2023 strategy survey : DCA; hold and wait until drop; long bull; long bear?

Hi all, well, we didn't have the Santa rally, and then had the Jan one.

Inflation hasn't hit people's pockets and put us into recession (yet?)

Interest rate rises haven't destroyed the equity in people's homes (yet?)

Companies are still announcing record profits

I had been holding half of holdings in cash waiting for the big drop I thought would happen in March. Looks like its not.

So, redoing the strategy.

For your 2023 strategy (non-day trading) are you:
DCAing (always have, always will)?
Hold cash and wait until drop (maybe Nov after all fixed go to variable and negative equity sales, increased unemployment, etc.)?
Long bull and already all in with cash?
Long bear and shorting or waiting for bottom?

 

Just about everything written on the topic suggests attempting to time the market is futile so status quo on the DCA.

At the end of the day most significant pullbacks have arrived unexpectedly and were only obvious in hindsight, even on the rare occasions someone has correctly anticipated it thier timing is still out.
In otherwords, history proves there is more risk being out of the market than there is of buying at a peak.

This might be of interest:
Three all-time best tables for every adviser and investor

 

It depends on 1) What your prediction of the future is and 2) How good your prediction of the future is.

Timing the market right is better than buying and holding. But what if you're wrong?

 

Of course @Trainee, good point. I'm not sure if your comment was asking what my thoughts are as I didn't actually put them in.

I think the economy has not seen the lag effect of central bank tightening (i.e. increasing unemployment, lower spending, decreased savings, increased sale of assets at increasing % of capital loss, etc.)

I think the market, which has been described as in the short term a voting machine and the long term a weighing machine, has been too enthusiastic about the Fed reducing the size of their rate rises and the confirmation bias of the impact of tightening to reduce inflation being factored in. That the current buoyancy of the market is the big players selling positions to retail markets at a profit at the expectation they will be able to buy them back at a discount later in the year.

That the impact on capital gain of these things on the market will be greater than the total return available from DCAing.

So, since this is a survey and I didn't vote, my vote is to hold cash until the signals are that the lag effect of tightening has hit the economy (mildly recessionary) and the large players are buying back in after and ride their wave.

Soem may believe that is what is happening now. That's why the vote.

@Trainee, I notice you also didn't vote. Want to put your 2c in?

 

On a separate note, this only relates to hold share investment. I am still trading when individual stocks hit certain signals. Still moving property stock when they do the same. This post is not about that. It's about moving cash back into the market as a log-term hold.

 

From Kyle Rodda:

When I was a kid, I was often accused of having selective hearing. If there was anything I was interested in or that I wanted, I could be perfectly attuned to what was going on around me.

If I had no interest at all or didn’t like what was going on, then good luck getting anything out of me, other than perhaps defiance.

Financial markets are suffering, it would seem, from a very acute case of selective hearing. Three central banks this week have met for the first time this year, and all have been clear that the focus remains on taming inflation.

While the US Federal Reserve “stepped down” the size of rate hikes to 25 basis points, the commentary emphasized the need to bring prices down - and avoid a premature loosening of policy. Despite this, yields have fallen, stocks have surged, and rates markets are pricing in rate cuts by the end of the year, as investors clutch to any sign that central bankers’ crusade against inflation is nearing an end.

When it comes to interest rate cuts by the end of the year, there are a few scenarios in which this could possibly occur. The first: inflation is practically back to target, almost certainly because of a recession, with the global economy needing a monetary boost.

The second: inflation is above the target and merely trending lower, with central bankers opting to lower rates in line with a gradual decline in prices. Given very explicit warnings from central bankers that they don’t wish to run the risk of unanchoring inflation expectations, the latter appears unlikely.

When it comes to the former, it seems unlikely a recession has been priced into asset prices. After a huge week in markets, which has seen risk assets extending this year’s face-ripping rally, the one big question remains unanswered. Are central banks once again behind the curve, or are markets reflecting a gravely optimistic set of assumptions?

 

DCA

It is very difficult to predict.

Sure, yes I have ploughed a heap of cash into stocks during March 2020. But that was a hybrid of timing the market.

I have been DCA-ing for a while until March 2020, but when I saw the opportunity similar to 2009 GFC, I held my breath and went all in.

However, I would not do the opposite (holding cash until an opportunity presented itself). Or sell shares when you think it's reached an all time high.

Note that I am only talking about index funds.

 

OK, thanks @structurelover

 

The DCA Gods have been testing my resolve over the last few months as my regular monthly VAS & VGS buy days have fallen on strong green days like today with both up over 1%

I just keep saying the words "stick to the plan and keep buying regardless of price" and hit the buy button.