Is this stupid, brilliant, or neither? Timing the market

[mtn]

Let me preface this with the fact that this is only my “play money” that I’m talking about here. My 401k and IRA will remain more or less entirely within various Vanguard index funds.

I have been doing some “research” on the markets and past swings up and down, the timing of them, etc. Obviously I have come to the following, rock solid conclusion: I have no clue. Anyways, this money is tied up in things from VTI and BRK to healthcare to manufacturing, and everything in between. I’m thinking that it would be a good idea to slowly be selling these off—maybe 10% of it a month, starting with my healthcare stocks and slowly moving down the line to the others, and placing the proceeds in bond funds—there the money would sit until I either use it as part of a down payment, or until the next crash when I pump it back into stocks.

Does the hive think that is a good idea? Or is that trying to get too cute with the market? There is nothing that the money is earmarked for, it is all at once just my trying to be better than the index, my emergency-emergency savings (>6 months of it hitting the fan), and a part of a future down payment. If I were to lose all of it, the result would basically be I delay purchasing a house for another 1-3 years (and that is currently 2-9 years away from now).

[The Beacon]

It is neither. Most TA based strategies are considered Market Timing.  Some people say it does not work. Some people say it does.  A lot of hedge funds are heavily TA based or TA and FA mixed.  These hedge funds guard their systems like their testicles. So you won't find a working one on the internet.

Personally, I think it works. It is true that you can not predict the randomness in the market because the market is moved around by news. No one can predict news. So that is that.

However, human behavior (fear and greed) responding to news is predictable.  So a good trader only reacts not predicts.  Of course this sounds easy in theory. To make it work will take a tremendous time and mental strength. Most people will fail long before they find a working strategy and have the conviction to stick with it through the hardest and worst losing streak.

Are you willing to go through the hell before you see the possible haven that may or may not exist?

>>it is all at once just my trying to be better than the index

As you can see, there will be a lot of work involved to achieve that. So it is not a good idea for you to time the market in this case.

[Indexer]

I have no clue.

If you have come to this conclusion why are you looking at a new market timing strategy?


My advice is pretty simple.  Its the same advice you will find on Bogleheads or at Vanguard.  Figure out your asset allocation.  Now build a portfolio using broadly diversified index funds in a tax efficient manner matching your asset allocation. 

VTI, VXUS, BND... maybe some BNDX.  VTI and VXUS are the more tax efficient so use them to fill in any taxable accounts before adding BND and BNDX.  Its a pretty simple strategy, and it has been working fine for me.

Since the house is a shorter term goal you could earmark some of the money for that in a more conservative allocation, and I imagine the rest of the money that isn't earmarked is really for 'retirement.'  That will likely be a more aggressive allocation.

If you do feel like market timing, do it with 5-10% of your portfolio and leave the rest alone.  Your future self will probably thank you.