Keeping one's powder dry

[MyNameIsUrl]

As I understand it, 'keeping one's powder dry' is strategically holding cash until prices become more favourable. I've been holding new cash in my ISA waiting for a correction in the price of a global tracker (iShares World ETF SWDA). In March it was around 6100p, increasing in April to around 6200p, and I've been waiting for a correction back to 6100p since then. It's now over 6700p. Am I keeping my powder dry, or am I just trying (and failing) to time the market?

[Dicky99]

As I understand it, 'keeping one's powder dry' is strategically holding cash until prices become more favourable. I've been holding new cash in my ISA waiting for a correction in the price of a global tracker (iShares World ETF SWDA). In March it was around 6100p, increasing in April to around 6200p, and I've been waiting for a correction back to 6100p since then. It's now over 6700p. Am I keeping my powder dry, or am I just trying (and failing) to time the market?

Timing the market is notoriously difficult as I know to my cost. I was sat on my hands waiting for falls to arbitrary price levels around March 2022 and I'm still nursing painful losses on some of those purchases when they overshot over the next 6 months, notably in May and during Truss's time in September. Had I drip fed the funds monthly over 6 months I'd have hit a couple of useful dips.

I should add that if you have a medium to long term time horizon there are probably worse times to be topping up than now given that inflation seems to be easing.

[Urbandreamer]

I am always VERY dubious about arguments with respect to cash.

Why buy shares when you can get XYZ return in a savings account.
You have to keep some powder dry, so that you can buy when the opportunity arises.

Sure, sure.....
To me it all sounds like justification for what people want to do, rather than a good reason.

In the first place, I'm very dubious about the intent of government to maintain any sort of value for cash.
In the second, with a well diversified portfolio you could sell something to buy something else.

Now If you were arguing that you WANTED to hold cash, that would be entirely different. I'd still think that you were making a mistake, but not that you were deluded.

FWIW, I believe that I hold too much cash on account. I'm expecting that to change as I spend it.

[vand]

Am I keeping my powder dry, or am I just trying (and failing) to time the market?

The latter.

Keeping some money aside is OK if you think valuations are grossly out of whack, but IMO you want to have most of your money working for you most of the time, even if you think valuations are expensive.

Thing is, you a preaching a passive approach with what you want to buy, but a wholly active approach to when to buy and hold it. Much confusion I sense in such a strategy.

[JohnW]

‘Timing the market is notoriously difficult as I know to my cost’

Nonetheless, here’s a timing suggestion:

‘I should add that if you have a medium to long term time horizon there are probably worse times to …’

One might imagine if staying in cash for a while worked, then there’d be a fund or two that exploited that strategy. Haven’t heard of them. Or you could do some modelling; this model demonstrated no benefit accrued: https://www.bogleheads.org/forum/viewto ... &start=100

[GoSeigen]

‘Timing the market is notoriously difficult as I know to my cost’

Nonetheless, here’s a timing suggestion:

‘I should add that if you have a medium to long term time horizon there are probably worse times to …’

One might imagine if staying in cash for a while worked, then there’d be a fund or two that exploited that strategy. Haven’t heard of them. Or you could do some modelling; this model demonstrated no benefit accrued: https://www.bogleheads.org/forum/viewto ... &start=100

I switched to 100% cash and gilts in 2006-7 along with a large short trading position. It didn't do too badly and then the cash was heavily deployed in bombed-out bank debt. There were days you could buy debt on the phone at 70p and sell it on the same call to another MM for 80p!

Not saying now is a good time for cash but it should not be dismissed out of hand.


GS

[Dod101]

As I understand it, 'keeping one's powder dry' is strategically holding cash until prices become more favourable. I've been holding new cash in my ISA waiting for a correction in the price of a global tracker (iShares World ETF SWDA). In March it was around 6100p, increasing in April to around 6200p, and I've been waiting for a correction back to 6100p since then. It's now over 6700p. Am I keeping my powder dry, or am I just trying (and failing) to time the market?

I agree with others about the impossibility of timing the market . If you get it right you can confirm to yourself that you are really clever but mostly it is just down to luck. I do not like that word 'correction'. How do you know what is the 'correct' price? If you are looking to invest long term you ought just to buy if you decide what you want, as it will probably not matter in 5 or 10 years time.

If you are prepared to work at it you might be able to trade successfully as GS has apparently done but for most mortals it is time in the market that counts, not timing the market, as the old saying goes.

Dod

[JohnW]

I switched to 100% cash and gilts in 2006-7 ... It didn't do too badly ..
Not saying now is a good time for cash but

Just seven years too late for us. Can you give us the heads up ahead of time next time, please?

[Dicky99]

this model demonstrated no benefit accrued: https://www.bogleheads.org/forum/viewto ... &start=100

Useful if you happen to have a 95 year time frame.

[GoSeigen]

I switched to 100% cash and gilts in 2006-7 ... It didn't do too badly ..
Not saying now is a good time for cash but

Just seven years too late for us. Can you give us the heads up ahead of time next time, please?

Seventeen years. And I did give a heads up ahead of time. Repeatedly. Posted as bareish on TMF.


GS

[spasmodicus]

When inflation is low, e.g. below 1% , you may be able to justify having cash sloshing about, if only to flaunt your wad. You get almost nothing for it in a savings account or short term gilts and have to bear trading charges to get in and out. If you stick it in longer term gilts you run the risk of being trashed when the situation changes and inflation and interest rates rise. These days, things are very different and you owe it to yourself to get at least some mitigation of the horrible erosion of your dosh by putting it in a a savings account or bonds. Judging by the increased activity these days on the Gilts and Bonds board on this site, others seem to agree with this propostion.

S

[JohnW]

Seventeen years.

Thanks. I'm living in the past again.

[Urbandreamer]

Seventeen years. And I did give a heads up ahead of time. Repeatedly. Posted as bareish on TMF.

GS

We all have such moments of lucidity. My most profitable was during the DotCom boom/bust.

They are though extremely rare. I think that I've managed two in 30 years. The second was spread betting against HMV, but I was being very careful about risks, so the rewards made no difference to my wealth.

[GoSeigen]

Seventeen years.

Thanks. I'm living in the past again.

'
You're posting ad hominems and missing the point.


GS

[GoSeigen]

Seventeen years. And I did give a heads up ahead of time. Repeatedly. Posted as bareish on TMF.

GS

We all have such moments of lucidity. My most profitable was during the DotCom boom/bust.

They are though extremely rare. I think that I've managed two in 30 years. The second was spread betting against HMV, but I was being very careful about risks, so the rewards made no difference to my wealth.

The big wins might be rare but I thin the smaller wins needn't be. You're much more likely to succeed by trying, failing and learning than by rolling over, to "can't beat the market" defeatism and just buying a tracker (which one**, LOL).

GS

(**) Anyone feel sorry for people who advocated buying a tracker in 2007, then ended up with a FTSE tracker, instead of an S&P500 one? Just buy a tracker indeed...

[pyad]

As I understand it, 'keeping one's powder dry' is strategically holding cash until prices become more favourable. I've been holding new cash in my ISA waiting for a correction in the price of a global tracker (iShares World ETF SWDA). In March it was around 6100p, increasing in April to around 6200p, and I've been waiting for a correction back to 6100p since then. It's now over 6700p. Am I keeping my powder dry, or am I just trying (and failing) to time the market?

It's trying, and failing, to time and if you were a naturally skilled timer you wouldn't be asking here.

As others have said market timing is a losers' game for most and in any case, timing is more relevant for people attempting short term trading - and even most of those lose. If though you are a long term hold investor, which I presume you are for wishing to invest in this fund, the time to buy is always now imo.

It was now yesterday, it will be now tomorrow and it is now now.

[GoSeigen]

As others have said market timing is a losers' game for most

Says the guy who has pushed his own brand of market-timing strategy** for more than two decades!

GS
(**) "Buy high yield" i.e. buy when the price is low / the dividend is high.

[Urbandreamer]

The big wins might be rare but I thin the smaller wins needn't be. You're much more likely to succeed by trying, failing and learning than by rolling over, to "can't beat the market" defeatism and just buying a tracker (which one**, LOL).

GS

(**) Anyone feel sorry for people who advocated buying a tracker in 2007, then ended up with a FTSE tracker, instead of an S&P500 one? Just buy a tracker indeed...

Or

“The harder I practise, the luckier I get.”

TBH, I do feel that with practice and work it's not too difficult to move the odds when it comes to investment.

However to be fair to the passive bunch, it does take quite a bit of effort and you have to accept your lumps when you get it wrong. Some find the latter so hard that they even find passive investing too painful.

[JohnW]

I don’t think your strategy of ‘waiting for a fall to 6100p’ fits well to any of the market timing strategies tested here, but you might find something for profit and pleasure.
https://www.portfoliovisualizer.com/tes ... sisResults

[88V8]

TBH, I do feel that with practice and work it's not too difficult to move the odds when it comes to investment.
However to be fair to the passive bunch, it does take quite a bit of effort and you have to accept your lumps when you get it wrong. Some find the latter so hard that they even find passive investing too painful.

I find selling much harder than buying.
Selling my bad ideas before they become disasters, and selling my winners before they fall again. I sat here through the interest rate cycle watching the SP of my FI rise and fall again, crystallised no gains.
At least I've done better buying near the bottom, perhaps I will do better selling when rates bottom out in a few years, but I wouldn't bet on it.

V8