Why market timing doesn’t work for me.

I successfully timed the market right before this 10% market correction we had. Hurray me! I went into a 10% cash position, selling WIX, INST and index funds 3 days before everything dropped. Naturally I did some personal back patting, felt proud, and told my wife how smart I am. Near the bottom I moved 1.5% of my portfolio back into NVDA. Long story short, I have a bunch of cash sitting around and have almost entirely missed this run up since I barely put any money back into the market. I would have been much better off holding my WIX and INST. Saul et al point is well taken. You have to be right twice each time you try to time the market and personally I find timing makes price anchoring more prevalent in my thought process because I’m looking to get back into a stock below the price I sold it.

best,
Ethan

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I find timing makes price anchoring more prevalent in my thought process because I’m looking to get back into a stock below the price I sold it.

best,
Ethan

What I have learnt(over the long term, say 5 plus years and with companies such as Apple and amzn) and painfully at times, is that if one is going to continue to sell something and then try and get back in at a lower price you will be continually chasing your tail and you can miss out on substantial gains…plus actually lose money in the process. Get rid of losses and add to your winners when suitable if you believe in the Companies and the story hadn’t changed.

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What I am timing is PE (or pick your valuation multiple) reversion to the mean.

I am much less tolerant than I was of astronomic multiples - and much intrigued by Scott Black’s rule of paying no more than 13.9 x forward earnings, estimated conservatively and regardless of the prevailing multiple of the overall market. Quite a challenge and certainly an interesting one.

The bigger challenge is of course at the other end of the investment: when to sell. I do not know Black’s/Delphi’s attitude to that. If anyone does, if it has been divulged, I would be interested to know.

What I have learnt(over the long term, say 5 plus years and with companies such as Apple and amzn) and painfully at times, is that if one is going to continue to sell something and then try and get back in at a lower price you will be continually chasing your tail and you can miss out on substantial gains…plus actually lose money in the process. Get rid of losses and add to your winners when suitable if you believe in the Companies and the story hadn’t changed.

Trading less over the years has improved my portfolio performance dramatically. Less losers in the portfolio. (Currently only 1 comprising only of 0.19% loss of total portfolio value) By rarely trading I have less taxes to pay (Few if any capital gains) The money continues working for me. Most profits come from increasing dividends/distributions which are growing and have reached a level way above my needs to where the excess income is deployed in additional income securities to provide growth. Mostly I do nothing but wait and spend what I need and reinvest the excess.

b&w

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Unless you’re between the 15% and 39.6% brackets, isn’t the tax on long term capital gains the same as the qualified dividend rate?

Unless you’re between the 15% and 39.6% brackets, isn’t the tax on long term capital gains the same as the qualified dividend rate?

Of course, I mean, unless you’re not between the 15% and 39.6% brackets, isn’t the tax on long term capital gains the same as the qualified dividend rate?

And as long as I’m editing, isn’t it just the same now across the board for qualified dividends and long term capital gains(10-15% income brackets are zero, 25-35% are 15%, and 39.6% bracket is 20%)?

ajm101,

https://www.fool.com/taxes/2017/12/29/your-complete-guide-to…

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@volfan84

Thanks. I was able to find a better resource than the link you provided, one that contained information about tax rates on dividends, also. To be clear, do you think my point couched in a rhetorical question was wrong?

To be clear, do you think my point couched in a rhetorical question was wrong?

That dividends and long term capital gains are taxed the same unless you’re a really low or really high earner? That point? Seems pretty straight-forward to me, if that’s what you were referring to.

volfan84

What I have learnt(over the long term, say 5 plus years and with companies such as Apple and amzn) and painfully at times, is that if one is going to continue to sell something and then try and get back in at a lower price you will be continually chasing your tail and you can miss out on substantial gains…

Q: Why does a dog chase his tail?
A: To make ends meet.

okapimoon

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Q: Why does a dog chase his tail?
A: To make ends meet.

Thanks for that!

Denny Schlesinger

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