Should we be good at market timing or take passive approach for Time in the market?
Practical and reality on the ground and forget about theories, can we really be good at BOTH market timing and time in the market to achieve optimum investment gains over our lifetime as retail investors?
These are what Uncle8888 has been seeing over the past years of holding stocks as Time in the market. He has no heart to kill the Geese who are laying Golden eggs to buy more new hens to get more decent eggs!
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Once we include those What If; we will see them differently.
ReplyDeleteCW,
DeleteOnce again, brutal honesty from you ;)
Most retail "investors" only selective remember and see the recovery from deep unrealised losses to breakeven from Buy-and-Hold.
Once they include the unrealised gain they have left on the table from what you have done, then Buy-and-Hold is not cheap!
If we have another 2008 event, then all the existing unrealised gains will disappear too :(
And there goes the theoratical compounding effect :(
Compounding only works if we are not investing to breakeven one day...
Money lost can be recovered; time lost cannot be recovered.
P.S. Unrealised gain is just paper accounting. Dividend is realised money in your pocket ;)
Investing is much harder than we thought!
DeleteFor dividend investing to work, need to buy and hold too. In fact not just buy and hold, but also to re-invest dividends during the initial years / decades. ;)
ReplyDeleteYes, buy & hold can be very taxing both on the mind as well as the pocket. LOL!
Ideally to buy and hold with greater peace of mind, one should have at least 2-3 years' of expenses in cash / safe bonds .... or a significant cash/bonds portion e.g. 25%-40% so that won't need to sell stocks at low prices, and can also buy cheap stocks when re-balancing.
I used to hold an expensive SG UT from 2004 till mid-2015. Actually I still use it as one of the asset class for my dual momentum portion of my portfolio...
From the graph can see that if you are dependent on the money within 1-3 years then better not be 100% invested.
Singapore large cap stocks from 1990 to 2018
Btw, the STI comparison is not quite accurate as it doesn't include dividends. With re-invested dividends, the STI should be at slightly above the 400% mark instead of just at 200% i.e. over the last 28 years, over half of S'pore returns are from re-invested dividends.