This is my current feeling. (and I know this will be very controversial in this community)
You are free to disagree with me and follow your own feeling or theory. That is what makes a market
I believe that the only way for this market is DOWN! For many reasons. If you would like, I will write up my suppositions.
I believe that the Downward Momentum of this market will continue for perhaps 18 months to 2 years, not dissimilar to the market from 2000 to 2003
I believe that the total Downward Movement will be in the order of 50+% before it hits the bottom, not dissimilar to the market from 2000 to 2003.
I believe that the Yen may very well strengthen as the flight to safety takes place, further amplifying foreign denominated asset price changes to the downside.
However, I am not able to predict the market with a high degree of accuracy, so I decided to take money out of the market at the end of 2021, locking in my profits since 2011, park it on the sidelines, and trickle it back into the market over the next two years to DCA and reduce the cost base. (It is in Tax Advantaged Accounts, 401k, iDECO, or NISA, so was not subject to any taxation.)
If I feel that the time is right, I can then accelerate the rate at which I put the funds back into the market.
Some quotes from the Vanguard Doc:
"As we would expect, LSI led to higher portfolio values in approximately two-thirds of the periods analyzed"
What about the other one third?...
"DCA in the context of our research
To some readers, our research may seem to discount the benefits of dollar-cost averaging often cited in popular financial commentary. Such articles tend to recommend DCA largely on the ground that investing a consistent dollar amount at regular intervals allows investors to diversify the prices they pay for a security, buying more shares when prices are low and fewer when prices are high.
This is true, but there is a notable distinction between DCA as commonly discussed and as a subject for the research covered in this paper.
Most popular commentary addresses DCA in terms of consistent investments made using current income — i.e., an employee transferring a portion of each paycheck into a retirement account. In that case, investable cash becomes available only in relatively small amounts over time, which makes DCA a prudent way to invest (and really the only sound alternative to accumulating that money in cash and then actively trying to time the market at some later point).
Our research, in contrast, focuses on the strategies for investing an immediately available large sum of money. Here, the average performance results have favored lump-sum investing"
"Two thirds of the time..."
I guess two thirds of the time, the market is in an upward trajectory, and the long bear markets are statistically much less of the total time, but would seem to account for a disproportionate one third under performance, compared to the ratio of Bull to Bear...
"Once the DCA investment period is complete, the DCA and LSI portfolios have identical asset allocations, and both remain invested through the end of year 10."
Once the last DCA contribution has been invested, you can immediately determine the method with the better return, simply by summing the number of Units owned (assuming the same Units were purchased by both methods).
The Percentages may well calculate differently, but percentages are misleading. Don't trust them. The only thing that matters is the actual number of Units owned at the end of the experiment.
If you eat bacon every day it increases you chances of getting cancer by 20%... If you don't understand it, don't eat bacon...
"Dollar-cost averaging does not guarantee that your investments will make a profit, nor does it protect you against losses when stock or bond prices are falling. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income."
I hate to tell you, NEITHER DOES Lump Sum Investing. Ask the Gamestop Investors who have been left holding the Dirty Baby!
"As we would expect, LSI led to higher portfolio values in approximately two-thirds of the periods analyzed"
"This is really quite intuitive — if markets are going up, it’s better to put your money to work right away to take full advantage of the market growth. We found that any factors unrelated to market trends had a minimal impact on the results."
but
"We found that DCA performed better during market downturns, so DCA may be a logical alternative for investors who prefer some short-term downside protection."
That is what I said. But I strongly believe that for the next 2 years, the market will be in an extended downturn...
Tkydon wrote: ↑Tue Feb 08, 2022 4:00 am
1. One-Time Lump Sum Investment - going all-in - is the best strategy in a Rising Market.
2. Dollar Cost Averaging - breaking it down into smaller chunks and going in gradually - is the best strategy in a Declining Market, or a directionless or sideways market.
For many reasons, my opinion is that we are now in a period of Declining Market and I believe that it is going to decline further, so I prefer to use 2 for the time being, until there is a clear indication that we are going into a Rising Market.
(I have some concerns about the two links provided. The devil is in the detail.)
So I am going to run this analysis of the market for the next 2 years and see if we are in the Two-Thirds period or the One-Third period.
My money is on the One-Third period...
The guys at Everything Money say You set the price when you buy. You cannot change it after...
https://www.youtube.com/watch?v=IOLrX_BrQiA
Benjamin Graham, The Intelligent Investor - Revised Edition (Harper & Row), p. 192-193
Chapter 7
(As of writing - 1971)
"Between 1897 and 1949 there were ten complete market cycles, running from bear-market low to bull-market high and back to bear-market low. Six of these took no longer than four years, four ran for six or seven years, and one—the famous “new-era” cycle of 1921–1932—lasted eleven years. The percentage of advance from the lows to highs ranged from 44% to 500%, with most between about 50% and 100%. The percentage of subsequent declines ranged from 24% to 89%, with most found between 40% and 50%.
(It should be remembered that a decline of 50% fully offsets a preceding advance of 100%.)
Nearly all the bull markets had a number of well-defined characteristics in common, such as
(1) a historically high price level,
(2) high price/earnings ratios,
(3) low dividend yields as against bond yields,
(4) much speculation on margin, and
(5) many offerings of new common-stock issues of poor quality.
Thus to the student of stock-market history it appeared that the intelligent investor should have been able to identify the recurrent bear and bull markets, to buy in the former and sell in the latter, and to do so for the most part at reasonably short intervals of time. Various methods were developed for determining buying and selling levels of the general market, based on either value factors or percentage movements of prices or both.
But we must point out that even prior to the unprecedented bull market that began in 1949, there were sufficient variations in the successive market cycles to complicate and sometimes frustrate the desirable process of buying low and selling high. The most notable of these departures, of course, was the great bull market of the late 1920s, which threw all calculations badly out of gear. (Note 1)
Even in 1949, therefore, it was by no means a certainty that the investor could base his financial policies and procedures mainly on the endeavor to buy at low levels in bear markets and to sell out at high levels in bull markets.
It turned out, in the sequel, that the opposite was true. The market’s behavior in the past 20 years (1952 to 1972) has not followed the former
pattern, nor obeyed what once were well-established danger signals, nor permitted its successful exploitation by applying old rules for buying low and selling high. Whether the old, fairly regular bull-and-bear-market pattern will eventually return we do not know. But it seems unrealistic to us for the investor to endeavor to base his present policy on the classic formula—i.e., to wait for demonstrable bear-market levels before buying any common stocks. Our recommended policy has, however, made provision for changes in the proportion of common stocks to bonds in the portfolio, if the investor chooses to do so, according as the level of stock prices appears less or more attractive by value standards. (Note 2)"
Sound familiar? Well, the Notes written by Jason Zweig in 2002...
Benjamin Graham, The Intelligent Investor - Revised Edition (Harper & Row), pp. 193,194.
Foot Notes by Jason Zweig
"Note 1. Without bear markets to take stock prices back down, anyone waiting to “buy low” will feel completely left behind—and, all too often, will end up abandoning any former caution and jumping in with both feet. That’s why Graham’s message about the importance of emotional discipline is so important. From October 1990 through January 2000, the Dow Jones Industrial Average marched relentlessly upward, never losing more than 20% and suffering a loss of 10% or more only three times. The total gain (not counting dividends): 395.7%. According to Crandall, Pierce & Co., this was the second-longest uninterrupted bull market of the past century; only the 1949–1961 boom lasted longer.
===>>> The longer a bull market lasts, the more severely investors will be afflicted with amnesia; after five years or so, many people no longer believe that bear markets are even possible. All those who forget are doomed to be reminded; and, in the stock market, recovered memories are always unpleasant. <<<===
Note 2. (After the book was published in 1972)
On January 7, 1973, the New York Times featured an interview with one of the nation’s top financial forecasters, who urged investors to buy stocks without hesitation:
“It’s very rare that you can be as unqualifiedly bullish as you can now.”
That forecaster was named Alan Greenspan, and it’s very rare that anyone has ever been so unqualifiedly wrong as the future Federal Reserve chairman was that day: 1973 and 1974 turned out to be the worst years for economic growth and the stock market since the Great Depression.
The New York Times, January 7, 1973, special “Economic Survey” section, pp. 2, 19, 44."
From the height of 119 at the end of Dec 1973, the S&P500 fell to 62 in Aug 1974... -47.9% ; back to levels previously seen in 1962...
"it’s very rare that anyone has ever been so unqualifiedly wrong", but not the Green-Spanner (Spanner = Wrench)
He was unqualifiedly wrong again, several times, resulting in the Global Financial Crisis.
Talk about throwing a Spanner = Wrench in the works!!!!
MMmm.