Question on war chest and market timing

[Contrarian]

No good deal, I wont buy. Even if 80% cash.

If blood on the street, maybe bet all in. 09 - I bought 1 condo, plus loaded up on a few stocks in big way.

One needs to know how to handle the mental ride during volatile times. That is critical to me.

Question 1: Should we be 100%(or close to 100%) vested all the time since many always said market timing is impossible(at least for normal folks like me)? Plus some also said cash is a dead weight in the portfolio since it is eroding its value with inflation.

Question 2: If we are 100% (or close to 100%) vested, do that mean that we will have no war chest? If we do have a war chest, we are considered not 100% vested already... (Emergency funds are not included as they will never be used in stocks purchase)

Question 3: With the market getting higher, should I cut down on the ratio and fatten my war chest? But will it contradict on the theory of "do not time the market"

[wahkao]

i think its possible using some market timing mechaism to get a feel on how near the crash is and catching the peak

[Temperament]

No! No one can really time the the Market. Only everyone of us can tell what was the time in the Market. So where were you when the Market was time for Cinderella to get home?

[specuvestor]

for someone with limited initial capital, will never get rich fast enough if just collect dividends. Even Buffett used insurance float & profit sharing to scale up.

need to make a few major asset allocation near mkts turns or get a few multi-baggers consecutively. Catching tops and bottoms with ETFs also wont make anyone with little capital, rich.

if not, have to earn capital via salary/savings or business or property. thats takes time.

Agree... the million $ question is how to get the first pot of gold.

And the stress associated with it cause the focus is on quick capital gains and with it, very astute market timing.

[opmi]

^^ prefer the proven way. Ride a bubble.

[specuvestor]

Question 3: With the market getting higher, should I cut down on the ratio and fatten my war chest? But will it contradict on the theory of "do not time the market"

We know market return is roughly 8-12% over the long run. Anything around 20% is like rolling a 6 on an unbiased die

If one been rolling 5 or 6 three times in a roll, do you think you should double up or cut your wager? It will be very different answer if you ask a trend-is-your-friend trader and a value investor

Similarly if 1 has been rolled two or three times, maybe the risk/reward is different.

Market timing in my context is to look at the overall big picture and business environment to adjust your gross exposure. It has little to do with Alpha, though in the process you might even have to reduce alpha stocks to reduce concentration risk. Market timing is about managing risk that's why asset allocation is relevant and catching top/bottom is not.

[paullow]

for someone with limited inital capital, if he is young, say 20 plus, the extra 15 years he spent compounding the investments, is actually a big deal. at cagr 15%, this extra 10years means some eightfold increase in net worth.

at 21 years capital of 10k cagr 15%, at 61 will become 2.6m, with no further capital injection.

if he works and accumulates some wealth and starts say 15 years later, at 36 years, capital of 100k cagr 15%, at 61 will become 3.3m, with no further capital injection.

so actually, the key is to start early. one might have a limited capital, as discussed above, but if he starts early, he would be able to use compoundation to bridge the wealth gap.

we can clearly see that inital capital doesn't matter too much, but it is important to equip one with the right knowledge and mindset that makes it advantageous to start early.

and a normal person can still get rich fast, the seemingly the slow way.

[opmi]

15% CAGR for 30 years - macham like Warren Buffett liao.

At 8% pa CAGR, $100k only $800k nia after 27 years.
FV even lower if 5% CAGR.

Young people should Chiong/Tikam/Hiong to get their first bucket of gold.
Don't follow older VBs.

[ValueMushroom]

I'm currently 60% in cash and 40% invested.

My plan is to increase my income so I'm slowly nibbles at income stocks such as REITs.
Although oil and gas stocks look very battered now, I decide to stick to my plan.

So I guess you need to have a plan and stick to it.

[blah]

With regards to OPMI and Specuvestors comment, will the VBs here mind sharing their story on how they came by their first pot of gold? I think a few examples will be instructive.

In Sg, property seems to be many's first step up onto the ladder. The first purchase makes a big difference as the lock-in period may be as long as two market cycles.

Thanks in advance.