I (like a lot of investors) have been beat up pretty badly in the recent Clinton recession (I say Clinton beacause this got started overa year ago). Anyway, my portfolio is mostly individual stocks, and I can’t take the roller coaster rides we have been having (my portfolio has been fluctuating as much as +/- 12% per day!
Anyway, I recently read Mr. Dick Fabian’s book, wherein he expounds his philiosophy of timing the market-you basically sell your mutual funds when the DJ 39 week moning average generates a seel signal. You then park your money in money market funds, and wait until the market averages again indicate a buy. he calims that by doing this, you can generate a 20% return per year, even in bad years.
Apart from the experts (who steadfastly advise against trying to time the market), is there ANY evidence that the market avarages actually PREDICT a trend>? ( Like a downturn)? Hads anybody ever tried this method-if so, what were the results?
And, if Mr. Fabian is so sucessful, why does he have to sell a newsletter?
I recommend you read “A Random Walk Down Wall Street” by Burton Malkiel.
He makes a convincing argument against using technical signals to predict the market. Among other things, he points out that any publicly known, reliable market “signal” would quickly be erased by people trying to take advantage of it.
Absolutely right.
Some no doubt unwanted advice :eek:: buy index funds–low costs without the nickel & diming your broker imposes for buying individual stocks. And leave them alone so you don’t lose money on capital gains taxes.
And if you can’t take the ups & downs, maybe you should diversify into bonds or a money market fund.
As for a Clinton or Bush recession getting the blame for plunging stocks, I’d be more inclined to blame investors who bought over-valued tech stocks. But that’s just my opinion.
There is no such thing as “timing a market.”
Anymore than there is such a thing as beating the house in a casino. Yes, you may do it one time. You might even do it the next time. But, play the game long enough, and you will lose.
My god! If your portfolio fluctuates +/- 12%/ day, then you are in over you head.
Do you control your own portfolio or did your broker put you into it? If it is your choosing, then please do what the two previous posters advised. If your broker picked the stocks, then you need to get a new broker.
I’d be curious as to what you told your broker(assuming you have one) your objectives were.
I remember talking to some folks a few years ago who, upon my reservations about an overheated market (This was 5000 points away from Chairman Greenspan’s “irrational exuberance” speech) insisted that things were different now, that we were entering a new dynamic in the market as a result of the Internet. Sound familiar? Yeah, I thought so too. I can only imagine how much they have lost in the last couple years.
The problem is, the lines have become blurred as to what constitutes an Investment and Gambling.
What are your goals? How much risk are you willing to take? What’s your time frame? If the reasons you bought the stock were valid, then there’s no reason to sell right now, generally speaking.
Timing the market is not for the faint of heart. Stick with quality stocks, invest regularly, and hang on to them.
I hear all this stuff about index funds, brokers are evil, blah blah blah. Tell me something. What is it exactly about brokers you don’t like? Are you convinced that paying less in fees is exactly the same thing as making more money? Have you had a bad experience with a broker lately? The business has changed GREATLY in the last very few years, and most brokers don’t work on the same fee structure they’ve worked on before.
As a broker, I can tell you for sure that doing a trade for $300 is history, doesn’t happen anymore.
We do more financial planning and asset allocation rather than pushing ebay or schlocky stuff like that.
Tell me about it. Why are brokers seen as evil?
If your selections have always outperformed the indexes by enough to pay your fees, and always will in the future, good for you. Come laugh at me when I’m bankrupt & eating dog food.
After paying through the nose for buying & selling small company stocks & getting steered into a Limited Partnership by a broker, I educated myself. Maybe all the bad guys have given up, but I don’t see any reason to use a broker again. Now I do my own financial planning & asset allocation.
Technical stock analysis always seemed to me to be one of the most ludicrous things I’ve even come up against (next to textual analysis of literature). Do you know if you plot all the digits of pi, you end up showing the classic “head and shoulders” pattern at one point?
The best way to work the market is to remember it’s time, not timing, that makes you the money. Keep investments for the long run and you’ll probably be OK. Try to time things, and you’re gambling.
I can say from my limited perspective that brokers have been guilty of what’s known as “churning”; getting you to buy and sell securities for the sake of garnering commissions.
I’ve also seen them steer people into some very shitty securities, again, probably for the sake of commissions. In another, the company stock they sold was padding the preferred stock over ordinary shares. After a couple years, while the stock is taking a nose dive, they said something like “Well, if you’re uncomfortable about it, maybe you should sell.” Yeah. Fuck you, pal.
In todays Internet world, I just can’t see the point of a broker for the average investor. If you have serious bucks, say an investment portfolio in the high 6 digits or better, then a broker makes sense, at least in theory.
A confession: I do “market time”, sort of. I do a regression where the S&P is the dependent variable while time is the independent variable (obviously). Basically, I “sell”, which means not putting any more money in or finding a different use for my money, when the S&P goes more than one standard deviation above the regression line and stays there for a while. I “buy”, which means adding money to my mutual fund account and to the stock funds in my 401(k), when it moves more than one standard deviation below the regression line and stays there for a while.
To me, this is just playing the percentages. I have no idea of when the “break” will come, obviously, whether to the upside or the downside. But at least it defines when prices are high relative to the norm, and when they’re low.
For the record, they’re low right now, more than one standard deviation below trend. I’m adding to my stock-oriented accounts as a result.
Sorry you had a bad experience with a broker, there’s some scumbags out there.
If you expect to have anyone or anything ALWAYS outperform the indexes you’re setting yourself up for disappointment, and I understand people who want to do it alone.
The thing is, I talk to people all the time who think that it’s time to dump their current mutual fund when their share price hits the skids. Not good. If they picked the fund for the right reason, and their circumstances haven’t changed, then there’s no reason to sell. Growth funds have taken a giant shit lately. Yes, they have. Very volatile. Is that a reason to dump ALL growth funds? Even the ones that got beat by the S&P? Very short sighted. That’s buying high and selling low.
A good broker will address the issue, and advise. Maybe the fund manager changed, or the fund has changed its investment objective. If so, maybe it’s time to switch to a different one. If not, it’s time to do the hard thing and buy more. Maybe even sell the value fund that’s been doing fine this whole time and buy more growth to rebalance the portfolio.
Were you maybe investing in things that you didn’t understand or that you didn’t have the risk tolerance necessary? A good broker would help you pick things you can stomach.
Fee based brokers are a good way to go. Much less expensive, and it puts you on the same side of the table. They don’t get paid for churning your account, they get paid 1-3% of your account’s value to take care of everything. Trades, mutual fund sales charges, bookkeeping, tax records, checking, money market… everything.
It’s my personal opinion that investing in individual stocks when you have less than 7 figs in the market is a bad idea. It’s a second job. It’s probably easier to invest that time in getting better at your job and make more cash that way than it is to buy the WSJ, keep MSNBC on 24/7, and try to beat Peter Lynch.
I like the disclaimer on one of the commericals, it says it all, 'Past performance is not indicative of future earnings"
Ok, I admit whether an investor needs a broker depends on how savvy the investor is. Some investors need a certain amount of hand-handholding. And people who churn their own portfolio (there’s no shortage of them), or buy high and sell low, or keep everything in CDs could certainly do with a little advice.
**Scientologist **'s advice strikes me as right on the money. I didn’t realize that (some?) brokers had gone to a fee-based system. Are fee-based brokers any different from financial advisors?
…thanks for the replies. I guess I did not state my original question clearly enough. What I asked was, “Is it possible to MAINTAIN profitability, by switching in and out of mutual funds”? Suppose for instance, that you were to sell all of your funds when the moving DJA trends down for a specified period 9say 2-6 weeks). You would then shift your funds to a money market account, which will always pay you some positive return (not less than 3.5-4%. If you f9ollowed this regimen, you would always come out ahead (except for the loads/expenses of the funds you were in). Has anyone performed a historical analysis to see if this works? granted, you might miss some of the “highs” when the Dow is trending upwards-butit seems to me you would always have some positive return.
Right now i am holding my stocks; as soon as thy reach what i paid for them, i will sell all and try this-will report in a yaer from now on how i fared!
Chartists should be taken out and shot. Past performance is not indicative of future performance.
I was an institutional equity derivatives guy in a bear market for most of my 8 years in the biz (can you say Japan or Asia?). Very few of the people broking, certainly in in the institutional side have experience with a bear market.
Bear market investing is contrarian big balls stuff. You buy when the entire market is selling. If you’re correct, you get in within 10% of the bottom. If you’re wrong, you can lose 50%. The key is to average in. It’s amazing how analytically sharp you become once you put say 10% into the market. It drops 10% and you have to make a trading decision and put more money in, and so on. Put in money you can lose, and do not bet your retirement or juniors college education on it.
Come on people, wake up and smell the roses. Everyone in the business has a vested interest in presenting a opotimistic buy scenario, even when the market is going to hell. Been there and done that and helped destroy the economies of Thailand and Korea. Analysts haven’t haircut 2002 earnings and god forbid they should look out to 2003. No F’in’ way, “yep, we’re at the bottom because we have dropped xxx from the peak.”
Bear markets can fall a heck of a lot further than anyone thinks is “reasonable.” And just because markets have fallen 50% from some dumb artificial bull market level is zero insurance they wont fall another 50% or worse. Look at the Nikkei
“Past performance is not a guarantee of future performance.” Just because the performance of a fund has experienced a downward trend over the past 6 weeks doesn’t mean it will decline again tomorrow. Similarly, just because a fund experienced an upward trend in the recent past doesn’t mean it will increase in value tomorrow. And I don’t have a cite for you, but I seem to recall reading (maybe it was A Random Walk, not sure) that when considering past bullish periods, the largest gains tended to occur at the beginning of the run, percentage-wise.
But to use your example of two investment options, a DJA tracking index fund and a money market fund, say you stick to your plan; buy the index fund when the fund shows a 6 week rising trend (to minimize trading fees) and sell when it shows a 6 week declining trend. ‘Time it right’ and you’ll do better than the DJA; ‘Time it wrong’ and you’ll do worse; no big surprise. However, if you’re ‘right’ half the time and ‘wrong’ half the time, you should actually end up faring worse than if you just sunk your money into the index fund and ridden it out; you’d have lost all your trading fees.
It sounds like you want to secure the potential gains that the stock market has to offer while holding some of the security and stability a money market fund offers. There’s nothing wrong with this, but for the long term investor, a better way to manage this has historically been through asset allocation, not market timing.
By no means answering the question in this thread, but for those investors who want to know more but don’t have an honest broker, here’s an article from the L.A. Times that strikes me as pretty level-headed. With the caveat that those who worry when stocks take a dive ought to think about having a diversified portfolio all the time.
This is the way the industry’s trending. If you’re dealing with a relatively new broker, with maybe 1-3 years’ exp, you’re probably going to be on a fee base if he’s smart. Who wants to pay $300 for a trade when etrade is like $7 or whatever?
I MIGHT be a financial advisor/fee based broker myself, but the compliance laws in the business would prevent me from identifying myself as one on a message board, so I’d never do that. Nope, not me. I’d much rather be on a fee than a commission because it takes away some of the client’s idea that I’m making a recommendation for ME rather than HIM. It works.
Here’s a question for the guy who wanted consistent profits on his stocks. What is it you’re trying to accomplish? Are you retiring in the next couple of months/years or are you just volatility-adverse? Are you in a position to average into the market on a consistent basis?
Why not stick with bonds if the consistency is what you’re after?