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Money Talk > Investing, Stocks and Bonds

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Brownsfan2k5
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Wino I appreciate your input. I currently invest $4000-$5000 a month. I just went over $100,000 in stocks and I also own 2 homes with my wife and partner 3 others with my father. I will be turning 25 soon and my wife is currently 21. Our strategy has been to invest as much as we can while I'm still making great money in the military. We currently bring home over $75,000 annually most of which is tax free. So I was just trying to find another strategy to maximize our profit. Do you still think this is a bad method? I'm still on the fence about it :/
Post Wed Jan 08, 2014 2:58 pm
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Wino
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If the market goes up 20% in the next 18 months, you'll make $1400 minus $210. That's $1200, close enough. That's around 25% of what you invest every month.

I don't think you need to do something complicated for so little possible gain, and possible loss. If this were $700K, I might have a different opinion, but at $7K? No. I wouldn't do it, myself.
Post Wed Jan 08, 2014 3:41 pm
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oldguy
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quote:
So I was just trying to find another strategy to maximize our profit. Do you still think this is a bad method? I'm still on the fence about it :/


I normally match the term of my money supply with the term of the investment. Eg, I invest in an 11%/yr index with 30-yr capital.

And I make certain of my money supply so that all of my risk is concentrated on the investment side. I use only 30-yr fixd rate loans, no designer loans, no adjustable rates, no 15 yr loans, no balloon payoffs, etc. That way a lender cannot call my loan, cannot foreclose due to a missed balloon, cannot raise my rate, my money is nailed down for 30 yrs.

You have interest in 5 rentals, can you refi some of them and build a fund of 30-years capital? (It might be good to start disentangling from your partner/relatives and own some rentals on your own, it gives you freedom to manage). Also the First Law of Landlording applies - "never rent to an acquaintance, a coworker, a friend, and never ever to a relative, you need an arm's length formal agreement with a stranger." This Law also works well with realtors, lawyers, tax people, and so on - do you really want uncle louie's cousin to sell your house? Very Happy
Post Wed Jan 08, 2014 3:48 pm
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coaster
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quote:
Originally posted by Brownsfan2k5
I'm still on the fence about it :/

I think it's time to put aside the dollars and cents as a factor in your decision process. Now factor in whether or not this is something you would enjoy doing; you find it interesting, it's a challenge that occupies your mind and your time --- or --- is this looked upon as a chore, something you feel you should do; have to do, or worse yet...something you're going to worry about. In the first case, go for it; in the second case, dump it and move on.

~Tim~
Post Thu Jan 09, 2014 5:35 am
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Radix3d
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It's not a bad idea just wait tell the market dips. Why do something like this when the market is certainly not cheap? If you did something like that back in 2009-2010 you would have made a pretty penny with little risk at that.
Post Thu Jan 09, 2014 7:22 am
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Wino
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quote:
Originally posted by Radix3d
It's not a bad idea just wait tell the market dips. Why do something like this when the market is certainly not cheap? If you did something like that back in 2009-2010 you would have made a pretty penny with little risk at that.

So, you're recommending market timing, and borrowing to do so? That's a recipe for disaster, if ever I heard one.

And to your second point, results don't change the risks involved.

There is absolutely no way I'd do this scheme. The gains will be minimal, at best, and there is risk that is not necessary. Add to that the administrative oversight necessary, and it becomes more trouble than it's worth. I'd rather put my efforts toward my main job for better results and more bonus.
Post Thu Jan 09, 2014 11:05 am
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Radix3d
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quote:
Originally posted by Wino
quote:
Originally posted by Radix3d
It's not a bad idea just wait tell the market dips. Why do something like this when the market is certainly not cheap? If you did something like that back in 2009-2010 you would have made a pretty penny with little risk at that.

So, you're recommending market timing, and borrowing to do so? That's a recipe for disaster, if ever I heard one.

And to your second point, results don't change the risks involved.

There is absolutely no way I'd do this scheme. The gains will be minimal, at best, and there is risk that is not necessary. Add to that the administrative oversight necessary, and it becomes more trouble than it's worth. I'd rather put my efforts toward my main job for better results and more bonus.


How is it timing the market? I'm not telling him to put any money on the sideline he's 100% invested now. It doesn't take someone with a high IQ to realize when the stock market has fallen off a cliff. If the market goes up 30% like it has recently it wont be insignificant gains. Not recommended for ordinary savers but this guy isn't ordinary.
Post Thu Jan 09, 2014 2:04 pm
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Wino
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He's not 100% invested. He's talking about borrowing $7K at a cost of $210 to invest for 18 months. "Waiting for a dip" is timing. What if it goes up 3%, then dips 2%? Do you get in then or wait for "another dip?" If you had "waited for a dip" one year ago, you'd still be waiting or you would have gotten in at a higher price than you could have paid at the beginning. Your timing advice assumes that we'll shortly drop below the point we are now at. There is no guarantee that will happen. Historically, the market has averaged gains, not losses, so statistically, waiting for a dip is a losing proposition.
Post Thu Jan 09, 2014 3:17 pm
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Radix3d
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quote:
Originally posted by Wino
He's not 100% invested. He's talking about borrowing $7K at a cost of $210 to invest for 18 months. "Waiting for a dip" is timing. What if it goes up 3%, then dips 2%? Do you get in then or wait for "another dip?" If you had "waited for a dip" one year ago, you'd still be waiting or you would have gotten in at a higher price than you could have paid at the beginning. Your timing advice assumes that we'll shortly drop below the point we are now at. There is no guarantee that will happen. Historically, the market has averaged gains, not losses, so statistically, waiting for a dip is a losing proposition.


Borrowing money and investing it would put him beyond 100%, but he hasn't done it yet, so he's at 100% I'm not sure what you're talking about. I don't need to know how tall someone is to know they are taller than me. I don't need to know exactly where the bottom is to know the stock market is cheap. It has nothing to do with timing anything. I bought some pants today that were on sale, am I timing the market? No.
Post Thu Jan 09, 2014 3:50 pm
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Wino
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quote:
Originally posted by Radix3d
Borrowing money and investing it would put him beyond 100%, but he hasn't done it yet, so he's at 100% I'm not sure what you're talking about. I don't need to know how tall someone is to know they are taller than me. I don't need to know exactly where the bottom is to know the stock market is cheap. It has nothing to do with timing anything. I bought some pants today that were on sale, am I timing the market? No.


You are suggesting timing the market. Your obfuscations don't change the fact.

"Waiting for a dip" precisely means timing to buy low/lower. If that's not timing, then there is no such thing as timing. Selling before a suspected dip is timing. Buying after a dip is timing. You're suggesting the latter. Just because you aren't constantly going in and out, doesn't mean that doing it one time isn't timing.

"I only got paid for sex once, so it wasn't prostitution."
Post Thu Jan 09, 2014 4:12 pm
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Radix3d
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quote:
Originally posted by Wino
quote:
Originally posted by Radix3d
Borrowing money and investing it would put him beyond 100%, but he hasn't done it yet, so he's at 100% I'm not sure what you're talking about. I don't need to know how tall someone is to know they are taller than me. I don't need to know exactly where the bottom is to know the stock market is cheap. It has nothing to do with timing anything. I bought some pants today that were on sale, am I timing the market? No.


You are suggesting timing the market. Your obfuscations don't change the fact.

"Waiting for a dip" precisely means timing to buy low/lower. If that's not timing, then there is no such thing as timing. Selling before a suspected dip is timing. Buying after a dip is timing. You're suggesting the latter. Just because you aren't constantly going in and out, doesn't mean that doing it one time isn't timing.

"I only got paid for sex once, so it wasn't prostitution."


No, I'm a value investor I don't time markets. Your criticism and ignorance of investing don't obfuscate that fact.

"Cash combined with courage in a time of crisis is priceless." -Warren Buffett
Post Thu Jan 09, 2014 5:03 pm
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Wino
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quote:
Originally posted by Radix3d
No, I'm a value investor I don't time markets. Your criticism and ignorance of investing don't obfuscate that fact.

If you want to hurl insults, that's fine. It doesn't change the fact that you suggested market timing to others, regardless of your impression of how you invest yourself.

http://blog.ngam.natixis.com/blog/david-lafferty/getting-back-into-stocks-should-you-wait-for-the-dip

You may want to look at that link before you spout in the future. It explains why "waiting for a dip" is a bad strategy, and you should be able to deduce for yourself that it would therefore be market timing. Or, you can continue to only time the market when you get in. I would assume your same logic would apply when you get out, as well. You probably suggest "waiting for a peak." But that's not timing, apparently, because you didn't use the word "time" when you said to time the market to dips that may not occur and to peaks that may not occur.

Wikipedia may not be a definitive source, but it is certainly an independent source:

http://en.wikipedia.org/wiki/Market_Timing

From the above: "Market timing is the strategy of making buy or sell decisions of financial assets (often stocks) by attempting to predict future market price movements."

I'll add, "such as waiting for a dip in the price."
Post Fri Jan 10, 2014 3:50 am
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coaster
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I concur with Wino's definition of "timing the market". Although the period is inexact, and "timing" is used with a rather broad interpretation, making a current decision based on "waiting for a dip" most certainly fits that definition of making that decision based on a predicted future price movement. Although the event is 100% certain, predicting *when* is not. That's the way I understand the definitions as applied here, any way.

I suggest you guys agree on a definition for "market timing" otherwise the debate is just a waste of words. It's like trying to play a game with two different sets of rules.

~Tim~
Post Fri Jan 10, 2014 4:45 am
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Radix3d
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quote:
Originally posted by Wino
quote:
Originally posted by Radix3d
No, I'm a value investor I don't time markets. Your criticism and ignorance of investing don't obfuscate that fact.

If you want to hurl insults, that's fine. It doesn't change the fact that you suggested market timing to others, regardless of your impression of how you invest yourself.

http://blog.ngam.natixis.com/blog/david-lafferty/getting-back-into-stocks-should-you-wait-for-the-dip

You may want to look at that link before you spout in the future. It explains why "waiting for a dip" is a bad strategy, and you should be able to deduce for yourself that it would therefore be market timing. Or, you can continue to only time the market when you get in. I would assume your same logic would apply when you get out, as well. You probably suggest "waiting for a peak." But that's not timing, apparently, because you didn't use the word "time" when you said to time the market to dips that may not occur and to peaks that may not occur.

Wikipedia may not be a definitive source, but it is certainly an independent source:

http://en.wikipedia.org/wiki/Market_Timing

From the above: "Market timing is the strategy of making buy or sell decisions of financial assets (often stocks) by attempting to predict future market price movements."

I'll add, "such as waiting for a dip in the price."


Where is the insult? I said you are ignorant about investing. It's no more an insult than when you said I'm "obfuscating" which someone might interpret as intentionally deceiving or lying.

Markets are somewhat predictable in the long run, for example buying a house while prices are cheap and the cost of borrowing is low is a path to building wealth. There is little difference in principal between borrowing money to buy a real asset and borrowing to buy a financial asset. There is a smart way to do it, a dumb way to do it, and there is always some level of risk involved. The ENTIRE financial system is built on investing borrowed money and it's been that way for hundreds of years.

I guess that is all timing the market by your definition though.
Post Fri Jan 10, 2014 12:34 pm
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Wino
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OK. Waiting for a dip" is not market timing.
Ignorance is strength. Freedom is slavery. War is peace.
Post Fri Jan 10, 2014 1:00 pm
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