Thread: Long Term: Buy and Hold

I would recommend reading William Bernsteins Four Pillars of Investing. You will learn about buy and hold vs market timing, asset allocation, and more.

This is probably the wrong board to be anti-market timing, but after reading that book and a couple of others, and hanging out on the morningstar diehards forum, im an asset allocation/buy and holder all the way

But it is fun to live vicariously though all of the timers on here, and I still readthese boardsevery day

Keep in mind I know very little about this investing stuff. The advise that i got for long term, medium to high risk, was the C, S, and I funds with a 40%, 40% and 20% allocation in those funds or somewhere in that range.

Fund prices on Jan 3: G10.69; F10.42; C12.81; S14.50; I15.41. Fund prices on Jun 24: G10.90; F10.69; C12.81; S14.85; I15.41.

Percentage change: G2.0; F2.6; C0; S2.4; I-0.5.

40-40-20 CSI = 0.9. There just isn't a lot of money to be made in this market.

Dave

Notice divergence in the Dow and the S&P....indicates bearishness...started in and around Oct.....remember my comment on negative impulses....They started in Oct...

http://finance.yahoo.com/q/bc?t=1y&s...=&c=%5EDJI

I sure would love to copy paste the actual gif file....but to no avail I'm having problems getting it done where one can see it.....don't know why.....cutting and pasting isn't rocket science....but this editor seems to be.....even attaching the file is screwy.....

:dude:

didn't someone mention a Trojan Horse virus the other day.....Maybe its the Trojan horse blocking taken affect.......

The Technician wrote:

Notice divergence in the Dow and the S&P....indicates bearishness...started in and around Oct.....remember my comment on negative impulses....They started in Oct...

http://finance.yahoo.com/q/bc?t=1y&s...=&c=%5EDJI

I sure would love to copy paste the actual gif file....but to no avail I'm having problems getting it done where one can see it.....don't know why.....cutting and pasting isn't rocket science....but this editor seems to be.....even attaching the file is screwy.....

:dude:

Can you explain your meaning of divergence? To me, divergence means one is going one way, and the other is going the other way. From this chart they look like they are going the same way just that the Dow dropped a little more than the other....

M_M

The Technician wrote:

didn't someone mention a Trojan Horse virus the other day.....Maybe its the Trojan horse blocking taken affect.......

OK! How do you remedy it???????

Go see your pharmicist silly......................:^

spaf...I just put the link in to view the plot......

Divergence suggest investment into quality over non quality investments.......

http://www.bullandbearwise.com/DJIASP500Chart.asp and click on the bearish reasons why on the upper right of plot.

:dude:

Boots wrote:

Next, however, is the rebalancing factor (essentially buying low and selling high). That seems to me to be justanother form of market timing and not necessary unless there is some kind of system to gauge what the right time is to buy and sell.

You raise a very important point. Why should a person ride the bull all the way up and not attempt to take some profits off the table versus riding it back down to earth again? As you suggest, however, if time is on your side why take any unnecessary risk? I think the biggest mistake people make in the market is NOT determining the type of investor or trader they are? There are all different degrees in either categoryand you've pretty much determined you are an investor versus a trader, but eluded to the possibility you might become an aggressive investor, if there was a system to gauge when to buy or sell.

I'll throw out a non-original approach or system that allows you to take some profits without undue risk. There are some assumptions built into this approach. Those assumptions are:

1. You can tell the difference between a bull and bear market by looking at various charts.

2. You can draw a trend line using a straight edge.

3. You can determinea trend channel - (upper and lower limits of a trading channel).

4. You can, by looking a chart, determine upper and lower resistance points.

If you are convinced you are in a bull market you simply sell 1/3 of your growth index allocation into strength. (I'm talking individual funds here not the collective of C, F, S, and I.) You don't have to sell this 1/3 all at once. You cansell 11% at a time until you hit your target of 33%. Ideally, you would have begun selling in the upper third of the bull trend channel and completed sellingnear the top of the channel, in a perfect world. Being the type of investor you've indicated, I wouldn't roll these profits into another growth fund, but put them directly in the G Fund. Theprofits or dry powder from this reallocation sit in your G-Fund until the price of the fund you sold retraces to the bottom third of the channel and you begin buying back in with your dry powder.

The beauty of this system is you don't have to be exact in your timing. Matter of fact, inherent in this system isthe acknowledgement you can't be exact in your timing because the future can't be predicted. Your charts and your straight edge point to probabilities but not theexact timing. If your timing is off and you sell1/3 of your growth fund too soon because an unforseen'event' took place that caused the price of your fund to exit the bull channel in a powerup trend move, after you've sold, you still have 2/3 of your position to play with to take advantage of the 'unforseen' event. If, on the otherhand, it retraces to the bottom third of the channel, you can pick up additional shares with your dry powder. By doing so, you've effectivelyintroduced the power of compounding to your TSP portfolio. Compounding is something normally associated with the G-Fund (interest bearing funds), but by selling 1/3 of a particular growth fundinto strength and buying itback on weakness you cancompound your growth fund without undue risk, provided youhave a handle on the 4 assumptions listed above.

Yes,we could potentially make more money and accumulatemore shares ifwe traded in and out with 100 percent of our given growth allocation, but thatassumesone of two things...we can either afford the inherent risk or we can predict the future. I don't recommend that approach, butmaybethat is why they call me Wimpy.