I’m in the process of consolidating all of my investment accounts at Fidelity. This isn’t because I think Fidelity is “the best”, but because I think they’re good and they’re certainly convenient. There’s a Fidelity “investor center” not far from my home. (In other words: I’m not endorsing Fidelity; I’m merely following my own advice to pick a good option instead of spending forever looking for the best.)
As I gather my various accounts under one roof, I’m also trying to set investment goals and to implement an asset allocation based on these goals. As I do this, though, I’m struggling with some emotional stuff. I’ve found that it’s one thing to write about smart investing, but it’s another thing to actually do it.
I’ve just learned a real-life lesson about market timing, for example. In general, short-term market timing doesn’t work — especially for amateur investors. If I asked you to tell me whether the stock market (or an individual stock) will rise or fall next Monday, you’d only be guessing. Investors shouldn’t make decisions based on guesses. Or wishful thinking.
Let me give you an example. I recently decided to sell a large stake in an S&P 500 index fund. In order to get my asset allocation correct, I wanted to transfer the money to bonds. But when it actually came time to sell the mutual fund, I couldn’t pull the trigger.
“What if it goes up?” I kept thinking. The market has been climbing over the past few months, and the fund was up 35% since March. 35%!! That’s a pretty good increase, but I wanted more. “Maybe I should wait until the market goes up another three or four percent,” I thought.
I held the index fund for an extra day. Then two. Then three. Each day, the market went down — and my fund followed with it.
“Ouch,” I thought. “I should have sold!” My fund had dropped 5% from the day I first decided to make the move. ”I guess I’d better just sell. Now I’m losing money that I could have safely on the bond side of my portfolio.”
So I sold.
That was early this week. As soon as I sold, the the market began to rise again. Up half a percent on one day, and the next, and then two percent yesterday.
“Holy cats!” I thought. “It’s up three percent since I sold it. I should have held on!”
This, my friends, is the problem with market timing. You can’t know what the market is going to do from day-to-day. Over the long term, the stock market has returned an average of about 10% per year. But that’s the long term. Over shorter spans, the market is volatile. It swings up and down. Over a period of days, its movements are basically random, unpredictable.
I made the decision to sell on June 12th, but I didn’t pull the trigger until June 22nd. In those ten days, my fund lost over 5% of its value. Now, in the three days since I’ve sold the fund, it’s risen 3%. Obviously, I managed to just about nail a worst-case scenario.
Market timing doesn’t always yield such poor results. But, in general, you’re better off basing decisions on your long-term goals and the market’s broad performance instead of trying to guess what your stock or mutual fund will do tomorrow.
GRS is committed to helping our readers save and achieve your financial goals.Savings interest rates may be low, but that’s all the more reason to shop for the best rate.Find the highest savings interest rate from Ally Bank, Capital One 360, Everbank, and more.
This article is about Investing, Real-Life
Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.
Discover is a paid advertiser of this site. Reasonable efforts are made to maintain accurate information. See the Discover online credit card application for full terms and conditions on offers and rewards.
SEARCH FOR RECENT ARTICLES
Here is another view on market timing. Long term buy and hold is still bad advice.
I also wouldn’t expect to make 10% from the stock market.
loading....
I’m exactly the same way.
I think the trick is to make the move and don’t analyze the other options after the fact. Exactly how to do this? I’m not sure.
loading....
A good lesson to take out of this is that most of us are not day traders. The best thing to do is just call the company and say I want to transer $xxx into this fund. You shouldn’t even look at the price of the fund or what the market is doing that day. You just need to buckle down and say “I am in this for the long run”.
loading....
I noticed you added “especially for amateur investors” to your statement that short-term timing doesn’t work.
I’d argue that no such qualification is necessary. I have yet to see evidence of any professional investor with a long-term track record of successful short-term market timing.
loading....
I love the insight and had a similar experience this past fall. My wife and I bought our first home in November 2008 and decided to withdraw some funds from a ROTH IRA to use towards our downpayment. I had been watching the markets during the month of September trying to “pull the trigger” and sell. Finally on September 29th when the DJIA dropped 733 points (largest single day point loss in history) I decided I would cut my losses and sell. So I called up Fidelity and told them to sell my shares. Thankfully they did not sell until close of business on September 30th, and the DJIA had risen 485 points. I came out okay by only losing a few hundred dollars, but the acid that formed in my stomach that day as I watched my downpayment dwindle away will not be quickly forgotten. I have become a staunch proponent of the buy and hold philosophy. I would live a short life wrought with ulcers trying to day trade and time the market!!
loading....
I agree with Adam (#3) that the best thing to do is just move the money without looking at the price on a given day. If my goal is to re-balance my assets, I have to force myself to stick to that goal and not become distracted by the numbers.
J.D. makes an excellent point that this is MUCH easier said than done. It’s hard not to look and even harder not to try to predict the numbers.
loading....
@ObliviousInvestor –
Whereas I can see that being true, I think one important difference between an amateur investor and someone who does it for a living is the fact that the “professional” expects all of the swings. He knows that if he makes 10 ST investments, he may lose on 5 of them and gain on the other 5. The amateur investor might not have the right expectations.
loading....
You can dollar cost average your sales / transfers as well. This is especially useful with no load / no fee mutual funds.
loading....
@MLR
That’s a good point.
Still, just because professionals expect the swings doesn’t mean they have any ability to predict which way they’ll go.
loading....
JD, my experience has been similar to yours on timing. I used to think it was my bad luck, but as you get older and compare notes with others the truth becomes clear.
I’m with Obliviousinvestor (#4) on this. Market timing and day trading are different editions of the get-rich-quick schemes proliferating on TV infomercials. If it’s so easy and so sure how come everyone isn’t doing it? Do you know anyone who does it successfully year after year? I sure don’t.
In order to be a successful market timer you’d have to have access to more insider information about more companies than the law would allow you to have on any one of them! I don’t think it’s doable.
Absent that information, the only way to handle the timing issue in a reasonably intelligent manner, if it can even be handled, is to be totally dispassionate about it. And not only towards the timing, but toward the market in general. Most of us can’t do that, certainly not me.
loading....
Actually market timing is not about predicting whether Dow Jones would close up or down tomorrow. It’s about having a plan and sticking to it. I would say that Buffett is a market timer, only that his timeframe is years or decades and not seconds ( or nanosecond for daytraders).
There are people who consistently make money in the markets.. Hedge fund managers such as George Soros are an example of that.
For most investors however a buy and hold, diversified, dividend reinvestment type of strategy is the one to go.
loading....
Two suggestion-1) I try and rebalance with new contributions not by selling. May take a while, but a well thought out plan in the beginning did not become a bad plan on a certain day requiring me to rebalance all at once. 2) If new contributions will take too long then do the rebalancing over a few months. Juust like you should not put a windfall in all at once. A person should dollar cost average in & out.
loading....
I have embraced the dollar cost averaging philosophy and don’t even look at the price when I rebalance. Over the last 9 months I have heard so many co-workers moan about their 401k balances and have seen them all reduce their contributions as the market went down and down. Just the kind of thinking that is making them lose more money, in the long run. Now that the market has come back up, I see more people starting to increase their contributions again. They don’t see the backward thinking in this strategy. Meanwhile I just keep my investments constant. The world and the US economy is not going to end, things will eventually turn around. It may make your stomach turn now to see the lose, but for those who have a decent amount of time before retirement I think will look back and be thankful they fought through the sinking feeling that they are losing money knowing in their heart, it’s only for the short term.
loading....
I agree that market timing is a bad idea for most people – and it’s especially bad for you. You have exactly the wrong mindset.
If you are a person who second-guesses himself, then you would have no chance if you were to attempt to profit from timing the market.
The idea is to make the best possible investment decision at the time a decision must be made. If it turns out to not be the best (looking back, after the fact), that’s the way life works. You do the best you can.
If you beat yourself up – as you did, then this is not for you. But you already knew that.
Regards.
loading....
If you’re looking to invest funds, it’s hard not want to try to time the market, at least for that day (sell on an up day, buy on a down day).
What surprises me is that you’d be having to put much into bonds at all. Was your allocation that far off? The market is still down from the beginning of last year (1/2/08 was S&P was at about 1447) – if anything, I would think you’d be selling some bonds to put your allocation back in line. Have you decided to change your approach?
loading....
I had a “set price”. I put my orders on fidelity by price, so if the my index fund that I want to sell (or buy) reaches XXXX on a certain day, then fidelity automagically sells (or buys) at that time. It involves less thought too. That way I’m not saying “I got $100 but I could get $105 the market momentum is great!”
loading....
Making a long term plan and sticking to it is one half of the battle. The other half, as JD illustrates is removing emotion from your trading to allow you to follow that plan. And that’s really tough! We’re emotional creatures. We spent millions of years evolving into animals that can think and feel and trying to fight our nature and turn that off is really stinkin’ hard.
What kind of things do you do to keep the emotion out of your investment decisions?
loading....
This is exactly why I pay my 401k manager a small fee to make these transactions for me. I tell them what sorts of allocations I want and they take care of the details. I know I’m paying them for something I could theoretically do myself, but I also know myself well enough to know that I would be paralyzed by fear of timing things poorly. As it stands, things are balanced for me and I just get to watch the portfolio’s value increase over time without stressing about how I “could have” done this or “should have” done that.
loading....
JD,
In my experience this is a challenge for almost everybody (including myself). One interesting idea that was told to me by a previous economics teacher was that most people put money into something thinking they are “investing” when in actual fact they are “saving”. They are two completely different activities.
Saving occurs when you want to preserve your capital. Investing occurs when you put your capital in harm’s way in order to create value. When saving, you want to minimize risk. When investing, you want to generate value. Saving is about “staying rich” and investing is about “getting rich”. The problem comes when you confuse the two and want to “get rich” without “generating value”.
Most people put money into stocks hoping for them to “go up”, but not actually adding value. Buying an index fund is NOT investing – it is saving. Buying a AAA rated bond is not investing, but saving. Loaning money to your brother-in-law to buy a table saw to start a deck-building business is investing. I believe the Warren Buffett has become rich because the value he adds is he takes identifies mis-priced companies and uses funds from his insurance businesses to purchase them.
Remember, you can’t have your cake and eat it too. Either you preserve your capital or you have to add value. You can’t have it both ways and still stay/get rich.
squished
loading....
Market timing==playing the market=gambling.
As the old adage (or new, paraphrased either way) says: the best way to have a million dollars a year from now by playing the stock market is to start with 2 million.
Gambling is luck. The problem is people get addicted, especially after a win. So, when someone plays the stock market and doubles his money in 3 months, he’ll spend years and lose thousands of dollars chasing that return. The same goes for people hearing of others success gambling in the stock market (fabricated or real.) And the books. All I have to say about them is this: I could write a book and say that I bought 100 shares of Google on 8/20/04 for $10,101 and sold them on 1/12/06 for $47,400 (a 473% return in 17 months.) I didn’t, but I could say I did. Its really easy to predict the past.
loading....
I believe there is a big difference between playing the market based on one’s emotions and setting up well defined rules to go by regardless of one’s emotion.
loading....
If you truly risk-adverse (i.e. You would be ruined if you lost all the money you have invested), you shouldn’t be investing in the stock market.
No, index funds really aren’t very diversified investments.
It’s easy to say, “Just buy long-term and hold, look over the last 30 years it’s had 10 percent returns!”
Well, over the past 10 years the returns have been negative. And read the link in comment #1 to see how good returns are compared to CD-laddering even over the LONG-TERM.
And the next 30 years most likely won’t see such growth again in the stock market.
Of course, I’m probably wrong – but the fact is, stocks are one of the most risky investments there are (even index funds). They fluctuate so dramatically because the stock price is based 100% on future expectations. Do you know what a P/E ratio is? That is the basic measure of how a stock is trading compared to past earnings. It’s usually quite high, and during the bubble times it’s INSANELY high.
If you look at investing as a way to secure retirement and not have your money destroyed by inflation – then stocks should be a much lesser part of your portfolio than they probably are.
If you think investing is your key to riches, then you can continue to throw all your money into equities and watch your investment disappear when the next world crisis hits.
EDIT: I just read through previous comments again and saw #19. That’s EXACTLY what I’m referring to, very well said. Hopefully these personal finance “experts” can start to dish out actual good advice instead of just saying “buy long-term and hold” and think they’re doing people a favor.
loading....
@Andy – how can you take Mish the Fish seriously? He refuses to incorporate dividends into his returns analyses, which is basically just ignoring the data that goes against his argument.
loading....
Limit order! That’s what it’s called!
That’s of course if you’re comfortable deciding when you’ve got enough
loading....
The key is setting aside your “play money” that is intended just for this kind of “gambling”. It’s like when you go to Vegas…you take the amount of money you are willing to lose, so that mentally if and when you DO lose it, you don’t beat yourself up too bad. The same philosophy can help with short-term investing.
The majority of our money still needs to be socked away for mid- and long-term investing goals, using dollar cost averaging as many here mentioned.
Otherwise, you’re gambling with your future when it’s not your full time job! When we do it ourselves, with our hard-earned money, we make too many buy & sell decisions on EMOTION.
Thanks JD for another good post…and some great comments.
loading....
@davidson07
I agree that leaving out dividends paints quite an inaccurate picture of returns. But at the same time, most of these so-called “investors” don’t really pay attention to dividends anyway, and the dividend yields don’t factor into their investment decisions.
So I agree with you – but I do think that even if he had included dividends in his numbers wouldn’t have changed too dramatically. Most companies have been reinvesting instead of distributing their earnings over the past 15 years anyway.
loading....
This has been on my mind a lot lately. It is said that the stock market is not gambling, because the shares you purchase represent an ownership share in a company. So it’s tempting to look at that company’s assets minus its liabilities to reach its net worth, and then divide that number by the number of outstanding shares and say, ‘Look! Each share of stock is worth this much, and since the company is profitable, the value of these shares should rise.’
None of this means squat if you can’t find a buyer. Never, ever ever forget that the only thing a share of stock is worth is what someone will pay for it. There really is no such thing as a stock that’s “undervalued.” You can own a share of stock in the best, most profitable company in the world, and it won’t be worth anything if no one will buy it.
Not to be all gloom and doom, or tinfoil-hat-wearing, but I think the U.S. economy is going to tank even worse than it already has. And it’s going to last, and last, and last. We have had decades of idiocy in government, and the current financial crisis is being handled the same way in which Japan’s government handled its similar situation, which led them to a “lost decade.” What’s the point of buying stock if it’s not going to increase in value for ten years? (Which I think is an optimistic – yes, optimistic – estimate of how long this depression will last.)
Also, have any of you watched the movie I.O.U.S.A.? It’s truly frightening. We are going to have a serious cash drain on SSI and Medicare within the next few years – these programs will have to start paying out more than they are taking in beginning in the year 2016. That’s only six years away. And this is on top of $13 trillion in national debt. The boomers are going to suck the system dry and then cash out their 401Ks and IRAs en masse so they can still retire, a massive selloff which will plunge the stock market even further down.
There are also a lot of reasons to think that inflation and taxes will skyrocket. I believe things are going to be very tough for a very long time. I’m getting completely out of debt – including getting my condo paid off in two more years – because I am convinced it’s going to get harder and harder for everyone to make ends meet. If I lost my job and had to take a huge pay cut, I would still get by just fine without a mortgage payment. So maybe I am being a nervous nellie, or overly pessimistic – actually I really hope that’s true and I end up being wrong. But right now I feel like the stock market is simply a gamble with a dismal future ahead of it.
They have *weather futures* for crying out loud. What distinguishes it from a football pool?
loading....
@Eric: From what I’ve seen, when people suggest a buy & hold strategy using index funds, they’re not usually suggesting a portfolio comprised entirely of equity index funds but rather one composed of a mix of equity index funds and bond index funds (perhaps with a REIT fund as well).
loading....
Things usually go haywire when your emotions get all tangled up with decisions about when to invest or “get out” of the market.
loading....
This is exactly the reason why I think that rebalancing your assets based on selling the ones that have gone up the most in order to buy more of the ones that haven’t done so well recently is troublesome. In my own investments, I “rebalance” by adjusting my future contributions to direct my asset allocations towards where I would like them to be.
loading....
Just from reading the comments you can see that stock market investing is full of tension. There was a recommendation by a fairly famous investor some years back who said, “Invest down to the sleeping level”.
He was saying that investing should never cause you to loose sleep, and if it does you need to reduce your exposure down to a level at which you can sleep soundly at night without worrying what’s happening with your investments. I suspect that would be a pretty low level for most people.
Unless you work in the security markets on a full time basis, that’s pretty solid advice. Most of us have a “day job” plus other responsibilies where we need to focus primarily, that might somehow be impaired by worrying about questions of buy or sell, timing, risk, etc.
It’s my experience that stocks never cooperate with our timing in life–ie when we need to liquidate a position for an unrelated need–let alone the timing of a sale.
loading....
I have been suprised as some of the comments I have read so far. There are some great tools available from some retirement providers that auto rebalance your portfolio for you. This removes all emotional aspects out of the decision.
I have enjoyed reading those discussing the solid basics of passive investing; dollar cost average, non-market timing, and tracking stocks.
Maybe I missed it but make sure you are keeping your fees to an absolute minimum. Don’t pay anyone 1% annually to manage a simple 60% equity 40% bond portfolio (just an example) when you could do the same for yourself for 0.2% annually with tracking stocks. Nothing will eat more long term gains than ongoing fees within your long term investment choices.
loading....
I’m going to disagree. Anecdotal evidence being what it is, and the fact I lost a lot of money doing things the wrong way (more anecdotal evidence) actually doesn’t invalidate solid technical analysis. Looking at moving averages and such will help give you some perspective on the general trend in the market. I won’t claim you can time the market perfect every time, but I wouldn’t say you can’t or should never attempt to time the market. Hit me up via email if you want more information on some moving average technical analysis – including how you could have gauged your trade mentioned in this article.
P.S. – I’m not selling a system, I just have learned some things that are not common wisdom.
loading....
First @Randy for a bit of humor: http://t-shirts.cafepress.com/item/analyst-gifts-tshirts-organic-cotton-tee/179231169
But more seriously, the analysis by Mish does not include dividends. The article states that the S&P has doubled over the past 15 years (it went from about 450 to 900), so he is right that the value of the S&P index has doubled. If you include dividends (i.e., total return) then returns increase to 150% instead of 100%. Sounds like you may want to reconsider those telling you not to buy and hold. Reinvesting the dividends is almost as important as capital appreciation for this strategy to work, so you must keep that in mind. You can see the difference by examining the following spreadsheet:
http://www2.standardandpoors.com/spf/xls/index/MONTHLY.xls
The second tab is more useful for seeing the role dividends play in one’s investment strategy.
loading....
“Invest down to the sleeping level”.
Thing is, people want to spend the last thirty years of their lives not working. This unrealistic expectation has established itself within people’s minds as an entitlement, thanks to the Ponzi scheme of Social Security. But do the math.
If you were debt-free and lived inexpensively, you could get by on, say, $20,000 a year. If you did that for 30 years (the ages of 60-90), you would burn through $600,000. Average household income in the USA is somewhere in the neighborhood of $40,000 a year, which puts a 30-year retirement far out of reach for most people. But people hate their jobs, so they scrape together whatever pitiful amount of money they can, trying to make that retirement dream happen. The stock market is the “magic box” – that thing you’re supposed to be able to stick money in and have it spontaneously generate even more money. They might as well be sticking it into a slot machine.
As they get closer and closer to the age of 60 and don’t have enough money accumulated, they get ever greedier for high returns and put more of their money at risk.
Maybe it would be better for people’s mental health if they just accepted that they will still have to earn some kind of paycheck – even if it’s only a part-time job they don’t mind doing – up until the last 5-10 years of their lives. It makes me glad I don’t have to lift heavy things for a living.
loading....
If you made profit, don’t look back, always another chance to make more money again. Chasing after bad is also a poor strategy, you are either committed to a stock for the extended long term or you are going to sell if it drops too much or too fast for your liking. If it goes back up maybe you should consider having a longer outlook when you are debating whether to sell. So i’d say know your goals before you even BUY the stock. Also once you are invested in a stock, if you make more than 3% set a trailing stop, takes the emotions out of the situation. You are correct that it’s hard to tell what a stock will do on monday, but giving that on average the market sells off on friday and the market is indeed down, i’d give you an 80% chance that the market will be up on monday, especially if you see a stock that was potentially oversold. It’s not a science, market timing doesn’t work out for everyone, but for the best gains…It’s all timing.
loading....
The biggest mistake you made is deciding you needed to get out all at once. You should never invest all your money in one shot. You should set a ladder of buy/sell orders, also referred to as cost/dollar averaging, but in a little more disciplined way.
Here’s the gist. You want to buy $1000 worth of ABC. ABC currently trades for $10/share. You can never be sure that is as cheap as it will get, so you place 10 orders for $100 each at $10, 9.75, 9.50, 9.25, $9,…
It isn’t about getting all your money in the market, it’s about getting it in at the best price. Then you wait. Your $10 order may hit right away, then maybe the next and maybe even the 9.50 hits. You’ve picked up 30% of your position for an average of $9.75. Let the other orders sit there. If ABC moves up to $13/share and you still feel like it’s a good buy, adjust your orders that haven’t hit yet, so that you buy it higher or wait for an inevitable pullback. Or if ABC continues to drop to $9 or lower, you have a set of orders picking it up along the way.
You can do the same for selling, but if you feel strongly that a stock is going to go down, then be more aggressive. Setup fewer ladders or if you’re happy with your overall gains and won’t likely feel remorse if it continues to go up, sell in one shot. I’m always more aggressive on the sell side, because some market condition or indicator is telling me to sell.
This is all about letting the market come to you instead of you chasing the market. Another tip is to place these orders when the market is closed. Then you are less likely to act emotionally. Setup a system and stick to it. It takes discipline to do well in the market.
loading....
Pirate Jo–I can’t say AMEN loud enough here! Fiancial press/media investment projections assume perfect world conditions (and a healthy dose of wishful thinking). Investing is worthwhile, but invest for LIFE, not for some fixed date in the future when all will be right with the world. In real life that hardly ever happens.
In the meantime, you’ll need money throughout your life, not just when you’re 65. So while you’re trying to think long term, you always have to be prepared to answer the question ‘what if I need the money sooner’.
Because the market cooperated with longterm plans during the 80s and 90s–with almost mathematical precision–many people are conditioned to believe that performance to be “normal”. It isn’t.
There are people who did all the right things–steadily investing a percentage of earnings, dollar cost averaging, diversifying in different sectors–amassing large fortunes during the 80s and 90s, then retired only to find the market taking back all the gains they worked so diligently to accumulate.
Better to “invest” your time and money in a career that you find so satisfying that you could easily do it the rest of your life. In the meantime, invest money for both the short and medium terms, as well as longterm, because none of us knows what will happen. It’s never as simple as ‘averaging 10% over the longterm’; life has a way of making a mockery of averages!
loading....
JD: I, for one, would love to see you do an evaluation and article on the link/article in comment #1…
loading....
JD,
As a personal finance blogger, we need you to keep up the image that we are all flawless and perfect. We don’t make investing mistakes.
Nah… good personal story. I’ve done that myself. “Maybe one more day…” then it plummets.
Another lesson learned, and reinforcement that timing just doesn’t work.
loading....
No Debt Plan–That’s a very humble admission on your part, but I think it’s one of the reasons people come to personal finance blogs, to hear the truth of real people experiencing real life.
We get too much of the cannned “if you do this, then you’ll get that” talk from the schmexperts in the mainstream media, as if life can be reduced to a scientific or mathematical formula, and the only people who fail are the ones not following the program correctly.
Real life is so much more interesting.
loading....
One thing strikes me about this discussion, and it’s the idea of centralizing on one broker: I’m not so sure. In a vibrant stock market, following one person’s applied principles is okay, but in a sluggish, turbulent economy, you want to hedge all of your bets, and approaches to betting. I think all of the comments fall under that umbrella–whether to invest short term, long term, etc.
For whatever it’s worth: As a college professor and longtime journalist specializing in finance and teaching kids about money management, I constantly encourage my students not to let any one theory overtake their own thinking. Instead of consolidating my investments with one brokerage house right now, I’ve diversified, including giving portions of my investment capital to brokers of different ages.
My own financial advice blog is AskAnne–giveme20.com/blog.
I’d love to hear critiques about the advice i’m giving there. This is such a great, vocal group.
–Anne
loading....
“schmexperts”…that was great. Love your style Kevin@OutofYourRut! I’m going to have to use that!
loading....
MFIC.com–As much as I’d love to claim credit for schmexperts, I can’t. It was coined by Robert Ringer back in the 70s as a word to describe someone who, I believe, is a schmuck passing himself off as an expert. It seems a glove-fit for TV “experts”.
Otherwise the style is all mine
Thanks!
loading....
I usually don’t promote my blog through discussion on other sites (or haven’t since I learned it’s not in good taste) but on the topic of timing the market and expert advice I wrote an entry on my site regarding the *experts* from a Feb 2008 Kiplinger magazine. Jeremy Siegel wrote a lengthy article where he predicted in 2009 the recession would end, foreclosures would slow to normal levels, the subprime crisis would end, the economy would grow, stocks would return 8-10% and the best part is where he predicted Rudy Giuliani would win the republican primaries and Hillary Clinton would win the democratic primaries, ultimately predicting Hillary would be elected president.
Don’t rely on *experts* from TV and magazines to make your investment decisions. Ultimately you need to have an awareness of your personal goals, and how best to achieve them, then be willing to act.
http://my5k5k.ning.com/profiles/blogs/do-financial-experts-have-a
loading....
Kevin@Outofyourrut: Oh definitely I completely agree. Personal stories help us all connect better… and think of times where we go “Oh yea! I remember doing that…”
loading....
No Debt Plan–Makes us realize we’re not as screwed us as we thought…Well, we’re still screwed up, but we have company, so we’re not screwed up alone–which makes it easier to live with ourselves. I’m rambling…I’ll stop now…
loading....
Total Return seems to be around 10% historically.
About 6% for price appreciation.
http://www.hussmanfunds.com/html/longterm.htm
loading....
I would agree with you that for the amateur investor, market timing does not work. They either do not have access to the news and data a professional does, nor perhaps the skill or time to try and day trade. Many an investor lose money because they have an emotional tendency to sell when a loss starts getting a little uncomfortable, and or to sell at a minimal gain, and missing the run up.
For you and your 500 Index fund… The S&P500 closed on June 12th at 940 followed by 3 down days straight. Were you aware that on that 3rd down day (June 17th) that we closed above the 200day moving average. A bullish sign. And we did bounce right off it reaching a high of about 923.81 before closing around 917. On the 22nd we had a big sell off and closed below the 200Day Moving average (the day you sold off). Again this might look bearish, however the 50Day MA did cross the 200day MA (called a golden cross) that day. This is a very very bullish sign, as it shows a longer term trend to the upside. We have since stayed right around the 200 day (Our new support).
If you are attempting to day trade, it is important to have as much information at your hands as possible. Having the days market profile numbers on your screen for an index or stock is very important. Having perhaps a 5-10-20 Day moving average. Watching the Bank Index in pre-market. I could go on, but without this you’re basically just gambling.
Here is an example for the sp500 for Friday (not a recommended trading day). high value area 917ish, point of control 912.50, low value area 904. We opened around the HVA and sold straight down to the POC (a buy) and bounced back up the HVA. We then went right back down, this time falling just below POC (another buy) and headed right back up again to the HVA. If you had bought at the open and held all day long, you’d have lost money. If you had watched it and bought a couple hours in when it came down to the point of control and held all day, you’d have made a couple points.
There is a science to charting and day trading. Its not 100% perfect, nor will it be (that’s why we have trailing stops!). I might also argue the average investor does not play with enough money. Even with a small $5 commission, you play with 100 bucks or 500 that is already 10% or 2% respectively working against you on one buy and sell order.
loading....
I also like a previous comment about re-balancing your asset allocation with new money vs. buying and selling existing holdings. No doubt at some point in the future the market will recover and many will have wished they were on board that train, but will undoubtedly be on it too late.
All 3 major indices have had their 50day MA cross the 200 now. As I said above that is a very bullish sign to the longer trend upwards. It is very significant run up and moment for our market. The Government is not going to let it slip so easily.
loading....