Timing is Everything

 
Originally written Jan. 31, 2014 I’ve updated this post to reflect the reality of how time affects perspective. I’ve added new comments in blue italics surrounded by parentheses.

Well it’s back to a topic that is very important to me, finances.

Going DownAs I write these words the stock market is a bit more than an hour from opening though you’ll read these words (because I’ll finish this post) after it opens. Based on the pre-market indicators today is going to be a down day (possibly very down). So far 2014 has been a down year with the Dow dropping 4.39% or 748 points and that doesn’t include whatever is in store for today. I for one hope it continues down. (Well it didn’t continue and as you read these words the Dow is up 3.82% for the year)

Wouldn’t it have been nice to sell everything on Dec. 31, 2013, the peak, and then buy it all back whenever we hit the bottom? (That would have been Feb. 03) It would have but it’s also impossible to know when those two events will occur, eveyone knows that. They say timing is everything in life but perfect timing is impossible when it comes to stocks. Since perfect timing is impossible then what about not so perfect, or just average timing? We’ll get to that in a second.

I gave up trying to time the market very early in my investing career but there is some wiggle room. Almost as soon as this new year began, I started selling stock. Not because I’m a clairvoyent investor but because I had to rebalance my portfolio anyway and rebalancing to me doesn’t mean selling and buying at the same time. Since the year began I have sold 3.2% of all my stock holdings and moved it to cash or bonds. (I’ve continued selling as the year went on and the markets have risen) That’s not a lot in the grand scheme of things and fits with my philosophy of buy and hold. I held onto 100% of my stocks during the 2008 collapse and subsequent recession and even added to my positions which paid off very well with 2008 seeing a 16% decline but 2009 seeing a 25% increase and 2010 seeing a 17% increase all while buying on the way up.

If you have a plan you can and should stick with it and that’s exactly what I’ve done and am doing. (My plan is to buy low and sell high – duh – but I rarely sell – the little selling I’ve done is very small compared to my holdings. More importantly I’ve been saving and it’s those savings that will allow me to buy when I beleive the time is right) Also very importantly, do not make big moves. 3.2% is not a big move but, if I’m successful, it will have a big impact many years from now, and that is what planning is all about.

Will I begin buying stocks at the exact right moment, when the market hits the bottom and things begin going up again? Absolutely not! But will I buy at a lower price then I sold? Yes. Will that growth compound over many years if I continue to hold? Yes. The timing is not when to sell but when to scale back buying and when to amp up buying.

My next post will be on my technique for rebalancing my portfolio.


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Foolish Cycle Continues

 
WhitneyThe experts are at it again. Not that they ever stop spouting off but when they change direction I think that’s a sure sign to ignore them. One such expert perpetuating this foolish cycle is Meredith Whitney.

The Difference

I’ve said it before, that if you use the gauge of who is richer, who garners more respect, and who can get on TV any time she wants then Ms. Whitney is far more qualified than I am to offer her financial advice. The difference is that I’ve been correct in my predictions and she’s been wrong though she’ll never admit it (especially to me).

What Now?

Stocks have gone up very quickly and there are various reasons for that but Ms. Whitney has been cautious about stocks – until now. CNBC states “Known more for her pessimistic take on the markets, and banks in particular, Whitney has turned in the opposite direction.” Run the other way!

Whitney says she’s “not been this…bullish…on equities in my career.” Yeah I know, but I have, and I’ve been right and she’s been wrong. I’m a lot more cautious, now, just as she seems to be jumping in with both feet.

This reminds me of another person I’ve called out for being a fool who jumps on whatever bandwagon is rolling through town, James Glassman, who wrote the book DOW 36,000 just as stocks were about to crash from their internet binge. Glassman later wrote, Safety Net, a book about how stocks were not a good investment and which favored bonds just before this amazing stock market run we’ve experienced these past few years.

Pickers

My feeling on investing has evolved over the years and at one time I thought I could time the market, predict with reasonable certainty what individual stocks would do. I was wrong. Since then I have become a passive investor (passive is such a misnomer).

It’s been said that you can pick your friends, you can pick your nose, but you can’t pick your family; I’d change that to you can’t pick the direction of the market. And yet people try. They tried with internet stocks, they tried with housing, and they’re trying again with bonds.

My Advice

You choose whether you want to listen to these so called experts but my advice is to ignore these fools and invest with a long term view. Tomorrow I’ll have a post about how my saving and investing has enabled me to be aggressive when I wanted and cautious when I needed.


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