll a 1 or roll a 6 what would you do? If you roll a 2 or roll a 5 what would you do?

The reality is most people dont know if the market is a 1 or 6. It's actually easier to guess a 1 because in previous crashes, BROAD equity indices are down around 50%. It is sector or "niche" indices like Nasdaq or say Baltic dry indices that can collapse more  75-90% and really wipe you out. 

As the adage says: a stock that collapse 90% is one that collapsed 80% and halved. That's what you are worried of. Hence if we are uncertain of company specific risk, just focus on broad market ETF or funds to invest and the risk we take is timing risk rather than company risk. I'm not a believer of catching a falling knife but if you are holding the handles of a basket carrying knives I think it's good

And people think it's a binary decision when we are sure it is a 1 or 6 (this is overconfidence or slighting Mr Market) but actually we should imagine we rolled a 2 or 5. We can pace out and minimise the fear of next roll being 1 or 6, both losing money & chickening out and losing out in rising market, knowing that over 5 years period we will likely be right in terms of "timing" ie allocation

I know the smell of fear and exuberance, which is why over years I've learnt to ignore some very obvious "ducks" and be disciplined to not even touch them ie value traps and hypes. But if you know a company well and believe in the cyclical timing (yes that word again) and hence willing to take the company specific risk (alpha stocks do exist), averaging down does work if you spread it out say over 12-24 months period and not make a binary decision.

[Temperament]

Hi specuvestor,

"As the adage says: a stock that collapse 90% is one that collapsed 80% and halved. That's what you are worried of. Hence if we are uncertain of company specific risk, just focus on broad market ETF or funds to invest and the risk we take is timing risk rather than company risk. I'm not a believer of catching a falling knife but if you are holding the handles of a basket carrying knives I think it's good. Big Grin"

Unquote:-

Ha! Ha!

U think it's good for for holding the handles of a basket for collecting falling knives rather then trying to catch them with bare hands. Ouch!

Of course! Of course!

Always time the market COMBINE with company risk as number one consideration if not going the Index or ETF route.

Even going the ETF route i understand each Country Stock Market ETF has it's own peculiarity.


http://awealthofcommonsense.com/2018/01/...is-unique/

[nitro]

[@Life is a game Haha Bro Blue. How many percent cash now? I'm 70 into cash already. 
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I am over 70% cash already.

Overall the ratio is not changing much as dividend income adding to cash is being balanced by value of stocks rising.

Still have a couple counter not gone up yet might be moving soon with Sti chionging every week and on a bull run, should be 80% cash in a few months time if STI hit 3800 or 4000

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I am also 70% cash at this moment. When market crashed in Jan 2016, prepared 3 bullets and only spent 1 bullet. did not expect such a fast recovery. Heart pain with the remaining bullets growing smaller due to inflation in the last 2 years collecting pathetic bank interest.

Just have to be patience to time the market. Prefer to preserve bullets for Mr Bear instead of seeing portfolio value dropped during correction.