day trading vs hold steady

[Guest]

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Tom,

All is cool. I really don't know what I'm doing. I'm really not sure what I am looking for anymore. I read this sight daily and value the opinions/insight of everyone and I appreciate your hard work.

If I really knew what I was doing I wouldn't of lossed 30% in my personal IRA's this year trying to "time" the market on my own. That was offset by huge gains in my larger pension (I did nothing to achieve that) and decent gains in my TSP (thanks to all of you). I was definately looking for a "system" at one time to tell me what to do and I may still be. It looks like MLK may have something after much hard work so I'm watching carefully the trades. Right now, I'm fully invested C/S/I-30/30/40 and fortunately that is up around 6% since I have done that. This is purely coincidental (unless you subscribe to the feeling that stocks do well Oct-Dec typically, which I do.)

By the way, it seems that Oct the last 8 years has been an awesome month for stocks, even in bear markets. I think only in 2001 was that month down in the last 8 years. Even in the bear market of 2002, the S/P was up over 10% for the month. Why do you think that is?

I didn't know you had an art gallery? Pretty cool. Let's see- Federal job, Art Gallery owner, master of this sight. How long are your days? 36 hours? You have my utmost respect.

Joel

 

[rokid]

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Joel,

Based on historical returns, the F Fund beats the G Fund.That result also makes intuitive sense,i.e. more risk usually impliesmore return. The F Fund is also a good diversifier. It non-correlates with the stock funds.

However, if I was market timing, I'd use the G Fund. It's not a moving target. Since I'm not, I use the F Fund.

Finally, Excel has a standard deviation function, i.e. STDEV. It also has functions for calculating the average return for a series and the correlation between the funds.

 

[rokid]

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All,



The attached spreadsheet contains return, average return, standard deviation, and TSP fund correlations from 1988-2003. You can use it for back testing and MVO analysis. Pls let me know if you find any errors.

 

[rokid]

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All,

Attached is a spreadsheet that allowsthe comparison of different "buy and hold"portfolios with the S&P 500 (C Fund) for the period 1988-2004. Not surprisingly, 100% C Fund had the highest returns 1988-2004.However, the C Fund might not be the best in the future (S Fund, I Fund?). Also note that 100% C Fundlost a considerable amount during the recent bear market. Finally,holding 100% G Fund was very, verycostly.

Thehilited blue areas in the spreadsheet, i.e. fund percentages and the initial portfolio value,can be modified to meet your analysis needs.

 

[tsptalk]

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Nice rokid. Thanks!

 

[pyriel]

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Ladies and Gents,

I need some help. I am a buy and hold but is getting braver to test the water of moving allocations (not too much moving). If the market is going down and interest rate is being slashed, is it best for me to be in F/G/C Fund? And if the market andinterest rate is going upis the C/S/I allocation the way to go?

 

[rokid]

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Pyriel,

Stay buy and hold (that's probablynot what you wanted to hear!) andfocus on your strategic asset allocation, i.e. portfolio mix of the G/F/C/S & I funds.

In their 1986 landmark study, Determinants of Portfolio Performance, Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower concluded that asset allocation explained more than 93% of the variation in an investment manager's average returns over time (quoted from the Motley Fool). In other words, professional money managers' returns are almost 100% explained by asset allocation - not market timing.

In addition, Efficient Market Theory (EMT) contends that the current price is the consensus of the best minds on Wall Street. Therefore, unless you have information not known to the market, i.e. insider information, there is no way to consistently predict which way the price will go, i.e. up, down, or sideways.

 

[Guest]

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rokid wrote:

Pyriel,

Stay buy and hold (that's probablynot what you wanted to hear!) andfocus on your strategic asset allocation, i.e. portfolio mix of the G/F/C/S & I funds.

In their 1986 landmark study, Determinants of Portfolio Performance, Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower concluded that asset allocation explained more than 93% of the variation in an investment manager's average returns over time (quoted from the Motley Fool). In other words, professional money managers' returns are almost 100% explained by asset allocation - not market timing.

In addition, Efficient Market Theory (EMT) contends that the current price is the consensus of the best minds on Wall Street. Therefore, unless you have information not known to the market, i.e. insider information, there is no way to consistently predict which way the price will go, i.e. up, down, or sideways.

That is exactly why "market timing" is best. You can get in and out anytime you want. IF the market is down, go somewhere safe and wait. If your buy and hold, you just sit there and watch your money twindle. Remember, professional money managers have hundreds even thousands of clients. Pretty hard tomarket timethat many accounts in the few hours that you have to make a move. Which in my opinion, is why most money managers push asset allocations instead of market timing.

A friend of mine had 4 different retirement funds she collected through the years.One wasan IRA, one was a 403B, one was an annuity, and one was a 401k. Each one has lost money the pastfour years. I took over her accounts, except for the annuity,at the end of June and am up between 10-15% in each of her accounts. I'm in the process of combining her IRA, her 403, and her annuity into one IRA where I will have more investment options and make her even more money, if she'll ever get off her butt and go get me the distribution form I needand her mother's SS# who is her beneficary....................I can't do awhole lotwith her present 401K because she is still with the company. They do have a couple of funds which mimic our C and S. They also have a real estate fund which I go into when I'm playing safe.

Besides these accounts, I also manage two other people's plus my own. I will be managing more in the coming months. Luckily my system tracks closing prices so I have all night to move things around. Some people I'll just be e-mailing and they will move things around on their own. I couldn't imagine trying to move things around for thousands of people. I'd probably tell them to spread out their allocations and leave it alone also..............remember, most money managers are 9 to 5 folk.........

Just my opinion..............

Good luck.............take control of your own future..........I wish I could with "MY" social security..........luckily, I'm notgonna need it though.........:^

M_M

 

[Guest]

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rokid wrote:

Tom,

Last call

100%C Fund won - if you could stomach losing $131K+ between 1999's high and 2002's low.

Boots test allocation: 35% C Fund, 35% S Fund, and 30% I Fund

% Annual Returns Boots Test 100% C Fund

1995 28.2 37.4

1996 15.9 22.9

1997 21.1 33.2

1998 19.0 28.4

1999 27.8 21.0

2000- 13.0 -9.1

2001-14.0-11.9

2002 -12.5-22.1

2003 36.4 28.5

2004 (YTD) 9.1 6.4

Average11.813.5

Std Deviation (risk) 18.7 21.2

Starting with $100,000 in 1994:

1994 100,000 100,000

1995 128,193 137,410

1996 148,514 168,808

1997 179,795 224,802

1998 213,959 288,736

1999 273,375 349,226

2000 237,920 317,306

2001204,548 279,420

2002178,956 217,808

2003 244,083 279,970

2004 (YTD) 266,209 297,748

Are you really comfortable not making any money since the end of 1999? I don't get it..........

 

[Spaf]

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pyriel wrote:

Ladies and Gents,

I need some help. I am a buy and hold but is getting braver to test the water of moving allocations (not too much moving). If the market is going down and interest rate is being slashed, is it best for me to be in F/G/C Fund? And if the market andinterest rate is going upis the C/S/I allocation the way to go?

Pyriel
rokid and mlk_man have good points. The problem is that TSP participants are generally not experts in the market. However, we have our retirement in funds that range from secure to volatile. Your question is what to do with the funds?

The answer is to become informed and take responsibility over your funds. The G fund is safe with small returns. F is bonds, and with interest rates rising, it's not the place to be. C-S-I are the stock funds, and the most volatile with gains/losses. I would suggest keeping in touch with the market on seeing it's " big picture" (is it a bear or bull market). Developing your own asset allocation: bonds%, stocks%%%, securities%, etc. based on your risk tolerance and goals. Stay with sites like this and learn how to protect your funds and grow.

mlk_man is right, my financial advisor was not around during thebubble years, and he doesn't sit on the beach giving advice to all his clients.

rokid is right, it's best to stayand hold until you learn the market and whatother people are really saying.

I feel that I have a right to reconfigure my asset allocation at will to preserve my investments. I don't have any specialnewsletters or future predictors that would qualify as market timing, but as M_M aluded to, why hold in allocations that are not profitable? Like the song said "It's time to hold them, and time to fold them".

 

[tsptalk]

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pyriel wrote:

If the market is going down and interest rate is being slashed, is it best for me to be in F/G/C Fund?

In general I would saythe F fund until you see a bottom form in the stock market.

And if the market and interest rate is going up is the C/S/I allocation the way to go?

Good question. When the economy first recovers small caps (S fund) do well, but eventually the larger stocks (C) catch up. I believe we are somewhere in the middle of this small to large cap phase. The I fund is volatile and I would watch the dollar to decide how much to use it.

 

[Guest]

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mlk_man wrote:

That is exactly why "market timing" is best. You can get in and out anytime you want. IF the market is down, go somewhere safe and wait. If your buy and hold, you just sit there and watch your money twindle.

Did I say "twindle"? :shock:I meant "dwindle"...............:^

 

[Boots]

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Spaf wrote:

"It's time to hold them, and time to fold them".

"You gotta know when to hold 'em. Know when to fold 'em. Know when to walk away. Know when to run."

Key phrase is "know when to run" when applying it to investing.

 

[Guest]

imported post

Boots wrote:

Spaf wrote:

"It's time to hold them, and time to fold them".

"You gotta know when to hold 'em. Know when to fold 'em. Know when to walk away. Know when to run."

Key phrase is "know when to run" when applying it to investing.

And "which way to run", thata way ---------------> or thata way <-------------------- :shock:

 

[pyriel]

imported post

Boots wrote:

Spaf wrote:

"It's time to hold them, and time to fold them".

"You gotta know when to hold 'em. Know when to fold 'em. Know when to walk away. Know when to run."

Key phrase is "know when to run" when applying it to investing.

Back in 2001, after 9/11 and the downfall of Enron, there were big indications that themarket was about to tumble. From Sep through Dec 01, I could already tell that there was a market correction that was going to take place and would last for awhile. I could have taken action but didn't know how.

If I knew then what I know now, I would have moved my funds out of C fund and move them to either G or F. and ride them out for awhile. This site and the members here have taught me or at least made me aware of these options. I will definitely be looking out for signs such as what I witnessed in 2001.

I wonder if you all were aware on whattranspired in 2001 and if it wasdiscussed here in this site? How many of you jumped out and changed allocation or funds? Would you experts (compared to me) give us, novices, some warnings when it happens again?

On another note, I am still a "boring" buy and hold kind of guy with a little know how on jumping out of a fire when the time comes...

 

[Guest]

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pyriel wrote:

Boots wrote:

Spaf wrote:

"It's time to hold them, and time to fold them".

"You gotta know when to hold 'em. Know when to fold 'em. Know when to walk away. Know when to run."

Key phrase is "know when to run" when applying it to investing.

Back in 2001, after 9/11 and the downfall of Enron, there were big indications that themarket was about to tumble. From Sep through Dec 01, I could already tell that there was a market correction that was going to take place and would last for awhile. I could have taken action but didn't know how.

If I knew then what I know now, I would have moved my funds out of C fund and move them to either G or F. and ride them out for awhile. This site and the members here have taught me or at least made me aware of these options. I will definitely be looking out for signs such as what I witnessed in 2001.

I wonder if you all were aware on whattranspired in 2001 and if it wasdiscussed here in this site? How many of you jumped out and changed allocation or funds? Would you experts (compared to me) give us, novices, some warnings when it happens again?

On another note, I am still a "boring" buy and hold kind of guy with a little know how on jumping out of a fire when the time comes...

Wait a minute, what happened in 2001? Did I miss something? Oh wait, you mean my 20 year high school reunion? Nope, missed it.........Just kidding...........

If this site was here then, what would we have done? Say "hey, umm the WTC just got blown up, get out of the market"? Yep, I think most of us "experts" would of said that. Then again, would of made for a nice "buying" opportunity huh? :shock:

Pyriel, I believe you were like most of us here, we didn't know how to switch our funds back then. If you "knew" a correction was coming from Sept. to Dec. 01, why in the hell didn't you find out? Sooner or later you have to do things for yourself, momma isn't always gonna be here for ya...........:x

Oh sorry, in case you didn't figure it out yet, this site wasn't here in 2001.............which is one of the reasons Tom started this site was because most of us lost money in the early 2000's..............

Good luck,

M_M

 

[tsptalk]

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Back in 2001 we were still only allowedone transfer a month. If the market was freefalling, we were stuck watching from the sidelines. I hate to admit it butI had a terrible year in 2001.After a bad year for the market in 2000, I was jumping into the market thinking I was catching a bottom.In September alone I lostover 11%. :shock:

The market actually did well fromOct to Dec 2001 (after 9/11). I made 5%, 7.8% and 4.4% in Oct, Nov, Dec respectively that year but the damage had already been done. Feb and March were down 9% and 6.3%.

And asI said, if you were in stocks during the month, you were stuck. And as you may remember, if you wanted to make a change for the following month, you had to do it by the 15th of the prior month. If you made the change on the 16th, you had to wait a month and a half for it to take effect. What a nightmare that was.

I ended up losing 14.6% in 2001. It is the only year I didn't beat the S&P 500 sinceI started tracking in 2000. The S&P 500 was down 12% that year.

 

[pyriel]

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Milkmiser ;-)

I didn't move because I was ignorant so I just looked at my funds (to include my ROTH) get clobbered. Still stuck in the idea of buy and hold. I would have been better off moving my funds around before it hit bottom and put it back just when it is going back up. That my friend will not happen again....

:!

 

[Guest]

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pyriel wrote:

Milkmiser ;-)

I didn't move because I was ignorant so I just looked at my funds (to include my ROTH) get clobbered. Still stuck in the idea of buy and hold. I would have been better off moving my funds around before it hit bottom and put it back just when it is going back up. That my friend will not happen again....

:!

LOL, milkmiser.........that's a new one..........

Good for you pyriel, I keep telling my friends and co-workers to take control of their own retirement funds. Some listen, some don't. It is in the best interests of money managers for their clients to stay in the market right? How many times have they told someone to get out and stay out for awhile?

Good luck to you,

M_M

 

[rokid]

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My buy and hold Quicken 2004 IRR year to date: 16.81%

AllocationYTD Returns

F Fund 25.0% 3.8%

C Fund/Fidelity Spartan (FUSEX) 23.6%8.6%/8.6%

S Fund/Fidelity Low Priced Stock (FLPSX) 32.6%14.8%/18.5%

I Fund/Fidelity International Diversified (FDIVX)18.8% 16.98%/15.9%

The excess return is due to dollar cost averaging, i.e. buying low with new money during the first half of the year.

My son's buy and hold Quicken 2004 IRR return starting5/18/2004 (new William and Mary graduate :^), Vanguard 2045 Fund: 22.46% (life cycle fund).

If you're doing better, great job and congrats. If not, consider strategic asset allocation, dollar cost averaging, and buy and hold.It works!