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Great post!! I'd add a few things that I've learned over the years: 1) Always be invested in the market. Corollary, don't time the market. This is by far the

Great post!! I'd add a few things that I've learned over the years: 1) Always be invested in the market. Corollary, don't time the market. This is by far the largest mistake people make. Investors typically pull money out at the bottom after they've suffered a physiologically devastating loss, like at the end of 2008 and hence they miss the rebound, like 2009-now. This isn't quite the same but it shows what missing the top 25 days in the market over the past 45 years does to your returns. http://www.marketwatch.com/story/how-missing-out-on-25-days-in-the-stock-market-over-45-years-costs-you-dearly-2016-01-25 http://www.marketwatch.com/story/how-missing-out-on-25-days-... If you are an investor you need to be in the market, period. 2) Accept that you will lose money some years. If you are buying index funds then you will get market performance, ex fees. Markets go down sometimes. Stay the course. 3) Don't look every day or you will go nuts. Keep in mind that the largest draw down (top to bottom) will be larger than what the returns look like if you just look year over year. Ie if you look and see the S&P lost 28% in 2008, understand that if you watched the S&P every day of 2008 then it probably lost more than 28% from its top to its bottom but rebounded slightly at the end of the year to make the year over year loss less than the maximum loss. 4) Have some exposure to outside of the US markets. Consider the scenario of investing all your money in the company you work for. In a rough time for your company you get the double whammy of losing money and possibly your job at the same time. Similarly to how you are told to not invest all your money in the company you shouldn't invest solely in the country you live in, same principle. EDIT see child comment, I mangled the English language in point 4

wtvanhest 10y ago
> 1) Always be invested in the market. Corollary, don't time the market. This is by far the largest mistake people make. The easiest way to tell if someone understands financial markets is to find out whether they believe they can time the market. If they believe they can predict the market, they don't know what they are talking about. [edited - removed ending]
- gxs 10y ago
  There is something very off putting about your comment regarding how you preemptively dismiss anyone who would dare argue with you. Time in the market beats timing the market - the adage is as old as time itself. Not sure that knowing it makes you understand the markets especially well. Similarly, not sure that not knowing it says anything about you either.
  - wtvanhest 10y ago
    Point taken. I edited it out. And... just to go a step further. My comment included the word 'easiest' to describe how to find out someone doesn't know what they are talking about. IMO, if someone starts talking about timing the market, I know right away that they do not know what they are talking about. Other indicators are much harder to diagnose. A self proclaimed market timer is just the easiest to identify.
  - enraged_camel 10y ago
    Knowing that adage doesn't mean you understand markets especially well, but not knowing it definitely means you don't understand markets. I had a friend in college who played World of Warcraft. When the first expansion was announced, he invested $10,000 in Blizzard stock. His reasoning? "It's going to be awesome and sell a lot of copies!" He didn't understand that the stock price at the time he made the purchase already reflected that information (that there was an expansion coming out soon).
- Xcelerate 10y ago
  > There will likely be people that reply to this comment with various comments saying I am wrong. You can judge those comments for yourself. This is the comment equivalent of a loaded question. Or it's like those people who dismiss those arguing against them because of who they are rather than what their argument is.
  - wtvanhest 10y ago
    Good point, I edited that out.
- bradleyjg 10y ago
  I like Patrick's restatement of the Practically Efficient Market Hypothesis: You are astoundingly unlikely to know more about any stock from reading the newspaper, seeing their chart on Google Finance, or consuming their quarterly reports than a team of PhDs who did nothing but study that stock for the last year, and accordingly are vanishingly unlikely to trade stocks in such a fashion that you do better than the market once you account for fees and tax impact. It gets to why these comment threads can sometimes have people talking past each other. Someone will say "You can't time the market", and mean 'you' in the same way Patrick does, but someone else will come along and think the statement meant "no one can time the market". Then the discussion goes off into a whole rabbit hole about quant hedge funds and the like.
  - Terr_ 10y ago
    Relating this back to techie-problems, perhaps we need the moderate Practically Secure Crypto Hypothesis: "You are astoundingly unlikely to create something better and more-secure from seeing a blog-post, reading some Wikipedia articles, etc. than a team of PhDs who did nothing but study mathematical theory, cryptography, and code-breaking for the last few years, and accordingly are vanishingly unlikely to create a new scheme which is more secure than existing standards once you account for performance and maintenance."
    - arielb1 10y ago
      Except that security standards are mostly driven by compatibility with all sorts of edge cases (ancient versions of software! COBOL-bound CAs! tiny smart cards! huge distributed systems!) that are probably not relevant to your case and create big random security holes. If you have a reasonable way of distributing software updates, signed-DH with an AES-based AEAD with termination detection for transport authentication, and a signed hash tree for data authentication, is going to be more secure than RANDOM_SECURITY_STANDARD. Thankfully, there are some good well-written implementations of that (https://www.tarsnap.com/spiped.html https://www.tarsnap.com/spiped.html, https://nacl.cr.yp.to https://nacl.cr.yp.to), but picking a standard randomly will not get you them.
  - dsacco 10y ago
- lbotos 10y ago
  While "If they believe they can predict the market, they don't know what they are talking about" is a cute adage, I think it lumps a bunch of us into a category that we don't deserve to be in? for example, I'm heavily invested in the market but recent events are leading me to consider halfing my investment rate to be more cautious. I'm not going to take any money out or stop investing but by your def I'm "timing" the market, but really I'm "timing" my life. I don't feel confident that I can afford the risk, and I'm lowering my exposure rate.
  - wtvanhest 10y ago
    If you are permanently lowering your exposure, you are not timing the market. If you are deciding that now the market is too hot and you don't like the risk, but plan on being invested later, you are timing the market.
    - asmithmd1 10y ago
      I don't understand why I have to be permanently lowering my risk exposure. If Trump wins the election, the market will tank. Everyone knows this so lets say a 20% risk of him winning thus causing a 40% drop is currently priced in - the market right now is ~8% lower because of the risk of a Trump presidency. I am not willing to expose myself to that risk so just yesterday I moved my 401k out of the market. If Trump loses, the market will probably pop up but I am willing to forgo that gain to not expose myself to the downside. The important point I haven't seen mentioned is that the money you put in the market should not be needed for 10 years. Not money you plan to buy a house in about 5 years, or maybe use to get married about 10 years from now. From 1929 to 1933 the DJIA went down 88% before starting to recover. Ten years is really too short a time horizon, you should have a 20 year perspective or longer. If you had invested the day before the 1929 crash and kept your money in the whole time you would not have broken even, adjusting for inflation, until 1957 - 28 years later.
      - wtvanhest 10y ago
        You are market timing.
- xioxox 10y ago
  So, if there was a massive crash in the stock market, you wouldn't be tempted to buy some shares at low prices?
  - philipodonnell 10y ago
    I wouldn't think "in the market" meant only in stocks. When the stock market falls, other markets (like bond markets) tend to rise, which makes the bonds look like a poorer value and stocks look like a better value, therefore you would re-balance your exposure by selling some bonds and investing in the stocks That's not always the case, just making the point that rebalancing a portfolio is not necessarily the same thing as trying to time a particular market.
    - WA 10y ago
      Rebalancing the portfolio to other asset classes smells a lot like timing the market. The question still remains: When would you move to other asset classes? You could see cash as a specific kind of market as well with your definition. I'm sure there were time periods when holding cash was your best option.
      - loeg 10y ago
        (Home currency) cash is essentially an ultra-short duration, zero yield (home government) bond. Edit: Clarified that both are local.
        djcapelis 10y ago
        No it's not. Currencies move against one another all the time. Your yield is only zero against the same currency, but it doesn't mean your yield is zero in terms of actual global buying power.
        loeg 10y ago
        FOREX movement doesn't factor here? I'm talking about a single currency.
- DINKDINK 10y ago
  >The easiest way to tell if someone understands financial markets is to find out whether they believe they can time the market. People also unwittingly imply have actions where, if you asked them, they'd say they couldn't predict the market, but they'll say things like "I'm waiting for the market to cool off"
- bertomartin 10y ago
  I believe you can make money in trying to "time" the market, given you have good risk management in place. Nobody can predict the future all the time perfectly, but some educated predictions do come true sometimes. If the aim is to make money and not just trying to hold on to what you've got, you must take risks and that invariably comes down to "timing" the market.
calebm 10y ago
This reminds me of when Fidelity did a survey to find which of their customers had portfolios that performed the best, and they found that the customers who were DEAD had the best performing portfolios: http://www.businessinsider.com/forgetful-investors-performed-best-2014-9 http://www.businessinsider.com/forgetful-investors-performed...
- tedmiston 10y ago
  > "...No, that's close though! They were the accounts of people who forgot they had an account at Fidelity."
Stratoscope 10y ago
> Consider investing all your money in the company you work for. Since that phrase is somewhat ambiguous, let me clarify for anyone who misunderstood it on first reading, like I did. :-) I'm pretty sure you don't mean "It may be a good idea to invest all your money in the company you work for." But rather "Consider this very bad thing that may happen if you invest all your money in the company you work for."
- deleted 10y ago
  [deleted]
- gxs 10y ago
  I had to reread that sentence a couple of times myself, but I think you captured his intended meaning here.
- infinite8s 10y ago
  I think he meant 'Reconsider...'
  - stouset 10y ago
    No, he meant "Think about, for a moment, the scenario..."
- barleymash 10y ago
  Uggh, I wish I had read your comment before I just invested everything into the company I work for. Thanks chollida1.
- chollida1 10y ago
  Yuck!! Yep, I really mangled that sentence. Sorry to everyone who just invested their life savings into the company they work for. I guess I really meant... > Consider the scenario of investing all your money in the company you work for.
- Terr_ 10y ago
  Immediate reaction: "Oh, like all those lucky people at Enron!"
shostack 10y ago
Great advice. Given your background (I've really enjoyed reading your previous posts), what are your thoughts on the Bogleheads/Random Walk Down Wallstreet approach of sticking your cash in a couple varied funds, making regular contributions to dollar-cost average, and letting it sit? Also, what are your feelings about various robo advisors like Wealthfront and Betterment and the competing products that Schwab and Vanguard have out now?
- bluedevil2k 10y ago
  The Bogleheads approach is the best approach for the normal investor. Stash it and forget it. Warren Buffett, considered the greatest investor of all time, highly recommends index funds to active investing. Robo Advisors like Wealthfront are still just advisors, and that means they're just guessing like real-life advisors. And as has been proven time and again, they underperform index funds. * http://www.investopedia.com/articles/investing/060216/3-reasons-why-buffett-suggests-index-funds-average-americans-brka-spy.asp http://www.investopedia.com/articles/investing/060216/3-reas... * http://finance.yahoo.com/news/buffett-most-mportant-investment-lesson-211351601.html http://finance.yahoo.com/news/buffett-most-mportant-investme...
  - ropiku 10y ago
    No, Wealthfront and Betterment are not active fund managers. They invest your money in a variety of index funds and rebalance it often. Due to their hugely managed sums they can do a lot of tricks to try to improve your yield while still being broadly diversified.
    - loeg 10y ago
      The only trick they have is tax loss harvesting, which has limited effect (mostly due to $3,000/year limit on deducting). And you can do that by hand pretty easily.
      - DontGiveTwoFlux 10y ago
        They also reinvest dividends automatically, and rebalance automatically when you add new funds so you aren't over allocated in a particular class of assets. Tax loss harvesting is limited to 3000 per year, but you can carry over until you've exhausted the losses. Of course TLH is only good if you're in a taxable account with them. I also don't buy it being easy- particularly with trying to avoid the pitfalls of wash sales and the paperwork to actually claim it.
melvinmt 10y ago
> Always be invested in the market. I'm glad you don't adhere to the defeatist approach of Efficient Market Hypothesis proponents. Always be in the market, yes. Always follow the market, no.
- lintiness 10y ago
  sorry, but "always be in the market" is a rule predicated on a period of history that's been especially kind to the good ole' usofa. there is absolutely no guarantee or even reason to believe in a guarantee of the same going forward. here's something to think about, and i know i'll take downvotes to hell for all this: if everyone agrees and everyone is investing (for retirement etc) identically (long stocks bonds whatevers), what are the odds it's "cheap" or represents future extraordinary gains?
- somic 10y ago
  "Always be invested in the market" - what does it mean? Always have at least something long in your portfolio? Always be 100% long in your portfolio? If I have 99% cash and 1% in VTI for 10 years, am I "always invested in the market" during this time?
watermelon59 10y ago
> Have some exposure to outside of the US markets. This is the part that kills my ability to "set it and forget it". So many things bother me about this. I know I have to do it (because Japan), but how much and on what markets? * I don't like the idea of investing in emerging markets. Having grown up in one, I know how shady those can be and how cooked the books are. Growth is often an illusion. If an emerging market is "promising", I'd rather wait until it achieves developed status. * Developed market indexes are dominated by Japanese stocks, which have gone nowhere in almost 3 decades. You have to accept that a good chunk of your money is going into a no-growth sink. * I don't know what to expect from Europe. Or even Canada for that matter. When I look at those countries from a distance, I see that 1) their large corporations have been established looong ago (i.e. no new ones are created) and 2) heavy taxation and regulations in those countries doesn't seem to leave much room for profits, at least not as much as in the US. I'm probably wrong though, so please educate me. I know home bias is supposedly wrong, but the American market is well studied, well known, highly liquid, and there's a cultural aspect to its growth in that its part of the general population's mindset to invest in it for long term goals. I don't think that's the case in all (or even most) countries. Part of me wants to go full jlcollinsnh/Bogle/Buffet, folks who say you don't need international diversification. Another part of me wants to go as blind as possible into it and just invest in a "world index" ETF like ACWI or VT. And yet another part of me wants to do something in between but has no idea what to do :)
- tedmiston 10y ago
  > I don't know what to expect from Europe. Or even Canada for that matter... Yeah, this is an over-generalization. There are plenty of index funds for European companies at a variety of risk levels, just like in the U.S. Also, there are worldwide funds too. Capital World Growth and Income Fund (CWGIX) [0] is one example that covers the U.S., Europe, and Asia. Note that this is a mutual fund, not an index fund. Edit: Perhaps the downvotes are because this is an actively managed fund. The point of giving the example was trying to counter the specific concern OP stated. For passive, a specific Vanguard fund that's similar, at least the closest I found, is Vanguard Total World Stock Index Fund (VTWSX) [1]. It is very diversified. [0]: https://www.google.com/finance?q=MUTF:CWGIX https://www.google.com/finance?q=MUTF:CWGIX [1]: https://www.google.com/finance?q=MUTF:VTWSX https://www.google.com/finance?q=MUTF:VTWSX
987654321s 10y ago
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987654321s 10y ago
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987654321s 10y ago
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lisper 10y ago
> If you are an investor you need to be in the market, period. This. Another way to think of it: if you are out of the market when it goes up by X% that is functionally equivalent to an X% loss, i.e. you have X% less money than you otherwise would have had. (Well, OK, technically it's equivalent to a loss of X/(1+X) but that's pretty close to X for X<<100%.)
FabHK 10y ago
Agree: timing the market is hard, but it's not impossible, particularly A) given that many big (institutional) investors are not at liberty to enter and exit (almost all mutual/index funds have prescribed what proportion must be in equities, say.) B) given that not all markets are as efficient as the EMH makes them out to be. For example, China fell precipitously from June 2015 ( http://www.bloomberg.com/quote/SHCOMP:IND http://www.bloomberg.com/quote/SHCOMP:IND ), and The Economist (AsiaPac edition) had a cover on 2015-05-30 proclaiming "China's overvalued stock market" ( http://www.economist.com/printedition/2015-05-30 http://www.economist.com/printedition/2015-05-30 ) To conclude, I think it is prudent to review your asset allocation maybe once or twice a year, and shift things around a bit.
WalterBright 10y ago
> Have some exposure to outside of the US markets. The larger American companies are global companies, so you get that anyway. The proof is look what happens to the US markets when some foreign event happens, like Brexit.
- loeg 10y ago
  Almost nothing happened to the US stock market on the day of Brexit.
martin_bech 10y ago
2) this is a mind game, you are not actually loosing money in down years (unless you are actively trading), the market is just valueing your assets for less. When the market does this, you should see if prices are cheap, and if so buy as much as you can! - Warren Buffet style
ausjke 10y ago
While timing the market is a no go, from 2000, 2008, now 2016 it does seem we're at the peak again so it does not make much sense to invest in recent years? I stopped putting money into the stock market since a while ago due to this obvious trend/concern(interest rate has been zero for too long, stock has overrun the real economy, stock peaks after 8 years since 2008,etc)
- keithba 10y ago
  >>While timing the market is a no go >>I stopped putting money into the stock market since a while ago These two statements are in conflict with one another. You are literally timing the market by not investing anymore. Just invest every month and you will be much better off.
- the_watcher 10y ago
  > While timing the market is a no go, from 2000, 2008, now 2016 You realize you are trying to time the market, right?
- 010a 10y ago
  Are you forgetting about dividends?
- buddylw 10y ago
  The criticism here is silly. There's a big difference between timing the market and looking at p/e ratios or debt load for stocks (or entire indexes) and deciding that they are way over valued. If you also think bond interest rates are too low likely to climb, hold your cash and come back to pick up stocks when they are cheaper. There's nothing wrong with that strategy as long as you are buying and selling on value and not trying to time a crash. Let the mob chase the yield down the rabbit hole. If no one did this and everyone was just long everything forever, the market would be immediately broken. edit: While I think John Bogle is a hero of the investment world with advice that all investors should heed, the Boglehead-Dunning-Kruger-effect can be profoundly annoying. They are a fantastic starting point and they address the most common mistakes, but it's a wee bit more complicated than Bogle's rules if you really want to learn equities and investing.
- 10y ago
alejohausner 10y ago
>Always be invested in the market. Yes, I've heard that a million times, but that kind of advice presupposes a bull market. What if it's 1967, and you're about to go into a 15 year period of up and down markets, with no real growth in stock prices? And that's before inflation; the market fell substantially during the horrible 70s if measured in real dollars. All kinds of stock enthusiasts (like most folks here) got eaten alive. Pessimism reigned by the early 80s. Most people said "I'll never buy stocks again.". Ironically, when investors finally capitulated, the great bull market of the 80s and 90s started. My point is that most people here are mesmerized by that bull market, and by recent gains. But historically the indexes have had huge, long term swings that probably exceed most people's investment horizon. "Past performance is no guarantee of future results" is not just a legal disclaimer. It's a bitter truth. Our current optimism is strongly colored by recent gains. What if you had retired in 1929? You would have received nary a return for 25 years. Sure, indexes average 8 percent or so, over the very long term, but it can be an intolerably long averaging interval.
- lewisl9029 10y ago
  > "Past performance is no guarantee of future results" is not just a legal disclaimer. It's a bitter truth. Definitely this. I personally believe "Always be invested in the market" is very irresponsible advice to give, precisely because it completely ignores this fundamental truth. Just because markets have averaged a positive return in the past doesn't mean they necessarily will continue to average a positive return in the future. And as the saying goes, the market can remain irrational far longer than you can remain solvent. That said, I still do invest most of my money in the market, but I don't try to pretend it's anything but a gamble. I've weighed my options, and the upside of investing in the stock market is much higher compared to all my other available options for investment, and I can afford to lose this gamble at this early stage in my life. But when people ask me for investment advice, I will tell them it's a gamble and let them make that decision for themselves, rather than try to propagate this ridiculous urban myth that the stock market will always somehow eventually end up higher, and add fuel to what has essentially become a massive pyramid scheme.
- loeg 10y ago
  > Yes, I've heard that a million times, but that kind of advice presupposes a bull market. What if it's 1967, and you're about to go into a 15 year period of up and down markets, with no real growth in stock prices? And that's before inflation; the market fell substantially during the horrible 70s if measured in real dollars. All kinds of stock enthusiasts (like most folks here) got eaten alive. Pessimism reigned by the early 80s. http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ http://awealthofcommonsense.com/2014/02/worlds-worst-market-... > What if you had retired in 1929? You would have received nary a return for 25 years. That just isn't true? You're looking at charts without dividends reinvested. Plug 1929-1950 into https://www.measuringworth.com/datasets/sap/ https://www.measuringworth.com/datasets/sap/ for example. It had bounced back above 1929 by 1937; never falls below the starting value after 1944.
narendraj9 10y ago
Always be invested in the market but make sure that when you need the money that you have invested, it is there for you to spend. It doesn't make sense to keep in the money in the market when you know that you will be in loss when you will have to take it out.

wtvanhest 10y ago

> 1) Always be invested in the market. Corollary, don't time the market. This is by far the largest mistake people make. The easiest way to tell if someone understands financial markets is to find out whether they believe they can time the market. If they believe they can predict the market, they don't know what they are talking about. [edited - removed ending]

gxs 10y ago
There is something very off putting about your comment regarding how you preemptively dismiss anyone who would dare argue with you. Time in the market beats timing the market - the adage is as old as time itself. Not sure that knowing it makes you understand the markets especially well. Similarly, not sure that not knowing it says anything about you either.
- wtvanhest 10y ago
  Point taken. I edited it out. And... just to go a step further. My comment included the word 'easiest' to describe how to find out someone doesn't know what they are talking about. IMO, if someone starts talking about timing the market, I know right away that they do not know what they are talking about. Other indicators are much harder to diagnose. A self proclaimed market timer is just the easiest to identify.
- enraged_camel 10y ago
  Knowing that adage doesn't mean you understand markets especially well, but not knowing it definitely means you don't understand markets. I had a friend in college who played World of Warcraft. When the first expansion was announced, he invested $10,000 in Blizzard stock. His reasoning? "It's going to be awesome and sell a lot of copies!" He didn't understand that the stock price at the time he made the purchase already reflected that information (that there was an expansion coming out soon).
Xcelerate 10y ago
> There will likely be people that reply to this comment with various comments saying I am wrong. You can judge those comments for yourself. This is the comment equivalent of a loaded question. Or it's like those people who dismiss those arguing against them because of who they are rather than what their argument is.
- wtvanhest 10y ago
  Good point, I edited that out.
bradleyjg 10y ago
I like Patrick's restatement of the Practically Efficient Market Hypothesis: You are astoundingly unlikely to know more about any stock from reading the newspaper, seeing their chart on Google Finance, or consuming their quarterly reports than a team of PhDs who did nothing but study that stock for the last year, and accordingly are vanishingly unlikely to trade stocks in such a fashion that you do better than the market once you account for fees and tax impact. It gets to why these comment threads can sometimes have people talking past each other. Someone will say "You can't time the market", and mean 'you' in the same way Patrick does, but someone else will come along and think the statement meant "no one can time the market". Then the discussion goes off into a whole rabbit hole about quant hedge funds and the like.
- Terr_ 10y ago
  Relating this back to techie-problems, perhaps we need the moderate Practically Secure Crypto Hypothesis: "You are astoundingly unlikely to create something better and more-secure from seeing a blog-post, reading some Wikipedia articles, etc. than a team of PhDs who did nothing but study mathematical theory, cryptography, and code-breaking for the last few years, and accordingly are vanishingly unlikely to create a new scheme which is more secure than existing standards once you account for performance and maintenance."
  - arielb1 10y ago
    Except that security standards are mostly driven by compatibility with all sorts of edge cases (ancient versions of software! COBOL-bound CAs! tiny smart cards! huge distributed systems!) that are probably not relevant to your case and create big random security holes. If you have a reasonable way of distributing software updates, signed-DH with an AES-based AEAD with termination detection for transport authentication, and a signed hash tree for data authentication, is going to be more secure than RANDOM_SECURITY_STANDARD. Thankfully, there are some good well-written implementations of that (https://www.tarsnap.com/spiped.html https://www.tarsnap.com/spiped.html, https://nacl.cr.yp.to https://nacl.cr.yp.to), but picking a standard randomly will not get you them.
- dsacco 10y ago
lbotos 10y ago
While "If they believe they can predict the market, they don't know what they are talking about" is a cute adage, I think it lumps a bunch of us into a category that we don't deserve to be in? for example, I'm heavily invested in the market but recent events are leading me to consider halfing my investment rate to be more cautious. I'm not going to take any money out or stop investing but by your def I'm "timing" the market, but really I'm "timing" my life. I don't feel confident that I can afford the risk, and I'm lowering my exposure rate.
- wtvanhest 10y ago
  If you are permanently lowering your exposure, you are not timing the market. If you are deciding that now the market is too hot and you don't like the risk, but plan on being invested later, you are timing the market.
  - asmithmd1 10y ago
    I don't understand why I have to be permanently lowering my risk exposure. If Trump wins the election, the market will tank. Everyone knows this so lets say a 20% risk of him winning thus causing a 40% drop is currently priced in - the market right now is ~8% lower because of the risk of a Trump presidency. I am not willing to expose myself to that risk so just yesterday I moved my 401k out of the market. If Trump loses, the market will probably pop up but I am willing to forgo that gain to not expose myself to the downside. The important point I haven't seen mentioned is that the money you put in the market should not be needed for 10 years. Not money you plan to buy a house in about 5 years, or maybe use to get married about 10 years from now. From 1929 to 1933 the DJIA went down 88% before starting to recover. Ten years is really too short a time horizon, you should have a 20 year perspective or longer. If you had invested the day before the 1929 crash and kept your money in the whole time you would not have broken even, adjusting for inflation, until 1957 - 28 years later.
    - wtvanhest 10y ago
      You are market timing.
xioxox 10y ago
So, if there was a massive crash in the stock market, you wouldn't be tempted to buy some shares at low prices?
- philipodonnell 10y ago
  I wouldn't think "in the market" meant only in stocks. When the stock market falls, other markets (like bond markets) tend to rise, which makes the bonds look like a poorer value and stocks look like a better value, therefore you would re-balance your exposure by selling some bonds and investing in the stocks That's not always the case, just making the point that rebalancing a portfolio is not necessarily the same thing as trying to time a particular market.
  - WA 10y ago
    Rebalancing the portfolio to other asset classes smells a lot like timing the market. The question still remains: When would you move to other asset classes? You could see cash as a specific kind of market as well with your definition. I'm sure there were time periods when holding cash was your best option.
    - loeg 10y ago
      (Home currency) cash is essentially an ultra-short duration, zero yield (home government) bond. Edit: Clarified that both are local.
      - djcapelis 10y ago
        No it's not. Currencies move against one another all the time. Your yield is only zero against the same currency, but it doesn't mean your yield is zero in terms of actual global buying power.
        loeg 10y ago
        FOREX movement doesn't factor here? I'm talking about a single currency.
DINKDINK 10y ago
>The easiest way to tell if someone understands financial markets is to find out whether they believe they can time the market. People also unwittingly imply have actions where, if you asked them, they'd say they couldn't predict the market, but they'll say things like "I'm waiting for the market to cool off"
bertomartin 10y ago
I believe you can make money in trying to "time" the market, given you have good risk management in place. Nobody can predict the future all the time perfectly, but some educated predictions do come true sometimes. If the aim is to make money and not just trying to hold on to what you've got, you must take risks and that invariably comes down to "timing" the market.

calebm 10y ago

This reminds me of when Fidelity did a survey to find which of their customers had portfolios that performed the best, and they found that the customers who were DEAD had the best performing portfolios: http://www.businessinsider.com/forgetful-investors-performed-best-2014-9 http://www.businessinsider.com/forgetful-investors-performed...

tedmiston 10y ago
> "...No, that's close though! They were the accounts of people who forgot they had an account at Fidelity."

Stratoscope 10y ago

> Consider investing all your money in the company you work for. Since that phrase is somewhat ambiguous, let me clarify for anyone who misunderstood it on first reading, like I did. :-) I'm pretty sure you don't mean "It may be a good idea to invest all your money in the company you work for." But rather "Consider this very bad thing that may happen if you invest all your money in the company you work for."

deleted 10y ago
[deleted]
gxs 10y ago
I had to reread that sentence a couple of times myself, but I think you captured his intended meaning here.
infinite8s 10y ago
I think he meant 'Reconsider...'
- stouset 10y ago
  No, he meant "Think about, for a moment, the scenario..."
barleymash 10y ago
Uggh, I wish I had read your comment before I just invested everything into the company I work for. Thanks chollida1.
chollida1 10y ago
Yuck!! Yep, I really mangled that sentence. Sorry to everyone who just invested their life savings into the company they work for. I guess I really meant... > Consider the scenario of investing all your money in the company you work for.
Terr_ 10y ago
Immediate reaction: "Oh, like all those lucky people at Enron!"

shostack 10y ago

Great advice. Given your background (I've really enjoyed reading your previous posts), what are your thoughts on the Bogleheads/Random Walk Down Wallstreet approach of sticking your cash in a couple varied funds, making regular contributions to dollar-cost average, and letting it sit? Also, what are your feelings about various robo advisors like Wealthfront and Betterment and the competing products that Schwab and Vanguard have out now?

bluedevil2k 10y ago
The Bogleheads approach is the best approach for the normal investor. Stash it and forget it. Warren Buffett, considered the greatest investor of all time, highly recommends index funds to active investing. Robo Advisors like Wealthfront are still just advisors, and that means they're just guessing like real-life advisors. And as has been proven time and again, they underperform index funds. * http://www.investopedia.com/articles/investing/060216/3-reasons-why-buffett-suggests-index-funds-average-americans-brka-spy.asp http://www.investopedia.com/articles/investing/060216/3-reas... * http://finance.yahoo.com/news/buffett-most-mportant-investment-lesson-211351601.html http://finance.yahoo.com/news/buffett-most-mportant-investme...
- ropiku 10y ago
  No, Wealthfront and Betterment are not active fund managers. They invest your money in a variety of index funds and rebalance it often. Due to their hugely managed sums they can do a lot of tricks to try to improve your yield while still being broadly diversified.
  - loeg 10y ago
    The only trick they have is tax loss harvesting, which has limited effect (mostly due to $3,000/year limit on deducting). And you can do that by hand pretty easily.
    - DontGiveTwoFlux 10y ago
      They also reinvest dividends automatically, and rebalance automatically when you add new funds so you aren't over allocated in a particular class of assets. Tax loss harvesting is limited to 3000 per year, but you can carry over until you've exhausted the losses. Of course TLH is only good if you're in a taxable account with them. I also don't buy it being easy- particularly with trying to avoid the pitfalls of wash sales and the paperwork to actually claim it.

melvinmt 10y ago

> Always be invested in the market. I'm glad you don't adhere to the defeatist approach of Efficient Market Hypothesis proponents. Always be in the market, yes. Always follow the market, no.

lintiness 10y ago
sorry, but "always be in the market" is a rule predicated on a period of history that's been especially kind to the good ole' usofa. there is absolutely no guarantee or even reason to believe in a guarantee of the same going forward. here's something to think about, and i know i'll take downvotes to hell for all this: if everyone agrees and everyone is investing (for retirement etc) identically (long stocks bonds whatevers), what are the odds it's "cheap" or represents future extraordinary gains?
somic 10y ago
"Always be invested in the market" - what does it mean? Always have at least something long in your portfolio? Always be 100% long in your portfolio? If I have 99% cash and 1% in VTI for 10 years, am I "always invested in the market" during this time?

watermelon59 10y ago

> Have some exposure to outside of the US markets. This is the part that kills my ability to "set it and forget it". So many things bother me about this. I know I have to do it (because Japan), but how much and on what markets? * I don't like the idea of investing in emerging markets. Having grown up in one, I know how shady those can be and how cooked the books are. Growth is often an illusion. If an emerging market is "promising", I'd rather wait until it achieves developed status. * Developed market indexes are dominated by Japanese stocks, which have gone nowhere in almost 3 decades. You have to accept that a good chunk of your money is going into a no-growth sink. * I don't know what to expect from Europe. Or even Canada for that matter. When I look at those countries from a distance, I see that 1) their large corporations have been established looong ago (i.e. no new ones are created) and 2) heavy taxation and regulations in those countries doesn't seem to leave much room for profits, at least not as much as in the US. I'm probably wrong though, so please educate me. I know home bias is supposedly wrong, but the American market is well studied, well known, highly liquid, and there's a cultural aspect to its growth in that its part of the general population's mindset to invest in it for long term goals. I don't think that's the case in all (or even most) countries. Part of me wants to go full jlcollinsnh/Bogle/Buffet, folks who say you don't need international diversification. Another part of me wants to go as blind as possible into it and just invest in a "world index" ETF like ACWI or VT. And yet another part of me wants to do something in between but has no idea what to do :)

tedmiston 10y ago
> I don't know what to expect from Europe. Or even Canada for that matter... Yeah, this is an over-generalization. There are plenty of index funds for European companies at a variety of risk levels, just like in the U.S. Also, there are worldwide funds too. Capital World Growth and Income Fund (CWGIX) [0] is one example that covers the U.S., Europe, and Asia. Note that this is a mutual fund, not an index fund. Edit: Perhaps the downvotes are because this is an actively managed fund. The point of giving the example was trying to counter the specific concern OP stated. For passive, a specific Vanguard fund that's similar, at least the closest I found, is Vanguard Total World Stock Index Fund (VTWSX) [1]. It is very diversified. [0]: https://www.google.com/finance?q=MUTF:CWGIX https://www.google.com/finance?q=MUTF:CWGIX [1]: https://www.google.com/finance?q=MUTF:VTWSX https://www.google.com/finance?q=MUTF:VTWSX

987654321s 10y ago

https://m.facebook.com/profile.php?id=100006448920160&fref=ts#!/photo.php?fbid=1649169341974681&id=100006448920160&set=a.1588861311338818.1073741828.100006448920160&source=44&refid=17 https://m.facebook.com/profile.php?id=100006448920160&fref=t...

987654321s 10y ago

lisper 10y ago

> If you are an investor you need to be in the market, period. This. Another way to think of it: if you are out of the market when it goes up by X% that is functionally equivalent to an X% loss, i.e. you have X% less money than you otherwise would have had. (Well, OK, technically it's equivalent to a loss of X/(1+X) but that's pretty close to X for X<<100%.)

FabHK 10y ago

Agree: timing the market is hard, but it's not impossible, particularly A) given that many big (institutional) investors are not at liberty to enter and exit (almost all mutual/index funds have prescribed what proportion must be in equities, say.) B) given that not all markets are as efficient as the EMH makes them out to be. For example, China fell precipitously from June 2015 ( http://www.bloomberg.com/quote/SHCOMP:IND http://www.bloomberg.com/quote/SHCOMP:IND ), and The Economist (AsiaPac edition) had a cover on 2015-05-30 proclaiming "China's overvalued stock market" ( http://www.economist.com/printedition/2015-05-30 http://www.economist.com/printedition/2015-05-30 ) To conclude, I think it is prudent to review your asset allocation maybe once or twice a year, and shift things around a bit.

WalterBright 10y ago

> Have some exposure to outside of the US markets. The larger American companies are global companies, so you get that anyway. The proof is look what happens to the US markets when some foreign event happens, like Brexit.

loeg 10y ago
Almost nothing happened to the US stock market on the day of Brexit.

martin_bech 10y ago

2) this is a mind game, you are not actually loosing money in down years (unless you are actively trading), the market is just valueing your assets for less. When the market does this, you should see if prices are cheap, and if so buy as much as you can! - Warren Buffet style

ausjke 10y ago

While timing the market is a no go, from 2000, 2008, now 2016 it does seem we're at the peak again so it does not make much sense to invest in recent years? I stopped putting money into the stock market since a while ago due to this obvious trend/concern(interest rate has been zero for too long, stock has overrun the real economy, stock peaks after 8 years since 2008,etc)

keithba 10y ago
>>While timing the market is a no go >>I stopped putting money into the stock market since a while ago These two statements are in conflict with one another. You are literally timing the market by not investing anymore. Just invest every month and you will be much better off.
the_watcher 10y ago
> While timing the market is a no go, from 2000, 2008, now 2016 You realize you are trying to time the market, right?
010a 10y ago
Are you forgetting about dividends?
buddylw 10y ago
The criticism here is silly. There's a big difference between timing the market and looking at p/e ratios or debt load for stocks (or entire indexes) and deciding that they are way over valued. If you also think bond interest rates are too low likely to climb, hold your cash and come back to pick up stocks when they are cheaper. There's nothing wrong with that strategy as long as you are buying and selling on value and not trying to time a crash. Let the mob chase the yield down the rabbit hole. If no one did this and everyone was just long everything forever, the market would be immediately broken. edit: While I think John Bogle is a hero of the investment world with advice that all investors should heed, the Boglehead-Dunning-Kruger-effect can be profoundly annoying. They are a fantastic starting point and they address the most common mistakes, but it's a wee bit more complicated than Bogle's rules if you really want to learn equities and investing.
10y ago

alejohausner 10y ago

>Always be invested in the market. Yes, I've heard that a million times, but that kind of advice presupposes a bull market. What if it's 1967, and you're about to go into a 15 year period of up and down markets, with no real growth in stock prices? And that's before inflation; the market fell substantially during the horrible 70s if measured in real dollars. All kinds of stock enthusiasts (like most folks here) got eaten alive. Pessimism reigned by the early 80s. Most people said "I'll never buy stocks again.". Ironically, when investors finally capitulated, the great bull market of the 80s and 90s started. My point is that most people here are mesmerized by that bull market, and by recent gains. But historically the indexes have had huge, long term swings that probably exceed most people's investment horizon. "Past performance is no guarantee of future results" is not just a legal disclaimer. It's a bitter truth. Our current optimism is strongly colored by recent gains. What if you had retired in 1929? You would have received nary a return for 25 years. Sure, indexes average 8 percent or so, over the very long term, but it can be an intolerably long averaging interval.

lewisl9029 10y ago
> "Past performance is no guarantee of future results" is not just a legal disclaimer. It's a bitter truth. Definitely this. I personally believe "Always be invested in the market" is very irresponsible advice to give, precisely because it completely ignores this fundamental truth. Just because markets have averaged a positive return in the past doesn't mean they necessarily will continue to average a positive return in the future. And as the saying goes, the market can remain irrational far longer than you can remain solvent. That said, I still do invest most of my money in the market, but I don't try to pretend it's anything but a gamble. I've weighed my options, and the upside of investing in the stock market is much higher compared to all my other available options for investment, and I can afford to lose this gamble at this early stage in my life. But when people ask me for investment advice, I will tell them it's a gamble and let them make that decision for themselves, rather than try to propagate this ridiculous urban myth that the stock market will always somehow eventually end up higher, and add fuel to what has essentially become a massive pyramid scheme.
loeg 10y ago
> Yes, I've heard that a million times, but that kind of advice presupposes a bull market. What if it's 1967, and you're about to go into a 15 year period of up and down markets, with no real growth in stock prices? And that's before inflation; the market fell substantially during the horrible 70s if measured in real dollars. All kinds of stock enthusiasts (like most folks here) got eaten alive. Pessimism reigned by the early 80s. http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ http://awealthofcommonsense.com/2014/02/worlds-worst-market-... > What if you had retired in 1929? You would have received nary a return for 25 years. That just isn't true? You're looking at charts without dividends reinvested. Plug 1929-1950 into https://www.measuringworth.com/datasets/sap/ https://www.measuringworth.com/datasets/sap/ for example. It had bounced back above 1929 by 1937; never falls below the starting value after 1944.

narendraj9 10y ago

Always be invested in the market but make sure that when you need the money that you have invested, it is there for you to spend. It doesn't make sense to keep in the money in the market when you know that you will be in loss when you will have to take it out.