57

If mean-reversion does exist, am I correct to say that timing the market is likely to reap great rewards? Sure!!! Just one problem: you can't time the market. why do so many people think it's a bad idea to invest when the market is high Because "they" think that the market will crash Real Soon Now. and a good idea to invest when the market is low? ...


36

Say you buy 25% of a corn field, and the other 75% is owned by others that decide how to operate the whole field (for this metaphor, assume the shares of the corn field are highly liquid and can be traded at "fair" value at any time). Every year, that field produces corn that is then sold for a profit. The majority owner can do two things with those profits: ...


34

The common expression in retort would be "Time in the market beats timing the market." Meaning: On average, the stock market rises [because on average, the global economy is expanding as outputs continue to increase] - a common rule of thumb for North American markets would be 7% / year, after factoring inflation. This general rise beats out the average ...


19

If you save x every month, the future value (FV) is where n is the number of months r is the monthly rate of return So if Y% return is 10% nominal interest compounded monthly r = 0.10/12 For example, over 3 months, saving $100 per month n = 3 x = 100 FV = (x (1 + r) ((1 + r)^n - 1))/r = 305.03 Checking the balance at the end of each month long-hand ...


16

Market timing vs dollar-cost averaging This is a strategy for changing the asset mix in your portfolio. Paid brokers positively love dollar-cost averaging; because it allows them to give exactly the same advice regardless of market conditions, and always be "right" and evade responsibility for market turns, even obvious ones. I'm not 100% thrilled with ...


16

Neither of these strategies apply to long-term investing. They are more applicable to day-traders or short-term investors. "Buy low, sell high" is more of a reminder that one should not always buy things that have gotten expensive (follow the trend) and sell things when they've declined (panic sell). If you're a long-term investor, then these short-term ...


13

Why do so many investors agree to pay now huge sums of money (trillions in total) for something that may eventually pay dividends, and even in the best case, these dividends are typically only a fraction of the price you paid to acquire these stocks? The average annual dividend rate for the US stock market is 2%. That means if you bought 100 million ...


13

If mean-reversion does not exist: It does not. Why were the returns for the 10 years following the 2008 recession unusually high? Because after the market finishes going down, it goes up. That's what it means to "finish going down". Similarly, after it finishes going up, it goes down. That's how we know when it finished going up. So it went down. Then, ...


11

This is what sovereign wealth funds do. How the wealth is shared becomes a political question, for example: Alaska Permanent Fund eliminate state tax and give an annual dividend to residents Temasek Holdings advance industrial and diplomatic policy of Singapore. Now less so, but in the beginning, industrial policy = jobs. Government Pension Fund of ...


11

No one can predict when the market will correct or how far it will drop but you can certainly react to that if you are not fear based or uninformed. This assumes that it's not a one day event like 1987 (down 22%) when everyone is the proverbial deer in the headlights but rather a 50% drop over 15-18 months (see 2000 and 2008). If you are concerned about ...


8

I'm wondering, why not invest all together in the stock market with a single account? Mutual funds already enable individuals to interact with the market collectively, so many people are already essentially doing what you propose. We would all be rich. Well, those that have significant excess funds after paying for essentials can earn a decent return. ...


7

That's about an EU directive. The way EU directives work is that each member state is obligated to make laws that comply with it. But these aren't EU laws. They are laws of each individual country. They can and will be different from country to country but they need to comply with the general idea. Leaving the EU won't make UK laws go away.


6

As I wrote in another answer, minority shareholders have the right to resell their shares to another investor (e.g., one who may be accumulating a controlling stake in the company). This works out so that shares are generally valued as if they were an entitlement to profits, because in the long run this is the basis of their value. That is, if smaller ...


5

Endowment manager here. Investing works. Really. If you think it doesn't, that's a knowledge gap. We'll close it. Now, investments earn money one of three ways: interest (on investments such as bonds or loans), dividends (on stocks), and capital gains (the increased value of the thing.) If Ford stock went from $8.10 to $8.80 in the last year, that ...


4

You can buy inflation-protected securities in some countries. In the US they're called Treasury Inflation-Protected Securities or TIPS. In the UK they're called inflation-linked GILTs. With these securities, the principal amount increases by the level of "inflation", typically measured as a change in the Consumer Price Index (CPI). Unfortunately they don't ...


4

The short answer is that it is impossible to KNOW when the best time is to sell a stock. There are a number of reasons to sell a stock: You need the money Company fundamentals have changed Share price has advanced very rapidly, perhaps unsustainably The stock is overvalued The stock is overvalued compared to its peers The dividend has been cut Portfolio ...


4

The main problem is that indexes like the FTSE only show growth in share price. The FTSE 100 is, by definition large companies, and most of those would be regarded as dividend rather than growth stocks. You need to look at a total return index to get a more accurate picture because if you reinvested dividends you would see an additional ~4% compound growth ...


3

Where I live (Finland), stock market is high but not as high as in the US. On the other hand, there is no good alternative for stocks because bond yields are negative! So, compared to the bond market, the stock market is not at all that high. The problem in general with timing the market is that if you time the market, you spend less time in the market. ...


3

I'd highly recommend reading JL Collin's Stock Series. This is a great resource to teach you about how investing works, and gives you a primer on index funds, stock and bonds. Aditionally (and most importantly) it teaches you how to think about your money so that you don't make the bad decisions that so many people do by panic selling every time the market ...


3

You have several good answers already, but I feel there are two important factors worth mentioning, which haven't been brought up yet. Firstly, your assertion about investing as a majority shareholder in a single company seems to be based on this belief: You can guarantee your own payback. That's simply not true, in nearly any kind of investment. ...


3

If in the US, major discount brokers have eliminated commissions. Pooling money doesn't make you rich. Pooling money doesn't increase gains. Pooling money doesn't reduce risk. Pooling money is a headache.


3

Some points: When the company offers you a match, not contributing to your 401(k) is -- in no uncertain terms -- a pay cut. If this is your first home purchase then you'll be able to exclude $10K from the 10% penalty you'll pay on the 401(K) withdrawal. You'll have to pay income tax on the whole value of your 401(k). Thus, put aside 20-25% of the value of ...


2

A margin account is one where you can borrow money from your broker to buy securities. The loan is collateralized by your cash and/or marginable securities. You pay interest to the broker on cash borrowed. However, you do not have to borrow cash from your broker. Some strategies cannot be done in a cash account and require a margin account: shorting ...


2

Past returns are past, future returns are future. I have no experience in Indian real estate market, but I should mention that any CAGR should take into account inflation. Stocks yield about 6% above inflation. If inflation has been on average at 14-24%, that explains the origin of the high CAGR in real estate. Also, how much time has your father spent in ...


2

The technical answer to you question involves the Synthetic Triangle: There are six basic synthetic positions: Synthetic Long Stock = Long Call + Short Put Synthetic Short Stock = Short Call + Long Put Synthetic Long Call = Long Stock + Long Put Synthetic Short Call = Short Stock + Short Put Synthetic Short Put = Short Call + Long Stock ...


2

A proper appraisal is not usually done by a realtor, but realtors should know their markets and how to research. Apartments/condos/townhouses are usually much easier to price than single-family houses because there are many comparable units in a relatively small area that can be used to get a good ballpark estimate. Starting with the comparable units you ...


2

Many stock indexes are capitalized-weighted which makes them momentum funds of current trends. And so the historically recent double-tops or triple-tops don't have a lot of technical meaning. The index will just re-balance on pull-backs and ride the new balance back-up. One potential problem would be that there are no trends but just that everything is down. ...


1

If you are an EU citizen and NOT an US citizen, https://justetf.com is meant for you, and I found IE (Ireland)-domiciled versions of several Vanguard and iShares funds. The fees for IE-domiciled Vanguard funds are somewhat higher than the US-domiciled ones, but not outlandishly so - 0.07% vs. 0.03% for Vanguard's S&P 500. Key: the ISIN should begin with ...


1

How do I (and real-estate investors and people considering buying in general) proceed in coming down to a conclusion without attempting to low-ball the seller or aim to high, with such different ranges in hand? You are essentially trying to mimic what a seller does. Before they list the house on the market they ask several agents to prepare a ...


1

I would see if there is an official open register where you can check the taxation value of the real estate. In The Netherlands you can check https://www.wozwaardeloket.nl/index.jsp and get for every address the taxation value of the real estate. Although the market value is often slightly higher than the value listed in the register, it gives you an ...


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