Timing the market

[shuoyanz]

What I will do is to realize 50% of my stock portfolio when I predict the next possible crisis. If there is no crisis, I realize my gain and keep the money for other opportunities. If there is a crisis, and prices come down 25-50%, I can buy back those shares with good fundamentals. I will try this approach during the next downturn...

I find it quite hard to do prediction, so I shift my focus to selling after the fact - that is as stated before, I have about 2-3 months after the start of the fall to decide to sell.

Care to share your experience of prediction so far? Did you flinch during the Ukrainian crisis?

[Temperament]

Ha! Ha!
Everyone surely knows when the market peaked and when the market bottomed, after. It is what we do in-between that matters.

[Temperament]

O to put it more succinctly, what you do after the market crashed matter most.

[weijian]

weijian, you make a good point here. Let me examine the 10% drops that have happened.

In the last few years, several have happened. Latest was in May-June 2013. My notes on that period say it was due to tapering and REITs correction.

Second latest was in April-June 2012. My notes say it was a time of Greece bailout was in doubts.

Third latest was in July-Aug 2011. My notes say that the US credit rating had just been downgraded.

At that time, I did not think any of those three events were going to lead to recessions, as I kept buying

I am curious, during GFC, what point in time did you know it was confirm going to be a recession? I use the term recession loosely to refer to a large fall in stock value, typically around 40%. Also, what allows you to make that confirmation, like news reports etc?

Thanks!

hi shuoyanz,
I think we should be using the term bear market, rather than recession. Some people like to call it big bear (>50% drop) or small bear (10-20%).

I did not have the temperament or intellect to know Big Bear was coming in GFC2008. My singular savior was the availability of a call option (called cash by WB) and the continued focus on value, ie. If i see value, i just buy.

Fast forward to current times, a tad wiser after bruises, a couple of epiphanies and reading, i still do not think i have a competitive advantage over others in predicting this dynamic global financial eco-system that disadvantages OPMIs.

To borrow a quote from Howard Mark, 'The market is structurally efficient, but cyclically inefficient'. There will be market cycles, because of humans' greed and fear...So, i will love to use myself as a contrarian indicator at times, ie. if i am happily mopping up shares, i should stop and take a look. If i am scared, i should force myself to pull the trigger.

[Henri]

What I will do is to realize 50% of my stock portfolio when I predict the next possible crisis. If there is no crisis, I realize my gain and keep the money for other opportunities. If there is a crisis, and prices come down 25-50%, I can buy back those shares with good fundamentals. I will try this approach during the next downturn...

I find it quite hard to do prediction, so I shift my focus to selling after the fact - that is as stated before, I have about 2-3 months after the start of the fall to decide to sell.

Care to share your experience of prediction so far? Did you flinch during the Ukrainian crisis?

Your guess is as good as mine... I usually follows the 10 year cycle for financial crisis (similar to 1998 and 2008), probably the next big one is in 2018. Currently I stick to stocks which I can see and feel (learnt from Peter Lynch), e.g. telcos, reits, retail counters with good fundamentals, recession proof and good dividend yields. My objective is to accumulate them when the price is down or reinvest with dividends.

My last bet on UMS, deviating from my strategy did make me learnt to stick to my original plan, don't be fearful and greedy!

[psslo]

Article on market timing.

https://www.theedgesingapore.com/native-...2-87243593

Excerpt
"The last option is to stay mostly invested and to focus one’s attention on what one is buying and the price one is paying. For example, the investor may occupy himself with examining the assets in the balance sheet and determining whether they are fairly sta­ted. He may decipher whether the cash flow accruing to the business is sustainable. He may want to estimate its dividend policy and capital expenditures going forward.

In other words, just focus on buying a stock without paying too much and the result will take care of itself."

I learnt it the hard way myself.

[Temperament]

Market Timing or Time In The Market?

Whatever & whenever U buy, a Bear Market like 2008/2009 will affect all companies.

Even if U had the guts to buy from 2008 to 2009 March, U could experienced a 50 % loss in your portfolio from 2009/2010.

No?

What if U having been buying constantly, what do U think your portfolio  loss will be?

< 50% or much more > 50?

Investing is really not for the faint hearted.

[BlueKelah]

Those were fun times arc 1997 and HD 2008. do wonder if 2018 repeat history will really gonna happen? Maybe it will be 11 or 12 years this time around with all the central bank meddling, hard to say...

American markets at least are undeniably peaking out, so the previous argument that Dow wasn't that bubbly enough for a crash are moot.

U can limit a portfolio going down by keeping more cash. E.g if one was in a 70% cash position when gfc hit, the 30% in the market would become 15% so even though ur stocks are down 50% , ur whole portfolio is only down 15% and u would have ample cash to scoop bargains.

Also real crashes / corrections usually happen in a space of a few weeks to a month, so one may not be able to pick the bottom, but can actually be buying quite close to bottom and at the same time avoid catching a big falling [emoji380] (knife).

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[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.

[Temperament]

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?