I think we're agreeing that you need a strategy and you need to stick to it. Where we differ (I think) is you think my strategy is objectively bad and yours is objectively good. I don't think we really know what each others strategies are though.
I'll assume you're a proponent of B&H SPY and continuing to buy $X/month of SPY until you retire. I'm just saying there are other ideas than that that you can use that have smaller drawdowns and comfortable returns to risk. You could B&H 60/40 SPY/treasuries for example.
Is it active management if you rebalance 60/40 once a year? What if you rebalance quarterly? At what point is it active management and therefore bad?
For the curious thread-reader, here are some websites that offer ideas that might make you question whether all "timing the market" is the same and equally bad long term.
Note, dear thread-reader, how these links are all blogs, none of them are actual academic literature, unlike the dozens of citations in even an introductory book such as A Random Walk Down Wall St.
If pablum on the Internet is your preferred method of investing advice, by all means care about a blog. If understanding finance as it operates is your preference, I recommend staying far, far away from the Internet blogosphere.
I don't believe the EMH is settled nor that markets follow a random walk. There is academic literature to back up both sides of both of those beliefs.
Things aren't as settled as you make them out to be, and that's OK. What's important is that you have enough confidence in your methods, whatever they are, to stick with them. In the end, the stickwithitness may be more important than what you stick to.
EMH being settled isn't of issue here, and I did not claim the markets followed a random walk. It's the name of a book, not a theory pushed by the book itself. The fact that you haven't even heard of the book speaks volumes as to your education in personal finance.
The basics of investing are settled for individuals, and you are not operating at a level of sophistication to rise into the areas of finance that are debated.
These aren't "my" methods, they're the methods. You either do these basic things as a retail/individual, or you lose money. Period.
I'll admit I haven't read the book completely or in a long time but is it not about how the EMH is true and so anything other than B&H low-cost index funds is a fruitless pursuit? Doesn't he back that up with the random walk theory of asset prices?
Instead of me assuming I know what you mean by the methods, would you mind stating what they are?
I think we could agree that some of them are:
* Have a sound plan (I'm sure we could debate what makes a plan sound)
If your plan is "throw my money into a pit" that is not a good strategy, even if you stick to it. So no, we would not agree.
You ignore Nejat Seyhun's 1994 paper "Stock Market Extremes and Portfolio Performance" [0] which says:
> For the 1963-1993 time frame, the findings were similar. The index gained at an average annual rate of 11.83%, for a cumulative return on $1.00 of $23.30 over 31 years. If the best 90 trading days, or 1.2% of the 7,802 trading days, are set aside, the annual return tumbles to 3.28% and the cumulative gain falls to $1.10.
And from ARWDWS [1]:
> The past history of stock prices cannot be used to predict the future in any meaningful way. Technical strategies are usually amusing, often comforting, but of no real value.
Further:
> Using technical analysis for market timing is especially dangerous. Because there is a long-term uptrend in the stock market, it can be very risky to be in cash. An investor who frequently caries a large cash position to avoid periods of market decline is very likely to be out of the market during some periods where it rallies smartly.
A lot of people would be better off it they just took a $100 a month and put it under their mattress, i.e. throwing money into a pit. There are obviously many better ideas than that.
Thank for for that paper, I'll give it a read.
The next line in Seyhun's paper is more interesting to me and the focus of my research and strategy:
> If the 10 worst days are eliminated, the annual return jumps to 14.06%, and the cumulative return increases to $44.80. With the 90 worst days out, the annual return rises to 21.72% and the cumulative gain to $325.40.
If you're open-minded, give the paper a read. They suggest a method, that you can verify yourself, for figuring out which months are likely to be worse.
The paper you shared defines "in the market" as long equities and "out of the market" as long T-bills. The paper I linked looks at other assets you could rotate into besides T-bills. How could that one change (they offer several other ideas) impact the results of your paper?
If that's not interesting to you, skip the paper I linked.
Personally, I believe that type of research is still valuable. I don't structure my life just based on things in published and cited articles.
If you can't smell the salesmanship taking place on this link, there is a whole lot more wrong with your filtering abilities than I had initially thought.
So based on this, I think you have a filter problem; you seem to be unable to accurately evaluate sources for their credibility, and take in any/all arguments without understanding how easy it is to be manipulated by un-credible sources into believing hard-to-disprove ideas that are nonetheless actively harmful to you and your ability to grow your investments.
This leaves you susceptible to charlatans and snake-oil salespeople, which fully explains your desire to believe proven-wrong ideas on investing. When you lose out on these market timing attempts, you apparently do so in a way that allows others to profit directly off of you, and you further advocate for others to follow suit.
We certainly have different types of filters. Your filter apparently catches blogs and that's fine. I feel I've been exposed to many interesting things on blogs. I'm sure others would agree.
Your model/filter may be better because you don't have to think about as many things. There's certainly more information out there than one has the ability to ingest. In my experience many things I thought were settled turned out not to be upon further inspection. A simple filter might be good enough for your purposes!
I think your ideas about investing can be correct (in that they produce favorable outcomes) and other ideas can be correct too.
Not a perfect analogy, but Newton's ideas about gravity are correct to explain a lot of things. Einstein's ideas expand and explain more. They are both correct, depending on the level of detail you need. Sometimes "correct" roughly equals "useful".
It's a logical fallacy to assume what they are saying is false because they might stand to profit from it. They might be biased but can't we investigate their claims independently?
I guess we'll have to disagree about whether I'm capable of investigating their claims. Maybe you aren't and that's well and good for you. If you cannot investigate their claims, I don't think there's much more to discuss on this topic.
Thank you for being a live demonstration to anyone left reading this of how fools and their money are soon parted.
Knowing your limits and knowing how bias creeps in are two skills you clearly lack. I hope nobody depends on you to make these kinds of decisions for them or in a way that impacts them.
For anyone left reading, let this be a live demonstration of how it can be a waste of time to try to convince someone on the Internet their thinking is wrong.
I'm pretty sure Zetice hasn't changed their mind on anything. I haven't really changed my mind on anything.
I still think the things we linked to are valuable. For those of you who have filters that let the information through, I hope you find something useful. Read the paper Zetice linked to and see what questions you come up with. Or don't.
Probably best to just ignore everything we've both said (including this advice). There haven't been any published and cited papers about this thread yet so it's too early to tell whether there's anything of value here.
There have absolutely been published and cited papers in this conversation (I cited one and then cited a book with literally hundreds more), the fact that you don't realize that should make it clear to anyone left reading this what's going on.
I'm not sure why I feel the need to convince you. I think your confidence in the face of contradictory evidence that I've seen triggers something on an emotional level for me. I also feel confident I am correct but you disagree.
Hopefully you, someone reading this thread, or I get something beneficial out of this, though! I hope you are successful with your investments and they give you peace of mind.
I'll assume you're a proponent of B&H SPY and continuing to buy $X/month of SPY until you retire. I'm just saying there are other ideas than that that you can use that have smaller drawdowns and comfortable returns to risk. You could B&H 60/40 SPY/treasuries for example.
Is it active management if you rebalance 60/40 once a year? What if you rebalance quarterly? At what point is it active management and therefore bad?