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Does Market Timing Work?

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Re: Does Market Timing Work?

#151

Post by ais89 »

rr808 wrote: post #113

The problem with buy and hold and pretty much every current strategy is that its distorted by the huge 40 year bull market we've seen in the USA. Every American asset has gone up big time - of course "time in the market" is a good thing. If you look at Japanese or European stock markets they tell a very different story. Similarly the next 40 years in the USA could be a miserable time for investors. I can't believe ho…

and the 7% is skewed towards a small % of companies that have averaged up the S&P 500, usually big tech companies. If you look at the distribution and median return its actually far less.

Re: Does Market Timing Work?

#153

Post by PaulDavisThe1st »

jfthoi wrote: post #144
PaulDavisThe1st wrote: post #141

Earlier quoted context omitted.

Or you can elect a government that fundamentally doesn't agree with #1.

I'm unsure if you're being facetious so I'll take your comment at face value. Government isn't a static thing - especially one that is elected by the people (for the people). Sooner or later members within said government will also consider retirement. So even if you can elect a government that disagrees with #1, you won't be able to hold it for too long.

"People ought to be able to retire" ... I assume that you mean the idea that people who have worked most of their lives should be able to stop working something in the age range of 60-70, and then enjoy at least a moderately comfortable life until death.

If that assumption is correct, this is a relatively new idea, at least in the sense that government has any active responsibility for it.

I can absolutely guarantee you that there are currently elected members of the US Republican Party, and similar political parties in other countries, who do not agree with the concept that government has any role to play in this. Don't work hard enough during your life? Your problem. Don't save/invest appropriately ? Your problem.

100 or 150 years ago, the idea that there would ever be a US government that would take notable steps to try to ensure a moderately comfortable life during retirement would have seemed like a pipe dream. It remains something upon that some political ideologies do not agree with.

Re: Does Market Timing Work?

#154

Post by grogers »

Devasta wrote: post #136
rr808 wrote: post #113

The problem with buy and hold and pretty much every current strategy is that its distorted by the huge 40 year bull market we've seen in the USA. Every American asset has gone up big time - of course "time in the market" is a good thing. If you look at Japanese or European stock markets they tell a very different story. Similarly the next 40 years in the USA could be a miserable time for investors. I can't believe ho…

1 - People should be able to retire. 2 - Their retirement should be financed by 401ks and the like. 3 - Stock Markets can go down as well as up. You can't have all three, so the government will always ensure that the stock market goes up long term.

With the excessive debt (which is not slowing down) the government is planting the seeds for high inflation in the long term. This historically has been very bad for equities (in real terms).

Re: Does Market Timing Work?

#155

Post by wolverine876 »

bob1029 wrote: post #114

Timing absolutely doesn't work in my experience. This effectively makes many forms of derivative instrument worthless to me. There are only a few targeted situations where I believe something might happen within a certain window, but I absolutely wouldn't bet more than 1-2% of my portfolio on anything with time decay attached to it. What works better for me is joining in on earnings calls and reviewing presentation m…

> This effectively makes many forms of derivative instrument worthless to me.

Derivatives have another, much more valuable use: They enable you to hedge your investment, essentially insurance.

For example, if you invest heavily in agriculture in Iowa, you might buy derivatives tied to the weather and to the price of whatever you grow - derivatives that pay if those things go bad. You lose a little if things go well, but that's just the cost of insurance. Similarly, if you invest heavily in electric vehicles, you might by a derivative tied to the price of key inputs, such as metals for batteries.

Re: Does Market Timing Work?

#156

Post by thelastgallon »

TacticalCoder wrote: post #79
zer0tonin wrote: post #54

Earlier quoted context omitted.

The dogma that it's impossible to beat the market is frankly weird at this point. If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX.

> The dogma that it's impossible to beat the market is frankly weird at this point. I agree. Meta was literally priced below $90 not even a year ago (I entered at about $100 FWIW, which was my nice and round number). Now at $315. Anybody who believes the market is efficient is on some serious drugs. The market correctly valued Meta a $380 or so before the crash (because "TINA" I'm supposed to believe), then correctly…

Price and valuation are very different. Aswath Damodaran explains this well: https://www.youtube.com/watch?v=DeChWXTg7Og (skip to 19:29)

Re: Does Market Timing Work?

#157

Post by RivieraKid »

auxym wrote: post #77
zer0tonin wrote: post #54

Earlier quoted context omitted.

The dogma that it's impossible to beat the market is frankly weird at this point. If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX.

> If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX. This assumes that the expected return of a single, randomly-picked stock is symmetrically-distributed. It is not, single stock returns are highly skewed and "lott…

I've watched all of the videos on Ben Felix's channel and generally share his worldview. But I've been having some doubts about market efficiency and active investing being extremely hard.

There were 4 moments when I thought - I should buy this stock for some reason, e.g. after ChatGPT I thought about buying NVidia. But I decided to continue being a purely passive investor. Now I regret that decision because all of those stocks overperformed.

I also correctly guessed that 3 out of 4 stocks would underperform (TSLA was the wrong call). It seemed obvious that the market was dumb about GME, AMC and TLRY.

Sure, many active investors are extremely sophisticated but what if the average invested dollar is kind of stupid?

Also, one minor nitpick about Ben Felix's content is focus on historical statistics. I think this gives you a false sense of confidence and security.

Re: Does Market Timing Work?

#158

Post by missedthecue »

wolverine876 wrote: post #147
Devasta wrote: post #136

Earlier quoted context omitted.

1 - People should be able to retire. 2 - Their retirement should be financed by 401ks and the like. 3 - Stock Markets can go down as well as up. You can't have all three, so the government will always ensure that the stock market goes up long term.

Or governments could insure retirement income.

It's called social security and it's enormously expensive and borderline unaffordable... And not even enough to retire on comfortably

Re: Does Market Timing Work?

#159

Post by wolverine876 »

missedthecue wrote: post #158
wolverine876 wrote: post #147

Earlier quoted context omitted.

Or governments could insure retirement income.

It's called social security and it's enormously expensive and borderline unaffordable... And not even enough to retire on comfortably

Yet it works so well that the public overwhelmingly supports it.

> borderline unaffordable

It's funded by your own income; it's a compulsory savings plan.

Re: Does Market Timing Work?

#160

Post by nickpp »

wolverine876 wrote: post #146
tlarkworthy wrote: post #137

Earlier quoted context omitted.

I believe human ingenuity and power over the elements goes up 7% a year, of which, the stock market is a proxy for. We are a networked organism and good at leveraging innovation at a global scale through supply chains. I see no reason to be pessimistic, we have AI, we have better space flight, we constantly improving energy sources.

Then why didn't the markets go up in Japan and Europe (per the GP)? Also, why do the US (and maybe other) securities markets increase when the underlying economy is performing poorly?

Differences between countries, cultures and people do exist. These differences will manifest themselves as variations in productivity, ultimately leading to unequal growth rates.
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