Timing the market

[kazukirai]

I think that many people here are getting away from the real philosophy of Value Investing.

While I don't disagree with this, we have to remember that Value Buddies' previous incarnation was after all Afralug and prior to that, Wallstraits. Naturally, the forum wouldn't be confined to Value Investors.

Also, we must remember that Warren Buffett himself tweaked his investing style over the years. At one point, he shut down his first partnership because he couldn't understand the market.

In sum,

a) We can't expect only hardcore, real fundamental Value Investors here.

b) Markets, being the dynamic entities that they are, mean that over the years, some tweaks will be required to the basic philosophies. Probably not to suit the theory but to suit the investor's own psychology.

[Musicwhiz]

I think that many people here are getting away from the real philosophy of Value Investing.

Actually, I think there were never many people who were into Value Investing in the first place!

A casual survey of all my friends/peers/colleagues has revealed that about 99% are traders or punters, and do not even bother what business the Company is in, much less do detailed, systematic research on whether a company is investment-grade.

So what you will see (as the market grows hotter), is people who were once risk-averse jumping into the market with both feet. There may also be some buy-and-hold investors who get impatient and sell out in order to cash in on quick gains; but they may be the ones who end up carrying the baby instead!

[mrEngineer]

So in terms of timing, we need to let the market tell us. When you see that your intended purchase is trading well below the IV and your are happy with the Margin of Safety, just be patient and watch until you see that the trend has hit a bottom. Even if you do not get the absolute bottom do not worry, you are in for the longer term ride up. So the key of the true bottom is when the trend starts back up again. Time to buy in then. You cannot guess the market as the traders are not rational like a value investor they are emotional so unpredictable behaviour abounds.

You need to do the same at the top. When you are well above the IV and the market have over reacted as it normally does, you might consider taking profit. Once the top is hit you will know it from the turn around in the trend, time to think about getting out unless you just want to hold on. Nothing wrong with taking a profit and getting back in when the market again over reacts the the price is back down below the IV, if you still believe you need that company in your portfolio.

It sounds so simple. As a young investor/speculator, I think about this every day, every hour; whether is it overvalued, undervalued, what action to take. Different routes to Rome.

[jeremyow]

There is no one single investing technique that stands out from the rest. Even Warren Buffett may be misunderstood by many to be just strictly a value investor. In fact, his investing style is a harmonious fusion of various different techniques together. He uses growth investing, value investing, arbitrage and keen sense of capital allocation into different asset classes (stocks, preference shares, bonds, and sometimes even seemingly dangerours weapons of mass destruction, "derivatives"). I will say he is a versatile opportunistic investor who has a bag full of various investing tricks (techniques) ready to perform his "magic of investing" when he smells the right opportunity coming his way for him to capitalise on it to make a good return on his investment.

Timing the market is a gamble in itself. Nobody knows 100% accurately in advance how high any bull will be and how low any bear will be. Only with hindsight will any bull and bear make known its full nature. So, investing for capital gains is important. Investing long term for sustainable growing cashflows is even more important.

[Temperament]

I would agree that the market follows a pattern,
somewhat like spring summer autumn and winter.
We have passed winter, it is now looking more like spring.

Having said that, the market is a very dynamic place, it could be a harsh winter
(which is what is happening in certain parts of the US now)
followed by a short spring/summer. There is no certainty in this.

I have very basic rules to guide me. I like it simple.
Invest during doomsday and sell during heyday.

For me, it's not difficult to identity doomsday and I did invest
during doomsday. Problem is I don't have deep pockets and every month the
market grew bleaker and I bought more.... to a point I am out of $ and it is still sinking.

I am not exactly a newbie and I have learnt the hard way to respect Mr Market.
I could be right but will I be able to last through winter? I maybe frozen dead before spring arrives.
Or I could be burnt badly by the short summer.

Agreed.
Besides what you said about the problems of your style, the hardest thing to do is meanwhile, "Sitting On The dock Of The Bay, Watching Your Cash Flash Bye, Bye...iii

[Temperament]

Why MT works or doesn't works?


/////////
To the examples.

As I said, market timing works only when you take a systematic, methodical approach using objective data to guide your tactics. Let’s look at one market timing strategy that does just that. Take a look at the performance chart below:

- See more at: http://wealthpilgrim.com/investment-stra...d2IeA.dpuf[/code]

[Temperament]

Why MT works or doesn't works?

Summary
The big problem with timing the market isn’t always the system (but it certainly could be). The big problem is you (Me too). If you rely on your gut feelings to time the market you are breaking Rule 2 because you are really just trying to predict the future. If you bail out when the going gets tough, you are breaking Rule 1 – you are changing your timeframe. If you don’t do your homework and don’t find a good approach with a long track-record of success, you’re breaking another rule…I just don’t know what number it is…
I am not trying to sell you on market timing. I am pointing out that if you take a methodical, adult approach and if you are willing to underperform for some time periods, it can work out very well for you in the long-run.


/////////
To the examples.

As I said, market timing works only when you take a systematic, methodical approach using objective data to guide your tactics. Let’s look at one market timing strategy that does just that. Take a look at the performance chart below:

- See more at: http://wealthpilgrim.com/investment-stra...d2IeA.dpuf[/code]

[theasiareport]

Marketing timing is really tough. You can be right, but still wrong... just look at people who shorted the dot-com bubble too early.

At the same time, I think its important to know which part of the cycle we are in, and be especially weary when everyone starts getting on the investing bandwagon.

[Temperament]

Yes! There is no "HOLY GRAIL" in investing as the saying goes. Read the summary very carefully and reflect on it. But please go and check on what YOGI BERRA said on "Theory & Practice".
In other words you have to find your own niche in the Market by practical means and not on theory only.

[CityFarmer]

Marketing timing is really tough. You can be right, but still wrong... just look at people who shorted the dot-com bubble too early.

At the same time, I think its important to know which part of the cycle we are in, and be especially weary when everyone starts getting on the investing bandwagon.

Timing the market is very difficult, if not impossible. You can be right once, twice, and very wrong at third time, and all back to square.

I have given up on it. The market sentiment is a good supplementary indicator for FA, but shouldn't be the main one, IMO