The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: bthewalls on October 25, 2018, 01:33:25 AM
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Hello everyone. I'm fairly new at this and have recently got obsessed with studying the US/global market trends.
I get the feeling the current Asian market slow down will domino across uk/Europe and slightly into the US market. Employment is still high and interest rates relatively low. The markets show mass exodus anytime there is a dip recently, so everyone is still super sensitive after 2008.
Combined with fed rates going up a bit and the trade war, is it possible we might experience a substantial correction and avoid the brutal recession everyone is waiting for?
First post.... its only a day since I last shaved and barely have 5 o clock yet.
Barry
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Hello everyone. I'm fairly new at this and have recently got obsessed with studying the US/global market trends.
I remember when I first got interested in finance...I watched Jim Cramer, read the Financial Times, check my portfolio on a daily basis, and did some stock picking. After a while, I came to the conclusion that "nobody knows nothing" really is true.
Sure, it's possible that a substantial correction is imminent, but don't forget that people were making the same predictions in 2010, 2011, 2012, 2013, 2014, 2015, 2016, and 2017. Instead of "fed rates and trade war" we had fiscal cliff, government shutdown, Zika, Trump election, Korean nukes, Clinton Election, quantitative easing, and so on and so forth as the fears de jour back then.
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Hello everyone. I'm fairly new at this and have recently got obsessed with studying the US/global market trends.
I remember when I first got interested in finance...I watched Jim Cramer, read the Financial Times, check my portfolio on a daily basis, and did some stock picking. After a while, I came to the conclusion that "nobody knows nothing" really is true.
Sure, it's possible that a substantial correction is imminent, but don't forget that people were making the same predictions in 2010, 2011, 2012, 2013, 2014, 2015, 2016, and 2017. Instead of "fed rates and trade war" we had fiscal cliff, government shutdown, Zika, Trump election, Korean nukes, Clinton Election, quantitative easing, and so on and so forth as the fears de jour back then.
I studied Finance and I would read the WSJ / Financial Times / Bloomberg almost daily, and would play with stock picking in simulations. Learned quickly how the analysis was never as clear as it seemed and how reading the news is basically "old data" by the time it's released.
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I get the feeling the current Asian market slow down will domino across uk/Europe and slightly into the US market.
Maybe!
And that's the best anyone can say. I think I'm a pretty smart dude, but whenever I think I've had some great insight into the market I remind myself that there are literally ten thousand ivy-educated business professionals who see this data before I do, and they each get paid hundreds of thousands of dollars per year to have contingency plans in place to execute instantly whenever new data is released. My insights, as revelatory as they may seem to me, are already documented in a white paper somewhere that games out all of the cascading consequences of each observation and the ways it might interact with other insights.
So you think the Asian markets are slowing and the Euro market will soon follow suit, with a lesser impact to the US market? Why? What is the mechanism of that interaction? Have you considered the differences in changing demographics and market segments across those economies? Which industries will first see the impacts of the trade wars and tariffs, and to what extent? Will oil prices contribute to this hypothesized connection, or offset it? What's the time lag? What are your top five proposed strategies for profiting from these interactions, and how will you decide to apportion your assets toward each strategy and then adjust between those strategies as the events play out? What metrics will you look at to make these decisions? I can absolutely guarantee you that every major investment bank has an army of Ph.Ds. who have already written all of this stuff out and traded it around for review and feedback. These guys are serious about their jobs, and they have access to data and analytic tools and markets that you and I do not. We're just armchair quarterbacks, and these guys are Tom Brady and Aaron Rodgers playing on the same team, backed up with billions of dollars of team resources.
Employment is still high and interest rates relatively low.
Relative to what baseline? For what reasons? Are those reasons going to be present next quarter, next decade? Are there other factors that might impact these metrics that you haven't seen coming? Which industries do these metrics most substantially control, and are you playing those industries as opposed to the market as a whole?
First post.... its only a day since I last shaved and barely have 5 o clock yet.
I'm not trying to rag on the new guy. I always commend people for trying to learn, it's just that predicting global stock markets is a silly game. It's easy to think you're good until you jump in and get fleeced, because most of us don't know just how much we don't know.
And that's the reason this community typically advises against market timing and stock picking. You're guaranteed to not do any worse than average, and that's a better result than you can reasonably expect to get with any other strategy.
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It starts 2 years from now, meaning on exactly October 25th of 2020?
If you hadn't planned on being that specific, consider what that says about your information.
You also need to predict when the recovery kicks in. If you sell everything, and then wait out both the crash and recovery, you didn't benefit at all from the prediction.
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What sol said. Us humans are very bad at predicting the future, even the ones that are good at it.
Go back and look at financial news from two years ago. Was anyone predicting anything crazy correct?
Everyone was crying about how the market would crash when Trump was elected; that happened, right?
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Don't time the market. Buy and hold all of the market.
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I get the feeling the current Asian market slow down will domino across uk/Europe and slightly into the US market.
Maybe!
And that's the best anyone can say.
Morgan Housel wrote a great article about this several years ago (linked below).
Short version: Every year 22 "chief market strategists" from the largest, best-funded investment firms put out their forecasts for the following year. These guys (I believe they are all men) have missed each of the last five down market years. In 2008 each predicted above-average market gains when we had our biggest crash in half a century. Collectively they did WORSE than if you had just guessed the market would return its historical average of ~9% each and every year.
(https://g.foolcdn.com/image/?url=https%3A%2F%2Fg.foolcdn.com%2Feditorial%2Fimages%2F160162%2Funtitled.png&w=700&op=resize)
my point? The guys who are paid 6+ figures to predict where the market will be in 6-12 months are fantastically bad at predicting crashes. You or I have no hope. Luck is the determining factor for 'correct' predictions. Unforseeable events can move markets, and seemingly 'bad' metrics can carry on for years before their effect is felt.
https://www.fool.com/investing/general/2015/02/25/the-blind-forecaster.aspx (https://www.fool.com/investing/general/2015/02/25/the-blind-forecaster.aspx)
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Thanks all....it's seem to be a case of buy and non sky high prices and just hold.
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That is an awesome chart/study @nereo. I hadn't seen that one before, thank you for posting.
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That is an awesome chart/study @nereo. I hadn't seen that one before, thank you for posting.
What maizeman said - thanks @nereo . I really don't mean to pile on the OP - it's great you are learning more about finance! But it simply cannot be said enough times - some of the biggest brains in the world are using incredibly powerful computers running software that brilliant and knowledgeable people have spent entire careers creating to get microsecond advantages over other big brains using powerful computers running complex software...and you think you're going to find something they missed? No fucking way. Just...no. While it's true you might get lucky (and I'm sure you know someone who sometime got lucky once or twice with a great stock pick or getting in/out at the right time) - luck is a losing strategy. Because the markets always go up over the long term and because there are transaction costs and taxes, luck will always lose out most of the time to just buying, holding, and ignoring.
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I appreciate the kudos, but the praise all should go to finance writer Morgan Housel. It's his graph and analysis, all I did was read it and summarize it here.
~n~
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Keeping modestly informed of relevant local and global news is one thing, but developing an entertainment dependence habit on financial news and global affairs is extremely detrimental to both your own mental health and financial well-being. Write an IPS if you don't have one and follow it to the letter no matter what you hear on the news
http://www.mrmoneymustache.com/2013/10/01/the-low-information-diet/
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Keeping modestly informed of relevant local and global news is one thing, but developing an entertainment dependence habit on financial news and global affairs is extremely detrimental to both your own mental health and financial well-being. Write an IPS if you don't have one and follow it to the letter no matter what you hear on the news
http://www.mrmoneymustache.com/2013/10/01/the-low-information-diet/
I hate acronyms. Luckily I hit IPS on the first try. Investment Policy Statement. So I read a description.
https://www.thebalance.com/how-to-write-an-investment-policy-statement-357210 (https://www.thebalance.com/how-to-write-an-investment-policy-statement-357210)
It seems like a good idea, but I was surprised to see the criticism in the description of index funds. The man in the article talks about the development of a portfolio to give you $5k / month to augment Social Security. People on this site have written time and again to use index funds since they are as good or better than using a financial advisor.
It seems most of the folks here think a big recession won't come for a couple of years. This eases my mind. I don't have an IPS, so I guess I'll ride this out.
I don't totally ignore the news, but I'm getting better at ignoring it. When talk comes of the economy, I look at the price of oil. It fell and there seems to be plenty so this seems to keep the economic machine humming. Besides, we've been finding all kinds of new oil on the North American continent. Brief bumps in supply and demand look like all we'll see unless there is another war.
OK - the tariff thing. I'm sort of a believer that we ought to keep people gainfully employed producing stuff here. The US is a big country, with lots of raw materials and has an educated free workforce. Mr. Trump has slapped quite a list of stuff to be tariffed:
https://ustr.gov/sites/default/files/enforcement/301Investigations/Tariff%20List_09.17.18.pdf (https://ustr.gov/sites/default/files/enforcement/301Investigations/Tariff%20List_09.17.18.pdf)
I'll bet there are people ready, willing and able to fill the needs previously occupied by the Chinese. People have the choice to pay a little more for the import or to support someone here to supply the same or similar item. The money spent on said item stays here generating domestic jobs and further spurring demand. There will be an adjustment period, but when I see the vast amount of manufactured goods that used to be made here,.................lots of jobs to be reclaimed. Lots of needs to be filled domestically.
I was taught in macroeconomics class long ago that mutual trade between countries if conducted in a fair manner benefits both countries. Then I saw the closure of steel mills, automotive manufacturers, etc and the ripple effect to all the sub-suppliers. Entire cities never recovered. It wasn't good for them. The macroeconomic theory ignored the human cost.
I don't like Trump, but maybe his tariffs will actually be good for the economy after some adjustments.
People still have to eat. People still want to buy stuff. People are willing to work. I guess it won't be too bad a dip. (Knock on wood.)
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in addition to the fed continuing to raise rates and extract money from the market, you now have mortgage applications and new and used cars sales declining and the prices of houses for sale in some markets starting to drop.
maybe motgage apps and car sales turn around but unlikely with raising rates and if that continues; a recession is likely to follow.
I still contribute regulary to my 401k but I switched some to bonds on oct 9, sure it'll come back eventually but meanwhile you lost that time to get it back there by riding it down, I just do not understand how that concept is discarded by most here.
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You gotta decide what kind of investor you are going to be, the kind that sets asset allocations in a ratio of stocks/bonds that you feel comfortable with long term and sticks to it through the highs and lows, or the kind that changes their assets every time the Fed does something, financial pundits say something or global somethingorother happens. The vast majority of people here, as well as every study I've seen on the topic agrees that the first type is the best way to go.
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It seems most of the folks here think a big recession won't come for a couple of years. This eases my mind. I don't have an IPS, so I guess I'll ride this out.
I'm not sure where you drew that conclusion, but nereo's graph was intended to show that experts can't predict what happens for one year. And the rest of us have even less information, let alone predicting 2 years in advance.
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Recession / bear market can happen at any time. Might have already started, who knows? Certainly looks that way around the globe.
So how do you handle this. If you invest today and the market drops 50%, you would have been better off in cash.
Answer: only invest what you can afford to lose.
Create a budget that includes all of you expenses for a year. Build up an emergency fund. Invest all money that you don't need this year or isn't needed to top off the emergency fund.
Then don't worry about that 50% drop. Just focus on investing as much and as often as possible. The numbers in your account will go up and down, but you will hit a reasonable average overtime.
Especially if you are just getting started. If you have 50k invested and lose 25k that feels bad, but someday you will have 1MM invested. At that time your account will fluctuate by 25k everyday.
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It seems most of the folks here think a big recession won't come for a couple of years. This eases my mind. I don't have an IPS, so I guess I'll ride this out.
Lordy lordy lordy. That's not what I (or most) people here are saying at all. I have no idea whether a big recession will come sometime in the next couple of years, and neither do the best and brightest financial minds. Recessions happen, and we haven't had one in a long time. That's about all I am going to opine on the subject.
As for "I don't have an IPS, so I guess I'll ride this out" - why not make one? Seriously, it's a useful thing to do and takes just an hour or so. Mine fits on a single sheet of paper. Anytime I question whether I'm making the right decisions I go back and read it, and I realize that while I can't control all the outcomes I can control my strategy, and my strategy is sound and well formulated for my goals.
I was going to comment on the tariff comments, but then it occurred to me that its only tangentially related to the OP. Certainly could be discussed at length in another thread. All I'll say here is that the current tariffs are just another example on how it's virtually impossible to predict where the markets will be in 12 months. Tariffs could end, tariffs could escalate. No way of knowing where we will be in 3 months, let alone 12.
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I've attended several talks with leading analysts and economists this year (since retired, I have the time, moderately big stash at 3 brokers, I get invites). The data suggests that the economy is still very strong, so relatively high valuations are justified until that changes.
Could it change, sure. Our president is still pursuing stupid trade policies, war and terrorism can always make news and scare people, and the global economy is a fragile flower built on our interdependent addiction to stuff we dont need (and some stuff we do).
That said, we are interconnected in ways never before possible, so people are understanding each other and sharing globally, technology marches on and we are unlocking the very keys to life (I get Facebook posts from over a dozen countries from friends). Surely new, great stuff is on the waythat will spur growth.
Which will it be, recession or growth or neither? That is the fun of speculation about the future. What does your investment statement say you should do? Buffet and Bogle suggest buy and hold long term as working historically. If you think history holds, seems good. If you think not, you gotta do what you gonna do, Its your life.
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I don't want to beat a dead horse here, but the 'leading analysts' predicted better than average growth for 2008 a year prior. We had the 'great recession'. Earlier they predicted stellar gains in '01 and '02 - which was a big bear market and another recession.
There's a common thread about down years - analysts were optimistic about the future the previous year. It's actually how we get into these boom-bust/market bubble cycles. The financial sector looks at one series of data and gets optimistic about the next 6-12 months. Then soft spots are revealed and black-swans land, and it swings in the other direction. Irrational exuberance and spooked investors.
This isn't to say 2019 won't be a fantastic year - it very well may be. But the best and brightest have yet to show any aptitude for predicting downturns 6-12 months in advance.
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in addition to the fed continuing to raise rates and extract money from the market, you now have mortgage applications and new and used cars sales declining and the prices of houses for sale in some markets starting to drop.
maybe motgage apps and car sales turn around but unlikely with raising rates and if that continues; a recession is likely to follow.
I still contribute regulary to my 401k but I switched some to bonds on oct 9, sure it'll come back eventually but meanwhile you lost that time to get it back there by riding it down, I just do not understand how that concept is discarded by most here.
I'm not sure I understand what concept you think is being discarded by most people here. If you're saying that people are discounting the fact that it would be better to get out of the market before it falls and then get back in at the bottom - I think everyone agrees. However the point that I think most people are trying to make is that we have no idea when the right time to get out is and when the right time to get back in is. As nereo's chart shows even the experts don't know and you and I know a lot less about what's coming than they do. Check out the Top is In thread. I quickly went through a few years of posts to find a couple of posts where people were worried about the markets on this forum in the past few years. For reference, the S&P 500 is now at about 2600, give or take. Here are a few with the S&P 500 value at the time (rough estimates - I didn't want to put in much work so I just moused-over an S&P 500 chart. Should be close enough to get the point.):
October 2012 - S&P500 - 1400 https://forum.mrmoneymustache.com/investor-alley/investment-planning-for-the-'fiscal-cliff'/
January 2014 - S&P500 - 1800 https://forum.mrmoneymustache.com/investor-alley/market-top/
November 2016 - S&P500 - 2100 https://forum.mrmoneymustache.com/investor-alley/index-fund-'bubble'-about-to-burst/
Now that's not to say that I think everything's going to go up smoothly from here. You might absolutely be correct, and there might be a minor, moderate, or huge drop tomorrow. Or next week. Or in April of 2019. Or July 15th 2020 at 11:37 eastern time. If we make enough guesses one of us will be right and will be able to say that market timing worked for me while everyone who picked a different day and missed out on the run-up or stayed in for the drop will stay silent. But the markets go up 2 years out of every 3, so every time you pull your money out you're more likely to miss out on growth than you are to get out before a drop. The drops are part of the ride - buck up and be thankful for the buying opportunity when it shows up.
http://www.mrmoneymustache.com/2017/06/20/next-recession/
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Or in April of 2019. Or July 15th 2020 at 11:37 eastern time.
Phew, just put in a sell order for all my shares for 9:30am on 7/15/20. thanks @Fire20/20!
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bthewalls,
The most compelling evidence that even experts can't effectively time the market is Warren Buffett's recently concluded 10-year, million dollar bet that a low-cost Vanguard S&P Index Fund would beat any 5 hedge fund portfolio. The hedge funds have the advantage of being able to time the market, invest in any vehicle, sell short, leverage with options, etc. It says a lot that only one hedge fund manager was willing to take the bet. Even with all those advantages, that manager got his clock cleaned.
I'm not saying that you should always be 100% invested in stocks, but that your allocation should be based on factors that you can accurately assess such as your own tolerance for risk and your own timeline for needing your money. Nobody consistently times the market successfully.
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Or in April of 2019. Or July 15th 2020 at 11:37 eastern time.
Phew, just put in a sell order for all my shares for 9:30am on 7/15/20. thanks @Fire20/20!
No problem, and as a bonus I guarantee all of my market predictions up to the full amount you paid me for them. :D
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It seems most of the folks here think a big recession won't come for a couple of years. This eases my mind. I don't have an IPS, so I guess I'll ride this out.
Lordy lordy lordy. That's not what I (or most) people here are saying at all. I have no idea whether a big recession will come sometime in the next couple of years, and neither do the best and brightest financial minds. Recessions happen, and we haven't had one in a long time. That's about all I am going to opine on the subject.
As for "I don't have an IPS, so I guess I'll ride this out" - why not make one? Seriously, it's a useful thing to do and takes just an hour or so. Mine fits on a single sheet of paper. Anytime I question whether I'm making the right decisions I go back and read it, and I realize that while I can't control all the outcomes I can control my strategy, and my strategy is sound and well formulated for my goals.
I was going to comment on the tariff comments, but then it occurred to me that its only tangentially related to the OP. Certainly could be discussed at length in another thread. All I'll say here is that the current tariffs are just another example on how it's virtually impossible to predict where the markets will be in 12 months. Tariffs could end, tariffs could escalate. No way of knowing where we will be in 3 months, let alone 12.
Make an IPS - good idea. I guess I will find a few more links as time permits.
Another tidbit:
The average correction for the S&P 500 since World War II lasts four months and sees equities slide 13 percent before bottoming.
But bear markets average a loss of 30.4 percent and last 13 months; it takes stocks nearly 22 months, on average, to recover.
OK - Lots of that money I never really had because it came from the stock market run-up. So, I may need to wait about 2 years to get the money I never really had back - I guess I can live with that.
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The average correction for the S&P 500 since World War II lasts four months and sees equities slide 13 percent before bottoming.
But bear markets average a loss of 30.4 percent and last 13 months; it takes stocks nearly 22 months, on average, to recover.
OK - Lots of that money I never really had because it came from the stock market run-up. So, I may need to wait about 2 years to get the money I never really had back - I guess I can live with that.
Correct. Understanding these things are the first step in becoming a seasoned, long-term investor. The markets are going to hit the skids a couple times every decade or two. Most of the time its a 'correction' that will pass a few months later. Bear markets are much deeper and last longer, but in the grand scheme of a life-long invester they are short lived. The key is to ignore all the talking heads on TV and the panic in the market and do nothing. Don't sell, and keep putting money in every pay period. It can be hard when your portolio drops 30% from the previous year, but in the end the investors who do the best tend to be the ones who just ignore everything and stay the course. Market dips allow you to buy shares on sale.
Despite the lure, you cannot predict when a hot market will suddenly collapse, and you cannot determine whether a recent dip is just a correction or will continue down into bear-market territory until it's all over. In hindsight it appears obvious, but it never is in the moment, partly because the markets can ignore good or bad news for months (even years) before it suddenly flips on you.
Final advice: read this series from JL Collins. It explains much of what we've discussed here.
https://jlcollinsnh.com/stock-series/ (https://jlcollinsnh.com/stock-series/)
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Love the jlcollinsnh series, straight simple truth
My IPS is one line
"Buy total market index funds with all available income."
There is no selling
There is no redistributing
There is only the US total stock market and it's inevitable upward trend. If the United States collapses as a whole, I'll invest in ammo and potatoes.
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My IPS is one line
"Buy total market index funds with all available income."
Good for the accumulation phase, but worth considering what you will do once you start making withdraws.
e.g. %WR, frequency of disbursements, at what point do you reduce spending or add supplemental income, philithropic strategies, what to do with windfalls/unspent money, establishment of bond ladder (if any).
Build a nice potato gun, just in case you run out of bullets :-P
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My IPS is one line
"Buy total market index funds with all available income."
Good for the accumulation phase, but worth considering what you will do once you start making withdraws.
e.g. %WR, frequency of disbursements, at what point do you reduce spending or add supplemental income, philithropic strategies, what to do with windfalls/unspent money, establishment of bond ladder (if any).
Build a nice potato gun, just in case you run out of bullets :-P
You're correct, I'm in the beginning of the accumulation phase
There will be a couple more lines to add when I reach the withdrawal phase
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in addition to the fed continuing to raise rates and extract money from the market, you now have mortgage applications and new and used cars sales declining and the prices of houses for sale in some markets starting to drop.
maybe motgage apps and car sales turn around but unlikely with raising rates and if that continues; a recession is likely to follow.
I still contribute regulary to my 401k but I switched some to bonds on oct 9, sure it'll come back eventually but meanwhile you lost that time to get it back there by riding it down, I just do not understand how that concept is discarded by most here.
I'm not sure I understand what concept you think is being discarded by most people here. If you're saying that people are discounting the fact that it would be better to get out of the market before it falls and then get back in at the bottom - I think everyone agrees. However the point that I think most people are trying to make is that we have no idea when the right time to get out is and when the right time to get back in is. As nereo's chart shows even the experts don't know and you and I know a lot less about what's coming than they do. Check out the Top is In thread. I quickly went through a few years of posts to find a couple of posts where people were worried about the markets on this forum in the past few years. For reference, the S&P 500 is now at about 2600, give or take. Here are a few with the S&P 500 value at the time (rough estimates - I didn't want to put in much work so I just moused-over an S&P 500 chart. Should be close enough to get the point.):
October 2012 - S&P500 - 1400 https://forum.mrmoneymustache.com/investor-alley/investment-planning-for-the-'fiscal-cliff'/
January 2014 - S&P500 - 1800 https://forum.mrmoneymustache.com/investor-alley/market-top/
November 2016 - S&P500 - 2100 https://forum.mrmoneymustache.com/investor-alley/index-fund-'bubble'-about-to-burst/
Now that's not to say that I think everything's going to go up smoothly from here. You might absolutely be correct, and there might be a minor, moderate, or huge drop tomorrow. Or next week. Or in April of 2019. Or July 15th 2020 at 11:37 eastern time. If we make enough guesses one of us will be right and will be able to say that market timing worked for me while everyone who picked a different day and missed out on the run-up or stayed in for the drop will stay silent. But the markets go up 2 years out of every 3, so every time you pull your money out you're more likely to miss out on growth than you are to get out before a drop. The drops are part of the ride - buck up and be thankful for the buying opportunity when it shows up.
http://www.mrmoneymustache.com/2017/06/20/next-recession/
yes, but none of the dates you listed violated the long term MA for the bull rally we have been in, we now have. I would like to see the buy and holders here that held all the way thru 2008.
also, during those times; rates were still at zero or much lower than today and the FED was adding money to the mkts and as I mentioned mortgage apps and car sales were not declining.
maybe all these things reverse in the next 3 months, but the fed monetary extraction schedule goes up to 60 billion a motnh in a few days and is still scheduled to raise rates. you are free to keep fully allocated to stocks/indexes if you wish; I will not; sitting in cash as have been doing in some of my portfolio since oct 9 has been a great move
i'll take moving average investing every day of the week and twice on sunday over buy and hold and i'll retire earler and have to save a lot less along the way.
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I would like to see the buy and holders here that held all the way thru 2008.
Me! I bought and held through all of 2008. And every day since.
i'll take moving average investing every day of the week and twice on sunday over buy and hold and i'll retire earler and have to save a lot less along the way.
You can do whatever you want, but your strategy has historically not been a long term winner.
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I would like to see the buy and holders here that held all the way thru 2008.
Me! I bought and held through all of 2008. And every day since.
i'll take moving average investing every day of the week and twice on sunday over buy and hold and i'll retire earler and have to save a lot less along the way.
You can do whatever you want, but your strategy has historically not been a long term winner.
actually it has. if you go to cash under the moving average and then buy an index when it's over the MA; you outperform everything unless you bought something like amazon or apple shortly after their IPO.
I do not have a chart on me, but I've read murray rothbard and henry Hazlitt; so I got pretty good foundations.
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actually it has. if you go to cash under the moving average and then buy an index when it's over the MA; you outperform everything unless you bought something like amazon or apple shortly after their IPO.
If you think you have a strategy that beats the index long term, net of taxes and transaction costs, you are about to be a billionaire. Every bank on the planet will pay you to execute your strategy with billions and billions of dollars. Go forth and be successful! Come back and shower us little people with a little of your spare change after you cross the first billion dollars in profits.
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well, I'm going to dismiss the sarcasm; but i'll put some numbers up for you.
I estimate so far, I have saved around 50k in losses by going to cash on a percentage that I have and it will be around a 25k loss if it turns around and resumes the bull trend before I put that money back in a s+p index fund. certainly not going to make me a "billionaire" but I consider saving 25k pretty serious.
like you I also rode 2008 down before finding MA investing. if I could have limited my losses to 10 or 15% instead of the 48% drop and come back in 2009, I would not be a billionaire; but I would be retired or fire. yes, you will recover those loses, but you will not recover that time it took you to get back to even, it already will take me less time to be at even as I have reduced exposure. it took 6 years to get back to even from the 2007 high buying and holding. if you had followed MA; it would have been much less and your gains would be higher now as you would have lost less of your principal.
you keep buying and holding and be as sarcastic as you wish.
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yes, but none of the dates you listed violated the long term MA for the bull rally we have been in, we now have. I would like to see the buy and holders here that held all the way thru 2008.
[raises hand] - me! I've been buy and hold all this time. I was buy and hold when I had my first 'real' job and lived in Silicon Valley during the dot-com bust. I was buy and hold during all of the 2008 recession (was able to add to my biweekly contributions). And I continued to buy and hold throughout this latest run-up. My latest strategy? Continue to buy and hold!
Vanguard published a white paper a few years back and revealed that a majority of its non-institutional investors are buy and hold types.
i'll take moving average investing every day of the week and twice on sunday over buy and hold and i'll retire earler and have to save a lot less along the way.
Good luck. The history for people who think they've discovered a way to beat buy-and-hold is not kind to them.
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HODL
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I would like to see the buy and holders here that held all the way thru 2008.
Me! I bought and held through all of 2008. And every day since.
Mw too!
I started investing by putting in a big lump sum early 2007.
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I would like to see the buy and holders here that held all the way thru 2008.
Me! I bought and held through all of 2008. And every day since.
Mw too!
I started investing by putting in a big lump sum early 2007.
Same. Started investing in 2000, and have bought every two weeks (and held) ever since.
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well, I'm going to dismiss the sarcasm; but i'll put some numbers up for you.
I estimate so far, I have saved around 50k in losses by going to cash on a percentage that I have and it will be around a 25k loss if it turns around and resumes the bull trend before I put that money back in a s+p index fund. certainly not going to make me a "billionaire" but I consider saving 25k pretty serious.
like you I also rode 2008 down before finding MA investing. if I could have limited my losses to 10 or 15% instead of the 48% drop and come back in 2009, I would not be a billionaire; but I would be retired or fire. yes, you will recover those loses, but you will not recover that time it took you to get back to even, it already will take me less time to be at even as I have reduced exposure. it took 6 years to get back to even from the 2007 high buying and holding. if you had followed MA; it would have been much less and your gains would be higher now as you would have lost less of your principal.
you keep buying and holding and be as sarcastic as you wish.
So you're beating the index long term with a simple moving average strategy?
It sounds like your strategy could be simply executed by a computer, so why don't you whip up a simulation and start it with $1000 at 1000 random points in history and show us how it beats the index every time. Please post your results, I desperately want in on this strategy.
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yes, but none of the dates you listed violated the long term MA for the bull rally we have been in, we now have. I would like to see the buy and holders here that held all the way thru 2008.
[raises hand] - me! I've been buy and hold all this time. I was buy and hold when I had my first 'real' job and lived in Silicon Valley during the dot-com bust. I was buy and hold during all of the 2008 recession (was able to add to my biweekly contributions). And I continued to buy and hold throughout this latest run-up. My latest strategy? Continue to buy and hold!
Vanguard published a white paper a few years back and revealed that a majority of its non-institutional investors are buy and hold types.
i'll take moving average investing every day of the week and twice on sunday over buy and hold and i'll retire earler and have to save a lot less along the way.
Good luck. The history for people who think they've discovered a way to beat buy-and-hold is not kind to them.
HODOR Strategy...😎 Picture "hold door" while chaos surrounds...
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in addition to the fed continuing to raise rates and extract money from the market, you now have mortgage applications and new and used cars sales declining and the prices of houses for sale in some markets starting to drop.
maybe motgage apps and car sales turn around but unlikely with raising rates and if that continues; a recession is likely to follow.
I still contribute regulary to my 401k but I switched some to bonds on oct 9, sure it'll come back eventually but meanwhile you lost that time to get it back there by riding it down, I just do not understand how that concept is discarded by most here.
I'm not sure I understand what concept you think is being discarded by most people here. If you're saying that people are discounting the fact that it would be better to get out of the market before it falls and then get back in at the bottom - I think everyone agrees. However the point that I think most people are trying to make is that we have no idea when the right time to get out is and when the right time to get back in is. As nereo's chart shows even the experts don't know and you and I know a lot less about what's coming than they do. Check out the Top is In thread. I quickly went through a few years of posts to find a couple of posts where people were worried about the markets on this forum in the past few years. For reference, the S&P 500 is now at about 2600, give or take. Here are a few with the S&P 500 value at the time (rough estimates - I didn't want to put in much work so I just moused-over an S&P 500 chart. Should be close enough to get the point.):
October 2012 - S&P500 - 1400 https://forum.mrmoneymustache.com/investor-alley/investment-planning-for-the-'fiscal-cliff'/
January 2014 - S&P500 - 1800 https://forum.mrmoneymustache.com/investor-alley/market-top/
November 2016 - S&P500 - 2100 https://forum.mrmoneymustache.com/investor-alley/index-fund-'bubble'-about-to-burst/
Now that's not to say that I think everything's going to go up smoothly from here. You might absolutely be correct, and there might be a minor, moderate, or huge drop tomorrow. Or next week. Or in April of 2019. Or July 15th 2020 at 11:37 eastern time. If we make enough guesses one of us will be right and will be able to say that market timing worked for me while everyone who picked a different day and missed out on the run-up or stayed in for the drop will stay silent. But the markets go up 2 years out of every 3, so every time you pull your money out you're more likely to miss out on growth than you are to get out before a drop. The drops are part of the ride - buck up and be thankful for the buying opportunity when it shows up.
http://www.mrmoneymustache.com/2017/06/20/next-recession/
yes, but none of the dates you listed violated the long term MA for the bull rally we have been in, we now have. I would like to see the buy and holders here that held all the way thru 2008.
also, during those times; rates were still at zero or much lower than today and the FED was adding money to the mkts and as I mentioned mortgage apps and car sales were not declining.
maybe all these things reverse in the next 3 months, but the fed monetary extraction schedule goes up to 60 billion a motnh in a few days and is still scheduled to raise rates. you are free to keep fully allocated to stocks/indexes if you wish; I will not; sitting in cash as have been doing in some of my portfolio since oct 9 has been a great move
i'll take moving average investing every day of the week and twice on sunday over buy and hold and i'll retire earler and have to save a lot less along the way.
Me, too! Been investing monthly since about 2002. I don't even know--not even a rough guess--how much I lost on paper in 2008 because it made no difference to me.
I definitely wish you luck in your strategy long term. If you are happy with it, vaya con dios. I'm happy with the piles and piles of statistics and research out there that say buy and hold a simple portfolio of low cost index funds is best. But it take all kinds.
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Seriously, Cabaka, the collective sarcasm and discouragement you're finding here is not to shoot you down or humiliate you. The kind folks here are just pointing out one very serious, sensible point; that buying and holding index funds long term is the easiest and generally all-round best way to save up for FIRE.
The fact is that this strategy WORKS. It is tried and tested and it works. If you want to try and time the market, go right ahead, but don't say we didn't warn you when you get burned by your own arrogance a few years down the line.
sol is right - there are plenty of people that get paid millions per year to predict and analyse the market. If you're better than their degrees coupled with decades of experience and wisdom, then you must have superpowers. If you're the rain man of finance, then please enlighten us.
Personally, yes, I suspect we may have a recession within the next few years. Not because I've analysed anything, but because these things tend to happen in cycles and it has been quite a while now since the last one (and because of that sudden drop we had recently - that's not an encouraging sign.) However, I'm not going to pull out - I'm going to hold and keep investing. See, I could be wrong; we could be about to shoot up again. You cannot time the market, so don't try.
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HODOR Strategy...😎 Picture "hold door" while chaos surrounds...
Yes, travel through time and hijack someone's brain and shift the markets in your favor!
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HODOR Strategy...😎 Picture "hold door" while chaos surrounds...
Yes, travel through time and hijack someone's brain and shift the markets in your favor!
I mean if time travel were possible, no brain hijacking would be required; we'd all go back and invest in Google, Microsoft, Apple or Bitcoin* just before they soared!
* and we'd know just when to sell, too...
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HODOR Strategy...😎 Picture "hold door" while chaos surrounds...
Yes, travel through time and hijack someone's brain and shift the markets in your favor!
Spoiler alert, dude!!
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HODOR Strategy...😎 Picture "hold door" while chaos surrounds...
Yes, travel through time and hijack someone's brain and shift the markets in your favor!
I mean if time travel were possible, no brain hijacking would be required; we'd all go back and invest in Google, Microsoft, Apple or Bitcoin* just before they soared!
* and we'd know just when to sell, too...
It doesn't have to be required to be fun . . .
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Oh, if that was a reference, I'm afraid it may have passed me by! Ignore me...!
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Oh, if that was a reference, I'm afraid it may have passed me by! Ignore me...!
Game of Thrones.
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(https://g.foolcdn.com/image/?url=https%3A%2F%2Fg.foolcdn.com%2Feditorial%2Fimages%2F160162%2Funtitled.png&w=700&op=resize)
I'm not the only one that noticed that the predictions (blue) were positive every single year, am I? That should be enough to demonstrate how little the experts can understand the global economy. And if they can't, we little people definitely can't.
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I'm not the only one that noticed that the predictions (blue) were positive every single year, am I? That should be enough to demonstrate how little the experts can understand the global economy. And if they can't, we little people definitely can't.
Alternately, it could mean that the experts recognized that the fundamentals of the economy have remained consistently strong for the past 20 years, and it is irrational public sentiment that has driven the prices down periodically.
Just because two data sets disagree doesn't mean that you necessarily know which one of them is wrong. When I look at that graph I don't see experts misunderstanding the true strength of our economic engine, I see average investors misunderstanding the true value of those companies.
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I'm not the only one that noticed that the predictions (blue) were positive every single year, am I? That should be enough to demonstrate how little the experts can understand the global economy. And if they can't, we little people definitely can't.
yeah... that's one of the big takeaways I think. Collectively the analysts always predicted the market would rise (at least a little bit). Almost all of them miss the big drops, and the ones that predict it tend to be 'perma-bears' (people who predict big drops year after year until they are suddenly 'right'). And it's not just limited to the last two decades... go back into the WSJ archives and read what the financial writers were predicting before each major drop. In 1971 most articles were bullish, yet the next two years were among the worst in our parent's lifetimes. We have more information than ever and a greater ability to analyze that information, yet our ability to predict 6 months into the future has not improved.
That optimism is a big part of what drives market cycles: the financial industry keeps plowing along convinced everything is peachy, until it's not and panic-selling ensues. After every major drop there's a series of articles
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in addition to the fed continuing to raise rates and extract money from the market, you now have mortgage applications and new and used cars sales declining and the prices of houses for sale in some markets starting to drop.
maybe motgage apps and car sales turn around but unlikely with raising rates and if that continues; a recession is likely to follow.
I still contribute regulary to my 401k but I switched some to bonds on oct 9, sure it'll come back eventually but meanwhile you lost that time to get it back there by riding it down, I just do not understand how that concept is discarded by most here.
I'm not sure I understand what concept you think is being discarded by most people here. If you're saying that people are discounting the fact that it would be better to get out of the market before it falls and then get back in at the bottom - I think everyone agrees. However the point that I think most people are trying to make is that we have no idea when the right time to get out is and when the right time to get back in is. As nereo's chart shows even the experts don't know and you and I know a lot less about what's coming than they do. Check out the Top is In thread. I quickly went through a few years of posts to find a couple of posts where people were worried about the markets on this forum in the past few years. For reference, the S&P 500 is now at about 2600, give or take. Here are a few with the S&P 500 value at the time (rough estimates - I didn't want to put in much work so I just moused-over an S&P 500 chart. Should be close enough to get the point.):
October 2012 - S&P500 - 1400 https://forum.mrmoneymustache.com/investor-alley/investment-planning-for-the-'fiscal-cliff'/
January 2014 - S&P500 - 1800 https://forum.mrmoneymustache.com/investor-alley/market-top/
November 2016 - S&P500 - 2100 https://forum.mrmoneymustache.com/investor-alley/index-fund-'bubble'-about-to-burst/
Now that's not to say that I think everything's going to go up smoothly from here. You might absolutely be correct, and there might be a minor, moderate, or huge drop tomorrow. Or next week. Or in April of 2019. Or July 15th 2020 at 11:37 eastern time. If we make enough guesses one of us will be right and will be able to say that market timing worked for me while everyone who picked a different day and missed out on the run-up or stayed in for the drop will stay silent. But the markets go up 2 years out of every 3, so every time you pull your money out you're more likely to miss out on growth than you are to get out before a drop. The drops are part of the ride - buck up and be thankful for the buying opportunity when it shows up.
http://www.mrmoneymustache.com/2017/06/20/next-recession/
yes, but none of the dates you listed violated the long term MA for the bull rally we have been in, we now have. I would like to see the buy and holders here that held all the way thru 2008.
also, during those times; rates were still at zero or much lower than today and the FED was adding money to the mkts and as I mentioned mortgage apps and car sales were not declining.
maybe all these things reverse in the next 3 months, but the fed monetary extraction schedule goes up to 60 billion a motnh in a few days and is still scheduled to raise rates. you are free to keep fully allocated to stocks/indexes if you wish; I will not; sitting in cash as have been doing in some of my portfolio since oct 9 has been a great move
i'll take moving average investing every day of the week and twice on sunday over buy and hold and i'll retire earler and have to save a lot less along the way.
The fact that none of them violated the long term MA is irrelevant to the point that I was making. There's always someone who has some crystal ball that will predict the future, whether it's long term moving averages, trade deficits, predictions on inflation, debt levels, or whatever. Just because their crystal balls weren't the same as your crystal ball doesn't mean anything. You can make all the arguments you want for market timing, but unless you show some peer reviewed research that shows that the approach you're arguing for works it's not going to convince people who believe the abundant research showing the benefits of buying and holding index funds.
And I not only held through the 2008 crash, I held through the 2000-2003 downturn as well. I graduated in May of 1998, and have been in the market from then on (actually earlier due to a ~$5k inheritance that was invested for me). During the 2008 crash we "lost" multiple hundreds of thousands of dollars but we stuck through it and have been rewarded since then. If we have another crash I'll just be excited about another buying opportunity.
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Most consistently successful traders don't engage in predicting the market. No one knows what will happen next. The reason many traders fail is because they think they know what will happen next. Look at Bill Ackman - I don't care that he's still wealthy; he bought into his own predictions with other people's money.
If you think you have a strategy that beats the index long term, net of taxes and transaction costs, you are about to be a billionaire. Every bank on the planet will pay you to execute your strategy with billions and billions of dollars. Go forth and be successful! Come back and shower us little people with a little of your spare change after you cross the first billion dollars in profits.
No. The psychology of trading your own money vs. trading for a bank are vastly different.
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(https://g.foolcdn.com/image/?url=https%3A%2F%2Fg.foolcdn.com%2Feditorial%2Fimages%2F160162%2Funtitled.png&w=700&op=resize)
I'm not the only one that noticed that the predictions (blue) were positive every single year, am I? That should be enough to demonstrate how little the experts can understand the global economy. And if they can't, we little people definitely can't.
I mean to me this makes sense. In the long term the value of the market increases and there are more up years than down years. So if you're trying to minimize both the number of misses and how large a gap there is between your prediction and reality, the optimal strategy is likely to guess the market with grow about +6%* each time you are asked to make a prediction about the next year, with just enough noise in your estimates so that people don't realize you're just quoting the same number over and over again.
*Average return (not CGAR) of the stock market without dividends reinvested and without accounting for inflation.
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If you think you have a strategy that beats the index long term, net of taxes and transaction costs, you are about to be a billionaire. Every bank on the planet will pay you to execute your strategy with billions and billions of dollars. Go forth and be successful! Come back and shower us little people with a little of your spare change after you cross the first billion dollars in profits.
No. The psychology of trading your own money vs. trading for a bank are vastly different.
Why does the psychology matter? This poster is claiming a strategy for beating the market, based on moving averages, as if robotically following some set of mathematical rules will outperform the index in the long term. If your market-beating strategy is based on your "psychology" then I would argue it's not really a strategy at all. Gut instincts are not a strategy.
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If you think you have a strategy that beats the index long term, net of taxes and transaction costs, you are about to be a billionaire. Every bank on the planet will pay you to execute your strategy with billions and billions of dollars. Go forth and be successful! Come back and shower us little people with a little of your spare change after you cross the first billion dollars in profits.
No. The psychology of trading your own money vs. trading for a bank are vastly different.
Why does the psychology matter? This poster is claiming a strategy for beating the market, based on moving averages, as if robotically following some set of mathematical rules will outperform the index in the long term. If your market-beating strategy is based on your "psychology" then I would argue it's not really a strategy at all. Gut instincts are not a strategy.
Psychology matters in trading no matter what strategy you use. I may have missed it, but I don't see anyone saying their market-beating strategy was based on psychology.
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I don't see anyone saying their market-beating strategy was based on psychology.
You did! You said the psychology of following the supposedly market-beating strategy with other people's money is "vastly different" than following it with your own money. If it's truly a "strategy" then it wouldn't matter what the psychology is, it would work regardless of your mental state.
Unless the strategy is just "read today's financial news and then listen to your instincts about whether you should buy or sell" in which case that is not a strategy.
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I don't see anyone saying their market-beating strategy was based on psychology.
You did! You said the psychology of following the supposedly market-beating strategy with other people's money is "vastly different" than following it with your own money. If it's truly a "strategy" then it wouldn't matter what the psychology is, it would work regardless of your mental state.
Unless the strategy is just "read today's financial news and then listen to your instincts about whether you should buy or sell" in which case that is not a strategy.
Where did I say my market-beating strategy was based on psychology? Where did I say I had a market-beating strategy? I said the psychology of trading your own money vs. trading for a bank are vastly different. It is. And, a market-beating strategy for individual investors does not necessarily translate into a market-beating strategy for institutional investors.
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a market-beating strategy for individual investors does not necessarily translate into a market-beating strategy for institutional investors.
Can you elaborate a bit on this reasoning? I don't follow it.
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a market-beating strategy for individual investors does not necessarily translate into a market-beating strategy for institutional investors.
Can you elaborate a bit on this reasoning? I don't follow it.
Blueberries isn't following the thread of the conversation very well. First Cabaka claimed (https://forum.mrmoneymustache.com/investor-alley/i-cant-see-the-recession-yet-pass-me-the-glasses-recession-in-2-years/msg2185628/#msg2185628) he could beat the index with a moving average strategy. Then I responded (https://forum.mrmoneymustache.com/investor-alley/i-cant-see-the-recession-yet-pass-me-the-glasses-recession-in-2-years/msg2185660/#msg2185660) somewhat sarcastically that any such strategy that actually worked would surely make billions, because that's exactly what every trader in the world is constantly trying to find and execute. Then blueberry quoted (https://forum.mrmoneymustache.com/investor-alley/i-cant-see-the-recession-yet-pass-me-the-glasses-recession-in-2-years/msg2188080/#msg2188080) my response to Cabaka and said that Cabaka's moving average strategy might beat the market when Cabaka does it, but not for anyone else. Except I'm not sure blueberry really read through the entire thread and understood what discussion he was jumping in to, and appears to have just taken my comment out of context to argue against a different interpretation.
And that different interpretation is definitely arguable, if that had been the topic at hand. There are some strategies that small investors can use that big banks cannot (and vice versa, of course). But that's not the conversation we're having, and if blueberry were to actually read the thread before commenting and arguing about what it is we're arguing about (https://forum.mrmoneymustache.com/investor-alley/i-cant-see-the-recession-yet-pass-me-the-glasses-recession-in-2-years/msg2188164/#msg2188164), it would probably be a lot less confusing for everyone.
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It's interesting to hear people say the next recession won't occur until year 202x because - wait for it - the economy is currently growing at a fast pace. Are they aware that the definition of a recession is two consecutive quarters of negative growth, or that measurements from the previous quarter are not available until the next (and are then revised months later), or that most investors do not realize a recession is occurring until it is almost over, that stocks decline many months before a recession, or that growth does not necessarily slope downward for a few quarters to allow plenty of data to confidently draw a trend?
It is also interesting to hear predictions of continued jobs growth when unemployment is 3.7%, a record since the 1960s (that was followed by economic disaster in the early 1970s). Exactly who is going to work these new jobs?
It's simple linear extrapolation of current trends. A recession, like a correction, is a BREAK in the linear trends. That's why you're not going to predict it with currently available data*.
For me, FIRE is 4-6 years away almost regardless of the economic weather. I put my assets that were not locked into a 401k into protected put positions this summer, guaranteeing no worse than about a 5% loss in 2.5 years, at a cost of about 3%/year. I watched my 95% stock portfolio exhibit the volatility, and underperformance, of a 60/40 portfolio for a few months. In October, however, my puts made up for much of the hit. I referred to my IPS which forbids me from selling my puts at a profit unless the market has dropped 20%. So I'm holding everything, not sweating the correction, and still aggressively allocated to the S&P and Nasdaq. This portfolio feels great - most of the upside of stocks and very little of the downside, all while rooting for a market crash that is historically probable across any 2.5 year span.
Will I underperform a 100% stocks B&H portfolio over the next few years? Probably, but there is also a chance I'll overperform. This late in the game, I am more concerned about a bear market turning my 5 year career into a 10 year career.
That said, I don't advise going this route until the VIX gets back down to the 11-13 range. The implied volatility of options is high enough now that you'd lose a third of your hedge as soon as the panic passes. I mean, if you're about to capitulate and sell everything, but the puts instead! But otherwise wait until portfolio insurance is on sale. Do the math on the historical probability of a large correction and make that your top dollar, in terms of the cost of protecting assets.
Regarding moving average investing: could that be called "selling the dips"?
*I'll allow for one possible exception: evidence of massive asset bubbles that deviate from historic valuation metrics. Massive means exceeding historic valuation metrics by at least 50% and being a very widely held asset.
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a market-beating strategy for individual investors does not necessarily translate into a market-beating strategy for institutional investors.
Can you elaborate a bit on this reasoning? I don't follow it.
Individuals and institutions generally (not always) trade differently due to volume. I am not claiming a moving average strategy beats the market, but using that as an example, if a stock breaks the 50 day and your rules tell you to sell, you can move in and out pretty freely with 1,000-5,000 shares, assuming liquidity. 5,000,000? 10,000,000? Not as easy. And, if they have to follow an individual investor's plan that states they must buy back the shares at it passes the 50 day again, well, good luck.
Institutions can bid up a market in order to offload their shares, but they can get screwed doing so. And, because most individual investors can't bid up a market, I'm not including this as part of the plan.
(Edited to remove the word "yes", as it read condescending.)
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well, I'm going to dismiss the sarcasm; but i'll put some numbers up for you.
I estimate so far, I have saved around 50k in losses by going to cash on a percentage that I have and it will be around a 25k loss if it turns around and resumes the bull trend before I put that money back in a s+p index fund. certainly not going to make me a "billionaire" but I consider saving 25k pretty serious.
like you I also rode 2008 down before finding MA investing. if I could have limited my losses to 10 or 15% instead of the 48% drop and come back in 2009, I would not be a billionaire; but I would be retired or fire. yes, you will recover those loses, but you will not recover that time it took you to get back to even, it already will take me less time to be at even as I have reduced exposure. it took 6 years to get back to even from the 2007 high buying and holding. if you had followed MA; it would have been much less and your gains would be higher now as you would have lost less of your principal.
you keep buying and holding and be as sarcastic as you wish.
@Cabaka, you asked who held through 2008. Like many here, I did.
I bought in 2007 until fall 2008, mostly in 3 large increments. Then I held through the main crash (Lehman's collapse was a few weeks after the last increment), followed a few months later (early 2009) by a series of purchases in a different account. I clearly remember that my 45k investment from the 3 increments dropped under 28k at one point, but I thought it took me less than 2 years to get back near the 45k mark; seems odd that you needed 6 years.
Are you going to post your moving average strategy specifically enough that others can replicate based on publicly available data? And were you using that strategy when it took you 6 years to recover?
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Seriously, Cabaka, the collective sarcasm and discouragement you're finding here is not to shoot you down or humiliate you. The kind folks here are just pointing out one very serious, sensible point; that buying and holding index funds long term is the easiest and generally all-round best way to save up for FIRE.
The fact is that this strategy WORKS. It is tried and tested and it works. If you want to try and time the market, go right ahead, but don't say we didn't warn you when you get burned by your own arrogance a few years down the line.
sol is right - there are plenty of people that get paid millions per year to predict and analyse the market. If you're better than their degrees coupled with decades of experience and wisdom, then you must have superpowers. If you're the rain man of finance, then please enlighten us.
Personally, yes, I suspect we may have a recession within the next few years. Not because I've analysed anything, but because these things tend to happen in cycles and it has been quite a while now since the last one (and because of that sudden drop we had recently - that's not an encouraging sign.) However, I'm not going to pull out - I'm going to hold and keep investing. See, I could be wrong; we could be about to shoot up again. You cannot time the market, so don't try.
you were saying ?
moving average investing works and beats the mkt.
you all keep buying and holding, i'll keep my estimate of over 50k I would have had in loses by now by staying in and put it back to work when the MA reverses.
it took from 2009 to 2012 to get back you gains after the correction started in December 2007; that's 6 years you lost just getting back to even and I did that too; i'm not doing that this time.
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Seriously, Cabaka, the collective sarcasm and discouragement you're finding here is not to shoot you down or humiliate you. The kind folks here are just pointing out one very serious, sensible point; that buying and holding index funds long term is the easiest and generally all-round best way to save up for FIRE.
The fact is that this strategy WORKS. It is tried and tested and it works. If you want to try and time the market, go right ahead, but don't say we didn't warn you when you get burned by your own arrogance a few years down the line.
sol is right - there are plenty of people that get paid millions per year to predict and analyse the market. If you're better than their degrees coupled with decades of experience and wisdom, then you must have superpowers. If you're the rain man of finance, then please enlighten us.
Personally, yes, I suspect we may have a recession within the next few years. Not because I've analysed anything, but because these things tend to happen in cycles and it has been quite a while now since the last one (and because of that sudden drop we had recently - that's not an encouraging sign.) However, I'm not going to pull out - I'm going to hold and keep investing. See, I could be wrong; we could be about to shoot up again. You cannot time the market, so don't try.
you were saying ?
moving average investing works and beats the mkt.
@Cabaka - What data do you have to support this?
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Seriously, Cabaka, the collective sarcasm and discouragement you're finding here is not to shoot you down or humiliate you. The kind folks here are just pointing out one very serious, sensible point; that buying and holding index funds long term is the easiest and generally all-round best way to save up for FIRE.
The fact is that this strategy WORKS. It is tried and tested and it works. If you want to try and time the market, go right ahead, but don't say we didn't warn you when you get burned by your own arrogance a few years down the line.
sol is right - there are plenty of people that get paid millions per year to predict and analyse the market. If you're better than their degrees coupled with decades of experience and wisdom, then you must have superpowers. If you're the rain man of finance, then please enlighten us.
Personally, yes, I suspect we may have a recession within the next few years. Not because I've analysed anything, but because these things tend to happen in cycles and it has been quite a while now since the last one (and because of that sudden drop we had recently - that's not an encouraging sign.) However, I'm not going to pull out - I'm going to hold and keep investing. See, I could be wrong; we could be about to shoot up again. You cannot time the market, so don't try.
you were saying ?
moving average investing works and beats the mkt.
@Cabaka - What data do you have to support this?
I think Cabaka is trying to suggest that his moving average strategy predicted the 2.8% decline in the S&P500 since the Nov 1 post quoted above, and since the market is down since then his/her decision to go all cash that must mean the strategy is a magical secret sauce for always beating the market.
There's no arguing with that!
I've basically given up on arguing with market timers. Go ahead and do your thing, if you think you're smarter than everyone else. I honestly wish you the best of luck, and expect that some minority fraction of such people will succeed in beating the index. Just not most of them, not most of the time, and not on a dollar averaged basis. Personally I don't see the upside in gambling on a system that is statistically weighted against you. That's not how I got rich in the first place.
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Seriously, Cabaka, the collective sarcasm and discouragement you're finding here is not to shoot you down or humiliate you. The kind folks here are just pointing out one very serious, sensible point; that buying and holding index funds long term is the easiest and generally all-round best way to save up for FIRE.
The fact is that this strategy WORKS. It is tried and tested and it works. If you want to try and time the market, go right ahead, but don't say we didn't warn you when you get burned by your own arrogance a few years down the line.
sol is right - there are plenty of people that get paid millions per year to predict and analyse the market. If you're better than their degrees coupled with decades of experience and wisdom, then you must have superpowers. If you're the rain man of finance, then please enlighten us.
Personally, yes, I suspect we may have a recession within the next few years. Not because I've analysed anything, but because these things tend to happen in cycles and it has been quite a while now since the last one (and because of that sudden drop we had recently - that's not an encouraging sign.) However, I'm not going to pull out - I'm going to hold and keep investing. See, I could be wrong; we could be about to shoot up again. You cannot time the market, so don't try.
you were saying ?
moving average investing works and beats the mkt.
@Cabaka - What data do you have to support this?
I think Cabaka is trying to suggest that his moving average strategy predicted the 2.8% decline in the S&P500 since the Nov 1 post quoted above, and since the market is down since then his/her decision to go all cash that must mean the strategy is a magical secret sauce for always beating the market.
There's no arguing with that!
I've basically given up on arguing with market timers. Go ahead and do your thing, if you think you're smarter than everyone else. I honestly wish you the best of luck, and expect that some minority fraction of such people will succeed in beating the index. Just not most of them, not most of the time, and not on a dollar averaged basis. Personally I don't see the upside in gambling on a system that is statistically weighted against you. That's not how I got rich in the first place.
Or there's the alternative answer - we're being trolled.
I'll leave it up to the OP to see whether s/he can provide any sustenance to the claims made and any refutation to the arguments already given. But I'm not expecting much. Still, I love to be surprised and learn new things.
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Here is the kicker - every strategy that works is adopted by the majority. Then it stops working and is reduced to just rolling the dice.
Be that as it may - My bank was being weird about one of the ETFs I selected for my AA and will take it off the no-buying-cost list in Jan.
So I said fuck it, might as well buy the allocated funds for 2019 now while the rebate lasts. Because it does not matter when I buy as long as I do not run out of cash.
Maybe MSCI PACIFIC exJapan goes down 20% right after the transaction is executed on Dec 15th. Maybe it goes up like a starship in the first half of 2019.
It's not like markets are rational, there is only an uptrend.
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Seriously, Cabaka, the collective sarcasm and discouragement you're finding here is not to shoot you down or humiliate you. The kind folks here are just pointing out one very serious, sensible point; that buying and holding index funds long term is the easiest and generally all-round best way to save up for FIRE.
The fact is that this strategy WORKS. It is tried and tested and it works. If you want to try and time the market, go right ahead, but don't say we didn't warn you when you get burned by your own arrogance a few years down the line.
sol is right - there are plenty of people that get paid millions per year to predict and analyse the market. If you're better than their degrees coupled with decades of experience and wisdom, then you must have superpowers. If you're the rain man of finance, then please enlighten us.
Personally, yes, I suspect we may have a recession within the next few years. Not because I've analysed anything, but because these things tend to happen in cycles and it has been quite a while now since the last one (and because of that sudden drop we had recently - that's not an encouraging sign.) However, I'm not going to pull out - I'm going to hold and keep investing. See, I could be wrong; we could be about to shoot up again. You cannot time the market, so don't try.
you were saying ?
moving average investing works and beats the mkt.
you all keep buying and holding, i'll keep my estimate of over 50k I would have had in loses by now by staying in and put it back to work when the MA reverses.
it took from 2009 to 2012 to get back you gains after the correction started in December 2007; that's 6 years you lost just getting back to even and I did that too; i'm not doing that this time.
Sorry, pal, you can't take a period of one month or so where your tactic happened to net you a short-term gain over the index and declare de facto victory.
We are here to seek financial independence, not to amass as much money in as short a time as possible. It's not about bagging a few % here and there by hard work and analysis. It's about planning a future where your money is passively sustaining you.
Yeah, you may well be an eyebrow ahead of the index now. But how about you come back and speak to us in ten, twenty, thirty years? The litmus test on a tactic like this - especially in the context of FIRE - is its ability to stand the test of time, and in how reliable it is in continuing to produce passive income. I mean I don't personally want to spend all of my free time analysing stock prices and market trends; I've got better things to do.
So, to reiterate, and to repeat my earlier comment; You cannot time the market, so don't try.
And yeah, (s)he could be trolling us. They don't have many posts on this account, so it could be very likely. Again, one would like to think that people have better things to do than to troll a forum like this one - especially if they're committed enough to return to a post after a month to try and brag.
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Seriously, Cabaka, the collective sarcasm and discouragement you're finding here is not to shoot you down or humiliate you. The kind folks here are just pointing out one very serious, sensible point; that buying and holding index funds long term is the easiest and generally all-round best way to save up for FIRE.
The fact is that this strategy WORKS. It is tried and tested and it works. If you want to try and time the market, go right ahead, but don't say we didn't warn you when you get burned by your own arrogance a few years down the line.
sol is right - there are plenty of people that get paid millions per year to predict and analyse the market. If you're better than their degrees coupled with decades of experience and wisdom, then you must have superpowers. If you're the rain man of finance, then please enlighten us.
Personally, yes, I suspect we may have a recession within the next few years. Not because I've analysed anything, but because these things tend to happen in cycles and it has been quite a while now since the last one (and because of that sudden drop we had recently - that's not an encouraging sign.) However, I'm not going to pull out - I'm going to hold and keep investing. See, I could be wrong; we could be about to shoot up again. You cannot time the market, so don't try.
you were saying ?
moving average investing works and beats the mkt.
you all keep buying and holding, i'll keep my estimate of over 50k I would have had in loses by now by staying in and put it back to work when the MA reverses.
it took from 2009 to 2012 to get back you gains after the correction started in December 2007; that's 6 years you lost just getting back to even and I did that too; i'm not doing that this time.
Sorry, pal, you can't take a period of one month or so where your tactic happened to net you a short-term gain over the index and declare de facto victory.
We are here to seek financial independence, not to amass as much money in as short a time as possible. It's not about bagging a few % here and there by hard work and analysis. It's about planning a future where your money is passively sustaining you.
Yeah, you may well be an eyebrow ahead of the index now. But how about you come back and speak to us in ten, twenty, thirty years? The litmus test on a tactic like this - especially in the context of FIRE - is its ability to stand the test of time, and in how reliable it is in continuing to produce passive income. I mean I don't personally want to spend all of my free time analysing stock prices and market trends; I've got better things to do.
So, to reiterate, and to repeat my earlier comment; You cannot time the market, so don't try.
And yeah, (s)he could be trolling us. They don't have many posts on this account, so it could be very likely. Again, one would like to think that people have better things to do than to troll a forum like this one - especially if they're committed enough to return to a post after a month to try and brag.
i'm not trolling you all I just know how hard it is to change anyone's mind; so I post rarely and having seen the reponses I got when I first started posting in this thread; it was confirmed that even a board as serious about personal finance as this one was not going to have its mind changed.
again, I am not a market timer; I am a moving average investor and given these facts:
1 - the fed(and fed banks the world over) is raising rates and withdrawing liquidity
2- housing and auto sales have declined
3- there are reports of credit cards and loan defaults increasing
4- we are years into one of the longest recoveries on record
I am using the 50 day, 100 day and 200 day averages and when the 50 crosses the 100 day, your ears should perk up and 200 is a serious sign going down and up.
the 50 day moving average(ma) has now crossed the 100 and 200 day ma, it's fairly easy to see that it is most likely that 2019 will be a negative year for the market.
as mentioned before, it took you 6 years to get back to even from 2007 in 2012. that's 6 you all aged while your money did nothing. it's only 5 years of the past 10, you made any gains and by many accounts; most of those gains were helped by the Fed, you think it's going to happen just like that again ? you might read about the long depression that took place in the 1800s, 1873-1879. it could be that stocks don't triple again from here as they have from 2007 for 20 or 30 years, so you want to preserve capital and that's was MA investing does.
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again, I am not a market timer; I am a moving average investor
Lol. I'm not a racist, I just hate minorities. I'm not a murderer, I just kill people. I'm not a musician, I just play instruments. I'm not a forum user, I just post here.
I think you might be confused about the meanings of the words you're using.
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again, I am not a market timer; I am a moving average investor
Lol. I'm not a racist, I just hate minorities. I'm not a murderer, I just kill people. I'm not a musician, I just play instruments. I'm not a forum user, I just post here.
I think you might be confused about the meanings of the words you're using.
In fairness, I definitely fall into the "Im not a musician, I just play instruments" club.
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i'm not trolling you all I just know how hard it is to change anyone's mind; so I post rarely and having seen the reponses I got when I first started posting in this thread; it was confirmed that even a board as serious about personal finance as this one was not going to have its mind changed.
It's particularly hard to change anyone's mind when you provide no evidence, no analyses, no nada. Your argument boils down to "using the moving average obviously beats the market because i said it does".
We're all analytical types here.
i'm not trolling you all I just know how hard it is to change anyone's mind; so I post rarely and having seen the reponses I got when I first started posting in this thread; it was confirmed that even a board as serious about personal finance as this one was not going to have its mind changed.
again, I am not a market timer; I am a moving average investor and given these facts:
1 - the fed(and fed banks the world over) is raising rates and withdrawing liquidity
2- housing and auto sales have declined
3- there are reports of credit cards and loan defaults increasing
4- we are years into one of the longest recoveries on record
I am using the 50 day, 100 day and 200 day averages and when the 50 crosses the 100 day, your ears should perk up and 200 is a serious sign going down and up.
That's market timing. Call a spade a spade. You are a market timer.
There's nothing wrong with that, but we've shown you a great deal of analysis showing how hard it is to beat the market - so again, what evidence do you have that using a MA strategy will reliably beat the market?
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what evidence do you have that using a MA strategy will reliably beat the market?
None, because historically it hasn't beaten the market. Not long term, net of costs.
If it HAD beaten the market long term and net of costs, then every investment bank in the world would be using it, and the advantage would disappear. Moving average strategies are just the same flavor of chartist bullshit that gave us death crosses, candlesticks, and elliot waves. They prefer to call it "technical analysis" but it's all just market timing of different sorts.
The highest average return for market investors is maximum up front investment of all possible funds in 100% stocks at every possible moment, into a whole-index fund. Never delay investments. Never hold funds back for "dry powder". Never hold cash or bonds. You can do all of those things for reasons OTHER than maximizing your long term average return, but you have to accept that they will be statistically suboptimal choices in terms of maximizing your profits.
Listening to Cabaka say "I'm not a market timer, I'm a moving average investor" is vaguely upsetting, because it means he/she is not only making bad investment decisions, but also doesn't understand the fundamental theory behind the methods being discussed, or any of the academic literature that shows why these strategies are losers.
You can absolutely make money as a stock picker, if you know how to invest in companies that will be more profitable than average. Buffet did it, for example. But this is a skill that requires researching a company's products and markets and competitors and regulatory hurdles and supply chain and expansion plans, and understanding why you think they will be more profitable than average. This methodology has nothing at all to do with looking at a the 50 vs 200 day moving average of the whole market. You can sort of reproduce the same skillset on an economy-wide scale, if you think you know why certain market sectors or nations will outperform others over the coming quarters or years, but this is essentially what every single wall streeter is trying to do, and those guys have PhDs in finance. You are unlikely to be better at their jobs than they are.
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it took from 2009 to 2012 to get back you gains after the correction started in December 2007; that's 6 years you lost just getting back to even and I did that too; i'm not doing that this time.
6 years I can handle. We've gone much longer than that a few times (including dividends and adjusted for inflation).
https://forum.mrmoneymustache.com/investor-alley/10-years-of-negative-returns/msg2100467/#msg2100467
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If it HAD beaten the market long term and net of costs, then every investment bank in the world would be using it, and the advantage would disappear. Moving average strategies are just the same flavor of chartist bullshit that gave us death crosses, candlesticks, and elliot waves. They prefer to call it "technical analysis" but it's all just market timing of different sorts.
To suggest that institutions would be doing it if Internet Joe used method X and it worked for him only shows that you know very little about professional trading.
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If it HAD beaten the market long term and net of costs, then every investment bank in the world would be using it, and the advantage would disappear. Moving average strategies are just the same flavor of chartist bullshit that gave us death crosses, candlesticks, and elliot waves. They prefer to call it "technical analysis" but it's all just market timing of different sorts.
To suggest that institutions would be doing it if Internet Joe used method X and it worked for him only shows that you know very little about professional trading.
Why would you say that? The (very few) managers who have consistently beaten the market over 5+year periods are awarded near-mythical status in the financial world; Peter Lynch, Warren Buffet, etc. Their funds frequently get closed to new investors (Magellan), or become so large that (e.g. berkshire hathaway) that they need to gobble up entire companies just to move the needle.
I'm solidly with Sol on this one - you get a fund or a 'strategy' that consistently beats the market everyone will start using it. Given the ability to back-test such a strategy (and the fact that no one has provided any such analyses) demonstrates just howw shaky this claim is.
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To suggest that institutions would be doing it if Internet Joe used method X and it worked for him only shows that you know very little about professional trading.
Not "method X", but moving average trading. That's what Cabaka is claiming beats the market. That is definitely a strategy that professional investors could use just as easily as Internet Joe.
I have, in fact, previously highlighte (https://forum.mrmoneymustache.com/investor-alley/i-cant-see-the-recession-yet-pass-me-the-glasses-recession-in-2-years/msg2188189/#msg2188189)d (in this very thread, in response to one of your own posts) that there are some strategies that small investors can use that large firms cannot, and vice versa. Maybe you missed that part of the conversation? Maybe you're deliberately ignoring it? Maybe you're being a dick to a stranger on the internet?
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Why would you say that? The (very few) managers who have consistently beaten the market over 5+year periods are awarded near-mythical status in the financial world; Peter Lynch, Warren Buffet, etc. Their funds frequently get closed to new investors (Magellan), or become so large that (e.g. berkshire hathaway) that they need to gobble up entire companies just to move the needle.
I'm solidly with Sol on this one - you get a fund or a 'strategy' that consistently beats the market everyone will start using it. Given the ability to back-test such a strategy (and the fact that no one has provided any such analyses) demonstrates just howw shaky this claim is.
Volume and concentration are important factors. Using your example of Buffett; he's buying millions of shares and a retail investor is not. Buffett cannot buy and sell 163M shares of AAPL with the click of a mouse like you and I could with 500 AAPL shares, even if the percent of portfolio is the same (25% in the AAPL example).
Just using moving averages, 60M shares traded when AAPL sunk below its 200 day moving average this last time. How is Warren Buffett going to buy 163M shares back on May X, 2018 when it crossed the 200 day and then unload 163M shares on October X, 2018? It cannot be done without suffering a loss of profits, if not a total loss due to slippage, the ripple effect, and the tax implications. On the other hand, Internet Joe can move in and out easily on his 500 shares. Joe's end result would be around a 3% gain (assuming 25% of his portfolio, a $10 commission, and 30% taxes).
Professionals sometimes defend moving averages, which is likely why retail investors try it. If your plan tells you to always follow this guideline, no matter what, you will struggle to survive a year like 2018. In a year like 2017? I wouldn't be surprised if someone had results that beat the market.
Not "method X", but moving average trading. That's what Cabaka is claiming beats the market. That is definitely a strategy that professional investors could use just as easily as Internet Joe.
I'm not sure where the disconnect is, but institutional investors couldn't use market averages as a way to beat the market in the same way a retail investor could. I don't know the details of Cabaka's trading, nor have I audited his/her results. If I have missed Cabaka's detailed trading plan, that's on me and I apologize. If I haven't, my response is accurate.
I won't respond to hostility so if I ignored parts of the post or entire posts, that could be the reason. Sometimes I'm doing something else and missed pieces and sometimes my eyes play tricks on me and I miss a post that was there the whole time, but it just didn't register.
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I never understood the "you can't beat the market" argument. Let's say in the long run the market nets you on average 7% gain, are you saying that with a $10000 trading account, I can't consistently generate more than $700 every year? That's laughable.
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I never understood the "you can't beat the market" argument. Let's say in the long run the market nets you on average 7% gain, are you saying that with a $10000 trading account, I can't consistently generate more than $700 every year? That's laughable.
The market's long term CAGR is closer to 10% than 7%, and yes you certainly CAN do better than that in any given year. It's just that on average, no one does so consistently after taxes and transaction costs. Remember that there are thousands of full time professionals trying to do so, and even THEY can't do so.
You're basically saying "Let's say the average runner can run a six minute mile, you're saying that I can't run a marathon in less than 6*26.1=156 minutes?" I don't know, can you? Some people certainly can, sometimes, depending on the course, but your average runner definitely can't.
But I've long since given up on actually trying to convince people not to bet it all on themselves. If you think you can beat the market, folks, please by all means do so. As a kindness, we would love it if you would tell us what you're trading the day before you do it, because so far every single forum member who has allowed us to follow along as they "easily" outperformed the index has failed to do so. We've had lots of stories of "I did it last year" but so far no one has been able to do it in real time for us. And believe me, we've watched people try and fail with ten different "sure-thing" strategies.
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What are you talking about? Are you seriously comparing running a fast marathon to generating $700 off of a $10000 trading account?
Anyway I won't harp over silly philosophical argument. It's better to demonstrate it with real time trading example. I will gladly take up that challenge if you so wish
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Ok, Scar, the clock starts now. Let us know what you're buying/selling on Monday. We'll track you for, say, 5 years.
-W
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Snide, bordering on sarcasm, with a touch of arrogance. Classy.
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Snide, bordering on sarcasm, with a touch of arrogance. Classy.
I'll try one: The internets don't forget. Hopefully you put some of your 401k money back in the market and didn't miss out on the 50% run up in the last 3 years while waiting for the big correction.
Right now my 401k is 100% sitting in cash waiting for a big correction. I don't call that market timing. I'm calling it oh crap there's a bunch of dark clouds and I'm hiding in my house sleeping soundly under my blanket to the tune of that hard rain outside. I might even watch some cool Netflix movies while waiting for the storm to pass... Learn, educate yourself, deploy your capital efficiently. Beating the market is easier than you think. Pssh what is that, like 7%? C'mon
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Yup still hiding in cash/money market. But you brought up an entirely irrelevant point to the topic at hand...to prove a point of what exactly?
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Yup still hiding in cash/money market. But you brought up an entirely irrelevant point to the topic at hand...to prove a point of what exactly?
Really? Your 401k money has been in cash for the last three years? Ouch. I was expecting a reply along the lines of "Yeah, that one call was early, but with my market timing prowess I saw the double golden eagle inverted cross, jumped in with 3X leverage, and my 401k is up over 100% since then." Now I just feel bad for joining the crowd picking on you. Sorry about that man.
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Ouch? LOL with trading you identify an overbought area and sell into strength and even a few years ago the market was clearly overbought, just a matter of time before it corrects itself. Your investment strategy is long all the time no matter what and hope for the best. Nothing wrong with that as it has historically proven to work in the long run. But during time of correction, knowing how to trade down with the market(shorting) will net you even more profit and I highly recommend you look into that, good sir.
AND to bring home the point, with company matching contribution you think I really care what the market returns are within these last few years? Please. I'd even double down on saying that I won't ever put my 401k in the index again and just look for other options with more trading instruments where I'd take complete control over how my money is being invested. And please do join the herd and feel free to make snide comments as you're just proving my point.
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Ouch? LOL with trading you identify an overbought area and sell into strength and even a few years ago the market was clearly overbought, just a matter of time before it corrects itself. Your investment strategy is long all the time no matter what and hope for the best. Nothing wrong with that as it has historically proven to work in the long run. But at the time of correction, knowing how to trade down with the market(shorting) will net you even more profit and I highly recommend you look into that, good sir.
AND to bring home the point, with company matching contribution you think I really care what the market returns are within these last few years? Please. I'd even double down on saying that I won't ever put my 401k in the index again and just look for other options with more trading instruments where I'd take complete control over how my money is being invested. And please do join the herd and feel free to make snide comments as you're just proving my point.
Is the top in (https://forum.mrmoneymustache.com/investor-alley/top-is-in/50/)yet?
You are just speaking gibberish here, hiding in vague language without putting anything verifiable on the line. If you know exactly when a stock, sector or market will tank, you can make a fortune shorting, but if you miss by a few months you can lose your short. People have prognosticating the top since 2011.
Sitting in cash is one reason so-called market beaters so frequently are less impressive than their boasts. Keeping cash on hand allows them to pick up deals, but it's a constant drag. Buying and selling incurs fees and taxes. At the end of the day these chaps typically show what they've bought and sold and declare themselves to have 'beaten the market' but never-mind all the negative baggage.
Certainly some succeed, but year over year, decade over decade their numbers are few. If you want to be seen as one of the greats, put put your picks down in writing and as @waltworks says, we'll see how you are doing in 5 years time.
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This forum is generally a nice place.
This forum is not really about trading.
This forum is about investing, doing so mostly passively, to reap the benefits of of live choices that lead to a high personal savings quote.
Please reduce the hostility.
If you have very strong opinions on trading techniques and want to proof you are right, I suggest to do the following:
Write them down in a personal thread, log every transaction you make a second after executing, and perform the correct statistical tests periodically to check how much of your under-performance or over-perfomance relative to the risk-reward-ratio of an index of your choosing comes from chance/bad luck/ or your superior knowledge and method.
If you achieve over-perfomance over the time frame that matters to you, good for you. Most people here think it is unlikely, and that it is not the most important part of the journey to FI.
I personally do a bit of trading myself. I took outsized risks in 2018 with 5k € and was lucky, generating roughly 50% in gains. I would not do that with more money. I was 2% off the knock-out barrier on leveraged certificates twice. Adjusted for risk, I probably still under-performed.
Yes, it is unlikely that markets will continue overperfoming next year. But everybody knows the macro situation.
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I'll try one: The internets don't forget. Hopefully you put some of your 401k money back in the market and didn't miss out on the 50% run up in the last 3 years while waiting for the big correction.
Bwahaha! Good find, YttriumNitrate.
Another one bites the dust, I guess. But hey, Scar, you can still start from scratch today and we'll track how you do. The past is the past, right? You lost a lot of gains and dividends over the last 3 years but we'll forget about that.
-W
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I can't help but feel like we're missing another point here, that I'd like to raise.
Cabaka, with your moving average trading, how much more quickly do you think you can actually achieve FIRE than someone who lazily slaps, say, 70% of their income into an index fund every month and forgets about it?
Assume a very optimistic scenario; let's say you secure on average a 2% lead on the index every year. Ignoring the odds of doing this reliably year on year ad infinitum (which exponentially reduce every year you tack on), how much more quickly would you actually FIRE?
Now take into account the hours of your life spent analysing the market, trends etc. In other words, hours spent not pursuing hobbies, passions, or any kind of side-income that may have blossomed into a post-FIRE sub-career, or even helped to fund FIRE sooner in the first place. Compare that to your profit (meaning your gains minus the %age growth of the index for the given year). What hourly rate is this paying you?
*I will say that I don't fully understand what Cabaka is doing, and I don't profess to know how much better than the index they claim to be able to achieve - if it was mentioned earlier in the thread, then forgive me for not going back and reading it. I've got other things to do today. Furthermore, if there is anything I've missed, looked over or generally neglected in what I'm saying here, feel free to correct me. If you feel like my point is completely invalid and that I'm barking up the wrong tree, I won't argue.
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If you feel like my point is completely invalid and that I'm barking up the wrong tree, I won't argue.
It's not invalid. Jacob made the same argument way back on the ERE blog: the higher your savings rate is, the less you care about investment returns.
For example, it takes a healthy dose of stock market growth to turn a 10% savings rate into FI over a 40 year time frame. But if you're investing 90% of your income and living off of the other 10%, then you reach 25x expenses in just a few years no matter what the stock market does.
But some folks feel the need to try squeezing out a few extra percentage points each year, usually by increasing their risk of catastrophic underperformance. They're usually the same folks who are intent on a high-spending lifestyle to begin with, and have resigned themselves to that 40 year pathway to FI. Unfortunately, the longer duration accumulation phase that makes their work potentially worthwhile in the first place also substantially increases their chances of hitting the whammy at some point along the way.
There's no such thing as a free lunch, folks.
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- BIG SNIP -
But some folks feel the need to try squeezing out a few extra percentage points each year, usually by increasing their risk of catastrophic underperformance. They're usually the same folks who are intent on a high-spending lifestyle to begin with, and have resigned themselves to that 40 year pathway to FI. Unfortunately, the longer duration accumulation phase that makes their work potentially worthwhile in the first place also substantially increases their chances of hitting the whammy at some point along the way.
There's no such thing as a free lunch, folks.
With the GM layoffs, the recent dump in stock prices and this ominous discussion of a death cross, I wonder if we are presently wading into the whammy swamp. If we aren't going to have a recession, it seems the actions by our businessmen may force one. The catastrophic under performance may be upon us.
Ford is reorganizing
Some banks are cutting back - That's where the money is - don't see why they would cut back
And other actions,....
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The catastrophic under performance may be upon us.
Perhaps. But people on this forum have been saying that for the entire life of the forum. We've always known they would be right some day, but so far no one has been able to accurately predict when, because it hasn't arrived. I will dutifully add you to the long list of forum members who were sure we're headed into a recession. Maybe you'll be the one who's finally right?
If you turn out to be the one, please keep us apprised of when we've turned the corner too so we know when we're at the bottom.
I'll be over here in the corner doing absolutely nothing with my investments. I've ridden this wave up 400% since 2009, I'll happily ride it down 20 or 30% without even blinking. If we hit 40%, I'll start scraping around for extra funds to throw in, but until then I'm sitting tight and continuing to invest every week as usual.
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Now take into account the hours of your life spent analysing the market, trends etc. In other words, hours spent not pursuing hobbies, passions, or any kind of side-income that may have blossomed into a post-FIRE sub-career, or even helped to fund FIRE sooner in the first place. Compare that to your profit (meaning your gains minus the %age growth of the index for the given year). What hourly rate is this paying you?
I 100% agree with you that the time factor is an important consideration in all things; you can make more money, but you can't make more time. And in the case of trading, it's especially true for those who view it as a get rich quick scheme. For others, this may be their passion and they just might be financially independent because of it, which makes the time aspect worthwhile.
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I just made a $19,000 Roth Conversion after hemming and hawwing for a while. My income will be unusually low this year, sucks to reach into pocket to pay the tax but I finally just went ahead and did it.
Will be slightly annoyed if the market has another big drop as that will mean taxes I could have avoided doing by timing the conversion differently.
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Are we in the recession yet?
Definition:
"Period of general economic decline, defined usually as a contraction in the GDP for six months (two consecutive quarters) or longer. Marked by high unemployment, stagnant wages, and fall in retail sales, a recession generally does not last longer than one year and is much milder than a depression."
Contraction in GDP for six months - I don't think so
High unemplpoyment - no
Stagnant Wages - Mostly yes for a long long time
Fall in retail sales - No
https://www.cnbc.com/2017/12/14/us-retail-sales-nov-2017.html
I guess the recession is still on the way.
I like to look at oil prices too.
http://www.infomine.com/investment/metal-prices/crude-oil/6-month/
This looks good. Oil companies can make money and aren't causing major spikes to other businesses.
So,.......does this mean there is a chance that stocks will go back up and put me back on track to FIRE?
Or,......are we nearing the end of this nebulous ill defined "business cycle"? Are there sneaky people working behind the scenes to mess up the economy?
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While I'm not calling a recession, Pecunia, you have to remember that all of the numbers you're talking about are reported with a huge lag, and are subject to numerous revisions. You only know you're in a recession 3-6 months *after* it starts. So yes, we could (in theory) be in one now and we'd figure in out sometime in March or so.
-W
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Not all of them:
Oil price changes happen quick.
Retail sales - a month lag maybe?
Unemployment - could be a lag there. All of those GM layoffs haven't hit yet.
I guess I'll just have to wait and see. The market crept up yesterday.
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Again, you can't use any of those indicators to predict a recession. You can see that they go down (or up in the case of unemployment) *after* a recession starts, but they aren't useful for prediction. Basically nothing is (inverted yield curve folks will make a case for that, but I'm not totally convinced). So we could be in a recession right now, or we could be 5 years from one - no way to know. There is no point trying to make investing decisions based on, say, oil prices.
-W
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Some recent data regarding crude oil prices (blue line) and recessions (grey bars).
synopsis: there's little predictive power in either absolute oil price or direction on recessions.
(https://fred.stlouisfed.org/graph/fredgraph.png?width=880&height=440&id=DCOILWTICO)
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Snide, bordering on sarcasm, with a touch of arrogance. Classy.
I'll try one: The internets don't forget. Hopefully you put some of your 401k money back in the market and didn't miss out on the 50% run up in the last 3 years while waiting for the big correction.
Right now my 401k is 100% sitting in cash waiting for a big correction. I don't call that market timing. I'm calling it oh crap there's a bunch of dark clouds and I'm hiding in my house sleeping soundly under my blanket to the tune of that hard rain outside. I might even watch some cool Netflix movies while waiting for the storm to pass... Learn, educate yourself, deploy your capital efficiently. Beating the market is easier than you think. Pssh what is that, like 7%? C'mon
Yup still hiding in cash/money market. But you brought up an entirely irrelevant point to the topic at hand...to prove a point of what exactly?
"my 401k is 100% sitting in cash waiting for [the right time]."
If someone asked me what market timing is, this is the example I would give them. If this is what you think you should be doing, I'm not going to argue with you, but in your case you just need to own it.
If you still can't admit it, can you tell us what you think market timing is?
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Do stock prices necessarily fall in a recession? Of all the indicators, I saw in the definition, none of them directly say stock prices will fall. Do they always lag the onset of the recession? It's kinda like - "Hey guys. We're in the recession now. Sell your stock, take your gains and watch the share price drop."
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Do stock prices necessarily fall in a recession? Of all the indicators, I saw in the definition, none of them directly say stock prices will fall. Do they always lag the onset of the recession? It's kinda like - "Hey guys. We're in the recession now. Sell your stock, take your gains and watch the share price drop."
Generally, yes. Earnings go down, profits go down, companies go under, etc. The stock market doesn't have to follow the general economy as there's a huge amount of randomness inherent, but if you've got an actual bona-fide recession, I'd expect stocks to decline.
Again, though, not actionable information in any way.
-W
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what evidence do you have that using a MA strategy will reliably beat the market?
None, because historically it hasn't beaten the market. Not long term, net of costs.
see below.
now, I am not a professional with decades of experience like the company that posted this but I can certainly reduce portfoilios when the 50 crosses the 100 and then crosses the 200 as it has with the economic environment(rising rates, QT, declining mortgage apps, house prices and car sales, global markets declining) looks worse for the immediate future than better.
HOWEVER, IT IS NOT MY PLACE HERE TO ARGUE THE MERITS OF MA AND I AM NOT GOING TO DO THAT. I keep a calculation of the capital I have saved and that's enough of a winning argument to satisfy myself.
as you can see I have been here 18 months and have made 19 posts, so i'm not going to go back and forth.
what I am here to do is watch you all.
if this turns into a bear market, i'm going to watch who stays in and who bails as so many of you live on mmm and know what the mkt is doing and are largely buy and holders. I am told everyone is buy and hold until a point, will be interesting to see what that point is for the majority here(mine was the 50 crossing the 200) if the correction becomes serious like over 25%, I imagine at some point many will sell; will be interesting to see what that point is.
(http://realinvestmentadvice.com/wp-content/uploads/2018/05/SP500-12MMA-Switch-100000-Investment-053018.png)
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Um, with that amount of garbled grammar and poor spelling, not to mention the random ALL CAPS, you're not going to convince anyone. Proofread, son.
Also, 3% WR requires a cool $5 million bucks?!?! WTF? That's $150k a year!
Nice graph, though. Nothing like hindsight. Too bad I don't have a Delorean.
-W
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what evidence do you have that using a MA strategy will reliably beat the market?
None, because historically it hasn't beaten the market. Not long term, net of costs.
see below. [snip]
If it's not painfully obvious to others joining in this conversation why the graph @Cabaka posted is complete BS, take a close look at the recessionary periods. The portfolio holds with no losses. The clear implication isn't that you buy only when the moving average is favorable, but that you sell everything and hold cash, jumping back in at the start of each post-recession run-up. During the 2001 and 'great recession' the portfolio lost no value.
Got that, everyone? The 'secret' here is to sell everything before the market goes down, and then buy right before it runs back up. Simple!
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If it's not painfully obvious to others joining in this conversation why the graph @Cabaka posted is complete BS, take a close look at the recessionary periods. The portfolio holds with no losses. The clear implication isn't that you buy only when the moving average is favorable, but that you sell everything and hold cash, jumping back in at the start of each post-recession run-up. During the 2001 and 'great recession' the portfolio lost no value.
Got that, everyone? The 'secret' here is to sell everything before the market goes down, and then buy right before it runs back up. Simple!
Nuh-uh! That's the *conservative* wimpy version. If you *short* the market every time it drops, you do WAY better. Cabaka's method is for suckers.
With my proven system, you can retire on millions of dollars a year, with almost no effort. Send $50 for my newsletter.
-W
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Do stock prices necessarily fall in a recession? Of all the indicators, I saw in the definition, none of them directly say stock prices will fall. Do they always lag the onset of the recession? It's kinda like - "Hey guys. We're in the recession now. Sell your stock, take your gains and watch the share price drop."
Most stock prices will fall in a recession. The market is typically a leading indicator and will top prior to a recession.
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That graph is the best!! : )
Perfect market timing , super low safe withdraw amount, huge yearly spending, it ticks every crazy box and belongs in the forum section of mustachian wall of shame.
That is GOLD
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^ +1
Slow hand slow plan, I think Cabaka deserves a slow clap.
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Somewhat is Cabaka's defense, I think the blue/red stuff is measuring their "indicators" of moving averages blah blah, not the actual market prices. In no way am I endorsing this strategy, or this chart as accurate, but I'm not sure how much lead time the moving average crap gives you on recessions?
Just needs a couple more charts to fully debunk, I'm sure.
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Somewhat is Cabaka's defense, I think the blue/red stuff is measuring their "indicators" of moving averages blah blah, not the actual market prices.
Moving average "investing" is just another name for momentum "investing". We've had multiple momentum threads of various flavors on this forum, including at least one (https://forum.mrmoneymustache.com/investor-alley/playing-with-momentum/) that is still being actively followed as of yesterday. Just read through the Investor Alley subforum for a good laugh. Most of those strategies have been substantially more complicated than the simple version cabaka has promoted, focusing on rotating your investments between more than just stocks and cash based on recent performance, and we've even devoted a few tens of thousands of words to choosing the right look-back period and representative funds for "stocks" or "cash". So far, none of them have outperformed the index over the duration they've been tracked, though several have been abandoned as being obvious losers and at least one promoter has permanently left the forum in disgrace.
Given this history, the fact that anyone would have the balls to show up here and claim they can beat the market with a momentum strategy is king of amazing. That person is either woefully ignorant of the amount time and expertise that we've already devoted to this topic, or is just trolling for lulz.
I feel the same way when someone shows up and posts an "amazing new analysis" by someone like Kitces. Um, the people on this forum have collectively done a much more thorough job of exploring these options than he has. For some reason, people think a single individual like that has more authority than the collected wisdom of all the people here, because they found it on a pretty blog page and didn't bother to dig into the actual data.
I know that we sometimes come off as flippant and dismissive to newcomers with dumb ideas. There's a reason for that, though. The amount of expertise applied by this forum, both financial and technical and computational and theoretical, far outweighs anything any single person can offer you. That expertise is largely invisible to newcomers, though, so they tend to think we're a bunch of loony amateurs.
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I feel the same way when someone shows up and posts an "amazing new analysis" by someone like Kitces. Um, the people on this forum have collectively done a much more thorough job of exploring these options than he has. For some reason, people think a single individual like that has more authority than the collected wisdom of all the people here, because they found it on a pretty blog page and didn't bother to dig into the actual data.
I know that we sometimes come off as flippant and dismissive to newcomers with dumb ideas. There's a reason for that, though. The amount of expertise applied by this forum, both financial and technical and computational and theoretical, far outweighs anything any single person can offer you. That expertise is largely invisible to newcomers, though, so they tend to think we're a bunch of loony amateurs.
Well @sol if you'd just finish creating your own blog then posters could bring THAT to the forum as some amazing new financial wisdom no one has ever thought of before.
:-P