If I am a patient investor, won't I always win?

Some of us do.

What happens if you sell and it goes up 5,000 points or worse buy and it goes down 9,000 points? Either way nice theory but in practice, well impractical.

buyer and holder wrote:

Some of us do.

4% of your portfolio's performance is market-timing and stock-picking. The other 96% is proper diversification. This was the conclusion of a well-known study done about 20 years ago. Basically, trying to time the market is a fool's game. I am a long-time investor but I will admit to doing something a little of what you say. For the most part I don't sell anything and have most of my portfolio in index funds. I used to do a lot of research on the best actively managed mutual funds but in the end the index funds win out.

Ghost of Igloi wrote:

What happens if you sell and it goes up 5,000 points or worse buy and it goes down 9,000 points? Either way nice theory but in practice, well impractical.

If you sell and it goes up 5000 points you still gain around 5% and you lose nothing. You just didn't gain as much as you could have. Then you wait for it to fall, buy, then eventually it will go up again, and you gain again.

If you buy and it goes down 9000 points (would be by far the worst drop in history), you still lose nothing since you just wait until it goes back up to sell. You still lose nothing. It might just take several years to get back to zero. Still more profitable than keeping money in a savings account and still more profitable on average over the long run than keeping money in a bond or CD.

Or just never sell. Never time. Just put it in. Rebalance when necessary.

The best benefit of this is that you don't pay high fund fees for glorified monkeys-at-typewriters to make guesses for you.

SAlly V wrote:

buyer and holder wrote:

Some of us do.

4% of your portfolio's performance is market-timing and stock-picking. The other 96% is proper diversification. This was the conclusion of a well-known study done about 20 years ago. Basically, trying to time the market is a fool's game. I am a long-time investor but I will admit to doing something a little of what you say. For the most part I don't sell anything and have most of my portfolio in index funds. I used to do a lot of research on the best actively managed mutual funds but in the end the index funds win out.

I have a Roth IRA that has gained about 28% of what I've put into it. It's a simple index fund that is never touched. I would never put money into an actively managed fund. Pissing money out the window.

There are times when timing the market is extremely easy if you are just patient and don't intend on trading more than a few times per year. Brexit in June was one of those times. I did not have enough money at the time to have a brokerage account, but I remember thinking at the time that now would be a perfect time to dump a ton of money into an index fund because it will come up to previous levels within 90 days. As it was it came back up to previous levels in less than 30 days.

My strategy is not going to make me rich, but it will provide me with an average of several extra thousand dollars per year. It's simple.

Maybe. There's no guarantee the DOW will always keep going up. Japan's Nikkei 225 has never recovered from a major downturn back in 1990. Something like that could happen in the US.

wiz kiz wrote:

If you buy and it goes down 9000 points (would be by far the worst drop in history), you still lose nothing since you just wait until it goes back up to sell. You still lose nothing. It might just take several years to get back to zero. Still more profitable than keeping money in a savings account and still more profitable on average over the long run than keeping money in a bond or CD.

Wiz,

You are wrong. The market dropped over 50% 2000-2002 and 2007-2009. Twice in less than 17 years. If you think it can't happen again, think again.

Lastly, if it was that easy why is the average investor return so poor.

Try your theory.

You will learn the hard way.

By losing money.

Burma Shave.

Igy

Ghost of Igloi wrote:

wiz kiz wrote:

If you buy and it goes down 9000 points (would be by far the worst drop in history), you still lose nothing since you just wait until it goes back up to sell. You still lose nothing. It might just take several years to get back to zero. Still more profitable than keeping money in a savings account and still more profitable on average over the long run than keeping money in a bond or CD.

Wiz,

You are wrong. The market dropped over 50% 2000-2002 and 2007-2009. Twice in less than 17 years. If you think it can't happen again, think again.

Lastly, if it was that easy why is the average investor return so poor.

Try your theory.

You will learn the hard way.

By losing money.

Burma Shave.

Igy

It doesn't matter if it does. You leave money in until it comes back up. What part of this don't you understand?

TAA wrote:

Maybe. There's no guarantee the DOW will always keep going up. Japan's Nikkei 225 has never recovered from a major downturn back in 1990. Something like that could happen in the US.

Not any time soon because America's economy is nowhere near maximum output. Japan is severely limited geographically while the US is not.

You guys are proving why it's so easy to win relative to the common fool.

wiz kiz wrote:

TAA wrote:

Maybe. There's no guarantee the DOW will always keep going up. Japan's Nikkei 225 has never recovered from a major downturn back in 1990. Something like that could happen in the US.

Not any time soon because America's economy is nowhere near maximum output. Japan is severely limited geographically while the US is not.

You guys are proving why it's so easy to win relative to the common fool.

Exactly. Everyone thinks they are a genius. Let them throw their money away and you have the steady hand. Easy to come out on top.

boglesballs wrote:

wiz kiz wrote:

Not any time soon because America's economy is nowhere near maximum output. Japan is severely limited geographically while the US is not.

You guys are proving why it's so easy to win relative to the common fool.

Exactly. Everyone thinks they are a genius. Let them throw their money away and you have the steady hand. Easy to come out on top.

I have many reasons to believe I am far superior in intelligence and temperament than the average investor, one of them being that I am above the 90% percentile in net wealth for my age group despite not making wealth a priority in my life and even taking almost a year off from work to travel the world. Outsmarting you numbskulls couldn't be easier.

Ghost of Igloi wrote:

wiz kiz wrote:

If you buy and it goes down 9000 points (would be by far the worst drop in history), you still lose nothing since you just wait until it goes back up to sell. You still lose nothing. It might just take several years to get back to zero. Still more profitable than keeping money in a savings account and still more profitable on average over the long run than keeping money in a bond or CD.

Wiz,

You are wrong. The market dropped over 50% 2000-2002 and 2007-2009. Twice in less than 17 years. If you think it can't happen again, think again.

Lastly, if it was that easy why is the average investor return so poor.

Try your theory.

You will learn the hard way.

By losing money.

Burma Shave.

Igy

Nope. Had someone put $100,000 into SPY (proxy for the S&P 500) on July 1 2007 - pretty close to the worst possible market timing imaginable in the past generation - they'd still have $189,270 today.

Buy and hold always wins.

When investing in stocks with a well-diversified portfolio one only needs to ask oneself one simple question: Over the time horizon I've selected, will the US economy be larger or smaller than it is today? If larger, then buy & hold.

wiz,I understand that it is a weak theory.Igy

wiz kiz wrote:

Ghost of Igloi wrote:

Wiz,

You are wrong. The market dropped over 50% 2000-2002 and 2007-2009. Twice in less than 17 years. If you think it can't happen again, think again.

Lastly, if it was that easy why is the average investor return so poor.

Try your theory.

You will learn the hard way.

By losing money.

Burma Shave.

Igy

It doesn't matter if it does. You leave money in until it comes back up. What part of this don't you understand?

If you invested in the S&P 500 3/2000 you would have annualized at 4.5% including dividends. A very comparable investment to Treasury bonds.Igy

Man Overboard wrote:

Ghost of Igloi wrote:

Wiz,

You are wrong. The market dropped over 50% 2000-2002 and 2007-2009. Twice in less than 17 years. If you think it can't happen again, think again.

Lastly, if it was that easy why is the average investor return so poor.

Try your theory.

You will learn the hard way.

By losing money.

Burma Shave.

Igy

Nope. Had someone put $100,000 into SPY (proxy for the S&P 500) on July 1 2007 - pretty close to the worst possible market timing imaginable in the past generation - they'd still have $189,270 today.

Buy and hold always wins.

When investing in stocks with a well-diversified portfolio one only needs to ask oneself one simple question: Over the time horizon I've selected, will the US economy be larger or smaller than it is today? If larger, then buy & hold.

The greatest risk in in index funds. The market structure and their use as trading vehicles.

Here is an article that should be required reading for anyone that believes the market structure is not vulnerable.

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/11/06/Fasanara%20Capital%20Investment%20Outlook%20November%2021st%202016.pdf

Of course most here will refuse to read because it challenges their narrow view of market risk.

Igy

Ghost of Igloi wrote:

If you invested in the S&P 500 3/2000 you would have annualized at 4.5% including dividends. A very comparable investment to Treasury bonds.

Igy

Man Overboard wrote:

Wiz,

Ig.

What is your timeline for the 4.5%? You seem like a naysayer.

This is S&P 500 return for the last 29 years. That is the first thing that came up. The return is 11.1% over that time. So, again, what time period is for your alleged 4.5%?

Dec. 31, 2016 5.87%

Dec. 31, 2015 1.40%

Dec. 31, 2014 13.69%

Dec. 31, 2013 32.39%

Dec. 31, 2012 16.00%

Dec. 31, 2011 2.11%

Dec. 31, 2010 15.06%

Dec. 31, 2009 26.46%

Dec. 31, 2008 -37.00%

Dec. 31, 2007 5.49%

Dec. 31, 2006 15.79%

Dec. 31, 2005 4.91%

Dec. 31, 2004 10.88%

Dec. 31, 2003 28.68%

Dec. 31, 2002 -22.10%

Dec. 31, 2001 -11.89%

Dec. 31, 2000 -9.10%

Dec. 31, 1999 21.04%

Dec. 31, 1998 28.58%

Dec. 31, 1997 33.36%

Dec. 31, 1996 22.96%

Dec. 31, 1995 37.58%

Dec. 31, 1994 1.32%

Dec. 31, 1993 10.08%

Dec. 31, 1992 7.62%

Dec. 31, 1991 30.47%

Dec. 31, 1990 -3.10%

Dec. 31, 1989 31.69%

Dec. 31, 1988 16.61%

[quote]Ghost of Igloi wrote:

If you invested in the S&P 500 3/2000 you would have annualized at 4.5% including dividends. A very comparable investment to Treasury bonds.

Igy[quote]

Comparable? hmmm....You'd still be 50 basis points ahead of the Treasury returns (assuming the 10 Year Treasuries) on an annualized basis having invested in the S&P in March 2000. That's a huge difference over 16 years. Factor in the fact that there's been a 20 year bull market for US Treasuries (likely now finished) and you've inadvertently proven the op's point that stocks are the better way to go over almost any lengthy historical period.

Of course any of your bond market assumptions should be juxtaposed against the third most overvalued stock market in the past one hundred and twenty years. The two others being the Roaring Twenties and the Technology Bubble.

Igy