Market Timing Investing

[robertbanking]

Hello you very intelligent and caring people that make up this forum. I do hope your day is going well so far.

I research shares i am going to buy in detail, from looking at how the company makes profits, how much debt the business has, what do employees say about working for the company. I also look into the annual accounts for the last few years in detail. However i am really poor at trying to buy stocks on dips when adding them to my watchlist. I understand it might not be wise buying a stock when it is reaching its 52 week high, but does anyone kindly please have any thoughts on finding a better way to trying to buy stocks at more reasonable levels? I know there is no magic formula, but if anyone could kindly help me with this i would be forever grateful and thankful.

Thank you so much for your time. Sending you lots of good wishes and hope you enjoy your day. Take care.

[Dao]

don’t try to time the market is a good start.

[stehuk]

@robertbanking

I understand it might not be wise buying a stock when it is reaching its 52 week high

Research would disagree with you. Look up “George and Hwang 52 week high” on a search engine such as Google.

[Zergui]

I think they meant Hwang was on a 52-weeks high when he was buying stocks.

[robertbanking]

Thank you very much for all your replies, i am very thankful for the time you took to reply.

Dao i completely understand not trying to time the market is a good start. However i please wondered the best way to try buy stocks on dips or at a lower price? Even if this does not matter completely, as i would have already done alot of research into the company, i please wondered if you had any further advice on this please?

Thank you so much for any advice you can give. Take care and hope you have a lovely weekend.

[Hbomb]

I dont time the market overall, but I think its wise to choose when to deploy cash into which stocks. What I mean is so lets say I have 10 stocks I own, and I now have some cash to invest. There might be 3-4 that are highly valued, 3-4 around fair value and then 1-2 that have been beaten down price wise. All things being equal it would make sense to put new money into the beaten down ones first. However if its because the business fundamentals have changed that muddies the waters, also depending on position sizing (ie risk management)

Best way is to monitor the stocks you own, for example I monitor their FCF yield, P/E, div yield etc and colour code them on my values I want so at a glance I can see ‘oh x stock is now at an attractive FCF yield’ then that helps direct my up to date research on why that company might be cheaper than previous.

[Zergui]

@robertbanking

i please wondered if you had any further advice on this please?

Well, if you already did such analysis of your companies pick, by that point you’d already have a fair valuation by DCF, to which you’d add some margin of safety.

Then you’d buy every time the share price dips lower than your calculated price, as long as no major change inside the company caused the price to dip of course.

If you target a more regular investment approach, some DCA, then any period (such as now) of discounted securities across the board present favorable prices; and it doesn’t matter too much that maybe tomorrow’s price would be better, as long as today’s is.

[Dao]

the issue is that you will never know if you did buy the dip until its truly well and done and beginning to recover. its the same for looking at a chart and knowing if the stock is actually cheaper than before or if the company fundamentals changed. if you have done your research and you are happy with the price, then there is no issue with buying whether it seems high or low, but to even out the odds you could buy in chunks rather than getting everything in 1 go. cost averaging is a great low-risk way to build your position even if it means you don’t get the best price.

I am on the other end of the spectrum, I keep ending up buying the peak about 3days before the crash and dips occur

[robertbanking]

Thank you very much for your responses, these have answered my questions perfectly, thank you again for your support, you have been more than helpful.

Hbomb, i think thats a very clever strategy you deploy and i agree it would make sense to put money into the beaten down stocks first. Its very interesting that you colour code your stocks on values and you monitor the FCF yield, P/E, dividend yield etc, i really appreciate you sharing your thoughts on this.

Dao i truly understand haha, you would never know if you did buy on the dip and its me also that buys on the peak about 3 days before the crash haha. I agree buying in tranches could help with risk and is good cost averaging. I appreciate your thoughts on this.

Thank you again for all your replies, you have been amazing. Hope you have a pleasant day.

[Mofojonno]

Read a book by Stan Weinstein called How to profit in bull and bear markets and yes you can time the market to a certain extent, people who say you can’t just mean they can’t. Don’t take stock tips from people as you won’t know what to do when things change.
Stocks go through stages in their life cycle and you want to avoid buying stocks in stage 4 declines at all costs. The goal isn’t to buy at the cheapes price because nobody know how low it can go, cheap can always go cheaper. The goal is to buy at a price when it is at its lowest risk of getting lower and sell at a profit at some point in the future.

[Mofojonno]

[Mofojonno]

Buying at the beginning of stage 2 break outs is the best way to make money and keep your mental health in good order. (Cut them at no more than a 10% maximum loss to avoid recent growth stock disaster type situations). A 10% loss only needs an 11% gain to break even, a 50% loss takes a 100% gain to break even.

[adindas]

It is an unban myth that you can not time the market. Many HFs managers are timing the market all the time, contrarians are doing that, Warren Buffet is doing that especially during the BEAR MARKET. Let alone the acute traders. They do it every single day. What it should actually say is that, you can not time the market in Perfection (e.g you get it right 100%), noone ever. However it is a game of probability, they just need 50%+ right to beat the other alternative e.g not timing the market.

The people who are timing the market are mainly investing in individual stocks, high risk/reward fund, not index fund or global tracker or globally diversified funds. Also they have analytical, good understanding of fundamental and technical analysis, the first people to get various news regarding the stock market to gauge the best time to strike. By knowing fundamental analysis they know for instance when good stocks are selling at a discounted price. Similarity with technical analysis they could identify when good stocks are oversold or overbought.

Without good knowledge of Fundamental Analysis, Technical, stock market news, it is actually just gambling.

This is just one examples of many HF managers

We're still 50% in cash, and I wish we would've stayed at 70%, says Loup Ventures' Gene Munster

(We’re still 50% in cash, and I wish we would’ve stayed at 70%, says Loup Ventures’ Gene Munster)

For ordinary people investing in blue chip good stock or fund containing a lot of high growth stocks DCA (E.g time the market with drip feeding rather than Lump-sum in one go) especially during the read days will normally beat Lump sum during the BEAR MARKET . There is a research showing about this.

Just imagine those who threw lump-sum £100k+ in either day during November 2021 to April 2022 especially in tech high growth stocks or fund containing a large number of high growth stocks. What happen with their money now, going down 50%-70% ??

This is the statistics about average cash level of fund managers.

https://www.trustnet.com/news/13302671/extremely-bearish-fund-managers-take-cash-to-highest-levels-since-911-attacks

If you are asking the IFAs, they will tell people to throw money in one go (e.g Lump-sum) as soon as you have it, as it is less hassles for them. Also it will lower their risk of getting sued. For Fund/Trust Managers the standard answer to retail investor is also not to time the market as they have incentive for that. By not timing the market they will benefit from the constant cash inflow to their funds. Imagine what happen to their Funds if an influx people are suddenly withdrawing their money and then later the same influx of people suddenly put their money back.