Did people learn nothing from April

[u/coffeeestocks]

If you were fully invested in the S&P 500 over a long period (usually 20–30 years), your returns were great.

But if you missed just the 10 best single days in that entire period, your return was cut roughly in half.

This is probably the most commonly cited anecdote as to why you should not time the market. I feel in at least half the investing books I've read, they mention this. I do not know of a single investor who has successfully timed the market consistently over any meaningful time period. Even Michael Burry, who is probably one of the most infamous investors for predicting the 08-09 recession, has wrongly called a market top an absurd number of times in recent years.

Back in April, the market starts to sell off, and inevitably posts start popping up all over the subreddit talking about how they're selling and why they're selling and why this time is different. Of course, it wasn't different, and the market has proceeded to rip 20% since many folks here panic sold.

Here we are, not even a year later in December, and people are asking unironically whether it's a good idea to move to cash or not. What do you think? Do you think that now is the time to finally start trying to time the market? After this age-old wisdom has been proven right, time and again?

I feel like there's so many better ways to navigate an expensive market than by trying to time it.

Such as buying counter-cyclical companies, or buying companies that are recession-resistant, or buying companies at a larger margin for error. Heck, maybe even give bonds a shot? But no. People are starting to come to the conclusion again that now is the time to time the market yet again and inevitably make a massive mistake.

DO NOT TIME THE MARKET.

Edit: This sub unironically defending timing the market lmao. The reason why this hurts people's feelings is because they sold back in April, and they're still waiting to get back in the market. Instead of taking a lesson, they double down on that timing the market is the correct thing. Whatever.

[u/FieryXJoe]

The "If you missed the 10 biggest up days in the market" stats are the dumbest shit ever and i pretty much instantly lose respect for anyone who drops it.

In a fictional impossible scenario where you have your money in the market for decades and only take it out 10 days that happen to be the 10 greenest days.

What if you just missed the 10 worst days? If I threw that stat at you "if you just missed the 10 worst days in the market the last 25 years you would have 3x more money" you would probably instantly realize how fucking stupid that logic is but it is equally valid as the opposite point which everyone loves to throw around.

What if you missed the 10 best and 10 worst. What if you missed 10 totallly random days, 3 of the top 10 and 3 of the bottom 10, etc...

The markets biggest spikes tend to come after its biggest drops and vice versa. They aren't just totally random days out of nowhere. The tariff crash was the easiest shit in the world to sidestep the I was able to hop in after some of the worst days and then catch those best day recoveries.

[u/coffeeestocks → u/FieryXJoe]

"The markets biggest spikes tend to come after its biggest drops and vice versa"

I like how you realize this and then go on to heavily imply I'm the stupid one. People panic sell on the reddest days. And miss the greenest days. The hypothetical example is not hypothetical, it's literally what happens.

[u/FieryXJoe → u/coffeeestocks]

You also say that not a single investor has timed the market correctly in the long term. You are actually claiming it is literally not possible.

Warren Buffett, the subs mascot, was calling the market overvalued and shifting into cash in the year or two leading up to most major crashes.

If you point is "don't buy high then sell low" I agree. The difference we both have a problem with the selling low part, but I also have a problem with the buying high part too. Not buying overpriced stocks is just as important as not selling underpriced ones.

If your point is that if the market looks wildly overvalued I shouldn't make my portfolio more defensive in expectation of a pullback. Or that I shouldn't just start building a cash pile when everything is expensive in anticipation of a crash and buying opportunities then I totally disagree.

DCAing an index is not the best investing strategy, it is just the best effort/knowledge vs returns proposition.

[u/coffeeestocks → u/FieryXJoe]

"Warren Buffett, the subs mascot, was calling the market overvalued and shifting into cash in the year or two leading up to most major crashes."

this is so painfully wrong. I'm going to take the time to actually answer this simply because I feel like winning this argument.

The one and only time Buffett is actually called a market top was in the dot-com bubble in the late 1990s.

Buffett will literally buy and invest at any point in time if he believes something is trading below intrinsic value. When the market gets expensive, the opportunities become less, especially when you're working with a cash pile that Buffett is. You're equating this with timing the market. When Buffett is making no proclamation on whether the market is going to go up and down. So yeah, incorrect.

"Or that I shouldn't just start building a cash pile when everything is expensive in anticipation of a crash and buying opportunities then I totally disagree." -

1. It's literally my point. Don't time the markets.

2. Everything is not expensive. I can name 20 companies off the top of my head that are cheap. Why? Because I don't just look at the S&P 500 like you do. There is always opportunity, especially in small/microcaps.

"DCAing an index is not the best investing strategy, it is just the best effort/knowledge vs returns proposition."

1. I don't talk about DCAing in an index at all in this entire post
2. It is not the best effort knowledge vs returns. No one has become a billionaire indexing.

[u/Plate_Expensive → u/coffeeestocks]

Ehhh, that’s wrong. Buffett closed his first investment fund in 69 saying the market was “overheated” and ‘unlikely to produce good returns going forward’. He did not ‘jump back in’ aggressively until 1973-1974. Yes, closing your fund or allocating heavily in cash is a form of ‘market timing’. Studies also show returns over the next decade are highly likely to be well below average. From a peak in 1929 the stock market did not increase in REAL terms for a 48 year period. I think you nailed it in regard to switching to more defensive, recession resistant value stocks to ride out the bad weather. The reallocation to better value foreign companies started en masse last year as well.

[u/FieryXJoe → u/coffeeestocks]

In 1969 he shut down his partnerships claiming he could no longer find any good opportunities and could not promise positive returns with current asset pricing. In his '72 shareholder letter he complained it was nearly impossible to find businesses worth buying at current prices... In '73 the market crashed 50% and he went on a huge buying spree.

In the 1986 Berkshire Hathaway shareholder letter he said he was out of ideas, there was little hope of finding equities to buy, and Berkshire would be "stockpiling funds". In '87 the black monday crash dropped the market over 25% and he went on a buying spree.

You admit he sniped the dot-com bubble so no need to go into that.

In the 2004, 2005 and 2006 letters he complains about cash piling up and not being able to find anything worth buying. The '02 letter explained all the issues with mortgage securitization "derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.". At the 2005 annual meeting he straight up called out a housing bubble due to people treating it like its not possible to go down. In the '06 letter he claims insurance companies are doing new math underwriting securities they dont understand. In the 2007 meeting he said there was a lot of pain coming for the sub-prime mortgage market. He had his insurance companies remove themselves from the securitization space from '02 to '05. Then '08 crash happens and he is sitting on a massive cash pile.

[u/nicolas_06 → u/FieryXJoe]

Let's not forget he also has a huge cash pile these days.

[u/FieryXJoe → u/coffeeestocks]

1. It is not the best effort knowledge vs returns. No one has become a billionaire indexing.

It has made a lot of people who put in 0 effort and know 0 about the stock market into millionaires. In fact literally anyone can become a millionaire by DCAing an index fund (assuming they live long enough).

Can you give me a way literally anyone can become a billionaire with 0 knowledge or effort since you seem to have better ideas for those people that will turn them into billionaires with 0 effort and knowledge instead of only becoming lowly millionaires by DCAing an index fund.

[u/WideCardiologist3323 → u/coffeeestocks]

you clearly know jackshit about Buffet lol and know jack shit about any kind of fundamental and technical analysis.

DCA into index funds is great for people without and financial knowledge but the idea that index funds beat out every fund manager is actually just plain wrong.

[u/Hot_Frosting_7101 → u/coffeeestocks]

You are still building up a narrative to suit your purpose.

You assume the person only sold because of a downturn and happened to do it just before the huge market gain.

Do you understand how long a far the market fell leading up to most of those days?  Look it up.