The Bad Money Advice blog recently posted a blog entry entitled Why Market Timing Is Hard.
I posted two lengthy comments.
Juicy Excerpt: The rub is that we cannot say how long it will take before we see the big crash. We went to 25 in 1995 and stocks didn’t begin performing poorly until 2000. Those who lowered their stock allocations in expectation of a crash as soon as we went to 25 missed out on five years of good stock returns. In the long term, though, those who “miss out” on a few years of gains because they want to avoid a huge crash end up ahead. There is a cost to engaging in long-term timing, but there is also a cost of not doing so. The cost of not engaging in long-term timing is greater than the cost of engaging in long-term timing.
John Walter Russell says
You gave outstanding advice in your comments.
It is amazing that there are still detractors. They are looking more and more foolish everyday.
Have fun.
John Walter Russell
Rob says
I think that a lot of people are in pain, John.
We all care about our personal integrity, no matter what any economic model says about what drives human behavior. It’s hard to let in that we compromised our personal integrity and caused ourselves financial ruin by doing so.
This isn’t just about dollars. The implications are much bigger.
My take.
Rob
John Walter Russell says
Professor Shiller’s numbers are trustworthy.
Beware of those quoted by others.
In particular, there was a reference to S&P500 returns. That table of returns was a REAL return table, not a nominal return table. I checked the NOMINAL 5 year returns. There are several years with nominal annualized losses exceeding 8%. These happened during the Great Depression and deflation. [The real losses were not nearly so bad during those years because of deflation.]
Have fun.
John Walter Russell