Picking Stocks versus timing the Market

[Darc Knight]

Let me just say first of all that I respect the talent you guys show in analyzing and picking Stocks. But, wouldn't it be easier to just use Index funds and time individual (index fund) markets?

Oh, I'm not saying timing the Market is easy, just easier than picking Stocks. Thanks.

 

[Joules MM1]

Let me just say first of all that I respect the talent you guys show in analyzing and picking Stocks. But, wouldn't it be easier to just use Index funds and time individual (index fund) markets?

does 'easier' translate to better safety or better return on your risk ?

 

[Joules MM1]

if you can define all parametres for 'easier' then you'll find you already have all the knowledge to trade a broad range of stocks that will have varying levels of risk (on entry) and better return (on exit)

if you have one stock that returns you 10% in a month and an index that slogs its way higher at 3% in the same month .....how better off are you if the risks are equivalent ?

isnt the real reason most people go for indexes much to do with the "sense" of safety than it is to with actual safety?

 

[greggles]

Apples and oranges. An ETF or an index fund is not going to give you a five bagger in a few months. Active traders are looking for something different than hands off investors.

It's a case of whatever suits your personality. Some people love the analysis and the economics and the wild market gyrations, some would rather play golf. Different strokes for different folks I guess.

 

[Darc Knight]

Thanks Joules and Greggles. I understand the potential for a lot higher returns with individual stocks, I just thought it would be easier to read individual markets.

Would someone be a fool trying to time Markets (Indexes) rather than focusing on picking Stocks.

Appreciate your wisdom and input. Thanks.

 

[tech/a]

Many stock systems use a market index filter.
I think Pete uses one in his long term discretionary
Method he shares here.

I use one in my Super fund longer term trading

If you understand market movements both Fundamental and Technical you can trade indexes longer term
Just as you could trade a single stock which is out performing.

 

[galumay]

Trying to time markets is quite different to picking individual stocks. I think you are confusing things. You can invest passively or actively and quite separately you can try to time markets or not.

There is ample evidence for me that trying to time markets has poor outcomes, regardless of the investment vehicle. (individual companies or ETF's) So its not something I would do, but as tech/a's reply shows there are people that believe they can time markets and thereby improve their returns.

 

[mcgrath111]

Let me just say first of all that I respect the talent you guys show in analyzing and picking Stocks. But, wouldn't it be easier to just use Index funds and time individual (index fund) markets?

Oh, I'm not saying timing the Market is easy, just easier than picking Stocks. Thanks.

Picking good stocks is a very hard thing to do on a consistent basis. Sure you can make 10,20, 30%+ in a year. However, doing that YOY, is a damn tough gig.
I like to pick stocks, but 90% of my cash is in ETF's, when the market flucuates and they go up and down it has no emotional effect on me. In contrast I feel emotional attachments to picking stocks. My personal opinion is that the vast majority of people should go the ETF route, but in contrast you won't get the big % increases from the ETF route.


If you're going long / fundamental investor, take market timing with a grain of salt.

(Edit: That being said, my 5 bearish full year picks are giving the folks on this forum a run for there money

 

[MrChow]

Comparing a bad idea to a bad idea generally doesn't lead to good results.

 

[Smurf1976]

One of the “breakthrough” moments for me was realising that paying some attention to individual stocks helped me get the overall market timing right.

 

[So_Cynical]

Let me just say first of all that I respect the talent you guys show in analyzing and picking Stocks. But, wouldn't it be easier to just use Index funds and time individual (index fund) markets?

Oh, I'm not saying timing the Market is easy, just easier than picking Stocks. Thanks.

Do both, i mean for me its not just about picking a stock its also timing, for example RIC is a stock i hold and like very much but not at any price, under 1.29 like it has been for the last few days its cheap, wouldn't pay more for it.

Index funds and big LIC's that pretty much index track except pay fully franked dividends, same, buy when its cheap it you want to own one, i sold out of my 2 index funds 2 months ago.

 

[Darc Knight]

Thanks guys. I might just put aside some play money and have some fun trying to time things across some Share, Property and Cash index funds.
After increasing my knowledge of course.

Comparing a bad idea to a bad idea generally doesn't lead to good results.

Confucius? Thanks for the warning but I want to try it, not betting Sheep Stations though.

 

[john5]

first priority is pick the stock, then time it if you can, but picking it is the most important

 

[tech/a]

first priority is pick the stock, then time it if you can, but picking it is the most important

Why? (Which is a leading question).

 

[john5]

context is investing, not trading, trading it doesnt matter what the stock is, all that matters is timing of when to get in and out (trend), but investing has passive income as first objective, a capital gain as second objective, so nailing down an (expected) income at a "good" price is the priority, timing is a matter of patience, also, if price falls after youve bought you have the option of buying more to increase your eventual upside

 

[galumay]

but investing has passive income as first objective, a capital gain as second objective,

Huh?

 

[luutzu]

Why? (Which is a leading question).

I think what he meant was that the aim is to try and find a good business, presumably selling at a good price. And if possible, if luck would have it, you can pick that good business at an even better/cheaper price.

 

[sptrawler]

but investing has passive income as first objective, a capital gain as second objective, so nailing down an (expected) income at a "good" price is the priority, timing is a matter of patience, also, if price falls after youve bought you have the option of buying more to increase your eventual upside

Maybe what he is saying is, at the end of the day, to retire you need to replace your income.
If you have an ongoing dividend that supports your lifestyle, why would you sell the investment, chasing the capital gain?
One reason could be to buy back in at a lower price, but that risks your dividend, on the hope that a cheaper price is reached.
Like he says, if the price does take a huge dive, buy more. That is as long as you have cash at hand, I personally carry about 40% cash.
If you are fully in the market, you have to sell something, to take advantage of an opportunity.
Everyone's ideas, are a result of a mirriad of personall perspectives, circumstances and goals. That is why one size doesn't fit all, also the reason for every seller there is a buyer, at a price.

 

[tech/a]

I know what your getting at.
Every value investor would say similar
But a 7% dividend and a 10% drop in price isn’t
The sort of maths year in and year out I’d want.

My point is that choosing a sound investment is as
Difficult as timing a trade or investment.
You wont know if you made the correct choice until
Years later.hope isn’t a good trading strategy.
But it’s common.

 

[sptrawler]

I know what your getting at.
Every value investor would say similar
But a 7% dividend and a 10% drop in price isn’t
The sort of maths year in and year out I’d want.

My point is that choosing a sound investment is as
Difficult as timing a trade or investment.
You wont know if you made the correct choice until
Years later.hope isn’t a good trading strategy.
But it’s common.

Two shares that spring to mind are TLS and CBA.
Both give a reasonable dividend, but for long term investors, the outcomes are quite different.
It goes back to the song, know when to hold em, know when to fold em.