Shouldn't The Stock Market Go Down?

[Phaedrus]

"I get the impression you are a chartist B, is that correct?

Is that a proven way to make money on the SM?"

My approach Works okay for me.

It combines Technicals & Fundamentals, thru Cycles.

My best year so far is in 7-figures (US$).

Best day about 6-figures. Yesterday was about half that

(dont copy this on other threads, plse)

<{POST_SNAPBACK}>

I'd figured you wouldn't just rely on one method to make your decisions, rather weigh various sources up. You're obviously very successful at it, good on you.

In comparison, I'm very small fish. I've done okay so far with my approach, in that over my time period it has returned more than a BS account would have. I'm happy with it and it lets me sleep at night. In order to get better returns I'd have to put more time and effort in and take greater risk, which I'm a little averse to.

[sp1]

The best thing you've got is reasoning. I dont kow your views on the economic cycle but if your conversant with this board then you are likly to better informed than most...

Extend your economic reasoning to the stock market.

Were you holding any then selling consumer / property stock would be good right now, not cos i'm saying but for the reasons you have for the housing correction/crash and what you reason that will do to consumer spending and market sentiment.

That strategy you mentio is okay. But here is the first step to optimising it. When you see prices going up on a weakening economy like today (market going up and your reasoning tells you economy will be doing bad for the next few years like now) then save the cash and only buy 33% of the index tracker you were buying before The rest should be saved for use later not spent

Then when you see the index prices going down and you but your reasoning tells you the economic conditions improving then start buying at 150% per month (the extra comming from the cash saving when you were buying 33%)

When you exhasut you saving amount then keep buying 100% of the monthly amount till we retern to the top.

When you start exersising resoning to adjust the rate you buy the traker at then it will be hard to stop your self picking biger moves from poised blue chips stocks.

Sp1

Edited August 5, 2005 by sp1

[Roman Abramovitch]

Still a bit of time to "go short" on the Dow Jones today.

I'm piling in heavy and sellin short.

Get your holiday money in early readers.

[FreeTrader]

Thanks for the replies. So me dripfeeding £x/month into an index tracker over a period of 30 years is not a reasonable investment strategy?

I always thought it was difficult to time the market, just look at the performance of 90% of the actively managed funds, they fail to beat the index over a 5 year time period. This is why I would prefer to track the index, take advantage of pound/cost averaging, low charges and lower risk than trying to pick an active fund or going for individual shares.

Stick with your strategy. It's an excellent one, for exactly the reasons you have stated. You're taking all emotion out of investing, arguably the greatest barrier to performance, and over your proposed time frame (30 years) very few professionals will outperform you.

There's an extension to this that will produce even better results with (counter-intuitively) less risk, but it requires more initial study, and now is not really the time to start. Also it needs a substantial minimum monthly investment, perhaps more than most would be prepared to make.

Basically you need to find (say) 10 different investment trusts which offer low-cost monthly investment plans with automatic dividend reinvestment. What you're looking for is funds which individually have high perceived volatility, but which are not correlated as a group.

When investing into a high beta fund, pound cost averaging over time really comes into its own. You can make extraordinary returns. Look at a graph of JPMF Indian Inv Trust for example, and imagine you'd been averaging into this over the past few years.

The danger with highly volatile funds is of course the added risk you're taking on. This is why you choose a number of uncorrelated funds (or even better, a group which collectively has low beta) so that overall your exposure is far more limited. This is the part that takes a great deal of time and study, and I wouldn't recommend you contemplate this unless you really know what you're doing.

As a final point, it's worth noting that most index funds are almost certainly underperforming, even though they beat the majority of investment managers. To understand why, read this article:

The Problem With Indexes

As you can see, there's an opportunity to create your own trackers which will give even better returns, but it would take some work.

[200p]

it was interesting to read these posts. The stock market is about level to where it was in late 2005.

[The Masked Tulip]

it was interesting to read these posts. The stock market is about level to where it was in late 2005.

DOW 15,000 by November election

[desertorchid]

it was interesting to read these posts. The stock market is about level to where it was in late 2005.

It would be interesting to hear from any of the original posters. Did they hold firm during 2009?, Have they changed their strategy? Do they feel more or less bullish than they did back then?