Can you time the markets?
Absolutely. Markets have cycles, and if you understand where we are in the cycle you can make more informed investment decisions. Market timing isn’t complicated. 🙂 You just have to be ware of the business cycle, and know how to value investments.
This week’s video about market timing
Any market can be timed if you have the right information and strategy.
In the video I explain how to time the stock market, the housing market, and even cryptocurrencies.
You can click here to watch it on YouTube, or see below. 🙂
Building the right strategy requires reliable data and metrics.
The 3 primary metrics I use are:
- Macro economic indicators.
- P/E ratio, earnings yield, or dividend yield.
- Technical signals.
Housing example
The sales to active listings ratio is a reliable monthly statistic that’s freely available.
This figure usually stays above 20%, suggesting a seller’s market with strong demand relative to available supply.
In Vancouver for example, the market experiences pullbacks occasionally.
During these times the sales to listings ratio falls to below 12%.
This is often the best time to buy, and the opportunity won’t last long.
So if you only buy homes in a buyer’s market you can probably find some great deals.
What does timing the market look like?
I’ve bought 3 properties in the Greater Vancouver area so far.
Each time was a rare period when the market favoured buyers. 🙂
If I buy another property in the future I will be using this strategy again.
Wait for sales to drop and prices to fall before taking action.
Is it possible to time the exact tops and bottoms of the market? No.
Timing the market for me is about picking up quality investments at discounted prices.
It means when the market falls, I intentionally try to “time it” and buy more before another bull market starts.
But just because it’s possible to time the markets I don’t think everyone should be doing it.
It can be risky to undertake and easily backfire if the data is misleading or misinterpreted.
Fortunately time in the market beats timing the market.
So if you’re patient you can still make a profit, even if you got in at a market high. 🙂
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Random Useless Fact:
Canadian banks are making record profits again.
Where do you locate the real estate information in Manitoba? Thank you
Great question. I think it depends on which region you’re looking at.
For example, the Winnipeg regional real estate board has information for the Winnipeg area.
You can search their website or watch their YouTube channel for market updates.
Here’s a video showing data for the previous month (July.)
They include commentary so you know if inventory is in short supply or not.
Thanks!
Thanks Liquid – I agree market timing can work to some extent. I think a key criteria is to be a very knowledgeable and experienced investor and to somehow take emotions out of the equation.
Ben Felix talks about some very interesting research on market timing; ‘buying the dip’ on his podcast at https://rationalreminder.ca/podcast/144
I can say for myself i’ve generally never regretted a ‘buy’ when assets are on sale. I usually regret my ‘sells’ in hindsight as long term they may have performed just as well if I had held. So I very much align with the ‘buy’ when fearful and ‘hold’ when greedy model.
Thanks for sharing your thoughts. 🙂 That was a great Rational Reminder episode. I often watch their podcasts on their YouTube channel and listen at 1.25x speed. Ben and Cam deserves more subscribers for sure.
In terms of market timing, I agree that you have to be a knowledgeable and experienced investor to pull it off consistently. Luckily this can be learned because knowledge comes with experience. And yes, I also find it’s easier to buy the dips than sell the peaks. Portfolio manager Ben Carlson did some research on this and also concluded that all-time-highs in the market are usually followed by all-time-highs, lol.
Hi Liquid
Interesting read, agree, market timing is certainly possible. For me, the suitable strategy though is buying pieces of businesses I feel comfortable with and stick to them for the long run.
But I am always open to learn new aspects and having some knowledge on cycles etc. could be helpful to find good entry prices.
Cheers
That’s very true, SavyFox. The most important thing is to buy awesome companies and hold them. Marketing timing can be a way to find good entry points occasionally when the market is mispriced, but it’s not a substitute for research, due diligence, and time in the market. 🙂