There are probably at least four major positions being articulated.
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Certain that they personally cannot time the market, but willing to accept a short term -EV outcome to reduce risk of ruin, to use the poker terms. This is actually a completely rational position in many economic models.
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Same certainty but willing to gambol it up regardless by taking a market position they think is -EV in real constant dollars.
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Not convinced that the extremely strong criteria for ‘no one’ and ‘in all cases’ are met, since extraordinary claims require very strong proof. For example, you might argue that information is not perfectly disseminated in all real-world markets, even our enormous global one.
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Complete certainty and riding it out.
So as not to troll this market sweat thread with lack of commitment, you can put me down for #1 with a little bit of #3 as well.
Except it’s not a strategy. Nobody plans to weaken, panic, and sell after a big loss. It’s just what happens a lot.
But I do think there are some reasonably good market timing strategies that involve increasing equity allocations when the markets are falling, and decreasing equity allocations when markets are expensive. I do this myself now but stay within loose AA bands so I can never make too big a mistake. This also means I’ll never make infinite money. I guess eventually I’ll find out if I ended up beating straight b&h. (But generally buying strongly into a falling market works pretty good until you find yourself in the next great depression.)
If you could identify bad moves that panicky investors make, you could always do the exact opposite and effectively time the market.
“Timing the market is bad” is 95% because the market generally goes up, and 5% trading costs.
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It’s not hard to spot a falling market and buy into it. You may have noticed that recently the markets fell hard. Doesn’t matter if people are making mistakes or not. Maybe it’s falling and completely rational. But I plan to hold long enough that dollar cost averaging down should work out. Except when it turns out to be the great depression.
And does anyone actually have any significant trading fees these days? My trades are all free in all our accounts.
I have a feeling that if this turns into a great depression, there will be enough deflationary policy that the USD will lose so much value it won’t really matter what you had your US-based assets in.
But generally buying strongly into a falling market works pretty good until you find yourself in the next great depression.
You have literally just described Martingale.
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Maybe, but then I’m probably fucked anyway. (Maybe that’s what you were saying. Monetary policy shit confuses me.)
Sort of. But the market is biased to growing not shrinking right?
Yep.
Martingale is a Net 0 EV strategy with infinite risk of ruin.
Employing it in a +EV market is +EV
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Yeah that’s what I was saying.
One of the reasons I love funds like Vanguard Life Strategy and most Target Date finds is they are constantly rebalancing for you, selling equities when they go up to buy bonds and vice versa. The downsides to these funds in taxable accounts are no tax loss harvesting and taxable distributions. Personally I’m both lazy and psychotic so I love they they do the work for me and I’m not tempted to do stupid shit trading in and out of stuff. And since I plan to use the money before I die, I won’t miss tax loss harvesting too much.
Don’t they tend to have somewhat higher expense ratios tho?
I’d like to solicit thread opinions on these Fidelity zero cost funds I’m seeing out there. Are there any hidden downsides? Is this the same type of loss leader marketing scheme as free checking accounts?
The Vanguard funds have expense ratios under 20 basis points. The extra cost is worth it to me for the reasons mentioned above.
Separately, it looks like Obama era bank regulation is…working?
Vanguards expense rations are basically the lowest in the industry. I haven’t looked in a while but I’m guessing the life strategy funds are <.10%. I think Index 500 is <.05%.
Edit: my pony has a high ER. And I was a bit to generous. VTIVX is .15. VFINX is 0.14. I might be thinking of lower ER’s on the funds in my 401K.
Tom Hanks with covid + NBA season cancelled + Euro travel ban, tomorrow gonna be brutal
The main downsides are that they track a proprietary index that doesn’t hold all the same stocks and the funds can’t be moved from Fidelity. If you compare the Fidelity TSM fund FSKAX to FZROX the zero fund has 2491 holdings and the other has 3454.
If you’re holding it in an IRA the difference is pretty neglogible but in a taxable account the risk of wanting to switch brokerages is not worth it.
JFC futures down ANOTHER 4%
Is the virus going to break everything? So many corporate balance sheets are at max leverage. I just can’t even start to game theory this out.
No stimulus is going to big enough.
Are we looking at a years long recovery?