Jaszbo
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SkyPilot
"Jazbo, what would define “success” for you?" in two words financial freedom
"Buy and hold strategy only works if you can retire during an up cycle." This is so far from the truth. I have a buy and hold, but change my allocation based on age in general. If you are reffering to the TSP, then I can see why you feel that way. Most people did really bad, but what can you expect. Some people love, love love the TSP. What is there to love unless you like the Total stockmarket index fund and the Total International index fund? If both do bad, your most likely going to do bad. Imagine you are in retirement and we have a crash for 5 years and half your money disapears. It's very difficult to tell when the market is going to rebound, becuase some quarters are up and some are down and 2003 most people were too scared, but what do you expect after 2000,2001 and 2002.
Just to let you know I have index funds in my Roth IRA and if you take the years 2000,2001 and 2002 I was not down. I had about a positive 5% give or take on average in these three years. Was it great, no, was it bad...not really. For me having a 5% return in 2000-2002 was better than the -10%, -12% and -22% and most timers did a lot worse than this, becuase if you look at data you cannot time it exactly and if you do, you can't do it everytime.
I think most people can agree as others have posted who even believe in timing the market that only 20% of market timers can beat the market average on any given year. Some time the definition of a market timer changes though for what people think market timing is. If a company is doing well and it's on the news and I buy a stock from that company that to me is not market timing at all.
Vanguard a few years ago had data that they accumulated on every single one of their funds. They displayed the average that each fund made over the past 5 years and then they displayed the average that each investor made over the past 5 years. The average investor was lower than the average of all the funds. The article explained that the average investor does worse than the market, because of some news they hear or some stragety instead of buying and holding.
I remember in 1999 there was one single day that the market returned 2% of the entire year. The article was illustrating that if you didn't time the market just right and you weren't invested that single day your return would have been 2% less, so hopefully the market timers were timing it just right that day.
I do realize that there are some investor who are succesful timing the market, but they are a minority. Also they don't do as good in the long run. I wish people would stop comparing themselves to the 20% of people who do beat the market. These 20% are people who went to college at least 4 years if not 8 years and then they work for 8 hours a day 5 days a week and they have been doing it for 40 years. Does this sound like the average person here who's claiming they can beat the market and that timing works?
If you can't follow these 10 rules of investing, then I would suggest the L fund http://www.fool.com/portfolios/rulemaker/1999/rulemaker991008.htm
Read this article also http://www.betterinvesting.org/articles/web/4747
It states:
Don't try to time the market. It does not work. There's a zillion studies which document this. Don Philips of Morningstar told us this very thing over lunch today when he said, "We have not discovered a single fund manager who has been successful using exclusively price charts over time." He told us that timing the market does not work. Trying to time price movements has been shown in tons of studies that this doesn't work. Miss the best 50 months over a 62-year period, your average return on the S&P would be negative 11.5 percent. Miss the best 30 months, your return is ZERO! (That's one month out of every two years.)
Timing the market doesn't work.
Ibbotson says that missing the best seven years from 1926 through 1998, your return on $1 invested would have diminished from $2351 to $202.
I really don't know what else to say. If you dont' believe me, don't believe the million of documents out there, then good luck on timing the market. I haven't yet seen any real life data information about it working. Not one single piece of evidence, yet some people come to this board and even ignore all the docutments and articles out there and even money-talk's financial advisor even posted about you can't time the market with real math models.
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Sat Mar 04, 2006 6:13 pm |
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SkyPilot
Senior Member
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Wow... 
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Sat Mar 04, 2006 7:12 pm |
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Rolo
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quote:
Originally posted by Jaszbo
For me having a 5% return in 2000-2002 was better than the -10%, -12% and -22% and most timers did a lot worse than this, becuase if you look at data you cannot time it exactly and if you do, you can't do it everytime.
What's your point as it relates to timing or not to time?
You beat me in the bear market; I was flat. However; how did you do in 2003? Small cap average was ~40%; I did 75%. You cannot pick one small sampling for your argument.
quote:
Originally posted by Jaszbo
If a company is doing well and it's on the news and I buy a stock from that company that to me is not market timing at all.
See that? That's thirteen knots. You just hung yourself.
Why cannot the same logic apply to market sectors? If I see that a sector (say 'GOLD') is doing well, then I will buy stock in that sector. Why do you call that timing in one instance but not the other?
Besides, if you see it on the news, it's usually too late.
quote:
Originally posted by Jaszbo
Vanguard...explained that the average investor does worse than the market,
Well, duh, of course they would publish that.
quote:
Originally posted by Jaszbo
I do realize that there are some investor who are succesful timing the market, but they are a minority.
You don't act consistent with that belief.
quote:
Originally posted by Jaszbo
Also they don't do as good in the long run.
...and you know this how?
You cite references to articles about the 'average' investor. Some of us aren't average!
quote:
Originally posted by Jaszbo
I wish people would stop comparing themselves to the 20% of people who do beat the market.
And why do you wish for that? Are you not comfortable with your average-ness? Why are you so convinced that nobody here could possibly be in the top 20%-class of investors, professional or otherwise?
Your are applying broad, general statistics to a small, focused group of people; you can see the logical flaw of that, can't you?
quote:
Originally posted by Jaszbo
These 20% are people who went to college at least 4 years if not 8 years and then they work for 8 hours a day 5 days a week and they have been doing it for 40 years.
Two thirds of the people you just described (fund managers) DO NOT beat the market. How much you went to school and how much time you spend on it does not guarantee you will be the creme de la creme.
Do you know what they call the guy who graduated LAST from medical school?
"Doctor"
quote:
Originally posted by Jaszbo
Don't try to time the market. It does not work.
According to you, one in five of us makes it work. WTF?
quote:
Originally posted by Jaszbo
We have not discovered a single fund manager who has been successful using exclusively price charts over time
Another logical flaw...who said anything about using price charts exclusively here? If it were that easy, chart-timing would be the norm.
quote:
Originally posted by Jaszbo
Trying to time price movements has been shown in tons of studies that this doesn't work.
Sure...you betcha...but that doesn't prove that ALL forms of market-timing do not work. Charts are just one tool in the toolbox, one sensory input for the grey matter to process and consider. You don't buy a stock exclusively looking at it's chart, do you? Then why do you assume all timers do it?
quote:
Originally posted by Jaszbo
I haven't yet seen any real life data information about it working.
Have you looked? You are obviously a zealot on a crusade here, hardly objective.
I compare my returns to that of the market to see if my efforts pay off and they have. I don't care what 'the experts' say, I only care about what my portfolio says. I realise that, in many aspects, I am far above average and this happens to be one of them. Apparently, I fall in your 20% who you keep ignoring.
quote:
Originally posted by Jaszbo
Not one single piece of evidence, yet some people come to this board and even ignore all the docutments and articles out there...
You hypocrite! You ignore the fact that 20% do outperform the market yet you say it cannot be done.
"Expect me when you see me."
Last edited by Rolo on Sat Mar 04, 2006 9:38 pm; edited 1 time in total |
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Sat Mar 04, 2006 9:35 pm |
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Rolo
Yo' Daddy
Cash: $ 309.70
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quote:
Originally posted by Jaszbo
Yes without a question, YES YES YES
My Roth IRA has been outpeforming the TSP.
You claim that you, yourself, can outperform the market averages. What gives?
quote:
Originally posted by Jaszbo
I personally really do like ETFs.
Do you have strictly ETFs in your IRA? The only way to beat market averages with market-average funds is to time them.
"Expect me when you see me."
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Sat Mar 04, 2006 9:47 pm |
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Jaszbo
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Sarah:
First thanks for the link sarah, it was a really really good link. Second I'm not a fan of Jim Cramer and just think he's enteraintment.
I just want to mention this part of the article:
quote:
Timing guarantees to cut your risk by reducing the total time you are invested in an asset class such as U.S. or international stocks. Many timing systems have been very effective in protecting against "the big ones," the disasters like those we saw in 1969-70, 1973-74 and 1987. Many newcomers to investing may regard those past years as ancient history. But I firmly believe that another "big one" is likely to hit the stock market again during our lifetimes. Timing prepares you for that and gives you a way to avoid much of the damage. There’s no such protection in buy-and-hold investing except having a substantial part of your portfolio devoted to fixed-income investments. And that reduces returns while it reduces risks. Warren Buffet and Peter Lynch, two of the most renowned investors of our time, have both been quoted as saying people shouldn’t be in the stock market unless they are willing to lose 50 percent. Are you willing and able to take that sort of loss? If not, market timing can let you be in the market without passively accepting that risk. Timing gives you at least the possibility to increase your long-term returns by avoiding the devastating losses of a bear market.
First off timing the market doesn't always work. Did every single market timer know that a few months ago Japan was goign to close their exchange in the middle of the day? Why not if you time you know it, you have it down to a science. You just cannot simply time everything, it doesn't work that way. To say its guranteed to lower your risk is something else........anything but the truth.
Let's say I have 10k in the total stockmarket fund and it's selling for 100 dollars a share and then each month I continue to put 200 dollars in there and the market bombs for 1 year. Market timers will pull the money out and then when they think it's safe will return. Now please please please do the math, after the year the fund returns to 110 dollars a share. Do you think you were better off getting 2% on money you already lost or buying cheap?
You can't really time the market, so most people act after they have lost a lot of money and then their emotions is what makes them time the market. A friend of mine took everything out of the stock portion of his TSP and moved everything into the G fund. years later and he's still not up, why? He's timing the market, I guess he didn't time it just right huh? Most market timers are really good about it, you guys know the news before it happens?
Thanks again for the link Sarah really appreciate you posting it
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Sat Mar 04, 2006 11:34 pm |
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Jaszbo
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Dear Rolo:
When I was talking about 2000-2002 I was mostly talking about my buying and holding for my Roth IRA as some investments have done better. How did I do in 2003, let me check. I got a little bit less than 25% return in 2003 and I'm not telling anybody I have the perfect portfolio and even then my whole point isn't too look at one year, two years, 5 years, but really long term. Most market timers do pretty well one year, one month, maybe two years, if they are lucky 5 years. After 10 years let's see how good they do on average. Personally I'd rather sit on the couch and be more sure about my investments than trying to time. To each his own.
The reason that I do not agree about timing the market when we're talking about a sector is that when you could be talking about 8,000 stocks the market. I'm sure you heard about the tech stock crash, do you think every single tech stock did bad? Do you think that every single software based technical company did not make a huge profit when others were leaving?
If you watched in the news that it's going to snow really bad for the next 5 years and you decided to take a gamble with a company that sells winter clothing, it's speculating and not investing. I'm not against people speculating and taking high risks for market conditions, it's still a risk. Also there's a difference if somebody wants to be a day trader and have fun versus putting your retirement on the line.
"You cite references to articles about the 'average' investor. Some of us aren't average!"
Please I don't want to get in with you Rolo and start insulting, so I'm just going to leave it at that.
"And why do you wish for that? Are you not comfortable with your average-ness? Why are you so convinced that nobody here could possibly be in the top 20%-class of investors, professional or otherwise? Your are applying broad, general statistics to a small, focused group of people; you can see the logical flaw of that, can't you? "
The 20% have more knowledge than you do honestly. The 20% also cannot do it consistenly. Has anybody heard of the money contest each year that shows monkey's do better than the average managers. When I say 20% I'm talking about 20% of the proffesional managers, the average person won't even make that 20%.
"According to you, one in five of us makes it work. WTF? "
One in 5 of the managers and I believe none do it long term personally. You don't belong in the category once again.
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Sat Mar 04, 2006 11:49 pm |
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Jaszbo
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Dear darly Rolo:
"You claim that you, yourself, can outperform the market averages. What gives?"
In short term I do believe with proper allocation you can bet the market average. If you are retired and decided to put 100% in the total bond market index and there's a stockmarket crash, who do you think will do better? I do not time the market, this is for sure.
"Do you have strictly ETFs in your IRA? The only way to beat market averages with market-average funds is to time them. "
Hum............... not true. What if I had the REIT index fund during last crash. Longterm you are right.
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Sun Mar 05, 2006 12:10 am |
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SkyPilot
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Uh, er... what time IS it?
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Sun Mar 05, 2006 2:03 am |
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Jaszbo
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No sarah I didn't mean that at all. What I mean is that I agreeed with the article the part about emotions.
I think even for the buying and holding that emotions plays a big rule. I think it's very hard to see your retirement at the age of 50 go down 40% and it's very hard not to pulll some of your funds even if you know in the long term you are better off holding.
It's one of the problems with buying and hoding, even if you dollar cost average when it's down and you know it's going to return eventually, it's very emotional to see it go down so much that it hurts us.
When I"m refering to my friend I mean that he has no strategy at all, he sees his funds doing bad and his emotions tell him to move it to G, he's not timing the market, he's pulling out his funds when they are doing bad, becuase he can't take it anymore. He waits until the market is doing good, which is generally a few months beyond the point and then he returns back into the market. His timing never works. He's hasn't still recovered from the last crash. He's only one person I know...he could be a bad timer also. If you truly think you are above average than I'm not here to stop you.
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Sun Mar 05, 2006 6:38 am |
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trisha
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quote:
Originally posted by Jaszbo
...Let's say I have 10k in the total stockmarket fund and it's selling for 100 dollars a share and then each month I continue to put 200 dollars in there and the market bombs for 1 year. Market timers will pull the money out and then when they think it's safe will return. Now please please please do the math, after the year the fund returns to 110 dollars a share. Do you think you were better off getting 2% on money you already lost or buying cheap?
When this discussion first started I understood it to be referring to TSPer's Buy&Hold vs Buy & Sell. However, it has gotten confusing, as it seems even w/i the same post I sense different meanings to the term `market-timing.' And it has certainly gone beyond the TSP allocations.
Nevertheless, I do understand that you, Jaszbo, are telling me that when my small IRA of several years ago went from $26K to 15K that it was wise to leave it but in trying to salvage the 15K, I should have left it alone, and not moved it into different investments. And that when it then went to 13 K in a very short while I was in Deep Error when I moved the residue to a `safety zone.' That was an hysterical time, so it was emotions that governed my actions??
I can understand your B&H for jcPenney over the years, but Edsel??? At some point you have to make a decision about leave or increase. Your discussion implies, to me, that you stay forever.
I am curious, tho, why is this such a hot item for you when it seems as if it is boiled down to different personal interpretations of the same word in the conversation. (senior moment here - I can't think of the word).
Are you calling Market Timing and Day-Trading the the same thing?
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Sun Mar 05, 2006 8:37 am |
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Jaszbo
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trisha:
Yes you most likely would have been better off staying in there when it went down. Generally most people act after something happens. After you hear the news, sorry it's a little late and you can't tell if it's going to be down 1 year, 2 years or 5 years. Most people think they have a crystal ball and they know everything, they are such excellent market timers.
If so then they all knew that the Japan's stock exchange was going to close early. You know nobody knew this, so common sense just tells you that you simply cannot time the market. You just can't do it, plain and simply. You can get lucky and you can do it sometimes, but in a long period you can't. Morningstar has some softwar that you can run through what happened last crash, so you can see if you made the right decision on trying to time the market.
I speculate and I do trade, but this is all for fun and I do well sometimes. When I speculate I put in a trailiing stop and I've never been hurt that bad.
Bill Schultheis quotes that only 20% of all managed mutual funds beat the stockmarket avreage in each of the last three, ten and fifteen year periods. This is comparing to Wilshire 5000.
For me to understand a market timer is to stay that he or she thinks that she is better than the top 20% of mutual fund managers? People are saying that even though you do this for a living and you aren't able to beat the market average buy timing or selecting stocks yourself, I can and I do.
I think people can trade and speculate all they want and it's fun, but to put your retirement on the line to say I'm better than 80% and even though I most likely don't have any proffional education in investing and I don't do it for a living, I'm still better than those people who do it for a living, just because I'm that good.
Hopefully people will start to follow rule#1
http://singaporeinvestor.blogspot.com/2005/10/you-gotta-stay-in-game-to-win.html
Here's a few reasons why it doesn't work also
http://www.jwafinancialgroup.com/book/chapter1m.html
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Sun Mar 05, 2006 3:17 pm |
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trisha
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[quote="Jaszbo"]trisha:
Yes you most likely would have been better off staying in there when it went down. Generally most people act after something happens. After you hear the news, sorry it's a little late and you can't tell if it's going to be down 1 year, 2 years or 5 years. Most people think they have a crystal ball and they know everything...[quote]
Yes, I acted after it happened; I knew nothing about stocks, it hadn't occured to me my money was tied up in stocks...only that I had a little IRA. So there was no `crystal ball'ing here. However, you are saying I should have ridden it down to zero & that totally does not compute. As I mentioned earlier, I managed to preserve some of what was left; it went down further, but at a much slower rate. I can't tell you now where it got moved to without digging thru a bunch of old files, and at this point I really don't care - 
If the guy in charge of IRA had listened instead of insisting I `hang in there' as you are instructing, I would most likely have an RMD that amounts to something instead of what is being distributed now - one house payment a year!
You cannot wad everyone up into one ball, then make excuses or exceptions each time you hear of a different case. Those of you who have several hundred K in your funds can B&H w/o a lot of damage. Those of us whose situations are far different than yours have to work from a different angle.
I haven't noticed your name in the TSP Allocation Posting pages. How about start doing that with the rest of us posters? That way I can kinda keep track of where you are and get a sense of your participation &
get the feel that you are truly a `part of us.' And not just a chastizer of people who don't do as you say...(but I'm not sure what you do do.)
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Sun Mar 05, 2006 6:47 pm |
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Jaszbo
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Trisha:
I believe in diversificaiton and allocation and age based allocation. I believe in exactly what the government believes in by offering you guys the L fund. I just do not have my allocaiton the same.
You are right as I cannot speak about every situation, but generally most people act after the fact and they move their money after it's gone down and then they move it back when they think it's safe.
I do not agree with putting all your money into one single fund, but it's much easier to just talk about the S&P500.
Ok, let's do some math so that I can explain why you are better off. Most likely you are purchasing shares biweekly (dollar cost averaging). But to make the math easy let's say that you are purchasing funds only monthly.
To make things easy say you buy yearly 100 dollars worth of shares and the price is currently 22 dollars a share, but it drops 1 dollar a share for 4 years and then on year 5 it's back up to 23 dollars a share.
1) You own 4.5 shares at 22 dollars a share = $100
2) you own (4.8+4.5) = 9.2 shares at 21 dollars a share = $193.2
3) You own 14.2 shares at 20 dollars a share = $284
4) You own 19.5 shares at 19 dollars a share = $370.5
5) you now have 24 shares at 23 dollars a share = $552
Ok, so the market went down 4 years in a row and then returned the 5th year, you spent 100 dollars each year and the 5th year you have a total of 528 dollars.
Now let's see the math on what would have happened if it never went down and it kept going up for 5 years in a row
1) You own 4.5 shares at 22 dollars a share = $100
2) you own (4.3+4.5) = 8.8 shares at 23 dollars a share =$202.4
3) you own 12.9 shares at 24 dollars a share = $309.6
4) you own 16.9 shares at 25 dollars a share = $422.5
5) you own 20.7 shares at 26 dollars a share = $538.2
Ok if you compare the two, you'll see that the first one has the funds at 23 dollars a share, but yet after 5 years you have more money, because you are buying it cheaper. Now if you want, you can do the math and see what would have happened if you pulled out and timed it or what if you were off about by a year?
An entire years return can have 2-3% account for one single day. So say the average return for this fund was 12%, if you didn't time the market correctly for one single day your return could only be 9%.
"So there was no `crystal ball'ing here. However, you are saying I should have ridden it down to zero & that totally does not compute." timing the market just doesn't work. Remember 30% of the time the market is down, you'll most likely move out when it's low and return after it's high. It's why people who time the market in the long run have a lower return after 10 years. Timing the market can have awesome returns in the first year, two years and even 5 years, but eventually you can't time it.
The S&P500 will always return, if you do not believe it will not return then you should be more worried about your job and the entire econmy of the country than your retirement. Since 1926 no 10 year period has been negative. I'm not saying it can't happen, but it depends on what investors do. In Japan they repeated history that has happened over and over and over and will continue to happy, then ignored the P/E and said this time it doesn't matter.
Trisha I'm not sure about your IRA, becuase I'm refering to index funds and mostly the S&P500, Dow Jones total stockmarket and Whileshire 5000 in general. Not a managed fund, because there's managed funds that never return. There's managed funds that die off or merge with other funds. So I can't speak about your IRA or what funds you had or what the person insisted. But I can talk to you about index funds all day, which is what your TSP is invested in.
To be honest with you Trisha, what upsets me about the TSP is that there's not many choices out there. You have two types of fixed securities and two types of stock funds. The two stock funds generally run together. When the USA total stockmarket does really bad the internatioanl does generally really bad. When we had bad years, so did they. I can't say the same about the REIT. REIT has had a good past 5 years, but it's days are numbered. It's over valued right now and I don't see good things for it, but I would do anything to see it in the TSP.
"get the feel that you are truly a `part of us.' And not just a chastizer of people who don't do as you say...(but I'm not sure what you do do.)"
I invest into too many things and some people are confused as to what I mostly invest in I think on the board. I mostly invest in ETFs with my outside retirement account. For my retirement account I have an age base allocation of funds and I rebalance when it's out by 5% off and I'm going to continue to redude the stock portion until I reach 60% and then hold it until retirement and I will then rebalnace yearly. In retirement I'll hold at 50% on both.
I have a Roth IRA also, which I don't have a problem posting what I'm investing in either. I'm invested at vanguard for my Roth IRA and it's mostly index funds except for 1 fund. I believe I have 7 different funds and I only change anything based on my age.
I'm not sure which TSP allocation your talking about, maybe I've been missing it. I've seen the one about chasing performance and timing the market for the TSP, which I just don't have much intrest in. I check in the thread now and then though. Feel free to send me a PM if something I said didn't make sense to you
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Mon Mar 06, 2006 1:27 am |
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surfer
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I think this is excellent discussion. I think the bottom line is that the only way to tell whether market timing works for the TSP is to try it. By keeping records of the top 5 or 10 investors every month, we should be able to tell if any particular strategy works. Personally, I just started trading my TSP, and am considering doing that with my private 401k also.
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Mon Mar 06, 2006 1:35 am |
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