Time in the market vs Timing the market

[TMNT]

I normally dont take too much notice of articles in the media for property, I try and make my own decision, especially with so much ulterior motives involved,

However, this article I thought was brilliant, I know nothing about the author but I found myself agreeing with 95% of it

http://spionline.com.au/blog/latest...campaign=_Bulletin10_01_2014&utm_medium=email

 

[INVSTOR]

I normally dont take too much notice of articles in the media for property, I try and make my own decision, especially with so much ulterior motives involved,

However, this article I thought was brilliant, I know nothing about the author but I found myself agreeing with 95% of it

http://spionline.com.au/blog/latest...campaign=_Bulletin10_01_2014&utm_medium=email

You would really enjoy Steve McKnights books then. I'm a fan!

 

[burning]

http://somersoft.com/forums/showthread.php?t=93799
another thread about the same article

 

[Hoffy]

I normally dont take too much notice of articles in the media for property, I try and make my own decision, especially with so much ulterior motives involved,

However, this article I thought was brilliant, I know nothing about the author but I found myself agreeing with 95% of it

http://spionline.com.au/blog/latest...campaign=_Bulletin10_01_2014&utm_medium=email

95% is self evident. The other 5% IMO is this: "Here's the thing... Most market commentators, along with most investors, don't realise that with recent advances in the science of property market analysis it is possible to predict how the property market in a suburb will move in the next 6-36 months, with a high degree of accuracy!

Let me guess, one can acquire this scientific knowledge by paying the Author?

 

[TMNT]

95% is self evident. The other 5% IMO is this: "Here's the thing... Most market commentators, along with most investors, don't realise that with recent advances in the science of property market analysis it is possible to predict how the property market in a suburb will move in the next 6-36 months, with a high degree of accuracy!

Let me guess, one can acquire this scientific knowledge by paying the Author?

good point, I didnt put two and two together

admittedly a lot of people do say its not when you buy, its how long you are in teh market, which has a certain degree of truth to it

 

[Richard Feynman]

Timing helps. Time in works.

 

[see_change]

Timing helps. Time in works.

Does it ?

Depends on your time frame and how aggressive you want to be.

If you want to take a long slow approach , time ( in the the right property - good position etc ) will work

Personally I'm in the timing camp . I've been on the wrong end of long flat periods and on the right side of periods of rapid growth . After that period of growth , some we've held and some we've sold to pay down Debt.

I know which one I prefer .

I'm happy to sit on the sidelines during the flat periods , start buying when I see bargains and gear up as the market starts moving.

I think it's fairly easy to predict when the market is going to start moving , but how fast or how far it moves is less predictable. I've been able to pick when the market is going to start moving by a combination of personal observations and listening to the forum.

Cliff

 

[keithj]

Timing helps. Time in works.

Time In works for 99% of people 99% of the time, and gives good returns.
Timing works for the small minority of smart people and gives better returns, and if it fails see above.

 

[Dazz]

Agreed Keith.

When most people look back, the basis of their wealth was created by enforced savings, via constantly contributing to a scheme (i.e. paying off a mortgage) against an asset that they could not sell (cos they were living in it).

We are our worst enemy, on average.

There are exceptions to this of course, but they do not negate the rule.

 

[Richard Feynman]

Does it ?

Depends on your time frame and how aggressive you want to be.

If you want to take a long slow approach , time ( in the the right property - good position etc ) will work

You answered your own question. It works.

I'm not at all suggesting that timing is not useful, or a great way of making a quick buck. I timed a buy well (and paid under market value) late last year, and estimate an 8% return in a couple of months as the result.

I will continue to aim to time well for purchases too, but not to the point where I sit on my hands for extended periods. When my experience, knowledge and understanding improve, I may well have the confidence to adjust my strategy to be one based predominantly on timing and short term gains, but not yet.

 

[Alex P Keaton]

This bit I can relate to! Good article! This is what I was alluding to in my topic I created in general discussion.

You only make a loss if you sell for a loss"
I'm sorry, but that's just a cop-out!

A poor decision to buy a property in an area that goes down in value, doesn't become a better decision just because the loss isn't 'crystallised' by selling.

And there is a very real loss here - not just the 'paper' loss while the investor holds on and prays their property goes back up in value... You lose the opportunity to have the money invested in something else with a positive return!

What's more, you lose the time that your cash or equity is tied up in the property while you wait and hope that it comes back up in value. Time in which you could have been maximising your returns rather than sitting on a dud asset.

 

[Alex P Keaton]

Personally I'm in the timing camp . I've been on the wrong end of long flat periods and on the right side of periods of rapid growth . After that period of growth , some we've held and some we've sold to pay down Debt.

I know which one I prefer .

I'm happy to sit on the sidelines during the flat periods , start buying when I see bargains and gear up as the market starts moving.

I think it's fairly easy to predict when the market is going to start moving , but how fast or how far it moves is less predictable. I've been able to pick when the market is going to start moving by a combination of personal observations and listening to the forum.

Cliff

good reply ! and, just to add to that, as well as buying at the right time (timing when the market starts to move) you also need to ensure you buy the right kind of property and figure out what location you think will grow.

 

[see_change]

You answered your own question. It works.

I'm not at all suggesting that timing is not useful, or a great way of making a quick buck. I timed a buy well (and paid under market value) late last year, and estimate an 8% return in a couple of months as the result.

I will continue to aim to time well for purchases too, but not to the point where I sit on my hands for extended periods. When my experience, knowledge and understanding improve, I may well have the confidence to adjust my strategy to be one based predominantly on timing and short term gains, but not yet.

If you want to read it that way that's fine by me .

I look at property investors as coming in two groups . Those who know what they're doing and those who don't . Those who do will usually looking at ways to improve on " time in the market " .

Cliff

 

[JenJen]

See_change, I totally agree with you, and I am a definitely in the 'timing the market' camp. However, I wouldn't generalise with either 'timing' or 'time in'. In my mind, it's just not an 'either/or' debate, but a combination of both, done well, that works, as well as a host of other factors.

I think it's too much of a sweeping statement to say that time in the market works. For those who unknowingly buy at or near the top of a market cycle, in a regional centre where the cycle is around 10 years, and hold for 8 years, time in the market will not work. In fact, it will most likely stall or slow any investment progress by a long way, as the lack of growth for many years will prevent any leveraging into subsequent properties.

However, in the above scenario, it would be true to say that staying in the market for a further couple of years to catch the next surge of growth, would probably work better than crystalising the lack of growth by selling after 8 years.

Similarly, timing the market alone would not necessarily work. Sure, you are more likely to catch the growth sooner. However, if you were to then go on and sell, in order to buy in the next place due for immediate growth, and repeat this process multiple times, the buying and selling costs would set you back considerably.

In my opinion, the success or otherwise of both 'time in' the market and 'timing' the market is also dependent on a combination of many other factors, including, but not limited to one's ability to:

• Select the location well
• Identify the correct type of property for the location and preferred investment strategy
• Time market entry to avoid buying at or near the top of a cycle.
• Stay in the market where practical and draw down equity to purchase subsequent properties
• Maximise flat periods in the market by lifting rents and adding value through well chosen upgrades
• Review properties and markets on a regular basis
• Sell under-performing properties if necessary and practical
• Time any sales to maximise profits and reduce loss due to capital gains tax.

Cheers

Jen
(please note, this is not to be taken as financial advice)

 

[DavidMc]

Yeah 'time in the market' doesn't sound so good when you buy at the start of a 6 year long flat and the yield is pretty bad. If it was positive then it's not so bad.

It's taken me 1.5 cycles (and buying at a peak a couple of times!) but I can start to see the trends better now. i.e. I'm not even looking now but for me, right now, Brisbane is the choice. Sydney is too hot and I just don't think Melb will be anything special.

 

[INVSTOR]

Yeah 'time in the market' doesn't sound so good when you buy at the start of a 6 year long flat and the yield is pretty bad. If it was positive then it's not so bad.

It's taken me 1.5 cycles (and buying at a peak a couple of times!) but I can start to see the trends better now. i.e. I'm not even looking now but for me, right now, Brisbane is the choice. Sydney is too hot and I just don't think Melb will be anything special.

Yep, and during that 6 yr period of no growth there has been six years of wear and tear. Property is due for a $10,000 repainting after 3 lots of tenants move in and out. I'm all for timing. Eg. I don't enjoy sitting around for 6 years with no growth, having tenants refuse to pay for their huge water bill because they left hose running for 3 days and realise it will cost landlord more in court fees than the bill, etc.

 

[devank]

Time will forgive you if you get the timing wrong

 

[starter]

I'm also in the camp where I rather have both, timing and time in the market.

 

[Brady]

I think everyone looks to time the market in some sense.

I think it's crazy if anyone enters into a market that they don't think it's a good time to enter. It's likely why most enter the market and then time is spent in that market which alot of the time smooths out the timing.

 

[DavidMc]

I'm also in the camp where I rather have both, timing and time in the market.

Yes. Do you best to time the market (but don't sit on the sidelines forever, waiting for that perfect time, go to another state!).

If you fail, time in should help.