Author Topic: Talk me out of timing the Australian market?  (Read 3016 times)

englyn

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Talk me out of timing the Australian market?
« on: March 05, 2015, 09:18:52 PM »
I have a lump sum to invest. I was planning to put it in VAS (Vanguard Australian Shares ETF). Trouble is, VAS/ASX300 is lurking around record highs since mid Feb. Much as I'm convinced market timing is a terrible idea, I can't get my head around dropping the sum into the market being a good idea right now, either.
Anyone know what the heck is going on with the Australian market right now?
Convince me to just get on with it?
Suggest something else?
I also have some ARG (Argo low cost managed fund ETF) which historically does slightly better than VAS for only very slightly greater fees. And it's not looking quite so overpopular right now, so I would be very tempted to put some in there instead, except that its current share price is > Net tangible assets ($8 > $7.92) so it's also overpriced.

bigchrisb

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Re: Talk me out of timing the Australian market?
« Reply #1 on: March 05, 2015, 09:25:53 PM »
Nothing wrong with the old school LIC's in Australia.  I'd put AFI, ARG, MLT, BKI and CIN in this group (I own shares in all of these).  They are fairly passive funds, with low (below 0.2% MER) costs. Sounds like you already understand the issues around premium/discount to NTA too.  I'd view these as an acceptable substitute for index funds in Australia - particularly if they are trading below NTA.

On market timing, like you I struggle with forcing myself not to try to time the market.  I keep trying to do so, and tend to get it wrong - I sold half my stake in CSL around the $55 mark - after all, it had returned almost 100% in the past 18 months, and looked expensive.   That was a great move (sarcasm).

Maybe go with averaging in over a period with some dollar cost averaging?  That way you are hedging your bets. 



dungoofed

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Re: Talk me out of timing the Australian market?
« Reply #2 on: March 05, 2015, 10:05:40 PM »
The theory says that lump sum beats dollar cost averaging on average, and the best time to lump sum is today.

Of course, you'd like to avoid being the outlier that puts their lump sum into the market the day before it plunges.

Further to what bigchrisb said above, you might want to buy a little gold or something else to hedge against what you think might happen, or research individual stocks to look for value. Also, if you are working and committed to putting a chunk of your salary into the market every month or so then this also takes the pressure off investing a lump sum today.

Sparkie

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Re: Talk me out of timing the Australian market?
« Reply #3 on: March 05, 2015, 10:13:58 PM »
I'm in a similar boat.  I've settled with the knowledge that no one can predict the future so do whatever helps you sleep at night. I have a wodge of cash to invest but won't do it now. If I miss out on some gains, so be it.

Also, how's your big picture situation? Whilst I have a few hundred thousand sitting in cash (earning 3-4%) which most here would deem unproductive, I'm ok with it considering my bigger picture. I've got about $350k in super (high shares exposure), and my house is paid off, so have largish property exposure. Also got a bit of gold etc.

So all in all, I've got a mix I'm happy with. I'll buy some ETFs down the track, but I'm happy sitting out for now. If the market keeps on up, my super will benefit. If it drops, I'll deploy some cash. And I'll sleep ok in the meantime

FFA

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Re: Talk me out of timing the Australian market?
« Reply #4 on: March 05, 2015, 10:33:27 PM »
Personally I'd say market timing is not inherently a bad thing. I believe it is possible just don't be fooled to think it's easy, in fact it's very hard.

But also how do you view the lump sum, I mean the timing of it is also purely random. Just because you won the lottery today, you should invest it all today? IMHO that is more like market timing. I would see a default plan as investing rate able chunks over 3-12 months depending the size of the lump sum versus your overall portfolio. This to me seems a sensible base case (ie the dollar cost avg already suggested). In my mind, after you define such a base case, any faster or slower approach I would call market timing. I'm sure I will cop some criticism for this since market timing is a hot button on this forum, but that's my opinion FWIW...
« Last Edit: March 05, 2015, 10:34:58 PM by FFA »

potm

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Re: Talk me out of timing the Australian market?
« Reply #5 on: March 05, 2015, 11:47:01 PM »
Not a big fan of LICs when they are trading above NTA, and that's not even considering the substantial deferred tax liabilities.

englyn

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Re: Talk me out of timing the Australian market?
« Reply #6 on: March 05, 2015, 11:55:19 PM »
Wow, thanks for all the thoughtful responses.

Trouble is, as you said dungoofed, the theory says that lump sum beats dollar cost averaging on average - and in a way dollar cost averaging is a form of market timing. And yet, I do not want to be that outlier!

Why would the size of the lump sum vs. my overall portfolio make a difference to the plan? (~14%, as it happens)

I certainly am working and committed to saving a chunk every month (very approximately 1% of portfolio), though I have not at all committed to a plan of what to do with it. It's accumulating in a 4% cash account until I work it out (or buy chunks of various Vanguard ETFs at random times because I know they're going to be in the answer somewhere and I can rebalance later).

At 31 years old in a well paid career I enjoy, I don't see much merit in keeping any asset allocation in cash. I'm prepared to take the risk of working a couple more years (or going back to work for a couple of years after ER) in the case of terrible market performance in the late years of accumulation / early years of ER, as a tradeoff for the statistically more likely scenario of shares performing better than cash enabling earlier ER.

My most likely dollar cost averaging scenario would be to put half in now, half in 2-3 months (or earlier if something that looks like a market dip comes along). It's not a large enough sum to be worth the brokerage of splitting it into more chunks, I think, plus I will have future chunks coming in from saved working income anyway. However, every time I've done that so far, I've regretted it, because the market has gone up. Would this be the exception? Bah.

englyn

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Re: Talk me out of timing the Australian market?
« Reply #7 on: March 06, 2015, 12:38:43 AM »
After all that, I discovered that VTS and VEU were unexpectedly at a price I was willing to pay. I already knew I was skewed a bit too heavily to Australian shares.
Orders placed, problem solved, DCA/timing avoided.
Thanks everyone, your advice helped. Best time to lump sum is indeed today, and now that I don't have to figure out what to do anymore, I will sleep better.

englyn

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Re: Talk me out of timing the Australian market?
« Reply #8 on: March 06, 2015, 01:04:35 AM »
Sadly, the reason the prices were unexpected were because I'd read something wrong. Still, there seem to be no valid reasons to cancel those orders - it just got me over my hesitation to do what I knew I should've been doing in the first place.

marty998

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Re: Talk me out of timing the Australian market?
« Reply #9 on: March 06, 2015, 01:34:38 AM »
Invest now because in 7 years time CBA will be $200 a share? Westpac and ANZ will be $75 a share?

You know it's inevitable lol.