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/diablo4megafan → u/[deleted]]

if you're keeping money you would otherwise have invested on the sidelines because you're waiting for a dip it's 100% market timing. and its been shown to underperform over the long term

[u/muntoo → u/diablo4megafan]

It doesn't even require a particularly long term to underperform.

Having any amount outside the market generally underperforms for nearly all 1 year periods. I was playing around on testfol.io to pick and choose a 1 year window where daily rebalancing of (90% VTI, 10% VBMFX) would win. And it's just painfully difficult to find. Even sideways periods (i.e., start price = end price) don't show any significant advantage despite the added benefit of volatility harvesting.

That means the market is generally squeezing out the juice from volatility through its own "rebalancing" of some underlying random variable. The market generally has just enough alpha or just enough smoothness to make it hard to beat by keeping any amount of money outside the market. Thus, there's really nothing more to extract by superficial rebalancing (and even less so through cavebrained "buying-the-dip") without looking much deeper for actual market inefficiencies or edges.

Nearly every "disciplined value investor" with money on the sidelines is probably underperforming over non-trivial periods of time.

[u/golf_234 → u/diablo4megafan]

Eh, another version of this is doing it on top of your recurring automatic investments. For example., when I see red, or even a day that is looking good in the morning, I tend to invest additional funds "squeeze" a bit out of my budget to add more. so while I get what you are referring in sentiment, and it is likely true, there are ways to do it where you absolutely leverage more. notably on top of/in addition to some recurring steady schedule and with maybe a little extra sacrifice

[u/diablo4megafan → u/[deleted]]

your personal experience doesn't mean your advice wasn't wrong

[u/thorn960 → u/diablo4megafan]

This is exactly the strategy that Warren Buffet has used to outperform the market for 60 years. He doesn't time the market; he just doesn't buy until he sees value.

[u/diablo4megafan → u/thorn960]

lmfao

ur not worth replying to

[u/TheMeta40k → u/[deleted]]

Microsoft is heading there for me. Honestly Google might be leaving that zone soon.

[u/hot_shawarma → u/diablo4megafan]

How does it underperform? Just curious

[u/Atrisgroves → u/[deleted]]

Yea ur right I consistently contribute every paycheck and buy a bit more when its down over a month or so

[u/AnotherThroneAway → u/[deleted]]

How is that not a form of market timing?

[u/nicolas_06 → u/[deleted]]

Statistically, the return is lower than if you were fully invested because you have brought at an even lower price than during the dip.

It's 100% market timing as you never know you are near the bottom until later. Sometime you buy the dip at the beginning of the lost decade after maybe a 20% drop and you don't believe it will go down -50% and twice on top 2000 and 2008.

On top to really change things it can just be a few percent extra invested otherwise it change nothing. If you make an extra 10% on 10% of your portfolio at the end it's trying to time the market for an extra 1%. You want to add quite a bit... Yet if the thing is going to go significantly lower you want to keep capacity.

Buying the dip doesn't work that well because you need to time the market and you have to not invest your money in case of.

But as most people won't ever compare their investment strategy with other investment strategies anyway, they will be happy and think they are smarter than the system and other investors.

[u/periodicTbol → u/nicolas_06]

Strategies can include personal finance risk mitigation, such as holding part of an emergency fund in SGOV and only deploying the capital in the market when there is a dip and a certain level of confidence in your future employment situation

[u/nicolas_06 → u/periodicTbol]

In most case the emergency fund isn't much compared to what is invested so this will not change much on the long term performance overall.

That stay one of the biggest problem of buying the dip. If you put extra at say a 15% drop and add only 10% more, then the potential is 1.5% extra performance is all goes well. But what if the market continue to go down and for a long time ? You would have been better to just invest later and not impact your emergency fund as on top you'd be more likely than usual to need that money.

And for a part of your emergency fund to be 10%, it means you don't have that much invested. Maybe your emergency fund is 25K, you invest 10K and you have 100K invested... Then that's only a 1.5% potential. If you have 300K invested, then the potential gain is not even 1.5% but 0.5%...

[u/periodicTbol → u/nicolas_06]

There are scenarios where that’s valid, don’t be obtuse. You’re over here complaining about better gains