# I would never dream of trying to time the market....but....



## favelle75 (Feb 6, 2013)

Good golly, the run the TSX has had lately, its sure tempting to try and lock in some gains. After that small dip we had and everyone was crying for a 10% correction, we promptly went the other way and haven't looked back! What happened? Surely everyone would love to sell high and buy back in lower, but that seems very dangerous and more like gambling.

I guess the more prudent method would be to come up with some more cash and DCA average on the eventual big dip, if it ever arrives


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## wendi1 (Oct 2, 2013)

Well, I wish you luck with that market timing thing... Myself, I have evidence to support the hypothesis that I am very bad at it.

:rolleyes2:


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## My Own Advisor (Sep 24, 2012)

I'm horrible at it...market timing.


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## cainvest (May 1, 2013)

More like gambling is right, there is no way of knowing when a correction will happen and how much it'll fall. You can always watch for the technical signs but false positives are likely as well.


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## richard (Jun 20, 2013)

What happened? The market didn't listen to what it's "supposed to do". It usually doesn't. But do wait for a dip, I'm making a purchase soon and would appreciate it if everyone stops buying until then


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## Pluto (Sep 12, 2013)

I think part of the answer to this dilemma is have a cold hard look at ones holdings to determine appreciation potential. If appreciation potential is low, then at least sell enough to get one's original cost out. This isn't market timing, its selling because prices are so high relative to earnings and earnings growth potential, that the downside risk is higher than the upside potential. The key is an assessment of value. If there is poor upside potential, the value is poor. 

We know for a fact that markets and the economy are cyclical. The tops are characterized by poor value, and the bottoms by abundant value. Acknowledging these facts and acting accordingly is not market timing.


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## Rhaegar (Feb 21, 2014)

I hate to break it to you, but the correction already happened about 2-3 weeks ago. If you didn't sell beforehand, and you didn't buy the dip, then you missed the boat.


These things don't happen every couple weeks, at most you get 2-3 of these a year, so it will likely be several months (barring surprise real world events) before you get another 5-10% dip. No sense trying to sell now for fear of another drop when one just happened.

Yes it will bounce around in a range for the next while as it slowly moves up, but not enough to try selling at a top.


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## Electric (Jul 19, 2013)

The most recent economics Nobelist explicitly endorses a market timing strategy. There is even a mutual fund for it - CAPE.


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## cainvest (May 1, 2013)

Electric said:


> The most recent economics Nobelist explicitly endorses a market timing strategy. There is even a mutual fund for it - CAPE.


Interesting ... how's this fund doing?


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## praire_guy (Sep 8, 2011)

wendi1 said:


> Well, I wish you luck with that market timing thing... Myself, I have evidence to support the hypothesis that I am very bad at it.
> 
> :rolleyes2:


+1


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## marina628 (Dec 14, 2010)

I do DCA for about 50% of our yearly investments in both registered and Non registered ,the other 50% We purchase about half in January/Feb and the balance in summer when we take our management bonus.I look for dips in particular stocks from time to time but for most part have no method to my style of investing , still trying to find a name for it lol


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## moose (Nov 19, 2013)

Call it what you want but I'm looking to sell some of my ING MFs real soon. Since the fund has no trading commissions, my plan is to DCA on the way out (assuming the market moves higher). I want to sit on a bit of cash. This technique obviously falls apart depending on your amount invested and trading costs. I will lose out on a bit of gains if the market moves up, but I might be able to redeploy in the event of a nice dip... I my situation the option and the flexibility is worth taking the small hit in potential gains..


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## Oldroe (Sep 18, 2009)

I read about the big 10% sell off and DCA. That's market.

Let's just look at 10 % on a stock. Lets say TD $47 and you bought 200 share plus $30 cost.

200*47+30= $9439 so you avg cost is $47.15.

TD drops 10% and is $42.30 and you DCA another 100 shares.

100*42.3+30= $4260

9439+4260=$13699/300= $45.66

So you drop your avg cost/share $1.34.

If you bought 300 more shares

300*42.30+30= $12720+ 9439=$22159/500+ $44.32

So I'm done with simple math. To really have any effect on your avg. cost per share you need to buy huge.


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## MoreMiles (Apr 20, 2011)

Oldroe said:


> I read about the big 10% sell off and DCA. That's market.
> 
> Let's just look at 10 % on a stock. Lets say TD $47 and you bought 200 share plus $30 cost.
> 
> ...


You need to double. It's like gambling, $1 then $2 then $4 then $8 then $16. There is only one problem... you will run out of cash soon if your luck or market trend does not improve.


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## Oldroe (Sep 18, 2009)

Can't believe it somebody understands.

So in the example we effected our avg. cost about 5% and we doubled + our investment.

In the investopetia DCA example it looks great in the real world DCA is scary.

With TD I would DCA and most DIV. aristocrats the rest I don't think so.


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## wendi1 (Oct 2, 2013)

Whenever I think about doubling down, I think Nortel.

And peptic ulcers.


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## OurBigFatWallet (Jan 20, 2014)

In my experience usually when I try to time the market, I fail. Of course it would be great to buy on the lows and sell at the peak but I've not been able to do that. Kudos to anyone that can though


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## marina628 (Dec 14, 2010)

At one point I was down 30% on CNQ so I tripled my position and today up 9.41% .Not fantastic returns for 2 years holding but dug myself out of the hole .


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## RBull (Jan 20, 2013)

Oldroe said:


> I read about the big 10% sell off and DCA. That's market.
> 
> Let's just look at 10 % on a stock. Lets say TD $47 and you bought 200 share plus $30 cost.
> 
> ...


Make it another one that understands. I'm with you on this.


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## hboy43 (May 10, 2009)

Oldroe said:


> Can't believe it somebody understands.
> 
> So in the example we effected our avg. cost about 5% and we doubled + our investment.
> 
> ...


I don't "understand" what is your point. The sequences under discussion are not DCA first of all, they are multiple purchases in time. I would argue pure DCA would be equivalent dollar amounts purchased at regular intervals for a very long time running in years. To complain that the mathematics is uninteresting based upon a 10% change in price in a sequence of a size of 2 does not reflect the reality of possible sequences spanning many years with price variability much greater than 10%. So while your calculations are presumably accurate, they are also quite besides the point.

Given that the sequences in the above examples are not DCA sequences, I provide my also non DCA sequence ... though it does span many years:

Consider my MX. I have purchased rounded to nearest dollar (and sell as noted) in order over about 15 years 

600 at $8 circa 2000, 
1200 at $4 circa 2000, 
600 at $19 2008,
600 at $17 2008,
1500 at $8 2009, 
sell 500 at $21 2009, 
sell 900 at $28 2010
sell 500 at $28 2010, 
sell 400 at $26 2010, 
100 at $23 2011, 
700 at $27 2012.

At least twice I have added shares when down considerably, about 30% and 50% from ACB. Twice though still ahead of ACB, I was down close to 50% from recent high, yet added shares. I have also added shares when priced well above my ACB. I don't see volatility as a problem as "scary", I see it as opportunity.

I leave it as an exercise for the reader to take it from here. Hint, much more interesting than "10% drop example above".

hboy43


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## thompsg4416 (Aug 18, 2010)

Personally I'm not a fan of DCA. At least for my investment style, I prefer to be a bit more strategic. I.E invest chunks of money into stocks I feel at the time of purchase offer good value. This may even include doubling down on a particular stock if its one I believe in and one that I think is oversold. This has worked out for me more often then not.. although I'm down big on TRQ which I've doubled down on numerous times - but I still believe If it ever pops I'll be rich

As someone mentioned before I think if you're holding a Div aristocrat DCA makes more sense.

With regards to market timing - I dunno if you can really time the market. Its been pretty much proven to be too difficult of a strategy to do on a regular basis. However that doesn't mean you can't make extra purchases during a correction. It also makes sense as someone else said earlier to keep evaluating your portfolio. When something is over bought move into something else. I suppose this is a form of market timing but its more about looking for value.


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## thompsg4416 (Aug 18, 2010)

Personally I'm not a fan of DCA. At least for my investment style, I prefer to be a bit more strategic. I.E invest chunks of money into stocks I feel at the time of purchase offer good value. This may even include doubling down on a particular stock if its one I believe in and one that I think is oversold. This has worked out for me more often then not.. although I'm down big on TRQ which I've doubled down on numerous times - but I still believe If it ever pops I'll be rich

As someone mentioned before I think if you're holding a Div aristocrat DCA makes more sense.

With regards to market timing - I dunno if you can really time the market. Its been pretty much proven to be too difficult of a strategy to do on a regular basis. However that doesn't mean you can't make extra purchases during a correction. It also makes sense as someone else said earlier to keep evaluating your portfolio. When something is over bought move into something else. I suppose this is a form of market timing but its more about looking for value.


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## Oldroe (Sep 18, 2009)

Fees kill you on true DCA.

If you get yourself in a DCA situation it's really Avg. Down. Most/Some on this site just buy into the miracle without know how little effect DCA/AD have on a larger holding.

HBoy in your example I can't tell if you effecting your avg. cost or just buy more share of a stock you like. In Marina case I suspect she did the math with out really thinking about it. At any rate I'm happy it worked for both you's.


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## Electric (Jul 19, 2013)

thompsg4416 said:


> With regards to market timing - I dunno if you can really time the market. Its been pretty much proven to be too difficult of a strategy to do on a regular basis.


Google "cyclically adjusted price earnings" or "CAPE ratio." It is a market timing strategy that seems to work. It is not that hard to implement this strategy, which is endorsed by a Nobel economics prize winner.


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## richard (Jun 20, 2013)

Electric said:


> It is not that hard to implement this strategy, which is endorsed by a Nobel economics prize winner.


Remember LTCM? 

Market timing is doing something that goes against your long-term strategy with the hopes that it will lead to a short-term profit. It's usually done with bad probabilities so it's like buying lottery tickets. Of course winners will always be happy to tell you all about their strategy for picking their lucky numbers.

For those who are afraid because the stock market went up, if you didn't think this should happen then why invest in stocks?


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## Electric (Jul 19, 2013)

Touche, but I think LTCM went bust because they made huge bets on derivatives. CAPE is very similar to a dogs-of-the-dow strategy and doesn't entail nearly as much risk.

I think we have different definitions of what market timing is, as well.

All I'm trying to point out is that the whole "you can't time the market" thing is not a universal truth, even if it is popular on indexing-type boards like this. I don't actually have any money at risk in a CAPE strategy, though. I remember piling into an RBC O'Shaugnessy fund a few years back for similar reasons, and it was dead money for years, so I'm soured on gurus.


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## cainvest (May 1, 2013)

richard said:


> Remember LTCM?
> 
> Market timing is doing something that goes against your long-term strategy with the hopes that it will lead to a short-term profit. It's usually done with bad probabilities so it's like buying lottery tickets. Of course winners will always be happy to tell you all about their strategy for picking their lucky numbers.
> 
> For those who are afraid because the stock market went up, if you didn't think this should happen then why invest in stocks?


LTCM - "The trillion dollar bet" is a good documentary on that.


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## richard (Jun 20, 2013)

LTCM had a problem with theory meeting reality, especially when reality knew about theory's reputation. It was a really nice theory though.


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## leeder (Jan 28, 2012)

I've done pretty well in the last couple years without 'intentionally' timing the market. My core portfolio is invested in index ETFs, which I re-balance annually when I contribute new capital. These are specifically located in my TFSA and RRSP. However, I do have some money on hand to purchase/add to some individual dividend paying equities, especially during significant dips. I don't mind DCAing companies that I am confident will do well in the long-term. It also helps that I target sustainable dividend paying companies. It allows me to get paid while waiting.


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## favelle75 (Feb 6, 2013)

Oldroe said:


> Fees kill you on true DCA.
> 
> If you get yourself in a DCA situation it's really Avg. Down. Most/Some on this site just buy into the miracle without know how little effect DCA/AD have on a larger holding.
> 
> HBoy in your example I can't tell if you effecting your avg. cost or just buy more share of a stock you like. In Marina case I suspect she did the math with out really thinking about it. At any rate I'm happy it worked for both you's.


No fees for me. I only buy ETF's and ETF purchases are FREE for me.


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