Is it better to be early or late?

[anitya]

Is it better to be early or late when trying to buy (invest) in a bear market?   I know many (but not all) posters' views on this already expressed in this forum.  If you have not already expressed your view, please let us know. 

It will be great if all of you are able to share your reasoning (even if previously shared) for why you think early or late is better for buying to invest (not necessarily to short term trade).

Also, please include if it is different for different investment vehicles.

Edit: This thread is not soliciting views on whether market timing is prudent or not. There are many investment styles that incorporate some element of market timing. I am not to question how and why posters reduce their risk. Once they reduce risk, I am trying to learn the timing of how they increase risk in their portfolio. Several posters in this forum are holding more cash (or equivalent) levels than they held at the end of 2021. These posters have to be thinking of increasing risk at some point.

Most of the time before I buy an investment, I evaluate it as if I am going to buy and hold for ever.  But I will not hesitate to sell if I think it is prudent to take profits or cut losses.  So, the premise of this OP is not for buying for short term trading but about timing of buying to increase portfolio risk in a bear market.

(This is not about who is right or who is wrong.)

Thanks.  

[anitya]

Today's CNBC Closing Bell program had a guest who has been quoted / discussed in this form often. He said today something to the effect of start buying otherwise you are going to miss the bottom - so that is an advocacy for early. We will hear more and more commentators in the media saying the same, which does not mean I am advocating it.

[uncleharley]

It makes no diIfference if you are judged to be early or late as long as you reach your goals. If one is buying index funds, you might want to be a little early. If one is buying stocks, they all bottom at a different time so being a little early is O K but if you happen to be a little late, tis better late than never. If one is buying OEF's, dcaing and buy & hold work better than either early or late.  JMHO

[Capital]

Since I don't trade in and out I guess I'm always in early.

[anitya]

Thanks for the replies.

In the context of buying OEFs / index funds, if one were to venture being early, is there a way to ensure they are not too early? That is, anything more than just reminding oneself of the probabilities of gaining vs losing given the then index / fund levels relative to the all time high, assuming the fund does not have idiosyncratic risks?

The problem with buying too early, even if DCAing, is one can become gun shy when the index / fund is in the bottoming process.

For conversation, I am assuming too early is more than 7-10% from the bottom for equities.  You may pick another metric.

Thanks.

[johnsmith]

I'm not sure who said this, maybe Howard Mark or somebody similar.

"Volumes are high before the bottom, so you should be buying before the market hits the bottom"

Problem is how do you figure out? The person said that when the stock hits absolute value, jump in with both hands and legs.

VWO was at $41.29 on Aug 31, 22; PE - 10.9, PB - 2, RoE - 14.5%

today it's at $37.89, today; PE - 10, PB - 1.84, RoE - higher

So definitely a better buy, screaming buy, not particularly,

Now if the price falls to $30, that would be a particularly good time to buy tons of it.

Also - in the last 10 years, lowest price was $30.62, during the covid March 20 panic, it hit $33.62

So buying it in the mid 30s and lower should provide a fairly good value over the long term. It's easier to do with Index Funds; individual stocks can be dependant on individual stock eccentricities, so much more knowledge + a handle on the actual business may be required.

Earlier I thought MMM at 130 was a great buy, not buying any at $112 though, didn't realise they would have billions in liability over products. 

added: VWO -s 50%+ China & Taiwan, if anything triggers an economic or hot war, VWO could easily hit the 20s.

[Mustang]

As a buy and hold investor who believes in DCAing I do see that it matters. If you buy shares of stock at $17 or $12 it doesn't matter if the market is going up on down. A $2,000 investment buys the same number of shares either way.

It matters to market timers who buy in and then a few days latter sell. If you are a market timer then is probably important that you buy when the market is rising.

[anitya]

This thread is not to discuss whether market timing is prudent or not.   

Thanks for your consideration for not bringing your old fights into this thread. Please refer to the OP if in doubt. If the topic in the OP is irrelevant to you, thanks for not participating in this thread.

[Deleted]

I would be interested to hear how investors plan to buy and when. DCA'ing is obviously one way. Waiting until a certain level of an index is met is another, individual valuation,...UH gave a nice summary.

I don't think there is any way to conclusively tell if you are too early or late. There are ways to establish systems to smooth the effects of decisions out and that is why you are and will always get responses that include systems to answer the unanswerable. To state the obvious - these are risk assets we deal with. An investor's goals matter a lot with how to answer this question as well.

Going back to bond OEFS and equity indexes. For both I would evaluate my best guess on the cost of capital and where it will settle out. Difficult for mere mortals. I would also evaluate the inflation rate.

At this time, that eliminates bonds of any type for me. I would be too early if I bought them and for the role they play in my portfolio, I don't mind being late.

Equity indexes. I have already bought some too early using the metrics suggested. So, I do not know of a way to avoid except in hindsight.

[uncleharley]

"Is it better to be early or late when trying to buy (invest) in a bear market?"

After a nights sleep I think it depends on your risk tolerance. Hindsight is 20/20 so if you are risk averse, being late is the way to go. If you are skilled enough to manage volatility induced risk, it is frequently possible to see turns coming & you may want to be early, knowing that you will get the occasional whipsaw along with frequently superior returns. Make a plan and work your plan and enjoy the ride.

[Deleted]

I would not buy more than a spec position in a bear market to be followed by a recession, especially this one with sticky inflation. 

[chang]

One factor (and apologies if this has been mentioned already - I didn't read all the replies) is whether we're talking about a growth or dividend stock. If a growth stock, say Amazon - I'd like to see a bottom first. On the other hand, a stock like Rio Tinto that pays 11-12% ... well, it's so volatile as a matter of course, I'd rather just buy it, collect the dividends, hold it, and ignore it - rather than try to identify and time the "bottom". Of course, divvies never make up for real NAV loss, but I'm just saying: a hefty divvy buffers a potential loss. It's just a minor factor that allows you to pull the trigger a little quicker. Big J-M-O. 

[anitya]

chang ,

I have not checked Rio. Some companies pay variable dividends and even those with non-variable dividends should be evaluated for company / industry specific potential weakness. Check out how the 2022 performance / chart looks for F, INTC, PARA, KSS, ZIM, etc. With Treasury yields at 4%, the market’s appeal for dividend buffer could decrease.  Many high Div stocks tend to be value stocks which take a bigger hit on price in deep bear markets and recessions.  I have low and unsuccessful experience with individual stocks relative to you.  If you change your mind on going early for high Div stocks, let us know.  Thanks.

[johnsmith]

anitya,

theirrelevantinvestor.com/2022/10/07/this-is-a-hitchcock-horror/

someone answering your question with data

[anitya]

uncleharley ,

Thanks for this post - big-bang-investors.proboards.com/post/26459

Given how low below the long term averages we are, I am presuming the potential targets you mentioned may not be achieved in a straight line and thus we may have some oversold and overbought action along the way. Perhaps, goes to you imploring patience in your post.

I consider your post relevant to this thread and welcome here your future posts like this on T/A.

[uncleharley]

Fwiw; The ADX momentum indicator is signaling that the S&P 500 is nuetral at this time. Meaning that if you bought the S&P 500 tomorrow you would be a little early for either a long or short position.

[coptomist]

Here is a ling to a Morningstar article from August this year entitled "Why Buying the Dips Could Hurt Your Portfolio in a Bear Market".

www.morningstar.com/articles/1111480/why-buying-the-dips-could-hurt-your-portfolio-in-a-bear-market


For me, this is a a tough call. I reduced my risk earlier from 60% to about 45% as of today. I am down about 11% overall this year, so definitely feeling the pain as a retiree. I use my Roth for risk management in times like these, not always effectively. I like to use the 200 DMA along with other indicators, such as posts herein and on Fido from more knowledgeable tactical investors, trusted advisors and other sources, and current events to help determine my re-entry points. Since I use ETFs such as IVV, SCHD, IJH, EAF, EEM, etc, I am not looking for individual stocks at a great price, though I am considering doing so if things get much worse from here.

[anitya]

coptomist , Thanks for sharing the article and posting.

A somewhat off topic - I recently realized that buying the dip works in a cyclical bull market.   To be successful with that strategy one needs to be able to figure out at what stage of cyclical bull the market is in at that time.  Not being able to figure this out could make one buying the dip in the early stages of (or transition to) a bear market, which could exasperate the pain of losses.  Some people just have a good nose for this sort of stuff.  One of the posters cautioned me in August 2021 about the equity market being on shaky ground.  In hind sight I see that the ARKK types already made their bull market highs and have started to make lower lows and lower highs.  Though I did not buy into the ARKK types, my investment is still down as of today.  A

[yogibearbull]

Funny thing is that many are quite sure about the last 5-10% decline in the last leg of the bear market and the drums from brokerages/advisors to get out are loudest then.

So, here we are back to around June low levels. If you lived through June, now should be a breeze.

Hold your noses and start buying something, some now, some more 5-10% down.

[fritzo489]

yogibearbull, +1 I told myself not to buy anything, add more until a 5% drop from the June lows. Seems it won't be long if the pace keeps up.
Good evening, fritzo489

[Deleted]

Oct 9, 2022 21:06:42 GMT yogibearbull said:

Funny thing is that many are quite sure about the last 5-10% decline in the last leg of the bear market and the drums from brokerages/advisors to get out are loudest then.

So, here we are back to around June low levels. If you lived through June, now should be a breeze.

Hold your noses and start buying something, some now, some more 5-10% down.

I agree.  I have been buying all along and it has felt horrible.  I have doubts and I work sometimes to keep the faith. I just keep reading those stats on bear markets, recoveries and look at how the time frames jive with my plans.  I do like seeing the reinvestments at lower prices.

[Norbert]

Oct 9, 2022 21:06:42 GMT yogibearbull said:

Funny thing is that many are quite sure about the last 5-10% decline in the last leg of the bear market and the drums from brokerages/advisors to get out are loudest then.

So, here we are back to around June low levels. If you lived through June, now should be a breeze.

Hold your noses and start buying something, some now, some more 5-10% down.

This approach seems reasonable.

Maybe hold 50% of one's equity target equity allocation now, increase to 75% at S&P 500 support near 3300 (pre Covid crash), then go 100% at major support around 3000?

(Click to enlarge.)



Valuations-wise, we're still well above historical averages; 3000 to 3300 on the S$P 500 would be more attractive.

FWIW. Am just speculating, have no convictions about the low point of the ongoing correction. But, would guess that we're 8%-15% away. It's essential to know one's "loss" tolerance, to avoid panic selling if the bottom is lower than assumed.

I remember gleefully buying around 900 in early October 2008, only to watch the S&P 500 go under 700 a bit later. 😳

Why my current pessimism? It's because I think the recent top was a liquidity fueled bubble for everything: stocks, real estate, and bonds, not to be repeated soon.

-----

Plus I fear that the current administration is sleepwalking us into a nuclear exchange with Russia, cheering Zelensky's success with high-tech US weapons.

Chancellor Merkel:

m.economictimes.com/news/international/world-news/merkel-bats-russias-inclusion-for-sustainable-peace-in-europe/articleshow/94717977.cms

WSJ (Peggy Noonan):

www.wsj.com/articles/putin-really-may-break-the-nuclear-taboo-russia-ukraine-weapons-attack-war-artillery-shells-fight-11651176309

N.

[chang]

Oct 10, 2022 3:34:29 GMT Norbert said:

Maybe hold 50% of one's equity target equity allocation now, increase to 75% at S&P 500 support near 3300 (pre Covid crash), then go 100% at major support around 3000?

That sounds like a conservative, probably a very prudent strategy. For someone like me, who is currently holding 100% of his target equity allocation, though... I can't apply that. This is a classic "stay the course" situation, as far as I can see. Of course, that assumes there won't be any major economic or geopolitical meltdowns or armageddons, resulting in a further drop of 20-50%. And, frankly, I am optimistic that there won't be. I'm hoping for divided government and gridlock next month, and an end to the Russia-Ukraine conflict (this year?). Fighting during a harsh winter is miserable. As for inflation and recession, I have no idea. But I am trying to orient my equity exposure toward inflation-resistant companies and sectors.

[anitya]

Mentioning one's projections (timeline, impact on financial markets, etc.) as it relates to war is fine but let us leave out who is to be blamed or who is right from this thread just so we are focused in these volatile markets.

Unrelated to the above, I have learned that there are no concepts that can be cast in stone or work in multiple situations. Being open minded and staying flexible (basically no concepts) is the only thing that seems to work for me.

chang , My investing gives this war ending in 2022 extremely low probabilities so much that I hesitate to make fresh investments on Fridays.

Norbert : "Maybe hold 50% of one's equity target equity allocation now, increase to 75% at S&P 500 support near 3300 (pre Covid crash), then go 100% at major support around 3000?

Valuations-wise, we're still well above historical averages; 3000 to 3300 on the S$P 500 would be more attractive.

FWIW. Am just speculating, have no convictions about the low point of the ongoing correction. But, would guess that we're 8%-15% away. It's essential to know one's "loss" tolerance, to avoid panic selling if the bottom is lower than assumed.

I remember gleefully buying around 900 in early October 2008, only to watch the S&P 500 go under 700 a bit later. 😳

Why my current pessimism? It's because I think the recent top was a liquidity fueled bubble for everything: stocks, real estate, and bonds, not to be repeated soon."

Very good. Thanks for sharing.

[anitya]

Jamie Dimon, JPM, in an interview today said he does not know how much farther stock market might fall but it could be another 20% (S&P 500 - 2,900), close to the levels Norbert & Uncleharley suggested. He also said the obvious - the next 20% will be a lot more painful than the first 20%. Though it is less in dollars than the first 20%, I thought it is worth repeating.

While many are focused on market levels, I think one of the less considered aspect is "time."   I think we have to consider the possibility for this to be a long, drawn out Fed, economy, & markets process and may even include an occasional, intermittent, temporary Fed reprieve.  

Let us stay flexible and focused.

[Deleted]

This has been a really good thread. It made me think about the purchases I have made/been making. Mostly I buy well known companies with dividends and try to avoid overpaying by ridiculous amounts. For the type of stocks I buy, I like being early better than late if I have to choose. As noted, this could go on for years, and these are my retirement building blocks. If I am buying close to fair value, time in the market will be my better move.

If I am trying to buy premium growth companies - like AMZN, GOOG, MSFT - If they get to a reasonable price, I would buy earlier. I think it might be better to be late with growth right now - particularly indexes as so much in them has been overvalued. Subjective - but the only one I think is reasonable is GOOG. Seems to get more reasonable every day.

Most mature equities are going to settle back to their long term values.

The Dimon interview - I really took the 20% comment as a real possibility - not probability - if everything keeps going South. Will have to listen to it again, but not sure it matters as it is an opinion - albeit from a very smart man who has a lot of economic visibility. If the market does fall another 20%, I will be sorry I didn't time it right and happy to be compounding away.

[Deleted]

Cyclicals - I tend to avoid cyclicals except big tech which I own. But I have some semiconductor stocks which i bought too early this year and I now feel for cyclicals it is better to buy late.

[uncleharley]

Time is very important, unfortunately we have ongoing issues that need to be resolved or put on a path to resolution. How high the fed will boost interest rates early next month is one of the issues. If they raise another .75 my thought [assumption] is that the market will spike down and we may see a bottom by Thanksgiving. However if the fed raises rates some level less than the expected .75, well the market will probably fluctuate for a period of time. Meanwhile the S&P tested last weeks low today and retreated just before it hit the low. If that level develops some support many people, except me, will be saying it is a bottom.

[anitya]

has anybody been buying ATVI (to be acquired by MSFT) recently? If MSFT acquisition goes through, the upside is 30+%, with MSFT buying price being $95. Are the anti-trust clearance issues so severe for such a big discount?