Market Timing – Waiting for That Fat Pitch

by FI Fighter on August 28, 2016

in Financial Independence, Post FI, Precious Metals, Thoughts, Thoughts

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Market timing. It gets such a bad rap… If your experience with investing has been anything remotely similar to mine, I’m sure that you’ll recall the moment when you first stumbled upon the concept of Buy and Hold Forever Investing. Whether through the channels of Dividend Growth Investing (DGI), Index Investing, or even Real Estate Investing (REI), the popular mantra out there (for the longest time) has been that market timing is a fool’s game, and that the only way to really succeed with investing is to simply Buy and Hold Forever, Dollar Cost Averaging (DCA) every step of the way…

Now before you jump to conclusions and call me a “hater”, just know that my background is no different than most anyone else’s, and I did indeed start out my own investing career executing the Buy and Hold Forever strategy. As a matter of fact, I currently still own 8 rental properties, which were all purchased with the intent to Buy and Hold Forever.

You know the drill, stop worrying about the underlying asset valuation, and just simply collect cash flow (passive income) like clockwork each and every month…

Yeah, Buy and Hold Forever definitely works… And there is certainly a time and place for it… But to assume that it’s the only way to invest?

That’s doing yourself (and your investing career) a huge disservice.

Like with everything else, there’s a time and place for Buy and Hold Forever. The entry points matter… a lot! And to suggest otherwise could be the difference between you retiring at age 35 and age 55…

Market Timing

So, why does market timing get such a bad rap? Well, for starters there’s just this extremely negative stigma out there towards anyone who is presumed to be trying to “outsmart” or “outfox” the markets… I guess for many investors, once you have sworn your allegiance to DGI, REI, index investing, etc., it becomes altogether dissonant to hear about someone else out there who is attempting to do something entirely different from what you are currently doing… I guess it should come as no surprise, then, that some people feel defensive when they learn about opposing strategies or philosophies that run counter to the ones that they are oh so familiar with, so the natural reaction is to find fault (criticize, attack, ridicule, belittle, etc.) with that which is considered “foreign”.

Case in point, last year I announced on this blog that I was liquidating out of my 401k and Roth IRA retirement accounts, completely selling out of general equities, and moving my money towards precious metals stocks.

As a consequence of my actions, I routinely received comments such as the following from readers:

I was just commenting on the general theme of his blog lately which was irrational fear of remaining in stock. He completely cashed everything out 100%. If that’s not an attempt at market timing I don’t know what is.

To say what I was doing was unpopular would be an understatement…

Nonetheless, it was undoubtedly the right thing to do. As I learned last year, investing is about making gains, not about being popular or liked!

With the benefit of hindsight, sure, you could make the argument that I was attempting to “time the market”… In reality, I do believe that all along, my thoughts with the gold and silver mining trade were centered around trying to leave behind a grossly overvalued asset class (S&P 500 stocks) so that I could re-deploy funds into another asset class that was operating in the Depths of Despair.

By the end of 2015, I thought that it was an absolute no-brainer to be doing what I was doing… But of course, when nobody else is really on board with your “best idea”, you feel like a lone wolf out there who might be perhaps the biggest idiot in the world…

Well, let’s now compare how those “crappy” gold and silver miners have been performing year-to-date (YTD) relative to the major indices.

  • Market Vectors Gold Miners ETF (GDX)
  • Market Vectors Junior Gold Miners ETF (GDXJ)
  • SPDR S&P 500 ETF Trust (SPY)
  • PowerShares QQQ Trust, Series 1 ETF (QQQ)
  • SPDR Dow Jones Industrial Average ETF (DIA)

GDX_GDXJ_SPY_QQQ_DIA_chart

  • GDX up 98.11%
  • GDXJ up 135.2%
  • SPY up 6.58%
  • QQQ up 4.40%
  • DIA up 5.65%

Looking back now, if you want to debate whether or not I was indeed trying to “time the market”, or just simply chasing after Deep Value, feel free to…

I really don’t think it matters much at all how you look at it…

  • Market timing?
  • Deep Value?
  • Being a contrarian?
  • Fan of opportunity?
  • Etc.

The proof is in the pudding

In 2016, gold and silver mining stocks have smoked just about every other investment out there by leaps and bounds… It’s not even close… We are talking about life-changing gains here folks!

No contest!

And as readers know damn well by now, bottom line, I’m just an early financial independence investor. My allegiance is to financial freedom, first and foremost, so I really don’t care about all the stupid micro details that everybody else likes to nitpick about all day and night long…

 

And you definitely shouldn’t either!

 

It doesn’t matter!!!

 

It’s all a huge waste of time

 

Check your ego at the door. Who cares if somebody thinks they are a better investor than you? I openly admit that I’m a mediocre investor all the time! I’m such a terrible investor, that if the markets didn’t continually give me wonderful buying opportunities, I know that I’d fail miserably.

In fact, I’m so bad at investing, that I should just as much admit that if you didn’t skew the risk vs. reward curve heavily towards the reward side (and I mean heavily), I would have no chance of winning at all!

So, I’ve learned to not even bother playing the game if I can’t operate with a clear-cut advantage.

Making enormous strides towards early FI… That’s the only thing you should really care about… If someone wants to accuse you of trying to “time the market”, let that be their problem.

All I know is that the markets are frequently stupid and slow to react… I’ve seen it happen time after time, again and again. There are huge distortions, and many times it takes what feels like an eternity for price discovery to eventually work itself out…

But let me be perfectly frank with readers here, the reason I was able to reach early FI at the age of 31 was because I made a series of “market timing” moves… In retrospect, these were the ABSOLUTE best investment decisions that I ever made in my life.

  • Index Investing (VTSAX) in 2009.
  • Real Estate Investing (Bay Area property) in 2012.
  • Gold and Silver Investing (mining stocks) in 2015.

So, anyone who thinks these “market timing” windows of opportunities don’t come around very often, you’re quite mistaken.

They do…

You just have to be paying attention so that when the investment “opportunity of a lifetime” presents itself, you’ll be in the position to capitalize BIG TIME!

Without a doubt, more opportunities will open up in the future for anyone who is patient and willing to think outside the box.

Agnosticism

I keep re-iterating this important point, but here it is again… This is how I invest:

  • I ain’t a dividend growth investor.
  • I ain’t a real estate investor.
  • I ain’t an index fund investor.
  • I ain’t a gold bug.
  • Etc.

Just give me the best deals and I will adapt my gameplan accordingly (which is always fluid and dynamic)… Further, I don’t discriminate against passive income (cash flow, dividends), and I sure won’t hate on capital appreciation.

I love both!

Give me whichever options are currently being discounted the most by the markets, and I will gladly buy hand over fist!

Quite frankly, I think that anyone who is attempting to get to early FI at a young age would do themselves a huge favor if they learned to look at investing in this type of agnostic light… If you are truly an agnostic investor you will be able to hear the following remarks and not feel insulted, offended, defensive, or emotional in any way, shape, or form…

  • Screw dividend growth investing!
  • Screw real estate investing!
  • Screw index investing!
  • Gold and silver are nothing more than pet rocks!
  • Etc.

If reading the above bullet points elicits any kind of emotional response from you, you’re probably a lot more “invested” in your assets than you think you are…

Waiting for That Fat Pitch

Once we know to decouple our emotions from our investments, the order of business of “waiting for the fat pitch” becomes all that much easier. For example, in 2015, I was initially operating in a state of limbo after I executed two separate cash out refis and quickly discovered that re-deploying that capital back into stocks was a losing strategy…

After all, the S&P 500 was trading at record highs (remarkably, it still is today!), and for anyone who doubts that there is any type of correlation between the broader markets and dividend growth stocks, well, look at the following chart and you be the judge…

  • S&P 500 (SPY)
  • Vanguard Dividend Appreciation ETF (VIG)
  • Vanguard High Dividend Yield ETF (VYM)

SPY_VIG_VYM_chart

Well, we all know to “buy low and sell high”… When it comes to investing, seriously guys, it doesn’t take more than an elementary school education to figure out if an asset class is expensive or cheap…

Cit pe multiples

Look at the chart above…

Clearly, US stocks ain’t cheap today. Period.

Ditto for US real estate (in the most desirable locations).

So, I have no problem with moving on to bigger and better ideas.

After all, I’m a macro investor who focuses on The Big Picture.

Screen Shot 2016-08-28 at 9.26.18 PM

Historically, every asset class goes through market cycles… Ups and downs… Every asset spends a good amount of time in both the sun and in the toilet… When you’re buying, you want to be loading up big time when an asset class has been discarded by most everyone. If you’re selling, you want to do so, under the radar, when everyone else and their grandma is interested in buying.

That’s really all that there is to investing!

I’m not interested in investing in micro stories… Experience has taught me that Big Money is made when you are out buying up entire asset classes that are hated and in liquidation.

It bears repeating, so here are my best investment decisions again.

  • Index Investing (VTSAX) in 2009.
  • Real Estate Investing (Bay Area property) in 2012.
  • Gold and Silver Investing (mining stocks) in 2015.

Each asset class that I purchased above was done so during periods of intense despair. As a consequence, to date, I have witnessed 100%+ gains in each asset class. With index investing and real estate, I have realized those gains and booked profits.

As it pertains to mining stocks, my triple digit gains are unrealized at this time. Here’s a quick snapshot of what my current Canadian mining portfolio gains look like.

Current as of August 28, 2016.

Screen Shot 2016-08-28 at 9.30.52 PM

Life-changing gains have been made already by anyone who got into the gold and silver mining space last year… And this new bull market may only just be getting started!

Fancy that…

Anyway, I think the hardcore readers of this blog can really appreciate the angle that I’m coming from… With everything I’ve done, it’s all been well documented on this blog, particularly as everything was unfolding in real-time… I’m not one of those lame ass Captain Hindsight individuals who only shows up to talk “after the fact”, once the dust has already settled.

Hey, I’m not perfect, and I’ve definitely made a ton of mistakes investing over the years… I’m writing all this to share with readers many of the things that I have learned along the way. Again, you all know that my allegiance is to early FI, so I really have no problem with ripping on any asset class or investment…

I just try and tell it like it is…

And right now, I really need to say this — Certain asset classes are just way too frothy right now… REI, DGI, index investing… There’s just no alpha to extract from these investments, which is why I’m sitting on the sidelines, patiently waiting for better buying opportunities.

Again, I’m extremely picky and selective with my investments… Give me a “deal of a lifetime”, or I ain’t interested in playing…

I got no problem with taking my chips off the table and going home…

Most investors fail because they’re too damn impatient and feel the ridiculous need to be “fully invested in the markets at all times”…

That’s a recipe for dismal returns…

Patience, patience, patience!!!

It will pay off, my friends…

Right now, anyone out there who thinks that they can just blindly invest their hard-earned dollars into buying up overpriced assets and still achieve early FI at a young age… you’ve got another thing coming.

I really don’t know what to say to you other than “good luck” because you’re going to need it… Or a ton of capital to help you get to the top of the mountain, doing things the hard way…

If it was so easy, everyone would be in early FI right now, right?!?

Let me see if I can articulate the “waiting for a fat pitch” investment strategy this way (risk vs. reward):

  • Risking 50% of your principal to chase after undervalued assets that could realistically and conceivably return 500% gains in the future is a winning proposition!
  • Risking 30% of your principal to chase after overpriced assets that could realistically and conceivably return no more than 5-10% gains in the future is a losing proposition!

Right now, there’s no bigger trap in the markets than the “yield trap”… Thanks to all the intervention by Central Banks and governments across the globe (ZIRP and NIRP to infinity and beyond!), everyone is super hungry for passive income. As a consequence, you have really crappy assets that are getting bid up out of the stratosphere…

How often does buying anything at record high prices work out spectacularly well for the retail investor?

Further, anyone who wants to overpay for blue chip income stocks (regardless of price because of how “wonderful” these companies and businesses are perceived to be): Procter and Gamble (PG), Coca-Cola (KO), Pepsi (PEP), General Mills (GIS), 3M (MMM), etc., be my guest… knock yourself out.

 

After all, that’s the popular thing to do right now! How could it fail (*sarcasm*)?

 

As for myself, I’ve learned that being a lone wolf ain’t exactly too bad… The assets that I have been buying up over the last year, man, I’ve been competing with myself for shares, for the most part… Would I like more passive income? Well, since I’m no longer working a W-2 job, the answer to that question should be most obvious… ABSOLUTELY I DO! But I’m not willing to buy income producing assets at today’s prices… Hell no, I want to buy these assets up hand over fist on my terms (which you know means heavily discounted)!

 

Investing is all about financial freedom… It ain’t about being liked or popular… Screw that shit!

 

Most importantly, remember, you gotta be patient to succeed. Although it will take some time, eventually, when you finally get that fat pitch you’ve been waiting for coming down the pike, you’ll know what to do with it!

 

And here’s the thing with waiting for that fat pitch… The pitch you end up getting might be something that you never saw coming… But that doesn’t mean you shouldn’t swing!

In 2014, I was big on travel hacking and stumbled upon an awesome opportunity to add many American Airline (AA) miles… I signed up for 3x Citi Executive cards in a span of a few months… It was that fat pitch that presented itself to me… one that I never, ever could have anticipated for in advance… Well, just recently, I cashed in a few miles so that I could fly to HK on business class!

In 2015, gold and silver mining stocks presented a buying opportunity of a lifetime… But I’ll be the first to admit that prior to 2015, I had never, ever considered investing in precious metals at all… As far as I was concerned, that asset class didn’t even exist b/c I knew absolutely nothing about it!

So, remember to keep your eyes and ears open to opportunity… Always!

Market timing? These days, I’m taking that criticism as a compliment. Sure, if market timing lets me get to early FI at a young age, I’m all for it!

 

Fight On!

{ 21 comments… read them below or add one }

1 James August 28, 2016 at 8:57 am

It’s not market timing if you did your research and decided to act by making a significant investment in a more attractive area by selling your other assets to fund it. Market timing is when people have a certain feeling about something without doing much homework and let their emotions determine whether to invest or not, thinking they can outsmart others. Some may get lucky and make big gains, but no one can time the market consistently over the long run.

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2 FI Fighter August 28, 2016 at 9:02 am

James,

Thanks for your feedback. With market timing, I think it’s very subjective and I’ve heard varying opinions from many different people. I do know that I was often accused of market timing last year with the whole gold/silver trade…

Market timing carries with it a negative connotation, but I’m not really even sure why… In the end, it’s all noise anyway… The main focus should be on trying to get to early FI as efficiently as possible.

Long-term, if you just hit 1-2 fat pitches, you don’t even have to “time the market” anymore… That’s the other thing that people over-fixate on… It doesn’t have to be a binary, all-or-nothing proposition for perpetuity…

I’ve learned to get to early FI you want to focus on building the net worth (total returns)… Get there, then re-allocate into income producing assets to meet your goals. If you want to keep speculating, do so with anything excess of that, but don’t jeopardize the early FI foundation.

Best wishes!

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3 Dividend Growth Investor August 29, 2016 at 3:32 pm

Back in February, you stated that you were short TSLA and COP. Are you still short those? Have you made any other trades, other than gold this year?

Year to date dividend growth stocks are up more than S&P 500 – looking at VIG and SDY or NOBL.

Sure, they have done worse than the gold ETFs but only year to date.
However, over the past 5 – 10 years, dividend stocks have done pretty well. Stocks in general have done ok, assuming you held on and didn’t panic. But when I look at the past 5 years, GDX and GDXJ have delivered negative returns to shareholders.

If you include a 5 year chart or a 10 year chart of those etfs vs US stocks in general, you will see what I am talking about. Gold etfs have done much worse than stocks or dividend stocks over the past 5- 10 years.

So with dividend stocks you get a dividend today, plus price appreciation. When dividend stocks are down in price, you at least get a dividend that you can spend. With gold, you are solely dependent on price fluctuations. This is speculation, which may have worked once for you, but will not work for most others. If you keep speculating, you may end up giving those profits back if your luck/skill runs out. You can sit through a 30 year bear market with gold or gold stocks, with nothing to show for it. ( don’t believe most gold stocks pay a dividend, possibly only a few)

I went back to 1990, and it seems like XAU has been going nowhere for over a quarter of a century. These are great for traders, but terrible for investors. In order for you to earn money with those gold stocks, you need to time your entries and exits perfectly. Most investors are terrible at timing things – so I would say they probably did ever worse than that. In fact, a CD has a better expected return than those gold stocks. Or gold in general.

I have been hearing from someone that equities will crash and burn for 8 years now. They will correct one day, but the problem is no one knows when. So to sell and wait for a correction so you can buy lower is risky. Probably 1% of people out there can pull this off. The rest however end up missing out on the wealth creation that long-term equities investment can deliver.

Now, I am happy that you have great timing skills. And I am hopeful you keep building your net worth from here. But some of the stuff you have been saying may be outright dangerous to less knowledgeable investors.

I do agree that equities in general are overvalued. But there are still some pockets of opportunity that are fairly valued. And just because equities are a little over fair value, that doesn’t mean you should sell them. You know, if equities grow earnings over time, that would increase their value and ability to distribute more cash to the shareholder. Only a token number of people can afford to dance in and out of stocks and come out ahead. That’s not me, but I have done well by investing regularly.

I wish you good luck!

DGI

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4 Joe August 28, 2016 at 9:21 am

I think you nailed it. Unfortunately, it’s 99 vs 1 rule. 99% of most people suck. They sucks at investing, they sucks at their job, etc.

Therefore, a little bit of knowledge is a dangerous thing. Trying to time the market without sufficient knowledge and foresight can be a terrible thing for 99% of us. Sadly I fall into the 99% suckers when it comes to stocks.

So I found another Avenue that allows for more control but yet has all the elements of risk and high returns. Real estate. Specifically buy and hold.

I held the same belief….buy and hold forever (10+ yrs) but just like timing the market cycles, real Estate cycles also exist.

So I’m cutting out some fat in real estate portfolio and cashing out the appreciation so that I can get ready for the next big buying opportunity when real Estate prices dramatically drop.

Thanks for your insights.

I still have 100% of my 401k in stocks….I really should sell most or all of it. But FOMO is holding me back.

Joe

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5 FI Fighter August 30, 2016 at 5:16 pm

Joe,

I hear you, and as a fellow real estate investor, I certainly understand the appeal with holding cash flow rentals.

With that said, with investing and buying up assets, in general, I think everything has a price. There comes a point in time when an asset class is just too pricey and a time when another asset class is just too cheap to ignore.

Jumping around too frequently can lead to trouble, no doubt, so the best way to mitigate (not eliminate) risks is to buy entire sectors that are in deep liquidation. I think anyone striving for early FI can definitely appreciate a good clearance sale…

That’s the best way to turbocharge the progress, as far as I’m concerned.

Does it take a bit more work, research, conviction, etc? Yes, no doubt.

But working 9-5 for 40+ years is not exactly a walk in the park either…

Best wishes!

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6 Fabi August 28, 2016 at 10:21 am

Market Timing is probably the biggest factor when it comes to long term ROI, and you have done it beautifully so far, my friend!

Being asset agnostic is a key ingredient!

Congrats!

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7 FI Fighter August 30, 2016 at 5:21 pm

Fabi,

Absolutely, especially in mining, the entry/exit points are most critical.

Thanks for the support! Looking forward to many more great conversations in the future 🙂

All the best!

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8 Sean August 28, 2016 at 10:34 am

How would you be viewing miners at this time. Would you be buying every dip. It looks like hui went below 250 last week and concern for further pullback.
Some of these silver miners such as Ag, and gpl have had significant pullbacks.
I’ve been accumulating new gold, Kinross, premium and sandstorm on pullbacks. I took some profits on Ag when it was 18.
i am thinking if hui gets below 200 would be great opportunity to be adding more aggressively.
Also any thoughts on iag, and gdxj?

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9 FI Fighter August 30, 2016 at 5:25 pm

Sean,

For the most part, I’m still very bullish on precious metals moving forward. When it comes to timing a good entry point, that will always be tricky because no one can ever know for certain where the short-term price action will lead to next. With that said, if I was a buyer with a medium/long-term viewpoint (not a trader), I would prefer to add positions on any significant pullbacks and dips.

It’s definitely not easy, but I would prefer to average down as opposed to chasing up (which usually never ends well).

AG for example was $18, like you mentioned, and now it’s around $12… So, that’s a pretty steep decline… I’ll just say I’d rather buy that stock at $12 than say $24 after it makes another new short-term high.

I’m not a fan of IAG, but GDXJ is well diversified so a good option if you want a “set it and forget it” option to play the gold trade. GDXJ will still let you capture the same type of leveraged upside gains.

Hope that helps.

Cheers!

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10 JC August 28, 2016 at 1:40 pm

Timely post and I agree with pretty much all of it in theory, but don’t quite put it into practice enough. I think many of the DGI’ers out there, myself included, are getting too caught up in the building up of the cash flow/dividends and ignoring the fact that the underlying assets are at least 10-15% above the high end of fair value and no where near close to being cheap. Just continually plowing the money into those assets will only work out if you’re less than a couple years from reaching FI with a significant margin of safety. Otherwise with a 5+ year timeframe investors are better off taking a TR approach. In the end all that matters is that you have the capital base when you reach FI, it doesn’t matter if the capital base was mainly savings, capital gains or dividends/rent.

The hard thing for me has been pulling the trigger on the sale of overvalued assets like many of the DG companies you mentioned. Realistically I think the downside for some of those companies is 20-40% but if everything works out great then you’re looking at maybe 4-5% annual capital gains + the dividends. KO and GIS are two that are showing declining or flat fundamentals yet the valuations just keep getting stretched which is a recipe for disaster down the line. Those are 2 that I’m leaning really heavily toward selling because I’m not at the stage where I’m living off dividends so TR still makes sense.

Regarding investment opportunities right now is there any asset class in particular that fits your risk/reward ratios? Are you still bullish on the miners after the run up?

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11 FI Fighter August 30, 2016 at 5:31 pm

JC,

Thanks for stopping by buddy. I do realize that this constant “jumping back and forth” type of strategy/mentality can be somewhat confusing, but it’s not like I planned for any of this… As an investor looking for deep value, I’ve simply tried to take what the market gives me… And as we all know, the market is extremely fickle…

One minute, general equities are cheap, and then it’s real estate selling at historic lows… Next thing you know, it’s commodities and precious metals that have been thrown out into the trash can…

But like you said, using historical data, we can compare valuations and get a good sense if the assets we are looking at today are “cheap” or “expensive”. With general equities and dividend growth stocks, there is no doubt that these assets have been bid up into overvalued territory… Rather than trying to look for that good ol’ “needle in a haystack”, my approach is to be a macro investor and just shun the entire asset class entirely…

Although unpopular, I just think the margin for error is greatly reduced when you start targeting asset classes as a whole, as opposed to individual stories… Investors fall into the trap of looking for confirmation bias and only sticking to what they know…

In 2015, I didn’t know the first thing about gold/silver investing… But I put in the time necessary to learn and looking back, all that effort was absolutely worth it.

Education is key. And for anyone who doesn’t think it’s worth all the work and effort, would you prefer to keep working a 9-5 job for the next 10, 20, 30 years, instead?

Just something to think about…

Right now, I still like precious metals, lithium… I’d be a buyer on any significant pullbacks, but outside of those ideas, there’s not much that interests me, other than holding a lot of cash for the next big opportunity.

All the best!

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12 Alex August 28, 2016 at 4:31 pm

seems pretty spot on /// earnings arent going up etc but stocks are running up and up and do you think the run up on the gold miners is over and do you know how i can purchase birimian through TD do i have to call them ?

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13 Raymond August 28, 2016 at 4:42 pm

Thank you for another inspiring post. You’ve definitely got the right idea here. It’s all about buying up certain asset classes when they are the most undervalued.

I am curious how you are able to recognize which assets are undervalued at the moment. That is a lot harder than it sounds and not something anyone can do. If you had zero knowledge about stocks/gold/real estate prior to investing in them, how would you even recognize the opportunity there?

To do that, you would have to
a) know enough about the asset to determine a fair valuation
b) keep up to date about that asset to spot a large price decline

Anyways, thanks for the post. I’ve learned a lot from this blog. Keep up the good work.

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14 OB August 28, 2016 at 4:52 pm

Lot of great points here. Will have to share this view with some co-workers of mine. Last week, the company I work at had a financial adviser deliver a seminar on where the market is at and what we should be doing with our retirement accounts. He started his presentation out by saying we can’t time the market and that timing is a loser’s game. He relied on this chart (http://static2.businessinsider.com/image/53309b9eecad04e412a1750b-1200-900/cortd.jpg) to prove his point, which showed returns when missing the best days of the market over a 20 year period. Of course, a fairer measure would have been to see returns after having missed both the best and worst days. So his conclusion, stay in the market. He said to keep putting in money because you’ll ultimately miss those big gains.

Luckily we were given a free lunch to sit through this presentation. The financial adviser had an obvious incentive to recommend us to keep our 401k’s all in the market. I couldn’t stand the simplistic advice of continually plowing money into the market with no assessment as to whether they are currently overvalued or not. Sure they may continue to go up a little, but what’s the likelihood? And like you said here, “Risking 30% of your principal to chase after overpriced assets that could realistically and conceivably return no more than 5-10% gains in the future is a losing proposition!”

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15 JC August 28, 2016 at 5:43 pm

OB,

Just an outside perspective on that chart. Yes the decline in returns are relevant to the market timing if, and it’s a big if, you’re only investing in one asset class the S&P 500 in the case of that chart. If you are completely agnostic as far as the asset class and successful with deep value investing then I highly doubt the return profile would look that way.

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16 Roadmap2Retire August 29, 2016 at 6:44 am

Great post, Jay.
Couldnt agree more. What some may consider market timing can simply be seen as a deep value investment..depends on how you approach new ideas. The labels dont matter.

I really liked the comment about saying negative things about your investment strategy and checking if that invokes an emotion. If that does, then we are falling for one of the most common biases out there 🙂

cheers
R2R

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17 Pon August 29, 2016 at 10:49 am

Great article Jay
I haven’t touch most of the popular blue chips either. Their price/yield is not worth it right now. What I find is there are small caps out there which will rise and gain popularity quickly once the public understand/know about them. There are a few sleepy small caps providing good yield, low price, profitable, then suddenly one year, it rises 20+%, making it not an attractive investment anymore

Despite the huge movement to clean energy, what are you thoughts on energy (oil, LNG). Also UK banks?

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18 Rudy SMT August 29, 2016 at 6:08 pm

Hi Jay,

Well said again; move the capital where they are best treated.

I think you are onto something here.

Do you think is possible to come up with a practical system for this type of investments?

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19 No Nonsense Landlord August 29, 2016 at 6:26 pm

Now comes the time, do you sell gold, or ride it up more or down…

International stocks have been beat up a bit, I have been considering them. I still like the USA ETFs though.

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20 Investment Hunting August 29, 2016 at 9:55 pm

Preach it brother preach it. It’s funny to me how angry other investors get when people sell their own stock. I keep saying this, but falling in love with a stock or dividend is a dangerous thing.

I’m all for buying and holding, but it doesn’t always make sense. I got beat up pretty bad for cashing in 30% of my portfolio last month. Fast forward 30 days and I used that capital to make $1,000 in options premiums.

I’ll buy these stocks back on a correction and hold them for a while before repeating the same process.

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21 Alex August 30, 2016 at 4:26 pm

explain how you did that ? covered calls ?

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