Market Timers (kinda) Anonymous

[nawhite]

Hi, my name is nawhite and I time the market.

I do it by paying off my ridiculously low interest student loans instead of investing in my taxable account (all the tax advantaged are still getting funded with DCA'ing). I just paid off a 2.1% student loan that was about to drop to 1.85% in 6 more months. The analytic part of me is kicking myself but I feel better by saying the market is overvalued. I think that makes me a market timer and I can't shake the feeling. Its taking some of the thrill off of the feeling of paying off debt.

[RFAAOATB]

compared to most investing in a stock bond mix, I am heavily invested in stock tracking funds which is quite aggressive.  Paying ahead on low interest loans is where I am conservative.  After all if disaster strikes, having the low interest loan paid off means you need less income to survive.  There's always the benefit of simplifying your life and not letting those loan companies have any more of your money than necessary.

The strategy you have for yourself should be based on your level of risk assessment and aversion.

[jstash]

I'm in a similar situation. My student loans are separated into groups of 2.2% and 6.65%. I'll have the 6.65% group paid off in a few months, but I'm going to let the rest ride at minimum payments and invest the extra. The markets are high, but I still think I'll be able to get a more than 2.2% return over the long term.

[bigchrisb]

Ditto here.   I've gone from highly leveraged to stocks (as in 250% stocks in asset allocation) to about 95/5 stocks/cash.  I struggle to see the benefit to being leveraged into stocks at the moment, and have been building up that cash reserve.  Its driven in three parts:
- Partly because as I've gotten a larger stash, I'm more conservative about losing it to margin calls (a valid change in asset allocation / risk profile)
- Partly because I want to buy a house at some stage in the mid term (a valid change in investment horizon)
- And partly because I'm struggling to justify valuations after a strong run-up, and want a war chest (pure market timing)

I'm getting a bit bored with it though - the slow grind higher from the markets has been excellent for my net worth, but not so stimulating!  I suppose that should be a good thing?

[DoubleDown]

I'm getting a bit bored with it though - the slow grind higher from the markets has been excellent for my net worth, but not so stimulating!  I suppose that should be a good thing?

Yeah man, you've done well, and if you need some stimulation I suggest an exciting hobby. The goal of investing is increasing net worth, not excitement, right?! ;-)

This generated excitement, but I don't recommend it!

http://www.youtube.com/watch?v=dwpfSkB8nls

[bigchrisb]

And in typically style as to why I try to avoid timing the market, after saying I think its overvalued, my portfolio shoots up another 2% ($25k)...  Again, lazy buy, hold and reinvest the dividends seems to be the ticket...

[Scandium]

I recently got an extra $35K to invest. And even though I have no problem "staying the course" and continuing with my 401k and monthly deposits, I'm  a bit hesitant to dump all of this on at this time. Everything I read goes on about how the market is overvalued. Must be something to it right..? Maybe I should put some of it towards the mortgage?
On the other hand; if everyone says it's a bubble, it's not a bubble.

edit: I know that statistically/historically/whatever I'm better of dumping everything into the market right away. It's just a struggle between my rational mind and the part that thinks "if I only wait X months it will drop and I will be super smart"...

[Roland of Gilead]

Student loans are a yoke you can't get rid of in bankruptcy (some of them at least).  I have no problem with someone paying those off no matter how low the interest rate, unless they are close to getting them forgiven due to length of service or something.

[brooklynguy]

Hi, my name is nawhite and I time the market.

I do it by paying off my ridiculously low interest student loans instead of investing in my taxable account (all the tax advantaged are still getting funded with DCA'ing). I just paid off a 2.1% student loan that was about to drop to 1.85% in 6 more months. The analytic part of me is kicking myself but I feel better by saying the market is overvalued. I think that makes me a market timer and I can't shake the feeling. Its taking some of the thrill off of the feeling of paying off debt.

Do you consistently pay down your student loans in lieu of investing in the market?  If so, you are not a market timer (but you are having market timer thoughts by feeling grateful that you are not investing in an overvalued market.)

Or do you alternate between paying down your debt and investing in the market depending on your perception of how over/undervalued the market then is?  If so, then yes, you are a market timer.  But the first step to recovery is admitting that you have a problem, which you have now done.  Only 11 more steps to go!

However, even if you are a market timer, you should not let it take away the thrill of paying off your debt.  As MMM has said, it's a win/win choice.  Even if you let your market timing propensities make the choice for you, you win either way!

[nawhite]

Do you consistently pay down your student loans in lieu of investing in the market?  If so, you are not a market timer (but you are having market timer thoughts by feeling grateful that you are not investing in an overvalued market.)

Or do you alternate between paying down your debt and investing in the market depending on your perception of how over/undervalued the market then is?  If so, then yes, you are a market timer.  But the first step to recovery is admitting that you have a problem, which you have now done.  Only 11 more steps to go!

However, even if you are a market timer, you should not let it take away the thrill of paying off your debt.  As MMM has said, it's a win/win choice.  Even if you let your market timing propensities make the choice for you, you win either way!

I currently pay off the student loans consistently as I didn't start down the MMM path until about 2011/2012, but if there were another major market correction (20% is the threshold number I use currently in my head), you can bet I'd switch over to investing vs debt. I guess that makes me a market timer. You're absolutely right though, its not like either choice is a bad one.