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Does Market Timing Work?

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Re: Does Market Timing Work?

#51

Post by mettamage »

veqq wrote: post #33
Centigonal wrote: post #17

IMO, this is a much more comprehensive article on the same topic: https://www.aqr.com/-/media/AQR/Documents/Insights/White-Pap... For unsophisticated investors, timing the market tends to keep money on the sidelines during growth periods, eroding long-term returns. This is part of why it's considered an investing sin - "time in the market beats timing the market." Sophisticated systematic investors can probably get g…

To go into further detail about systemic investing: There have been experiments like the turtle traders ^ 1 who applied "trend following", used today by many CTAs on exotic markets. For this, an investor taught some people his strategy/rules, gave them his money and they've shined for 40 years. The fundamental strategy still works today (updated). Fundamentally, it's a method to ride momentum in different ways (e.g.…

Fun! I'll save your comment (and upvoted it). Curious to see where this rabbit whole goes. On another point, I'd like to suggest you reference as follows [1]. I found that syntax to be more prevalent on HN than ^ [2]. It's easier to parse, since you know it's separate from the sentence. Whereas if I write that I have a reference like ^ 3 then it is harder to see that ^ 3 is apart from the sentence or part of it.

[1] This part you did do that way, haha.

[2] I haven't done a formal count, but I'm sure some regex search engine will give you many hits if you search for \[[0-9]\].

[3] That last sentence still confuses me.

Re: Does Market Timing Work?

#52

Post by henry2023 »

porknubbins wrote: post #39
Centigonal wrote: post #17

IMO, this is a much more comprehensive article on the same topic: https://www.aqr.com/-/media/AQR/Documents/Insights/White-Pap... For unsophisticated investors, timing the market tends to keep money on the sidelines during growth periods, eroding long-term returns. This is part of why it's considered an investing sin - "time in the market beats timing the market." Sophisticated systematic investors can probably get g…

This has been my experience too, I missed out more by being sidlined during good times than I saved. Personally as an engineering mindset person I am good at identifying likely failure modes of companies (i.e. reality) but rarely anticipate how much things will go up during good times which is more of a social phenomenon (hype).

It seems like identifying failure modes could work if you could model the likelihood of the company going bankrupt in a certain amount of time because even if the enterprise is working on failure mode, public markets have been popularity contests for a really long time.

Re: Does Market Timing Work?

#53

Post by mr_mitm »

shrimpx wrote: post #8

Although when the s&p dropped 20% in a few days in March 2020 — that was clearly a buy signal. And when tech stocks dropped by 70-90% in Nov 2022. Those stocks are now up 2x/3x from bottom. Sure, long term it probably doesn’t work out to time the market but sometimes it’s pretty obvious what’s happening.

I bought when it dropped 5% because I thought it was "a clear buy signal". Then it dropped even more and I couldn't spare any cash to buy more. How could you have known at the time that 20% was the bottom?

Re: Does Market Timing Work?

#54

Post by zer0tonin »

lend000 wrote: post #40
veqq wrote: post #33

Earlier quoted context omitted.

To go into further detail about systemic investing: There have been experiments like the turtle traders ^ 1 who applied "trend following", used today by many CTAs on exotic markets. For this, an investor taught some people his strategy/rules, gave them his money and they've shined for 40 years. The fundamental strategy still works today (updated). Fundamentally, it's a method to ride momentum in different ways (e.g.…

The fact that you're being downvoted for factual contributions kind of explains why it's possible to beat the markets. Most people refuse to believe it. No public strategies are going to beat the market by a huge amount, and having the discipline to execute them manually isn't easy, but it has been clearly shown to be possible.

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.

Re: Does Market Timing Work?

#55

Post by blitzar »

lend000 wrote: post #40
veqq wrote: post #33

Earlier quoted context omitted.

To go into further detail about systemic investing: There have been experiments like the turtle traders ^ 1 who applied "trend following", used today by many CTAs on exotic markets. For this, an investor taught some people his strategy/rules, gave them his money and they've shined for 40 years. The fundamental strategy still works today (updated). Fundamentally, it's a method to ride momentum in different ways (e.g.…

The fact that you're being downvoted for factual contributions kind of explains why it's possible to beat the markets. Most people refuse to believe it. No public strategies are going to beat the market by a huge amount, and having the discipline to execute them manually isn't easy, but it has been clearly shown to be possible.

Many public strategies beat the market by a reasonable amount; the consistent and disciplined application of them, however, is rare.

There is also a lack of consistency about what it is to "beat the market", in the world of clickbait headlines and armchair twitter dd - the benchmark each year (with hindsight) is the highest performing asset.

Re: Does Market Timing Work?

#56

Post by ttyprintk »

rocqua wrote: post #38

I wonder if there is a fixed buy date that outperforms dollar cost averaging. Something like "around new years lots of people get money they invest, so prices tend to pop, so buy in november' There just needs to be some kind of yearly pattern for such a strategy to exist. I even recall reading about it on money-stuff. But I can't remember the months.

I’d rather see a study where September and November are chosen for gold bullion, and other months for equities. I’ve heard this coincides with the wedding season in India —- maybe someone can confirm.

Re: Does Market Timing Work?

#57

Post by kqr »

lend000 wrote: post #29
shrimpx wrote: post #8

Although when the s&p dropped 20% in a few days in March 2020 — that was clearly a buy signal. And when tech stocks dropped by 70-90% in Nov 2022. Those stocks are now up 2x/3x from bottom. Sure, long term it probably doesn’t work out to time the market but sometimes it’s pretty obvious what’s happening.

The difficult part was knowing where to sell so you could have money on the sidelines before the market dropped. Was it right when lockdowns started? In that case, you already lost a fair amount from the top. I do believe that markets can be beat, but by definition, you need to be "smarter" than the average capital, where more than half of the capital in the market on a given day is controlled by somewhat sophisticat…

> where more than half of the capital in the market on a given day is controlled by somewhat sophisticated investors.

It's worse than that! The average estimation performs on the level of superforecasters, thanks to the wisdom of the crowd.

The priced-in evaluation beats even most sophisticated investors! ("How is that mathematically possible?" About half of the investors are on the lucky side, but not consistently.)

Re: Does Market Timing Work?

#59

Post by quickthrower2 »

golemiprague wrote: post #22
quickthrower2 wrote: post #3

Which is why better late than never I am overpaying into pension and chucking that on a far/wide international index. My calcs say I won’t retire rich but I will still most likely have the money and beat inflation. And not spend it lol! The real issue for the average Jo seeking alpha is you often need to pay the house (your government!) for the privilege. In Australia you trigger capital gains tax when you sell. And…

The problem in Australia is that they still tax you if you rent your house to someone and then use the money to rent for yourself. So if you need to move or change house size you must sell and buy. However if you buy an investment house you can get tax deduction on the interest of the mortgage. They basically tax people with one house but give deductions to people with multiple houses.

Yes. I think that is silly as they should encourage freedom to move. You should just get taxed on the “profit” you make if you find somewhere cheaper to rent than what you get. The workaround is buy to rent out a property you never live in then just rent and move around as normal. But then you lose out on the primary residence capital gains exemption. A work around to that is to never sell and use the death trust to pass that on to your kids. All this stuff takes a lot of planning and thinking about.

Another weird thing: transfer your house to your spouse and pay stamp duty! Stamp duty itself is regressive and should be replaced by a smaller annual property tax or just another form of tax (but given that property ownership tends to create wealth inequality probably good to tax ownership rather than add more income tax)

Re: Does Market Timing Work?

#60

Post by ttyprintk »

kleene_op wrote: post #44
neilv wrote: post #13

They didn't discuss Peter Perfect's sister, Petra Perfect, who -- rather than just wait for the one bottom day for the year -- instead buys and sells repeatedly, throughout the year, at more local lows and highs. Is that also considered market timing?

That sure counts as market timing. Pulling out such a strategy would make you insanely rich.

To quantify “insanely”,

$1 in the 1900 stock market would be $52000 today. In the 1900 T-bill market, $58. If you knew how to perfectly rebalance every Jan 1, $22.3m.

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