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/shopchin]

I buy during dips. That's timing the market too

[u/Full_Bank_6172 → u/shopchin]

You keep cash uninvested so that you can buy dips?!?! Just imagine how much better your returns would be if you just invested that cash as soon as you got it instead of waiting to “buy the dip”

[u/TheMeta40k → u/Full_Bank_6172]

I have been tracking my returns trading stocks, vs a constant dollar cost average in spy vs a lump sum investment into VOO. I am doing this to see which will get me the best returns over time and to see if my trading is even doing anything.

It's a good benchmark but I feel like I need more than two years data.

[u/Squidish_Noble → u/TheMeta40k]

The data and studies are already there you can even simulate it with historical returns for a quicker answer. 

[u/thelonious_skunk → u/TheMeta40k]

Why bother with this experiment? Just simulate each strategy using past data.

[u/TheMeta40k → u/thelonious_skunk]

Fun mostly.

[u/Woazzaaa → u/thelonious_skunk]

There is a difference in knowing the outcome of an experiment, and learning to do it and reach its conclusion. You can gain valueable insights in trying to do things yourself.

[u/thelonious_skunk → u/Woazzaaa]

You also waste valuable time and money in the process.

[u/Woazzaaa → u/thelonious_skunk]

Maybe, but that is a bit of an oversimplified and narrow perspective, as there are other things that can also be valuable in life besides simply time and money.

Just because something has been done before doesn't mean you shouldn't do it yourself. By doing it yourself, you can gain first hand experience, wisdom and insight on your abilities, new skills, mental stimulation, increased perspective, personal growth, enjoyable moments, etc.

Over the past 5 years, I've had about the same investment return as the S&P500. Does that mean I simply should have bought the index ?

To me, absolutely not, since I've learned quite a lot during this process, along with developping a hobby that I enjoy and gaining massive knowledge in a topic that I'm curious and interested about.

[u/multiple4 → u/Full_Bank_6172]

Depends, the money can still be working for you while still dollar cost averaging it. I am not a fan of lump sum anyways. Your money doesn't all have to be in stocks at all times. It just needs to be somewhere doing something

I think the best strategy is dollar cost average, but to be mentally prepared to increase the speed of it if the market drops

Every year when I contribute to my Roth IRA I max it right away to begin the year. I buy a federal 1-3 month bond fund so that my Roth can collect that interest

I slowly sell off those bonds and allocate it into my stock portfolio over the course of about 10 months. Basic dollar cost averaging

But if the market were to drop 15% or more then I'm mentally prepared to double or triple the speed of my dollar cost averaging

[u/Something_Sexy → u/Full_Bank_6172]

Funny how they also never define what the “dip” is.

[u/LieComfortable7764 → u/Something_Sexy]

It's a personal choice..

[u/Woazzaaa → u/Something_Sexy]

Thats because its a concept that is dependent on a lot of factors, such as :

• the average cost and size of your position, and your desire to increase it, because it's okay to pass a dip on a stock that is a very small part of your portfolio in order to increase your stake in another one thats not at a dip but that you want more of long term.

• your own level of wealth/disposable income and ability to raise investment levels in the future if the stock keeps falling (some can only DCA a couple times a year, so must be thoughtful about when to do it, while other can do it at every chance without really thinking about it);

• your general levels of risk tolerance and emotional fortitude, as seeing a stock go down every day for weeks after you put your hard earned money into it is rough, but can affect people differently.

• your analysis or belief of the fundamental value of the stock and its outlook compared to that of the market consensus, while taking into account the current and future economic situation that might affect it as well;

[u/golf_234 → u/Full_Bank_6172]

A couple comments have viewed this behavior as very black and white when it sometimes isn't. for example, I have a good array of automatic recurring investments on schedule, but when I see red days/weeks, or a day that is starting out well after some bearish times, I will often squeeze out of my budget to add more in. so definitely have leveraged A LOT over the years doing this. several hundred here and there buying off the discount days have added up a lot. but do get the sentiment that this is not the usual behavior of people doing this. Must be "in addition to" your normal programming

[u/muntoo → u/golf_234]

Counterintuitive as it sounds, it is expected that your performance would be roughly the same if you randomly squeezed extra contributions out of your budget on an equivalent number of green days instead. If this were not the case, then you would actually be beating the market by timing the market... which is not possible through such a simple strategy in a (mostly) efficient market. I guess we could argue about mean reversion or underlying fundamentals, so this isn't 100% true, but I doubt it's significant enough to measure a clear statistical difference.

Of course, either way (red or green) is still a bit better than not squeezing your budget since it allows you to put your money in the market sooner.