I believe the answer is that while stocks can be volatile over the short-term, they have produced favourable rates of return over the long-term [i.e. 4x the rate you’d get on a T-Bill over 15 years]. Willy
Mutual funds are against market timing because it brings them expenses and volatility… Should the actual holder of the mutual fund be for market timing? YES. Market timing is another word of analysis. Extreme case… Company issue bad news… If you don’t adjust because you are in it for the long term you are loss averse. Hence market timing is another mutual fund myth. I am not saying go to cash. Just do proprer analysis. rlange Wrote: ------------------------------------------------------- > If you go in and out of the market for your long > term strategy you are market timing. In that case > you are not “investing” you are “gambling”. When > the markets are way down, as history shows. you > don’t want to be out because when it turns and > goes up it will go fast. Then by the time you get > your money back in the market you miss out on > those gains. If you allocate your portfolio ahead > of time and are prepared for times like this, it > is less stressful.
That is exactly what I am talking about. When I am talking about market timing I am talking about all these people that are going to cash. When are they going to go back in? They are not going to know when the bottom is and the proper time to get in. Changing your allocation is the BEST thing you can do to be sure that the risk you are currently taking is appropriate for yourself. Jumping in and out of the market for your whole portfolio won’t benefit you if you are investing for 20+ years. PtrainerNY Wrote: ------------------------------------------------------- > Mutual funds are against market timing because it > brings them expenses and volatility… > > Should the actual holder of the mutual fund be for > market timing? YES. Market timing is another word > of analysis. > > Extreme case… Company issue bad news… If you > don’t adjust because you are in it for the long > term you are loss averse. > > Hence market timing is another mutual fund myth. > > I am not saying go to cash. Just do proprer > analysis. > > rlange Wrote: > -------------------------------------------------- > ----- > > If you go in and out of the market for your > long > > term strategy you are market timing. In that > case > > you are not “investing” you are “gambling”. > When > > the markets are way down, as history shows. you > > don’t want to be out because when it turns and > > goes up it will go fast. Then by the time you > get > > your money back in the market you miss out on > > those gains. If you allocate your portfolio > ahead > > of time and are prepared for times like this, > it > > is less stressful.
I would have to agree with rlange "That is exactly what I am talking about. When I am talking about market timing I am talking about all these people that are going to cash. When are they going to go back in? " From Buffett’s opinion piece “Those awaiting a ‘better time’ for equity investing are highly likely to maintain that posture until well into the next bull market.” The issues here are straight out of behavioral finance: Loss aversion, regret avoidance, euphoria, despair. Those who have cash available, regardless of whether they’ve held that cash through the downdraft or raised it more recently, should establish a clear discipline for reinvesting it consistent with their risk acceptance and overall investment objectives. A sense of wariness isn’t all bad. People shouldn’t let caution turn into fear and fear turn into paralysis. By the time you feel that reassuring burst of confidence, it’ll be late in the game once again.
There is an article in the Economist today and this passage caught my eye: “Broadly speaking, the 20th century can be divided into six phases: bear markets from 1901-21, 1929-49 and 1965-82 bull runs from 1921-29, 1949-65 and 1982-2000.” If that’s the case, we could be in this bear mkt for another 10 years.