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12-08-2013, 10:42 PM
Market Timing verses Value Investing?
Extract:_
{The first is that advisers usually do tell you to “rebalance,” meaning that when the market rises you should sell some of your stocks and buy more bonds, to restore the original portfolio balance between them, and when the market falls you should do the reverse. That means that if you, say, start out with a balance of 60% stocks and 40% bonds, you should make changes to your portfolio once or twice a year to bring it back into that original balance.
Yet although they never call it that, this strategy is actually market timing. It implicitly recommends you sell the stock market after it has risen and buy it after it has fallen. And data show that in the past it has “worked” — over time, portfolios where you rebalance periodically have tended to produce better returns than those you didn’t touch.
So even the people who say you should never time the market actually think you should time the market, after a fashion.
Shutterstock.com
This is where “Mom and Pop” investors tend to jump in.
The second caveat is more fundamental. As I mentioned earlier, by definition every stock must be held by someone. So when Mom and Pop buy stocks, they must buy them from someone else, and when they sell them, they must sell them to someone else. Let’s call those other parties “X.” The market rises, Mom and Pop want in, so they buy stocks from X. The market tanks again, and they rush to sell. X buys the stock back.
What we know is that X is timing the market, and he or she is making an absolute fortune. That’s because while Mom and Pop keep buying high and selling low, X manages to buy low and sell high, simply by trading with Mom and Pop.
As I mentioned above, over 20 years, the average investor with $100,000 missed out on two-thirds of his profits. He should have made $384,000, and instead only made $130,000. What happened to that extra $254,000? It went to X, of course.
I can’t read the future, any more than anyone else can. But I know that Mom and Pop have a terrible track record. Over the years, you could have made a fortune just by buying stocks when Mom and Pop sold them and selling when they were buying. And they are buying, heavily, right now.}
Unquote:-
You may agree or disagree with the above extract - "Market timing".
But you have to admit suddenly you find so many under "intrinsic value stocks to buy during and especially after a Black Swan event. The only problem is whether you still have the guts to buy. Even if you have, you find out very fast you don't have unlimited investible fund. You need to practise assets allocations too ma. Please Remeber Nothing is 100 % in LIFE. He who dares win is only true if he wins. If he lost, he is usually wiped out! OUCH.....!
Extract:_
{The first is that advisers usually do tell you to “rebalance,” meaning that when the market rises you should sell some of your stocks and buy more bonds, to restore the original portfolio balance between them, and when the market falls you should do the reverse. That means that if you, say, start out with a balance of 60% stocks and 40% bonds, you should make changes to your portfolio once or twice a year to bring it back into that original balance.
Yet although they never call it that, this strategy is actually market timing. It implicitly recommends you sell the stock market after it has risen and buy it after it has fallen. And data show that in the past it has “worked” — over time, portfolios where you rebalance periodically have tended to produce better returns than those you didn’t touch.
So even the people who say you should never time the market actually think you should time the market, after a fashion.
Shutterstock.com
This is where “Mom and Pop” investors tend to jump in.
The second caveat is more fundamental. As I mentioned earlier, by definition every stock must be held by someone. So when Mom and Pop buy stocks, they must buy them from someone else, and when they sell them, they must sell them to someone else. Let’s call those other parties “X.” The market rises, Mom and Pop want in, so they buy stocks from X. The market tanks again, and they rush to sell. X buys the stock back.
What we know is that X is timing the market, and he or she is making an absolute fortune. That’s because while Mom and Pop keep buying high and selling low, X manages to buy low and sell high, simply by trading with Mom and Pop.
As I mentioned above, over 20 years, the average investor with $100,000 missed out on two-thirds of his profits. He should have made $384,000, and instead only made $130,000. What happened to that extra $254,000? It went to X, of course.
I can’t read the future, any more than anyone else can. But I know that Mom and Pop have a terrible track record. Over the years, you could have made a fortune just by buying stocks when Mom and Pop sold them and selling when they were buying. And they are buying, heavily, right now.}
Unquote:-
You may agree or disagree with the above extract - "Market timing".
But you have to admit suddenly you find so many under "intrinsic value stocks to buy during and especially after a Black Swan event. The only problem is whether you still have the guts to buy. Even if you have, you find out very fast you don't have unlimited investible fund. You need to practise assets allocations too ma. Please Remeber Nothing is 100 % in LIFE. He who dares win is only true if he wins. If he lost, he is usually wiped out! OUCH.....!
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.