imported post
Pete1 wrote:
Rolo, you appearto be a big fan of Ric Edelman. Did you skip the chapters on timing
(no ill will intended, just curious)?
Baaaahahahahaha! lol!That is hilarious!
I do not think one can skip Ric's amonishments against market timing...they pretty much permeate the entire book. But I'm gonna do it anyway.
'Cos I'm smart...I know better... :dude: <-- Frizz B.
Seriously, Ric is right. Not in a wholly absolute sense, but he is right. There is much evidence to support his case: most market timers fail.
I see "buy-and-hold" as the baseline. I am rarely happy with "baseline" or "what you are supposed to do". I frequently find that "what you are not supposed to do" yields better results. (i.e. every computer I have ever had, and there are alot of them, since the 386 has been overclocked for better performance and not at the cost of reliability, but you are definitely
not "supposed to do that".)
When you have a firm understanding of the baseline, then you can modify it and measure improvements (or failures). This is where I am with investments and even my PT Cruiser. I am learning to understand the baseline so that I can modify it and design a method to increase efficiency/power/gains, yet maintain reliability.
So, yes, when I bungle the timing thing, Ric's entertaining "voice" is in the back of my mind, "iiiiit...doeeeeeeesn't.......woooooOOOOOoooooork!" (Judging by his writing, he seems like a fun guy to hang around, like a Rush Limbaugh of investing.)
Seeing the merits of different perspectives is a must. I may not agree with my evil twin brother Azanon
, but I do value what he has to say and keep it in my mind as the baseline, a counterbalance, and as a measuring stick for my performance. Thoroughly,
objectivelyresearching the other points-of-view will keep you from getting paradigm-lock, going off on the deep end, and stimulate new ideas.
A great example of that is a guy on my PT board, Jeff V, we pretty much disagree on everything, including investing. He is a stout value investor, and I am pretty much a momentum investor. We poke fun at each other (quite entertaining), and I have researched everything he had to say and his portfolio is doing quite nicely. I bought my best stock, VLCCF, because I took the time to examine his perspective and his moves. Basically, his goal is to find those stocks that will show on my radar long before they appear there, and VLCCF did just that. Now that it is mentioned in IBD, I wonder if it is time to sell
. Now I am interested in his methods and wish to add them to my own.
Pete1
wrote:
Doesn't Suze Orman call what you are describing buy and watch?
That sounds right. Keep an eye on it and if something is not up to par, fix it.
Warren Buffett has said, "Keep all of your eggs in one basket...and watch that basket closely." I tried that once and, wow, talk about brass ones. That requires a firm conviction in your decision. A tactic I may employ the next time I have that kind of certainty.
My point, however, is about taking ideas from various sources. You do not have to ball everything up into one investment in order to watch your basket closely.
Pete1
wrote:
I read a horror story about a guy who invested in one of Rolo's aforementioned losing funds (a tech fund as I recall). He bought high and continued to buy all of the dips all the way to the bottom believing that the fund would eventually bounce back. There is a time when you need tocome out of the rain.
Yes, the Monsters of Stock (heh) last year were tech and the 300% gainers were RS Investments' tech funds. They have a good fund family and I like them. I also did reduce my position in tech as they began to putter out and the sectors rotated. I shifted out of tech entirely earlier this year. The raging bull was clearly over, for now at least, and you cannot expect the same thing to gain so much forever. "All good things come to an end." duh. heh.
I started to do the same thing with REYFX. It did so well that I added to my position. Then it fell. fell more. more. oh, turnaround. oh, nope. fall. fall. "but the whole market is not doing so well, so this is normal". fall. fall. "well, this isn't working"...sold. Really, I should have sold it sooner, but I did stop riding it down. I occasionally look at my closed positions to check my decisions and see "what if I didn't sell".
If you've made a bad decision, then correct it. People have a hard time accepting that they made a mistake and will stick to a failing plan because of it. Don't argue with the Market, you will lose every time. Rationalise all you want, if you are wrong, you are wrong.
I do not know of other people do this, so I am curious. When I have had losses, the money is never the issue with me--I am always the issue with me, "How did I screw this up?", "How did I let this get this way?", or "WTF am I doing wrong here?". If I am upset, money has nothing to do with it, it is because I am upset with myself. Does anyone else do that, or am I an oddball with this also?
A stock suddenly tanking (and I have had that happen twice so far) is not a problem for me. I did not do anything wrong and those things are unavoidable. "Bahahaha...Oh man, my APPX tanked 20% today, holy cow!" and I handle it, laughing all the way, because, well, that is just funny to me in some Ziggy sense.Sudden allegationsof financial fraud are what killed it; there was not an error in my judgement, so I was fine with it. I sold it on its way down (fell 30-40%), waited, bought it back before it resumed its recovery. It gained 66%. I made more than I lost a month or two later.
rokid
wrote:
The academics and the Nobel Prize winners claim you don't.
AH HA! They don't have Nostradamus' Magic 8-Ball that my cat told me about! muahahaa!
heh, okay, seriously...
rokid
wrote:
How do you know when to come in out of the rain? The academics and the Nobel Prize winners claim you don't. You just set your allocation, rebalance, dollar cost share, and lengthen your bond position as your investment horizon shortens up - perhaps that's the umbrella/rain coat approach!
How do you know when it will rain? How can you tell?
Okay, do this: Wear your raincoat
every day, and
every time you are outside, you must
always have an umbrella over your head. Why? Because it might rain!
Would people think that is a good idea? No, they would think you were nuts. That is precisely how I view absolute, rigid allocation models.
rokid wrote:
The interesting thing is that the long term success/failure of an investing strategy only becomes apparent, in the future, AFTER it's too late (yelp, I knew the market was going bear in 2000, wouldn't come back until 2003, and would then go south again in 2004)! Even multiple years of success doesn't guarantee you won't get zapped. Will stocks continue to outperform bonds? Will large cap stocks continue to outperform small cap stocks and the EAFE? There's lots of information on what's worked in the past. I can back test until my eyes cross. However, will it work in the future?
These are very good questions. This is why we have
risk. If you want absolute certainty, buy T-bills or open a money market account, because nothing beyond that is guaranteed.
We do not know for certain, just like we do not know for certain whether it will rain tomorrow, or if even the sun will rise. When you break it down, all we are is giving educated guesses. No, I cannot say with absolute certainty that the sun will rise tomorrow, however, my educated guess is that it will.
This is why I am a big fan of tactical allocation. You can adapt to what is going on. If you made a mistake, an error, or even a blind guess, and you are later proven wrong, then adapt accordingly.
Example: You can start with your baseline allocation model. 2003 comes around and stocks are definitely the place to be, particularly tech. Go 100% stocks (IMO: if you were not 100% in stocks for the better part of 2003, then you were a stubborn fool or comatose). January 2004 comes around and this good thing is clearly coming to an end, if not now, then soon, so you go back to your allocation model but bonds are terrible right now, so put your bond money elsewhere, perhaps cash. This way, you have your Bernstein/whatever allocation model as your reference, and you tailor it based on what is going on in the market.
