Down goes the Dow

Klondike5 wrote:

My point is this.

The "experts" tell us to not try and time the market and to just stay in always and it will work out for the best. This is generally in their self interest as the more we have invested, the more money they make.

While saying don't try to time the market, that is exactly what the speculators and big time players do every single day.

Why not pay attention to what is going on and make educated guesses? We have seen two massive meltdowns of over 50% since the year 2000. Personally I was very happy to be out of the market for most of each of those. It saved me a ton of money. As I noted before, I am no expert but do have common sense and guessed right twice -- I am sure I am not the only one

The math to me doesn't work out that you guess right twice. You missed out on dividends that have since EXPLODED, and you missed out on great buying opportunities.

Regarding speculators and "big time" players, there are lots of them who lose their shirts too...day traders...VERY risky.

You are simply taking on too much risk. You say you're no expert...well, then you REALLY don't need to be getting in and out of the market like this...because even the experts get that wrong.

Want to play dips and valleys? Then get 100% debt free, continue to contribute 15% minimum to retirement accounts (made up of mutual funds) and THEN spend some Mad Money on individual stocks or even mutual funds if you like.

nice, bigfoot - I don't think many people will read your post carefully enough, but it is a condensed can of excellence.

I am 100% debt free and contribut far more than 15% to tax deferred retirement accounts (via a DB Pension Plan).

Neither of which has a thing to do with being in or out of the market.

I am taking too much risk? By not being in a volatile equities market?

I lost out on 3% in dividends in 2008-09 while avoiding a @ 35% drop in market value and this was a missed opportunity?

No I don't want to play dips and valleys. Which is why I am now out of the equities market for the third time in 14 years. By staying in at all times you will surely experience the dips and valleys

If you invest in a managed fund, you are paying people to guess as to what to buy and sell.

I.e., paying people with no knowledge of what the future will be to do exactly what you say investors should not do

Klondike5 wrote:

By staying in at all times you will surely experience the dips and valleys

...and the peaks.

The Truth. wrote:

Klondike5 wrote:

By staying in at all times you will surely experience the dips and valleys

...and the peaks.

Yes. Of course. I was using agip's phrasing

Investor wrote:

You lose nothing until you sell.

Bigfoot Investments wrote:

Let us imagine two individuals, Mr. Hold and Mr. Sell...

Thanks for the story, but it seems to me that it substantiates the original quote above. Mr. Sell sold stock and is now down $100,000. He did not lose anything until he sold. Mr. Hold has no loss because he has not yet sold.

Stanley R. wrote:

Investor wrote:

You lose nothing until you sell.

Bigfoot Investments wrote:

Let us imagine two individuals, Mr. Hold and Mr. Sell...

Thanks for the story, but it seems to me that it substantiates the original quote above. Mr. Sell sold stock and is now down $100,000. He did not lose anything until he sold. Mr. Hold has no loss because he has not yet sold.

Except for the fact that Mr. Sell is NOT down $100,000. He is in fact UP $500,000 (after taxes). And neither Mr. Hold nor Mr. Sell are thinking about losses because they are both UP rather substantially.

I politely suggest that you read it again. Let me know if you have questions.

Thanks for your reply. In the end, they have the same amount of stock, but Mr. Sell has $100,000 less in cash. That's because he sold the stock (before repurchasing). His smaller kitty is directly attributable to him selling stock. Yes?

The biggest fools here are the ones who are only invested in the market. Talk about all your eggs in one basket.

RL wrote:

The biggest fools here are the ones who are only invested in the market. Talk about all your eggs in one basket.

Who's that?

Stanley R. wrote:

Thanks for your reply. In the end, they have the same amount of stock, but Mr. Sell has $100,000 less in cash. That's because he sold the stock (before repurchasing). His smaller kitty is directly attributable to him selling stock. Yes?

Yes, they have the same amount of stock. And yes, Mr. Sell has $100,000 less in cash as a result of the tax consequences of selling. Nobody ever claimed (or at least I did not) that there are no tax consequences to selling.

The point is that according to LetsRun logic, Mr. Sell has made $500,000 (after taxes) while, according to the same logic, Mr. Hold has made absolutely nothing since he hasn't sold anything yet.. And yet it is Mr. Hold who is wealthier than (or at least as wealthy as) Mr. Sell.

How is it that the person who hasn't made a dime is wealthier than the person who has made a half a million dollars when they started out equal?

Bigfoot Investments wrote:

How is it that the person who hasn't made a dime is wealthier than the person who has made a half a million dollars when they started out equal?

Because he's like Flagpole and holding onto his investments. And the selling fellow is like Klondike5 who must face the tax implications for selling his stocks. As the other fellow said, you don't lose until you sell.

Klondike5 wrote:

If you invest in a managed fund, you are paying people to guess as to what to buy and sell.

I.e., paying people with no knowledge of what the future will be to do exactly what you say investors should not do

You are doing everything you can to justify very risky behavior. Again, you don't have the stomach to be invested in the market. You should stick with putting money in your pension plan and leave it at that.

Having a managed fund where fund managers move in and out of different stocks within the fund is no where near the same as you buying and selling your WHOLE position based on a hunch that the market will go down. Fund managers base their buying and selling on a whole bunch of different things that are specific to the stocks they buy and sell.

The way you protect yourself against potential bad funds is that you diversify. Buy several different funds that are in different sectors of the market. The good people at Vanguard especially and also Fidelity (I have funds with both) do a great job.

I know wrote:

Bigfoot Investments wrote:

How is it that the person who hasn't made a dime is wealthier than the person who has made a half a million dollars when they started out equal?

Because he's like Flagpole and holding onto his investments. And the selling fellow is like Klondike5 who must face the tax implications for selling his stocks. As the other fellow said, you don't lose until you sell.

Is it possible that you really don't understand? I am having a difficult time believing this.

If Joe and Frank start out with the exact same wealth. Then Joe makes $500,000 while Frank makes absolutely zip. Who will be wealthier at that point and by how much?

Oh, never mind. If you don't get it by now I really can't help you. Sorry.

Flagpole wrote:

...and then if the market tanks a TON, and you have extra, put more money in then. This is not timing the market...this is taking advantage of a buying opportunity...you can buy a lot more shares when the prices have dropped.

By your logic, Klondike is not "timing the market" with his recent sale. He is "taking advantage of a selling opportunity"... he can get a lot more money for his shares since the prices have run up a TON.

Smoked. wrote:

Flagpole wrote:

...and then if the market tanks a TON, and you have extra, put more money in then. This is not timing the market...this is taking advantage of a buying opportunity...you can buy a lot more shares when the prices have dropped.

By your logic, Klondike is not "timing the market" with his recent sale. He is "taking advantage of a selling opportunity"... he can get a lot more money for his shares since the prices have run up a TON.

No. He is timing the market...buying AND selling. What I do and what I recommend people do is that in addition to what you are already putting into the market, IF you have extra money and IF the market has dropped a lot (you need to decide what a lot is), then you simply buy more. You do this with money you don't need today, and you should only do it if you are debt free but for a reasonable mortgage. The market will ALWAYS go up over time, so putting in extra from time to time is not a bad idea. I might not do that if within 5 years of retirement though, depending on my circumstance at the time.

Onty wrote:

Klondike5 wrote:

So when I got back in at 9,000 and got the ride up to 15,000, I had a much larger pile than I would have had I stayed in for the ride down from 12,000 plus to 6,800 and so have a much larger pile today.

Why didn't you get back in closer to 6800?

The beautiful thing is that he didn't even have to get it anywhere close to "perfect" (nailing the exact bottom... or top for that matter), and he still benefited greatly.

perfect - enemy of good enough wrote:

Onty wrote:

Why didn't you get back in closer to 6800?

The beautiful thing is that he didn't even have to get it anywhere close to "perfect" (nailing the exact bottom... or top for that matter), and he still benefited greatly.

Not really. He's all stoked about getting out at 12,800, BUT he BOUGHT all the way up to 14,100 and then back down to 12,800. He sells then, then everything he bought above that level was at a loss.

Also, he was out of the market for a YEAR. A year in which stocks were of the biggest bargain in my lifetime. He missed out on dividends. He missed out on BUYING at 6400 Dow. He likes to call it a 3% gain missed opportunity, but it is MUCH more than that.

He's looking ONLY at when he sold and then bought back in. That gives him the very best look at what he really did, and it's what's making him think he did the right thing. When he started out by SELLING AT A LOSS and then missed out on buying stocks for cheap, as well as dividends that paid the whole time not only on stuff that could have been there but additional dividends that would have been paid on contributed monies during the year he was out, he's AT BEST at a wash.

When you factor in RISK, it's just not worth it.

The Dow had a swing from 14100 to 6400, but he sold at 12,800 and bought back in at 9,000...big freakin' deal.

Maybe since he has a pension, he feels that this is Mad Money, and perhaps it is...that doesn't change the fact though that what he's doing is risky.