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Let's talk about investing! Stock market, ETF, etc.


Springfield

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1 hour ago, Sacks 'n' Stuff said:

So I’m thinking about getting out of the market... any tips / advice for how best to do this? Any milestones or suggested dates? Was thinking Dow at 27,000 or April, whichever comes first.

 

You're not asking the right question... The real trick is knowing when to get back in.

 

Consider this: Swedroe: Lessons From 2016, Part One

 



Lesson 2: So Much of Returns Come in Very Short and Unpredictable Bursts

 

The road to investment “hell” is paved with market-timing efforts, because so much of the long-term returns provided by the market come in short, and totally unpredictable, bursts. Last year provided the following example. From January through October, the DFA Small Value Fund (DFSVX) returned 8.0%. From November through December, it returned 18.8%. For the full year, it returned 28.3%. Two-thirds of the full year’s return happened in the last two months.

 

These types of results are not at all unusual, For instance, the study “Black Swans and Market Timing: How Not To Generate Alpha,” which covered the 107-year period ending in 2006, found that the best 100 days (out of more than 29,000) accounted for virtually all (99.7%) of returns.

 

Blink and you'll miss it.

 

That being noted, should you wish to try, you'll need to find an asset that is not correlated with stocks, which won't go down when the crash you are apparently predicting kicks in. Cash would work, I guess, but doesn't return much. Bonds have a low correlation, but people are predicting those will be under pressure from rising interest rates too.

 

Dunno.

 

 

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  • 3 weeks later...

Benjamin Graham said that in the long run, the stock market is a weighing machine, but in the short run, it's a voting machine.

 

Nobody really knows why it's falling now, but this is nothing.

 

It's not even called a correction until it hits a 10% drop.

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The Fed Chairperson came out and said that the valuation are high on Friday and indicated that there might be a bubble.

 

https://www.cnbc.com/2018/02/05/yellen-hard-to-tell-if-market-is-in-a-bubble-but-valuations-high.html

 

Too many people have too much money that they play with in the stock market, but long term are really interested in income preservation so at the slightest sign of a down turn pull out (too much income inequality), which drives fast drops (and recoveries once they decide to put their money back in).

 

And P/E ratios are historically high.  Even after today, the Shiller ratio has them higher than any time since the late 1990s.

http://www.multpl.com/shiller-pe/

 

We're bound for a even a further readjustment.

 

(caveat- the market can stay irrational longer then you can stay solvent.)

Edited by PeterMP
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2 minutes ago, techboy said:

This IS a good moment for reflection, though. Stock markets have drops like this all the time. This is routine. They plunge MORE sometimes.

 

If this is bothering you, you're probably too heavily invested in stocks.

It’s botherIng me because a big drop is a near certainty and I want to time it right.

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After the drop, the S&P close is slightly above its value on November 30, which was a new record high at the time.

 

 

1 minute ago, Sacks 'n' Stuff said:

 and I want to time it right.

 

And I want to win the lottery.

 

No one knows how to time it right.

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6 minutes ago, Sacks 'n' Stuff said:

It’s botherIng me because a big drop is a near certainty and I want to time it right.

 

Again, lesson #2  http://www.etf.com/sections/index-investor-corner/swedroe-lessons-2016-part-1?nopaging=1

 

I already quoted this part, but I think it's worth highlighting again as context for the additional bit I want to highlight.

 



Lesson 2: So Much of Returns Come in Very Short and Unpredictable Bursts

 

The road to investment “hell” is paved with market-timing efforts, because so much of the long-term returns provided by the market come in short, and totally unpredictable, bursts. Last year provided the following example. From January through October, the DFA Small Value Fund (DFSVX) returned 8.0%. From November through December, it returned 18.8%. For the full year, it returned 28.3%. Two-thirds of the full year’s return happened in the last two months.

 

These types of results are not at all unusual, For instance, the study “Black Swans and Market Timing: How Not To Generate Alpha,” which covered the 107-year period ending in 2006, found that the best 100 days (out of more than 29,000) accounted for virtually all (99.7%) of returns.

 

That leads us to.

 



Peter Lynch offered the following example. He pointed out that an investor who followed a passive investment strategy and stayed fully invested in the S&P 500 over the 40-year period beginning in 1954 would have achieved an 11.4% rate of return.

 

If that investor missed just the best 10 months (2%), his return dropped 27%, to 8.3%. If the investor missed the best 20 months (4%), the return dropped 54%, to 6.1%. Finally, if the investor missed the best 40 months (8%), the return dropped 76%, all the way to 2.7%.

 

Do you really believe there is anyone who can pick the best 40 months in a 40-year period? Lynch put it this way: “Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.

 

Emphasis mine.

 

Good luck whatever you decide to try.

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19 minutes ago, Corcaigh said:

And I want to win the lottery. No one knows how to time it right.

I’m batting 1.000 so far though. Got in for the first time in 1999, pulled out in December of 2006, got back in in 2009.

7 minutes ago, techboy said:

I AM A STOCK MARKET GOD! LARRY SWEDROE SHOULD BE KISSING MY ASS!!

Edited by Sacks 'n' Stuff
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30 minutes ago, Corcaigh said:

 

No one knows how to time it right.

 

Basically, trading stocks is timing it because you are trying to figure out the direction of the stock in the short term.  On the other hand, investing is when you are holding long term.

There are hedge funds out there who have made money for years by trading.  So you can't say that nobody knows how to time it right.  We the normal folks don't know how to do it, no question about it though. We might get lucky, but that's it.

One big name  that has made tremendous amount of $$ is Renaissance Technologies.  

There are many successful traders out there. 

 

 

 

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