Note that thinking that now is an especially opportune time to buy is itself … Market timing!
Yes. I read somewhere that if a mutual fund makes 10%, its typical customer will get only 8% — because the customer has attempted to time his buys and sells of the fund! HOLD is a better strategy than BUY or SELL for amateur investors simply because it means fewer decisions. All trades by an investing amateur are, on balance, odds-on to be wrong!!
That’s why I own JNJ instead of the better-returning LatestWhatever.com. I can keep my eyes closed! Once every few years I check if the local 7-Eleven is still selling Tylenol. (And my coronary stent — manufactured by a JNJ subsidiary — does still seem to be working.)
No single stock is safe. When I was a kid Bell Bonds were listed right under government bonds in the NY Times since they were the most stable investment around. No longer.
Index funds are good choices, for those with limited amounts of money, but when you have a lot you should diversify further into bonds and perhaps some foreign markets.
I know someone who worked at IBM. He had most of his 401K in IBM stock, which used to be safe. He got laid off at the same time IBM stock tanked, so he was doubly screwed.
This is the complete opposite of rational investing. Your first investments should be in cash, almost zero reward but in FDIC insured safety. As you acquire more assets you can face more risk and can branch out into bonds, ideally bond funds. Low volatility but low reward. As you acquire even more assets you can start moving money into stock funds.
If you have only a limited amount of money you don’t belong in the stock market. Never put money that you can’t afford to lose in equities. That’s probably why you’re so determined to time the market, you’ve got more in there than you can afford to lose. Any money you expect to spend in the next decade should be in either cash or bonds. When you have ten years worth of spending in those vehicles it’s time for index funds.
There are hundreds of books available at Amazon you can buy cheaply. Tell you what, find one proper source that defines market timing as you did. In the real world, unlike message boards words have somewhat consistent meanings. Here is one cite on market timing.
My recommendation no one, aside from you considers to be market timing. As it’s not contingent upon anything other than you having money you can afford to invest. It doesn’t care what the market is doing. Thus it’s not trying to time anything.
Anyways, Humpty Dumptyism while fun in the Pit and among the ATMB rulers is actually harmful when applied to real life investing. Would you seriously advise anyone in your family or friends that time in the market or buy and hold is identical to market timing? That’s real advice you’d give?
That’s now how I read initially it. The money I intend to spend in the next decade is being earned today and over the next decade. The money I’m putting into my 401k is money I intent to spend in 30 years. If I were retiring tomorrow, a lot more of it would be in cash and bonds than is reflected by my current allocation.
But that last sentence is damning:
Goes to show the value of free advice on message boards.
Although wagers are no longer allowed here at SMDB, suppose hypothetically we were to fashion a bet on “who is right” here. I challenge you to construct and present a very carefully written unambiguous sentence which you think embodies a truth that discriminates between your view and mine; i.e. a sentence to which you would answer True and I would answer False (or vice versa).
Note that I offered no opinion on whether Buy, Hold or Sell is the proper policy right now; my comment was about the meaning of “Market Timing” and how views on that timing might be applied right now.
Maybe we’re in agreement, and are just in a semantic trap.
Who in the thread was recommending NOT to diversify? It certainly wasn’t anyone laying out a “safer” policy.
And the principles of diversification mean that if your career success is dependent on the success of Industry X or Company X, them your stock portfolio should focus on Industries Y and Z for some Y≠X and Z≠X. This is in Chapter 1, I think.
No, cash and bonds go in a 401k, and I’d recommend money that you don’t need for ten years, not ten years worth of savings go into stocks. If you’re steadily employed and have six months worth of spending (not income, but spending) in an emergency fund then start your investments.
There are three kinds of money, short term, that you need in the next two years, medium term that you need in years three through ten, and long term that you don’t need for a decade. If you make more than you spend and are confident enough in your income you don’t need any more than the emergency fund to go 100% in a stock index fund.
If you have to worry about periods of unemployment and having to tap your savings to make your monthly nut you need to have enough capital so you can weather a long recession without having to sell in a downturn. Hell, I’ve been through six recessions in the last 50 years and I never had to worry about having to sell my stocks for a pittance because I always waited it out.
I would say the chances of a recession are pretty high. We’re barely weeks into an outbreak that has barely made landfall in most major economies outside the United States, and we’ve already seen some pretty wild stock market rides.
What the bears are predicting is industrial supply chain disruption. What they’re also going to start confronting as well is the reality that people are going to hunker down inside their homes to try and wait this disease out. And that means a major loss of consumption. So until health agencies can develop better testing and some vaccines, they’re going to struggle to gain the confidence of ordinary people, which means that a recession is inevitable - and I think we’ve not seen the worst of the corrections.
What is less certain - and in my mind more ominous thanks to some of the idiots at the controls - is how governments are going to react, and what the consequences of that will be. When the president of the United States claims that a global pandemic is a Democrat hoax, a conspiracy by his political opponents to bring him down, I think you already have your answer.
Politicizing the response was a disaster for China, and it will be a disaster for the United States if this disease doesn’t somehow slow down on its own.
I moved my IRA into cash last November. I missed a little on the upside, but saved a bundle in the coronavirus selloff. Nobody can time the market perfectly, but I had a feeling something like this was coming. Too much irrational exuberance.
And I stand by that. Goes to show the value of reading the entire post. If you don’t expect to spend anything from those investments of course it can immediately go into stocks.