<story><title>Does Market Timing Work?</title><url>https://www.schwab.com/learn/story/does-market-timing-work</url></story><parent_chain><item><author>zer0tonin</author><text>The dogma that it&amp;#x27;s impossible to beat the market is frankly weird at this point.&lt;p&gt;If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX.</text></item><item><author>lend000</author><text>The fact that you&amp;#x27;re being downvoted for factual contributions kind of explains why it&amp;#x27;s possible to beat the markets. Most people refuse to believe it.&lt;p&gt;No public strategies are going to beat the market by a huge amount, and having the discipline to execute them manually isn&amp;#x27;t easy, but it has been clearly shown to be possible.</text></item><item><author>veqq</author><text>To go into further detail about systemic investing:&lt;p&gt;There have been experiments like the turtle traders ^ 1 who applied &amp;quot;trend following&amp;quot;, used today by many CTAs on exotic markets. For this, an investor taught some people his strategy&amp;#x2F;rules, gave them his money and they&amp;#x27;ve shined for 40 years. The fundamental strategy still works today (updated). Fundamentally, it&amp;#x27;s a method to ride momentum in different ways (e.g. crossectional.) Hedge fund managers like Rzepczynski, Cem Karsan, Alan Beer... Richard Brennan is the most insightful of them who shares his methods freely. N.b. trend following doesn&amp;#x27;t work well in stock markets, but flourishes in Mexican rate swaps, orange juice futures, London sugar... combined in ensembles.&lt;p&gt;Traditional value investors, building on the Intelligent Investor, have always done well over samples above a few years. (N.b. Warren Buffet hasn&amp;#x27;t been a value investor for a long time, because he has too much to manage. He was strongly inspired by Fisher&amp;#x27;s Common Stocks and Uncommon Profits, which gave us the concept of &amp;quot;growth stocks&amp;quot;.) (N.b. 2, value investing ETFs are mostly terrible, fundamentally not investing in value stocks due to their structures.)&lt;p&gt;Carisle&amp;#x27;s Acquierer&amp;#x27;s Multiple is the most recent development in systemic value investing (he also runs an ETF or two along these lines). &amp;quot;Magic formula investing&amp;quot; even holds up too!&lt;p&gt;In the mining space, you also get discretionary (not purely systematic) investors like Rick Rule openly discussing their methodologies, successful for decades and decades.&lt;p&gt;Here’s an interesting paper ^ 2 (exec summary pages 5-6). Note that 70% of underperformance is due to investors withdrawing funds during times of market crisis. Fund fees also drive the majority of underperformance. N.b. most wealth managers can&amp;#x27;t legally follow such strategies because of the prudent person rule. They are legally forced to underperform typical indices - and the majority of research has focused on them, distorting the data pool.&lt;p&gt;[1] &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.investopedia.com&amp;#x2F;articles&amp;#x2F;trading&amp;#x2F;08&amp;#x2F;turtle-trading.asp&quot; rel=&quot;nofollow noreferrer&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.investopedia.com&amp;#x2F;articles&amp;#x2F;trading&amp;#x2F;08&amp;#x2F;turtle-trad...&lt;/a&gt;&lt;p&gt;[2] &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;wealthwatchadvisors.com&amp;#x2F;wp-content&amp;#x2F;uploads&amp;#x2F;2020&amp;#x2F;03&amp;#x2F;QAIB_PremiumEdition2020_WWA.pdf&quot; rel=&quot;nofollow noreferrer&quot;&gt;https:&amp;#x2F;&amp;#x2F;wealthwatchadvisors.com&amp;#x2F;wp-content&amp;#x2F;uploads&amp;#x2F;2020&amp;#x2F;03&amp;#x2F;Q...&lt;/a&gt;</text></item><item><author>Centigonal</author><text>IMO, this is a much more comprehensive article on the same topic: &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.aqr.com&amp;#x2F;-&amp;#x2F;media&amp;#x2F;AQR&amp;#x2F;Documents&amp;#x2F;Insights&amp;#x2F;White-Papers&amp;#x2F;Market-Timing-Sin-a-Little.pdf&quot; rel=&quot;nofollow noreferrer&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.aqr.com&amp;#x2F;-&amp;#x2F;media&amp;#x2F;AQR&amp;#x2F;Documents&amp;#x2F;Insights&amp;#x2F;White-Pap...&lt;/a&gt;&lt;p&gt;For unsophisticated investors, timing the market tends to keep money on the sidelines during growth periods, eroding long-term returns. This is part of why it&amp;#x27;s considered an investing sin - &amp;quot;time in the market beats timing the market.&amp;quot; Sophisticated systematic investors can probably get good results with certain momentum-based market timing strategies, but most of us aren&amp;#x27;t sophisticated systematic investors.</text></item></parent_chain><comment><author>auxym</author><text>&amp;gt; If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX.&lt;p&gt;This assumes that the expected return of a single, randomly-picked stock is symmetrically-distributed. It is not, single stock returns are highly skewed and &amp;quot;lottery like&amp;quot;. Index returns come from the fact that a small number of stocks do exceptionally well, while most of them do poorly.&lt;p&gt;This becomes even worse if we talk about timing: stock returns come from relatively short periods of doing really well, if you miss that because you are out of the market for some reason, you lose out on the vast majority of the index return.&lt;p&gt;Sorry, I don&amp;#x27;t have specific sources to cite. This comes from stuff I&amp;#x27;ve picked up listening to the Rational Reminder podcast (&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;rationalreminder.ca&amp;#x2F;podcast-directory&quot; rel=&quot;nofollow noreferrer&quot;&gt;https:&amp;#x2F;&amp;#x2F;rationalreminder.ca&amp;#x2F;podcast-directory&lt;/a&gt;), which have very well researched episodes as well as guest interviews with leading academic finance researchers. I&amp;#x27;ll try to dig up the relevant episodes, which do cite sources.&lt;p&gt;Edit: here is some sources:&lt;p&gt;1. &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.dimensional.com&amp;#x2F;us-en&amp;#x2F;insights&amp;#x2F;singled-out-historical-performance-of-individual-stocks&quot; rel=&quot;nofollow noreferrer&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.dimensional.com&amp;#x2F;us-en&amp;#x2F;insights&amp;#x2F;singled-out-histo...&lt;/a&gt;&lt;p&gt;2. &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;assets.jpmprivatebank.com&amp;#x2F;content&amp;#x2F;dam&amp;#x2F;jpm-wm-aem&amp;#x2F;global&amp;#x2F;pb&amp;#x2F;en&amp;#x2F;insights&amp;#x2F;eye-on-the-market&amp;#x2F;agony-ecstasy-2021.pdf&quot; rel=&quot;nofollow noreferrer&quot;&gt;https:&amp;#x2F;&amp;#x2F;assets.jpmprivatebank.com&amp;#x2F;content&amp;#x2F;dam&amp;#x2F;jpm-wm-aem&amp;#x2F;glo...&lt;/a&gt;&lt;p&gt;Quote from this last one: &amp;quot;[...] around 40% of
the time a concentrated position in a single stock experienced negative absolute returns, in which case it would have underperformed a simple position in cash. And around 2&amp;#x2F;3 of the time, a concentrated position in a single
stock would have underperformed a diversified position in the Russell 3000 Index. While the most successful
companies generated massive wealth over the long run, only around 10% of all stocks since 1980 met the
definition of “megawinners”.&amp;quot;</text></comment>
<story><title>Does Market Timing Work?</title><url>https://www.schwab.com/learn/story/does-market-timing-work</url></story><parent_chain><item><author>zer0tonin</author><text>The dogma that it&amp;#x27;s impossible to beat the market is frankly weird at this point.&lt;p&gt;If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX.</text></item><item><author>lend000</author><text>The fact that you&amp;#x27;re being downvoted for factual contributions kind of explains why it&amp;#x27;s possible to beat the markets. Most people refuse to believe it.&lt;p&gt;No public strategies are going to beat the market by a huge amount, and having the discipline to execute them manually isn&amp;#x27;t easy, but it has been clearly shown to be possible.</text></item><item><author>veqq</author><text>To go into further detail about systemic investing:&lt;p&gt;There have been experiments like the turtle traders ^ 1 who applied &amp;quot;trend following&amp;quot;, used today by many CTAs on exotic markets. For this, an investor taught some people his strategy&amp;#x2F;rules, gave them his money and they&amp;#x27;ve shined for 40 years. The fundamental strategy still works today (updated). Fundamentally, it&amp;#x27;s a method to ride momentum in different ways (e.g. crossectional.) Hedge fund managers like Rzepczynski, Cem Karsan, Alan Beer... Richard Brennan is the most insightful of them who shares his methods freely. N.b. trend following doesn&amp;#x27;t work well in stock markets, but flourishes in Mexican rate swaps, orange juice futures, London sugar... combined in ensembles.&lt;p&gt;Traditional value investors, building on the Intelligent Investor, have always done well over samples above a few years. (N.b. Warren Buffet hasn&amp;#x27;t been a value investor for a long time, because he has too much to manage. He was strongly inspired by Fisher&amp;#x27;s Common Stocks and Uncommon Profits, which gave us the concept of &amp;quot;growth stocks&amp;quot;.) (N.b. 2, value investing ETFs are mostly terrible, fundamentally not investing in value stocks due to their structures.)&lt;p&gt;Carisle&amp;#x27;s Acquierer&amp;#x27;s Multiple is the most recent development in systemic value investing (he also runs an ETF or two along these lines). &amp;quot;Magic formula investing&amp;quot; even holds up too!&lt;p&gt;In the mining space, you also get discretionary (not purely systematic) investors like Rick Rule openly discussing their methodologies, successful for decades and decades.&lt;p&gt;Here’s an interesting paper ^ 2 (exec summary pages 5-6). Note that 70% of underperformance is due to investors withdrawing funds during times of market crisis. Fund fees also drive the majority of underperformance. N.b. most wealth managers can&amp;#x27;t legally follow such strategies because of the prudent person rule. They are legally forced to underperform typical indices - and the majority of research has focused on them, distorting the data pool.&lt;p&gt;[1] &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.investopedia.com&amp;#x2F;articles&amp;#x2F;trading&amp;#x2F;08&amp;#x2F;turtle-trading.asp&quot; rel=&quot;nofollow noreferrer&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.investopedia.com&amp;#x2F;articles&amp;#x2F;trading&amp;#x2F;08&amp;#x2F;turtle-trad...&lt;/a&gt;&lt;p&gt;[2] &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;wealthwatchadvisors.com&amp;#x2F;wp-content&amp;#x2F;uploads&amp;#x2F;2020&amp;#x2F;03&amp;#x2F;QAIB_PremiumEdition2020_WWA.pdf&quot; rel=&quot;nofollow noreferrer&quot;&gt;https:&amp;#x2F;&amp;#x2F;wealthwatchadvisors.com&amp;#x2F;wp-content&amp;#x2F;uploads&amp;#x2F;2020&amp;#x2F;03&amp;#x2F;Q...&lt;/a&gt;</text></item><item><author>Centigonal</author><text>IMO, this is a much more comprehensive article on the same topic: &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.aqr.com&amp;#x2F;-&amp;#x2F;media&amp;#x2F;AQR&amp;#x2F;Documents&amp;#x2F;Insights&amp;#x2F;White-Papers&amp;#x2F;Market-Timing-Sin-a-Little.pdf&quot; rel=&quot;nofollow noreferrer&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.aqr.com&amp;#x2F;-&amp;#x2F;media&amp;#x2F;AQR&amp;#x2F;Documents&amp;#x2F;Insights&amp;#x2F;White-Pap...&lt;/a&gt;&lt;p&gt;For unsophisticated investors, timing the market tends to keep money on the sidelines during growth periods, eroding long-term returns. This is part of why it&amp;#x27;s considered an investing sin - &amp;quot;time in the market beats timing the market.&amp;quot; Sophisticated systematic investors can probably get good results with certain momentum-based market timing strategies, but most of us aren&amp;#x27;t sophisticated systematic investors.</text></item></parent_chain><comment><author>TacticalCoder</author><text>&amp;gt; The dogma that it&amp;#x27;s impossible to beat the market is frankly weird at this point.&lt;p&gt;I agree.&lt;p&gt;Meta was literally priced below $90 not even a year ago (I entered at about $100 FWIW, which was my nice and round number). Now at $315. Anybody who believes the market is efficient is on some serious drugs.&lt;p&gt;The market correctly valued Meta a $380 or so before the crash (because &amp;quot;TINA&amp;quot; I&amp;#x27;m supposed to believe), then correctly valued it a few months later at $100, then now is again correctly valuing it at $315?&lt;p&gt;Please. Just please.&lt;p&gt;I&amp;#x27;ll go much further: &lt;i&gt;none&lt;/i&gt; of these valuation are correct. The market is highly inefficient.</text></comment>