Australian (ASX) Stock Market Forum

Time is not important for long-term investment

SFA

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Many believe that the timing of an investment is not important or not relevant for a long term investment. Therefore, people believe that losing money for a short period of time is justifiable. . This belief is for those who fail to get their timing right!. Many people only actively select and buy a stock. But once they are holding the stock, they become passive and are not concerned about what is happening in the market. Successful investment in stocks, is not only choosing the right stock, but buying the right stock at the right time. Look at the chart below. Even on an uptrend market, person A who buys at the right time (at the beginning of trend) will make money; compared to person B who buys the same stock but at the wrong time ( at the beginning of a pullback). As a result, person B makes a loss with the same stock.

13188999_f520.jpg
Jess Levermore, the Wall Street legend once said: "It is not as important to buy as cheap as possible as it is to buy at the right time"


Making a right trading decision does not only mean buying at a good price but also buying at the right time. Timing is the key element in Cycle Timing Analysis. This technique helps us to determine or pinpoint the turning point in terms of the timing of upwards and downwards trends? Knowing the entry price is one thing, however knowing when to buy a stock is also crucial in order to maximise profits and prevent losses.


There are many investments that do not provide a return, even though you have invested for many years. For example, Melbourne IT is an Australian internet company listed on the Australian Securities Exchange, which once traded above $16.00 per stock in the year 2000. Many investors invested their hard earn money based on the recommendation of the brokers. They went in with full confidence that their investments will pay off with good returns after a long-term holding. However, after 15 years of waiting, they have come to the state of despair, as the stocks are now worth less than $2.00 (in 2015).

13189003_f520.jpg



Another example of misguided investment is HIH Insurance. The company was Australia’s second-largest insurance firm. The media was full of broker’s recommendations to buy the company’s shares when they dropped from $3.50 to $2.00, causing a high buying volume at that time. However, if you, unfortunately, did make those investments at the time, you would come to know that at 6 years later, the shares have dropped to below $0.50, and the company sliding to an almost bankrupt state.

13189004_f520.jpg
HIH's Share Price | Source


How about the large, global, well-known large enterprise Microsoft Corp (MSFT)? Microsoft’s stock hit $58 back in 1999. During the dot-com bubble, it declined to below $20. It took more than one and half decades for it to rise back to $55.

13189005_f520.jpg



These are just examples of 2 so-called “long-term” investment companies, which were deemed “safe”. It’s not always accurate to say that buying-and-holding an investment long-term will always give you a good return. Even if the investment bumps back up to past the original price, you may have lost years of time waiting for it to recover; which is money that could’ve been helping you generate profits elsewhere. Therefore, be sure that you don’t fall into the trap of this myth. Pinpointing the most accurate time to buy and sell stocks requires a combination of fundamental, technical and timing cycle analysis skill.
 
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galumay

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Its a point of view, but not one widely held. If you research the statistics you will realise trying to time the market is a recipe for significant underperformance.

Cherry picking a few examples like you have is meaningless. That can be dont to support any hare brained concept.

Secondly this looks awfully like spam to me, the site you credit for this "info-mmercial is not even live yet, so I presume you are self promoting your own 'system'.
 

tech/a

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Its a point of view, but not one widely held. If you research the statistics you will realise trying to time the market is a recipe for significant underperformance.
Not so sure about that. A lot of us attempt to time in and out of our super holdings.

Cherry picking a few examples like you have is meaningless. That can be dont to support any hare brained concept.
If you think about it you'd have to be pretty stupid to hold the sort of drawdowns shown.
You'd be as luck as "A" to time "B" perfectly as shown.

Secondly this looks awfully like spam to me, the site you credit for this "info-mmercial is not even live yet, so I presume you are self promoting your own 'system'.
Perfect timing you could be right.
 
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Many believe that the timing of an investment is not important or not relevant for a long term investment.

Successful investment in stocks, is not only choosing the right stock, but buying the right stock at the right time. Look at the chart below.

Pinpointing the most accurate time to buy and sell stocks requires a combination of fundamental, technical and timing cycle analysis skill.
No argument from me on the importance of the Entry for whatever you trade. I think the entry price is an undervalued aspect of any trader's bottom line .... however ....

That aside, you were specifically talking about average Joe and his "stock" picking ... then you use 'Spot Silver' as your main example of a "stock" pick!!:eek: .......

When preaching to others its probably wise to prepare your 'sermon' from the correct 'bible' lest your followers find another more suitable rabbi:confused: ....
 
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tech/a, sounds as if he is the prime of life.

Remembering Churchill, Chamberlain, Il Duce and other non-entities ( as they no longer exist and I do ) it is important to be age specific in your trading and also beware of the numerous descendants one has who will undoubtedly squabble over the gains.

So it is as important to reflect upon oneself, one's timeline, timespan to the next re-incarnation and ultimate aim for the profits as it is to make the profit.

I find many rich friends unable to grasp this concept in their grasping.

As I do my poor friends.

As I do myself.

I do like profit.

As for the right time. Tell me.

gg
 
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Timing the market perfectly is obviously impossible but timing the market better than random entry buy and hold is very possible and to go a point further proactively trading a portfolio based on timing cyclical lows and highs is also possible and will markedly outperform a buy and hold static portfolio . A well managed proactive portfolio is the bar .. the index is the mediocrity


PS , the majority of the top 50 stocks on asx are mean reverting , this is where the edge lies . these reversions apply to both fundamentals and technicals and a combination of both gives a superior edge although i do believe even using only one singularly will give an edge ..
 
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13188997_f520.jpg

Many believe that the timing of an investment is not important or not relevant for a long term investment. Therefore, people believe that losing money for a short period of time is justifiable. . This belief is for those who fail to get their timing right!. Many people only actively select and buy a stock. But once they are holding the stock, they become passive and are not concerned about what is happening in the market. Successful investment in stocks, is not only choosing the right stock, but buying the right stock at the right time. Look at the chart below. Even on an uptrend market, person A who buys at the right time (at the beginning of trend) will make money; compared to person B who buys the same stock but at the wrong time ( at the beginning of a pullback). As a result, person B makes a loss with the same stock.

13188999_f520.jpg
Jess Levermore, the Wall Street legend once said: "It is not as important to buy as cheap as possible as it is to buy at the right time"


Making a right trading decision does not only mean buying at a good price but also buying at the right time. Timing is the key element in Cycle Timing Analysis. This technique helps us to determine or pinpoint the turning point in terms of the timing of upwards and downwards trends? Knowing the entry price is one thing, however knowing when to buy a stock is also crucial in order to maximise profits and prevent losses.


There are many investments that do not provide a return, even though you have invested for many years. For example, Melbourne IT is an Australian internet company listed on the Australian Securities Exchange, which once traded above $16.00 per stock in the year 2000. Many investors invested their hard earn money based on the recommendation of the brokers. They went in with full confidence that their investments will pay off with good returns after a long-term holding. However, after 15 years of waiting, they have come to the state of despair, as the stocks are now worth less than $2.00 (in 2015).

13189003_f520.jpg



Another example of misguided investment is HIH Insurance. The company was Australia’s second-largest insurance firm. The media was full of broker’s recommendations to buy the company’s shares when they dropped from $3.50 to $2.00, causing a high buying volume at that time. However, if you, unfortunately, did make those investments at the time, you would come to know that at 6 years later, the shares have dropped to below $0.50, and the company sliding to an almost bankrupt state.

13189004_f520.jpg
HIH's Share Price | Source


How about the large, global, well-known large enterprise Microsoft Corp (MSFT)? Microsoft’s stock hit $58 back in 1999. During the dot-com bubble, it declined to below $20. It took more than one and half decades for it to rise back to $55.

13189005_f520.jpg



These are just examples of 2 so-called “long-term” investment companies, which were deemed “safe”. It’s not always accurate to say that buying-and-holding an investment long-term will always give you a good return. Even if the investment bumps back up to past the original price, you may have lost years of time waiting for it to recover; which is money that could’ve been helping you generate profits elsewhere. Therefore, be sure that you don’t fall into the trap of this myth. Pinpointing the most accurate time to buy and sell stocks requires a combination of fundamental, technical and timing cycle analysis skill.

There is a difference between "long term" and what I'd call "long time" investing.

To buy whatever (blue chip or young ambition) and simply hold is just reckless "long time" investing. So in that sense I agree with your thesis there.

But to then conclude that since holding any stock for long does not mean it will rise... I think it's wrong to conclude from that that the investor ought to "time" the market. I mean it is true that we all try to "time" our entry and exit, but whether that move turns out well-timed or not is just pure luck.

The conclusion I think ought to be that investors cannot simply buy and hold and hope for the best. But that the investor ought to have some idea and insight into the business and its quality and value.

This is beneficial in a few ways. One is that if you pick a high quality business with established records and operations, buying in at a reasonable price.. .then over the long term, things would tend to work out pretty alright. No quarantees, but chances are it'll be alright.

Second, to buy quality at reasonable price mean that even if the price immediately halved as soon as you bought in, you'd be aware and informed enough to either take more advantage, or just suck it in and not realise your lose by selling right away.

Third.. once you know a business pretty well, you can do short term buy and sell and still make pretty decent profit trading that way. Maybe.
 
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1) Look at history

no dividends log scale. Could only really time really well once or twice in history form 1985 mark.



allord log.PNG





Interesting perspective
I am not affliated with fidelity

Taken from:

http://www.fidelity.com.au/fidelityP2/?LinkServID=B91D14A6-B125-E8DC-BB83AAD60C35BC5A








fidelity.PNG





2) Passive diversified investment is a bet on the future of the country/ companies as a whole.

My two favourites of passive investing failing. Greece market didn't really learn...
Japan around 350%+ in a 5 years, then never recovered to highs



https://finance.yahoo.com/chart/GD.AT


Greece linear, I think no dividends








yahoo greece.PNG




Nikkei linear


japan nikkei.PNG




3) Most people don't have the resources or time to overcome transactional, tax and capital hurdles in producing risk adjusted returns so become the proxy market.

4) Mean reversion is not guaranteed like everything else, look at 1987 crash by portfolio insurance for example participants pulled out and futures did not track the underlying index.Mean reversion is like insurance, make sure you can have a counterparty and are protected when the storm hits and your assumptions hold up.


5)Why hurt yourself trading if you don't enjoy it, just passively invest and smell the roses and drink the champagne. Work 9-5 and then retire.

my twocents
 

So_Cynical

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prevent losses.
There are many investments that do not provide a return, even though you have invested for many years. For example, Melbourne IT is an Australian internet company listed on the Australian Securities Exchange, which once traded above $16.00 per stock in the year 2000. Many investors invested their hard earn money based on the recommendation of the brokers. They went in with full confidence that their investments will pay off with good returns after a long-term holding. However, after 15 years of waiting, they have come to the state of despair, as the stocks are now worth less than $2.00 (in 2015).

13189003_f520.jpg
Melb IT used to be an internet company, they still do domains and web hosting but now most of the revenue comes from cloud services, since 2009 they have paid close to $1 in dividends, move your time line forward 1 year and you would of bought in at around $1.75, average down at the 2 big dips at about $1.25 and now your doing ok with the SP recently over the $2 mark.

I bought my MLB shares 2 years ago this month @ $1.33 ~ doin fine thanks...timing is super important.
 
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Timing matters if you want to know where you are in the economic cycle. You also want to broadly know where to put your money and whether that should be stocks at all. That depends on various factors and so when deciding asset allocations timing seems relevant. For example, buying apartments in the Brisbane CBD is unlikely to be a good investment today because of the massive supply of apartments set to come into the market over the next couple of years. That would be a very simple example of timing a market and seeing an opportunity maybe later down the track.
 
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Timing matters if you want to know where you are in the economic cycle. You also want to broadly know where to put your money and whether that should be stocks at all. That depends on various factors and so when deciding asset allocations timing seems relevant. For example, buying apartments in the Brisbane CBD is unlikely to be a good investment today because of the massive supply of apartments set to come into the market over the next couple of years. That would be a very simple example of timing a market and seeing an opportunity maybe later down the track.
While it is true that if we know certain business or economic cycle and get on or off at the right time, we'd do very well. But, and this could be just me, it's more luck than knowledge.

Take the property/apartment example... we can argue that the market is overpriced or not based on some basic business and investment economics alone. That without needing to know the oversupply in the making, we can just use a simple yield as a return on the investment... see if the return can realistically be maintained and if not, what should we do; if it can be maintained, should we worry about the property prices? Things like that.

Yes, that might mean getting out too early of property... but luck and fundamentals have a way of protecting capital and whether we can make all the money possible or not.

A couple of examples where I miss out big time trying to time the business cycle and corporate action... Aurizon I thought was reasonable at around $3 something but decided that given the low oil prices, the collapse in commodities/coal, it might be worthwhile to wait a bit.

Same with AQS [AQL?]... a lab testing company. I could have doubled my investment in a year if I didn't try to time it

Then there's MRM and STO where I jumped in and in hindsight should've waited. Would have made crap load too.


Now there's Sirtex... knowing, or think I know, it's an absolute bargain at the current $14s.. should I jump all in or wait for the class action to settle; wait for the possible negative research that's about due then bag even bigger bargains.

One feet in and one still out in case at the moment. But yea, investing and market or corporate timing is not as easy as it sound.
 
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Timing entry to individual stocks requires some skill but for the market as a whole it's not rocket science in my view IF you're taking a long term view (many years) of it.

Looking at global factors, specifically the US which is rather influential, right now we've got the S&P 500 p/e ratio at 26.75, the Fed raising interest rates and a business cycle that's getting rather old by historic measures. Looking at history the chance that there's a better entry point ahead in terms of the market as a whole extremely high. That said, the market could certainly go up further before it goes down.

OK so we're not in the US but it's relevant to the extent that our market is somewhat correlated to theirs and of course many will be putting their superannuation in particular into funds which include "international shares" so the US markets are definitely of some relevance.

Actively trading individual stocks on a shorter term basis is very different though in that the macro factors aren't a reliable indicator of anything. We've got the index up quite nicely in recent times but there's plenty of individual stocks which have declined sharply. Looking at the overall economy and market valuation really only works if you're investing in an index fund or if you're seriously expecting an outright crash that sends practically everything lower.
 

Triathlete

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Timing the market perfectly is obviously impossible but timing the market better than random entry buy and hold is very possible and to go a point further proactively trading a portfolio based on timing cyclical lows and highs is also possible and will markedly outperform a buy and hold static portfolio . A well managed proactive portfolio is the bar .. the index is the mediocrity
+1 :xyxthumbs
 

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