Quote:
Originally Posted by manaboutown
For many years I have been in for the long haul. It must be my nature. I was 80% solid stocks and 20% cash until a few weeks ago when a significant real estate investment property I had held for 37 years sold for a crazily high price. That brought me up to 50% cash. Last week I put my toe in the water and bought a little stock. Not much, just a few shares. I am taking my time and not in a hurry as I see buying stocks right now as trying to catch a falling knife. The Fed plans to raise the prime rate in June and again in July. Inflation is running wild. Many people have become financially stressed. A recession is on the horizon. And so on...
|
Are all attempts at market timing bad?
During our accumulation phase (working years), we were 90/10. Now that we have entered our distribution phase, we are 25/75. Yes, a very conservative portfolio. The 75% and SS easily covers our expenses while the 25% is to counter inflation. We diligently saved all we could for 30+ years in low-cost index funds. We split our qualified contributions between ROTH and traditional accounts (IRA, 401k and 403b). There came a time when we were no longer eligible for a ROTH. I never sold and kept on buying when the markets cratered and have been rewarded due to the wonders of compounded interest. At the time, I had no idea how powerful a ROTH IRA would become.
However, now with less time ahead than behind me, I have reconsidered the topic of market timing. I’m not talking about attempts to profit on arbitrage-type actions. I spent a lot of time last year thinking about what our future state of the economy might look like after 3 consecutive years of double-digit stock returns. Run-away inflation, chip shortages, cargo issues, Ukraine war (only a possibility at the time which came to fruition), etc. Some of our elected officials wanted to inject trillions more into the economy. I shudder to think where we would be had they been successful. I just couldn’t find any positives to support a buy-hold strategy.
As such, I sold my S&P 500 ETF and went to cash in November, 2021. I had deduced we were in for a major correction and potentially a recession. It turned out to be a prescient move based on, what I believe, was due diligence and not emotions. If I buy back the ETF shares now, I will have far more shares and realize a six-figure return when the market recovers. Obviously, the question is: When do I make this decision? Personally, I believe we have more pain ahead and will postpone the repurchase. However, I will not hesitate to pull the trigger, fully realizing there is no way to know when the bottom will hit.
So, was it luck or a well thought out plan? Is market timing all bad?