Comments on: Is there value in trying to time your entry & exit from the market? http://www.wealthfoundations.com.au/blog/is-there-value-in-trying-to-time-your-entry-exit-from-the-market/ Personal wealth management issues Sat, 21 Jan 2012 07:04:11 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Wealth Foundations http://www.wealthfoundations.com.au/blog/is-there-value-in-trying-to-time-your-entry-exit-from-the-market/comment-page-1/#comment-2782 Wealth Foundations Fri, 17 Sep 2010 00:14:45 +0000 http://74.52.19.179/~wealth1/blog/?p=37#comment-2782 From our perspective, market timing is a risky game with known additional costs that mean you have to generate additional reliable return. This is much harder than it appears over the long term. It can be done - statistics will show that someone always does a little better than the long term average. We just think that that has more to do with luck than skill. And given that you have to beat the average over the long term to offset your additional costs, we don't think its a great bet to "need" to be lucky in order to break even. I have no doubt that back tested trend following has strong empirical support, as do most back tested approaches. Yet, when it comes to using them in real time they don't always do what they're supposed to. To follow a trend implies that the trend has to be there before you follow it. And that's not a great strategy for gererating out performance. To reliably add value, you have to act early - at the start of the trend. But, then how do you know the trend before it has occurred? That becomes trend predicting, not trend following. And predicting markets is a tough game ... and always will be. From our perspective, market timing is a risky game with known additional costs that mean you have to generate additional reliable return. This is much harder than it appears over the long term. It can be done – statistics will show that someone always does a little better than the long term average. We just think that that has more to do with luck than skill. And given that you have to beat the average over the long term to offset your additional costs, we don’t think its a great bet to “need” to be lucky in order to break even.

I have no doubt that back tested trend following has strong empirical support, as do most back tested approaches. Yet, when it comes to using them in real time they don’t always do what they’re supposed to. To follow a trend implies that the trend has to be there before you follow it. And that’s not a great strategy for gererating out performance. To reliably add value, you have to act early – at the start of the trend. But, then how do you know the trend before it has occurred? That becomes trend predicting, not trend following. And predicting markets is a tough game … and always will be.

]]> By: Percy Allan http://www.wealthfoundations.com.au/blog/is-there-value-in-trying-to-time-your-entry-exit-from-the-market/comment-page-1/#comment-2032 Percy Allan Fri, 02 Jul 2010 07:17:33 +0000 http://74.52.19.179/~wealth1/blog/?p=37#comment-2032 This example of market timing is a straw man, not geniune trend following which has strong empirical support.. Check out www.markettiming.com.au for the evidence. Buy and hold is an extremely risky share strategy that saw the everage share portfolios fall 55% between Nov 2007 and Mar 2009. Those using a reliable trend following system avoided that fate. This example of market timing is a straw man, not geniune trend following which has strong empirical support.. Check out http://www.markettiming.com.au for the evidence. Buy and hold is an extremely risky share strategy that saw the everage share portfolios fall 55% between Nov 2007 and Mar 2009. Those using a reliable trend following system avoided that fate.

]]> By: Market Timing? … that’s easy! : : Wealth Foundations Articles http://www.wealthfoundations.com.au/blog/is-there-value-in-trying-to-time-your-entry-exit-from-the-market/comment-page-1/#comment-21 Market Timing? … that’s easy! : : Wealth Foundations Articles Thu, 30 Apr 2009 17:40:26 +0000 http://74.52.19.179/~wealth1/blog/?p=37#comment-21 [...] For a mathematical comparison of the two approaches see “Is there value in trying to time your entry and exit from the market?” [...] [...] For a mathematical comparison of the two approaches see “Is there value in trying to time your entry and exit from the market?” [...]

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