Imagine someone were able to just pull the money and put it somewhere safe. Even if you jump back in with growth at the same rate, you will have lost the gains you would have made had there been no tarrifs.
I’m not an expert but this is my understanding and it has made me money during this time.
Imagine Bob sells 100 shares of SPY at $600. He now has $60,000. If Bob did nothing else and waited 2 months he would now be able to buy 118 shares of SPY.
Alice held the 100 shares of SPY the entire time.
For Alice her ownership remained the same but her value decreased. Bob, on the other hand, keeps the same value and increased his total ownership.
If SPY increases in value back to $600 then Alice is a wash and Bob has an increase equal to the value of the additional shares purchased while the price was low. So 18 extra shares would net a profit of $10,800.
A 7-10% annual return can be expected during normal market conditions. It has been 4 months since normal markets. So the value of SPY should have trended upwards a bit less than 1% per month. Let’s give it a generous estimate that it would have gone up 5% since Trump 2. In this case Bob would have lost money and Alice would have increased her value $3000.
So Bob made more money in the same amount of time by selling.
Trying to time the market is a fools errand, unless you’re VERY good at day trading, or incredibly lucky. Advising people to try to time the market is terrible advice. Better advice is to hold steady and put more money in when there are huge dips. Trying to guess when the market is at its high and selling all your positions, then trying to time the bottom to put all your money back in is incredibly risky. Just average cost buy in. That’s all you can reasonably do. DON’T TRY TO TIME THE MARKET.
I did not give advice. I answered a hypothetical question. I even prefaced my response to show I wasn’t knowledgeable. Did you miss that part? It was right there at the beginning of the text that you have a problem with.
Let’s break down your comment. You start off by saying you’re not an expert. Okay. Fine. But then you say the method that has personally made you money. Nowhere in your response so you say the risk level you are comfortable with or that timing the market is incredibly difficult. So someone new to investing who reads this may interpret this as advice. I replied by saying that you shouldn’t time the market because it’s risky, in order to add clarity things for new investers. So I don’t see why you are upset here. I wasn’t personally attacking you so please don’t get offended.
I’m not offended. I was a bit of an asshole though and I apologize for that but I wasn’t offended. Your point about timing the market was valid.
I know it wasn’t personal but you did ‘attack’ my comment. Not the right word but I hope you get my meaning.
Advising people to try to time the market is terrible advice.
This is why I replied the way I did. I was not giving advice, but we know that already.
As for you advising new investors, good on you. I was not trying to do that. I was trying to answer a hypothetical question with knowledge from personal experience.
I actually considered writing “This is not financial advice” in the original comment but thought my preface was enough.
Ah yea man I get it. I meant that statement in general. Not like you personally gave bad advice. I’m sorry. I wasn’t clear with my reply. And my other comment was rude. So I apologize.
To be clear, I didn’t want it to sink and agree that it didn’t have to. That’s beside the point.
I don’t understand how the money would have grown just as fast. I suspect I’m not understanding your point properly.
In this example, the math shows ~$3000 gains from holding if the market never went down. That is less than the potential of ~$10,800 from selling high and rebuying.
I get what you’re saying but that’s not really my question. They both lost/missed out on earning potential because the market crashed. Now the market would have to preform better for them to recoup the loss.
Imagine someone were able to just pull the money and put it somewhere safe. Even if you jump back in with growth at the same rate, you will have lost the gains you would have made had there been no tarrifs.
That’s called “timing the market” and it’s impossible without insider knowledge.
Well, impossible to do with certainty.
But people are paid to try and do it at investment banks, and with enough outsider knowledge they can often get it right
Of course that’s practically just gambling at a much greater scale
They fail to outperform a broad market index like 85% of the time, and they charge fees for it lol
Yeah, you’re completely right, I was more going for not impossible, but it’s even more luck than I realised
I’m not an expert but this is my understanding and it has made me money during this time.
Imagine Bob sells 100 shares of SPY at $600. He now has $60,000. If Bob did nothing else and waited 2 months he would now be able to buy 118 shares of SPY.
Alice held the 100 shares of SPY the entire time.
For Alice her ownership remained the same but her value decreased. Bob, on the other hand, keeps the same value and increased his total ownership.
If SPY increases in value back to $600 then Alice is a wash and Bob has an increase equal to the value of the additional shares purchased while the price was low. So 18 extra shares would net a profit of $10,800.
A 7-10% annual return can be expected during normal market conditions. It has been 4 months since normal markets. So the value of SPY should have trended upwards a bit less than 1% per month. Let’s give it a generous estimate that it would have gone up 5% since Trump 2. In this case Bob would have lost money and Alice would have increased her value $3000.
So Bob made more money in the same amount of time by selling.
Trying to time the market is a fools errand, unless you’re VERY good at day trading, or incredibly lucky. Advising people to try to time the market is terrible advice. Better advice is to hold steady and put more money in when there are huge dips. Trying to guess when the market is at its high and selling all your positions, then trying to time the bottom to put all your money back in is incredibly risky. Just average cost buy in. That’s all you can reasonably do. DON’T TRY TO TIME THE MARKET.
I agree with you about not timing the market.
I did not give advice. I answered a hypothetical question. I even prefaced my response to show I wasn’t knowledgeable. Did you miss that part? It was right there at the beginning of the text that you have a problem with.
Let’s break down your comment. You start off by saying you’re not an expert. Okay. Fine. But then you say the method that has personally made you money. Nowhere in your response so you say the risk level you are comfortable with or that timing the market is incredibly difficult. So someone new to investing who reads this may interpret this as advice. I replied by saying that you shouldn’t time the market because it’s risky, in order to add clarity things for new investers. So I don’t see why you are upset here. I wasn’t personally attacking you so please don’t get offended.
I’m not offended. I was a bit of an asshole though and I apologize for that but I wasn’t offended. Your point about timing the market was valid.
I know it wasn’t personal but you did ‘attack’ my comment. Not the right word but I hope you get my meaning.
This is why I replied the way I did. I was not giving advice, but we know that already.
As for you advising new investors, good on you. I was not trying to do that. I was trying to answer a hypothetical question with knowledge from personal experience.
I actually considered writing “This is not financial advice” in the original comment but thought my preface was enough.
Ah yea man I get it. I meant that statement in general. Not like you personally gave bad advice. I’m sorry. I wasn’t clear with my reply. And my other comment was rude. So I apologize.
The money grew just as fast no matter when you bought it… it never had to sink…
To be clear, I didn’t want it to sink and agree that it didn’t have to. That’s beside the point.
I don’t understand how the money would have grown just as fast. I suspect I’m not understanding your point properly.
In this example, the math shows ~$3000 gains from holding if the market never went down. That is less than the potential of ~$10,800 from selling high and rebuying.
I get what you’re saying but that’s not really my question. They both lost/missed out on earning potential because the market crashed. Now the market would have to preform better for them to recoup the loss.
Okay. Now I understand. Thanks for taking the time to clear that up for me.