January 06 Tally

[mlk_man]

Now as to dollar cost averaging during the accumulation phase... how long does that phase run, anyway? Now if I had, say, 400k in my TSP, and was adding, say, 24k per year (2k/month), wouldn't it take me many years of contributions to make any meaningful dollar cost averaging inroads into a yearlong down market's effect on my 400k nugget? I'm just thinking, the bigger the nugget is compared to the annual contribs, the less power there is in dollar cost averaging....

oldschool

Those are my exact feelings as far as dollar cost averaging with contributions. Early on it's cool. Later I don't think it's that big of a deal. Once you get a nice nest egg, your best bet for dollar cost averaging is to gradual increase your equity holdings. I've noticed a couple of our members doing this and you seem to do it a little bit

M_M

 

[oldschool]

MM, yes it does seem like some of us here to sort of dollar cost average our way into, and out of, what we hope are the best near/mid term allocations. I'm thinking that's quite different in effect than just holding a static allocation, sending in a little more each pay period regardless of price...

'course you have to be right much of the time on what are those "best" allocations...

oldschool

 

[mlk_man]

Different, but similar. Sort of like you and I went to different high schools together..............

 

[dell]

MM,

I agree that one month - or even one year - doesn't prove a thing. However, I thought it would be interesting to incorporate the raw tracker returns with an indication of individual investing styles. I intend to update the info on a monthly basis.

Obviously, I'm pro passive allocation. I believe in the academic experts, efficient markets, diversification, statistics, and probability. Furthermore, I think the L Funds are a good idea. However, if someone, e.g. Dakota, keeps on piling up the out sized returns with a market timing approach, I would have to reevaluate.

Finally, I understand the "too boring" complaint. Fortunately for me, I'm boring by nature, i.e. I'm into boring.

If you go to Yahoo's Financial News section, David Dreman has a pretty good article in the Thursday edition of Forbes titled Deficient Market or something like that where he gives his reasons for NOT relying on the efficient market theory. I am not smart enough to agree or disagree. I just like to arm myself with as much knowledge as I can.

Currently 50% C and 50% I.

Dell

 

[SkyPilot]

Buy and Hold

"Buy and Hold" works great in a positive market, almost any strategy does. However, you will get skunked on the down side (2000-2003). It's really a choice between being the captain of your own ship, or being a victim of the market. For those in the L-fund's, don't quit paying attention. If we head for another recession, the L-funds do not account for trends, market conditions or anything else. They will "cruise-control" you into a brick wall, just as any "buy and hold" strategy will. I encourage you to keep your head in the game, and watch for the next big downturn, so you can preserve your retirement. Good Luck!

 

[Soldat]

With an increasing population, there is increased consumption, jobs, and production. Unless people start dying by the millions, the five to ten year trend will always be up.

 

[mlk_man]

Bird flu.................

 

[SkyPilot]

With an increasing population, there is increased consumption, jobs, and production. Unless people start dying by the millions, the five to ten year trend will always be up.

Except for when it isn't...

 

[rokid]

"Buy and Hold" works great in a positive market, almost any strategy does. However, you will get skunked on the down side (2000-2003). ...I encourage you to keep your head in the game, and watch for the next big downturn, so you can preserve your retirement. Good Luck!

Tom made a similar point, i.e. passive investing works in an up market, but not in a bear market.

Researchers Jess H. Chua and Richard S. Woodward arrive at a different conclusion in their paper Gains from Stock Market Timing. They state: If the investor has only a 50% chance of forecasting bull markets, then he should not practice market timing at all. His average return will be less than that of buy-and-hold even if he can forecast bear markets perfectly. Ouch!

Furthermore,Roger Gibson states in his book Asset Allocation that:

...a disproportionate percentage of total gain from a bull market tends to occur very rapidly at the beginning of a market recovery.

Therefore, it doesn't really help to forecast bear markets correctly, you have to forecast at least 50% of the bull markets correctly and forecast them at the beginning of the upturn.

Chua and Woodward go on to conclude that for market timing to pay:

Investors require the forecast accuracies of at least:

80 percent bull and 50 percent bear;
70 percent bull and 80 percent bear; or
60 percent bull and 90 percent bear...

Finally, Gibson states that a mythical 1926 investor, who invested $1 million and choose, with perfect predictive capability, on an annual basis, the best performing asset class (T-bills, long-term corporate bonds, large company stocks, and small company stocks), would have been worth $20 trillion in 1998. In other words, that mythical investor would have owned all of corporate America and half of all non-U.S. companies.

Obviously, that didn't happen, although on the surface, it doesn't sound all that hard, i.e. annually predicting and concentrating investments in the best performing of four asset classes.

 

[SkyPilot]

Rokid,

I don't think anyone can accurately pick bull or bear markets over any length of time. However, if you can identify trends and positions, you will likely outperform buy and hold. True, this can be tricky as well. However, if you do not stay engaged you may "buy and hope" instead of "buy and hold", and end up riding the coaster down when you will need to access the money at retirement.

 

[dell]

I can almost predict bull and bear markets and I am willing to share my methodology with everyone who posts here, for a price. If everyone sends me $10.00 USD, I will tell you which Funds I am about to invest in. They are GUARANTEED to go down as soon as word gets out that I have bougfht in.

Dell

 

[SkyPilot]

I must follow the same signals / indicators as you... will PayPal work?

 

[nnuut]

Hey Mike, no tracker this week, OK. I don't want to know!!!!
Norman
Just kiddin'!!

 

[Mike]

Finally, Gibson states that a mythical 1926 investor, who invested $1 million and choose, with perfect predictive capability, on an annual basis, the best performing asset class (T-bills, long-term corporate bonds, large company stocks, and small company stocks), would have been worth $20 trillion in 1998. In other words, that mythical investor would have owned all of corporate America and half of all non-U.S. companies.

And the mythical inventor that builds a time machine and travels back in time to bet on every winning horse, boxer, team, and company would be worth more than the rest of the world combined.

 

[rokid]

And the mythical inventor that builds a time machine and travels back in time to bet on every winning horse, boxer, team, and company would be worth more than the rest of the world combined.

Which is Gibson's point - it didn't happen and it isn't going to happen in the future.