Is it possible to time the market?

Can you time the market? In my opinion, you just cannot time the market. Today we will explore this topic first conceptually and then with a detailed example taking S&P 500 data from 6,848 trading sessions from 1988 – 2015.

Let us first understand this conceptually – there are millions of players (traders, investors, institutions) in the stock market and what is it that you know/ can analyze that none of them has already done? So, in my opinion, markets are almost always trading at a fair value.

For a long term disciplined investor, it hardly matters whether he/ she attempts to time the market or just keep buying regularly without worrying about the highs and the lows.

Time the market

To illustrate my point mathematically, I took S&P 500 total index from 6/1/1988 to 7/31/2015.

As soon as I had the data in Excel, I could not resist the temptation to see how much S&P 500 has returned over this 27 years 2 month period (we could call it 27 years from now on for simplicity). The answer is 10.3% – S&P 500 returns have averaged 10.3% over these 27 years (1988 – 2015).

Now coming back to people who want to time the market – there are many professionals around me who keep discussing on a daily basis how can they best time the market? I asked them how do they time the market, rather how do they attempt to time the market and they responded – “I buy when the market drops 10%”.

I hear this ‘buy on drops’ approach all the time, I have heard it as as recently as last week. Many people believe that they can buy low and sell high if they buy on market drops. So I tried to do an empirical study (past data analysis) myself.

So Scenario 1 – You have $100 additional every day (trading day) to invest and buy S&P 500 stock at that day’s price ONLY IF the price is at least 10% below it’s all time high from 1/6/1988.

Time the market_Excel ScreenshotEnd results (on 7/31/2015) of Scenario 1 – $89,500 in cash and 544.1 units of S&P 500 totaling to total assets worth $2,209,068.

Strategy End Result Millions
Scenario 1 Buy on 10% drop $2,209,068 $2.21

{One common theme across the scenarios is – you have new $100 to invest every day the stock exchanges are open. So you start with $100 on day 1 and you get an additional $100 on day 2…. so on and so forth TILL the day you buy stock, and if you buy stock then the cash becomes zero – you use all the accumulated cash to buy stock.

Let us take a small example: On day 1, you have $100 to invest and you do not buy. On day 2, you have additional $100 to invest (Total becomes $100 from day 1 + $100 from day 2) and you do not buy (total stock units = 0). On day 3, you get an additional $100, so your total cash becomes $300… and suppose you buy stock on day 3 at the price of $60/ unit, you get to buy 300/60 = 5 units. At the end of day 3, your total cash available to invest is 0 and your total stock in the portfolio is 5 units.}

Great, having $100 to invest every day leads to $2.2 Million after 27 years, this happens because of our best friend called compounding. Now let us take the Plane Jane version of investing, where you (like me) do not know where the market will be tomorrow – they might be higher or they might be lower. You just invest the $100 regularly every day without looking at the price and thinking ‘This is the right price to buy’

And guess what? At the end of 27 years, on 7/31/2015, you have no cash (because you bought every day, even on 7/31/2015) and you have 721.44 units of S&P 500 with a total portfolio value of $2,810,579.

Strategy End Result Millions
Scenario 1 Buy on 10% drop $2,209,068 $2.21
Scenario 2 Buy daily $2,810,579 $2.81

Wow – so you actually have about $2.8 Million in this scenario (as compared to $2.2 Million when you buy only at drops).

I thought buying at 10% drop is an extreme and perhaps over-smart people will buy at 5% drops, I did that analysis – at the end you have $19,600 in cash and 705.7 in stock amounting to a total of $2,768,701. Still not being able to beat my Plain Jane Vanilla version of buying daily and having $2.8 Million.

Strategy End Result Millions
Scenario 1 Buy on 10% drop $2,209,068 $2.21
Scenario 2 Buy daily $2,810,579 $2.81
Scenario 3 Buy on 5% drop $2,768,701 $2.77

Then I thought ‘buying on drops’ should not be the only approach people take to time the market. They might try the approach – buy if the market has been falling for several consecutive sessions.

For our discussion purposes, I analyzed two scenarios – buy when the market falls for 5 consecutive sessions (Scenario 4) and buy when the market falls for 3 consecutive sessions (Scenario 5).

If you buy every time the market falls 5 times, you end up with $400 in cash and 693.5 units of stock  with a total value of $2,702,232. If you buy every time the market falls 3 times, you end up with $400 in cash and 719.44 units of stock  with a total value of $2,803,179.

Strategy End Result Millions
Scenario 1 Buy on 10% drop $2,209,068 $2.21
Scenario 2 Buy daily $2,810,579 $2.81
Scenario 3 Buy on 5% drop $2,768,701 $2.77
Scenario 4 Buy after 5 consecutive losses $2,702,232 $2.70
Scenario 5 Buy after 3 consecutive losses $2,803,179 $2.80

Buying on three consecutive drops leads to $2,803,179 – this is damn close to buying every day and ending up with $2,810,579. This prompted me to try and analyze what would happen if you buy on ‘3 consecutive gains’ instead of 3 consecutive losses. Somewhat counter-intuitive if want to ‘buy low’. And this approach results in $2,797,210 – not very different from the buying on 3 consecutive losses.

Strategy End Result Millions
Scenario 1 Buy on 10% drop $2,209,068 $2.21
Scenario 2 Buy daily $2,810,579 $2.81
Scenario 3 Buy on 5% drop $2,768,701 $2.77
Scenario 4 Buy after 5 consecutive losses $2,702,232 $2.70
Scenario 5 Buy after 3 consecutive losses $2,803,179 $2.80
Scenario 6 Buy after 3 consecutive gains $2,797,210 $2.80

The last scenario I analyze here is ‘buying every pay check’ – most of us do not have $100 coming in every day, but most of us do have $1,100 coming in every 11th day (assuming 22 trading sessions in a month and 2 pay checks per month, it will be one pay check every 11 trading sessions). In the ‘buy every pay check day’ scenario, you end up with $700 cash and 719.04 units of stock, with a total value of $2,801,921.

Strategy End Result Millions
Scenario 1 Buy on 10% drop $2,209,068 $2.21
Scenario 2 Buy daily $2,810,579 $2.81
Scenario 3 Buy on 5% drop $2,768,701 $2.77
Scenario 4 Buy after 5 consecutive losses $2,702,232 $2.70
Scenario 5 Buy after 3 consecutive losses $2,803,179 $2.80
Scenario 6 Buy after 3 consecutive gains $2,797,210 $2.80
Scenario 7 Buy every paycheck $2,801,921 $2.80

Some things to notice:

  • ‘Buy everyday’ scenario has the highest ending value ($2.81 Million)
  • Waiting for a 10% drop to buy comes out with the worse possible end result ($2.21 Million)
  • ‘Buy every pay check’, ‘Buy after 3 consecutive losses’, and ‘Buy after 3 consecutive gains’ all end up with $2.80 Million.
    Isn’t it interesting that you end up with the same money irrespective of whether you buy when the markets are falling or rising? You know why – because no one knows whether the markets are at the rock bottom or extreme high. No one knows what happens tomorrow.
Moral of the story: If you are in the stock market for the long haul, do not worry about the short term highs and short term lows. Invest regularly – stick to your asset allocation with the use of low cost ETFs, and you will end up at least as rich (and most likely richer) as most of the flashy sophisticated traders.

Like a friend of mine once said “When you are climbing Mt. Everest, nothing is easy, you take one step at a time and just keep your eyes glued to the top”.

Please note – I have ignored transaction costs here (you pay a commission every time you buy stock).

Historical data is no prediction of the future but I do not know how else to guess what the future holds!

Download the Excel here

42 thoughts on “Is it possible to time the market?

  1. Hi Bobby,

    Great post and very helpful excel. Thank you. Today is the first time, I landed up on your blog so can’t comment on everything but I am hooked up.

    I like your writing style and explanation. Please keep it up.

    On timing the market post, I believe it will be horrendous mistake to ignore / avoid transaction cost. Each buy comes with about ~$4-8 cost and with every day or pay check purchase, it can eat up substantial part of the investment.

    Any idea about the total potential transaction cost on these scenarios?


    • Hello Abhay,

      I am so glad that you liked my blog. It gives me immense satisfaction to know that people like yourselves like my blog – because I do spend days (if not weeks) trying to write each post.

      YOU MAKE A GREAT POINT. Transaction costs are important. And you are right that they should be included in the analysis. But consider this – Merrill Edge does not charge trading commissions if your balances are in excess of $50k. Interactive Brokers charges only $1 per trade.

      Interactive brokers has it’s own set of problems: please see my comment here

      Still, let us estimate whether 4 – $8 trading commission you mention is worthwhile or not? I guess it would depend on how much you are investing.

      Let us say you are investing $x every 15 days. Assuming the S&P 500 gains to be 10.3% annually; gains for 15 days would be 10.3% * 15/ 365 = 0.42%.

      If $x multiplied by 0.42% is greater than the trading commission, then the ‘every paycheck investing’ is worth it 🙂

      Assuming transaction costs to be $6 (average of the range you mentioned), so x = 0.42%/$6 = $1,417. If you are investing more than $1,417 per pay check, then you are better off investing right away rather than waiting till your next pay check.

      Conclusion – either find a broker that charges a very low commission or wait for several pay checks.

    • Abhay,
      If you are doing indexing, large traders such as Fidelity and Schwab offer index ETF’s at no transaction fee and very little management fee. My favorites are Schwab’s broad market index, SCHB, and iShare’s–which Fidelity offers transaction fee–ITOT. Over time, the total market does better than S&P 500 (or SPY). You can actually buy 1 share a day (~$50 in January, 2017) with zero transaction cost.

  2. It’s useful data and for the average person it makes sense. I’d hardly call it conclusive though.

    First, timing involves both buying and selling one of the biggest advantages comes from not being in the market during significant drops. (All you had to do was sell out year before the dot com crash then buy in a year after and repeat around 2008/2009 to end up a fair bit ahead of the average).

    Second, you haven’t given really fantastic drivers for determining when to buy vs holding off. For example you might use lines of support and resistance or rolling averages or momentum indicators or better yet valuation metrics. There’s a lot of studies showing simply buying based on low P/E returns superior market returns on average.

    For the average person I’d agree dollar cost average into the general market with low fees but you won’t get to be Warren Buffett that way.


    • Appreciate your learned comments.

      1 – “All you had to do was sell out year before the dot com crash” – how would you have predicted that the dot com crash will happen and when? And how consistently can you do that?

      Were you able to predict the dot com crash? Were you able to predict the 2008 -09 crisis as well? Are you also in a position to predict when will the next crash happen, and what sector will it be in?

      2 – I do not use the technical drivers you mention but I know that many actively managed funds do. I also know that most of them do not beat a passive low cost fund. So combining the two, I again come back to the conclusion that my style of investing is better.

      I have seen reliable data that buying based on lower P/E returns superior returns but the difference is incremental (small).

      The motive behind regular investing is not DCA (Dollar Cost Averaging) though the end result is the same. The idea is to invest as soon as you have the cash, and not wait for a good opportunity to buy; because no one has a good enough method to predict when that opportunity will arise. In some cases, the opportunity might not even arise.

      • “1 – “All you had to do was sell out year before the dot com crash” – how would you have predicted that the dot com crash will happen and when? And how consistently can you do that?”

        I specifically operate based on valuations. When valuations get high I sell when they are low I buy it’s essentially a value investor approach. And yes value investing works consistently depending on the variation you apply.

        “Were you able to predict the dot com crash? Were you able to predict the 2008 -09 crisis as well? Are you also in a position to predict when will the next crash happen, and what sector will it be in?”

        Let’s clarify some language here. Can someone look into the future to see “oh in 2020 Vietnam will have a resources sector that’s overvalued”? No, certainly not but that’s not what’s required. What definitely can be done is to look at the market as it’s happening and identify “this is overvalued and in danger of a serious correction and get out”. For example, the situation in China this summer was quite predictable as it was happening due to the rapid rise, irrational valuations, and high amount of leverage being employed. As a result I personally did very well in late August when there was a severe correction. Consider that if you simply held the Index in 2015 you essentially ended up in a net zero position while a well managed portfolio did much better simply by strategically buying and selling a couple times per year. Would I call this timing the market? Timing is definitely an element of it but perhaps valuing is a more accurate term.

        “2 – I do not use the technical drivers you mention but I know that many actively managed funds do. I also know that most of them do not beat a passive low cost fund. So combining the two, I again come back to the conclusion that my style of investing is better.”

        This is completely true for the average person buying a low cost index fund or alternatively implementing some variation of Ray Dalio’s asset allocation strategy (an especially effective decision this year) is simpler than trying to beat the market. Keep in mind though the performance of large funds that don’t beat the market is somewhat of a red herring when compared with what is possible for a smaller investor due to the ability to capitalize on smaller market inefficiencies, get in and out of positions quicker. Funds also often don’t outperform the market due to their fees.

        “The motive behind regular investing is not DCA (Dollar Cost Averaging) though the end result is the same. The idea is to invest as soon as you have the cash, and not wait for a good opportunity to buy; because no one has a good enough method to predict when that opportunity will arise. In some cases, the opportunity might not even arise.”

        No one is definitely inaccurate. Some people consistently beat the market the majority of them are value investors in some shape or form, which makes logical sense. This is especially true when the market is performing poorly (rapidly rising markets tend to be more irrational and in the short term present misleading data about returns but in the long haul over say a 10 year period certain strategies tend to win out).

        For the average person who isn’t going to spend time to learn how to invest effectively, yes regular investing or dollar cost averaging into an index or asset allocation strategy usually makes the most sense and generally doing so via some form off tax deferral vehicle though if you intend to hold long term and benefit from capital gains rates the impact is less profound. I’d argue as per some of your comments above that dollar cost averaging as it makes sense with respect to fees is the key piece, investing $100 at a time generally isn’t worthwhile even if you think about the physical time required to make the transfer let alone the fees themselves combined with considerations of whether you invest through a tax sheltered vehicle and considering how much you should contribute annually, etc. allowing an amount to accumulate where the fees represent a smaller % generally makes sense, which will vary based on the individual, this could be daily for someone with sufficient income or annually for someone saving just a very tiny amount each year in the macro waiting a week will have a relatively minor impact.

        By contrast, this isn’t a strategy that’s going to make someone rich, it’s a great preservation and growth strategy but for someone who intends to really grow their investments substantially investment in learning how to beat the market is critical. Under these circumstances the strategy that most reliably beats the market over the long term is value investing (especially in combination with growth investing) combined with a minimal amount of leverage provided you’ve got a reasonable portfolio strategy (meaning you’ve got the cash and cashflow not to be forced to sell) performs the best by far if calculated on a long term risk weighted basis.

    • I did not have to use either. I did not take yearly returns to calculate the long term return. I took the ‘total index’ value (index + dividends reinvested) in 1988 and 2015, and solely based on these 2 numbers I calculated the growth rate over these 28 years.

      Now that I think about it, the result might be the same even if I took yearly returns and calculated the geometric mean returns, but the work would have been much more.

      • Did you use a reverse compound interest calculation or did you simply take the total difference as a % of the amount originally contributed and divide by the number of years in question?

          • Thank you for the tool – when I enter 1/1/1988 – 12/31/2014 (It does not have 2015 data yet), it gives me ‘true CAGR’ of 10.64% – more in line with my calculations of 10.3% rather than 7-8% that is often quoted in studies.

            I have bookmarked the tool for future reference. In this case, I needed daily index data because of other calculations that I made – buying every day, every pay check etc.

            By the way, I am still working on responding to one other comment from you… it is making me think…. think real hard – which is a good thing.

  3. It makes sense when you buy consistently over a period of time, but what if you have a lump sump to invest? Is it better to slowly invest it into the market (if so, what time period for say $500k, 12 months or 12 years)? or buy in one single tranche (in this case I imagine timing is everything)?

    • This is where asset allocation is so critical for the average person. If you’ve properly divisified then you don’t have to be so concerned about the timing.

      For example if you’d invested purely into stocks in mid 2008 and held you’d have a neutral or negative return for quite some time and it wouldn’t result in a great long term average.

      If on the other hand you’d blended your portfolio between mid and long term bonds, stocks, and commodities in a way that reflected the risk weighting when the markets crashed in late 2008 early 2009 the impact to you would have been greatly reduced. Moreover you would have rebalanced in each year and caught a fairly decent return.

    • Spencer, great question. First let me share what my mathematical/ psychological views are. Then I will share a personal example.

      1. Mathematically – you are slightly better off investing in lump sum. Reasons being:

      a. You cannot predict the market. May be the market will never come back to the levels today, may be from here on history will never see this low a level

      b. Idle cash problem – if you invest only 10% of the $500k today, then the remaining cash is lying idle, earning 0.1% interest. That will drag your total returns down

      But psychologically, since the amount at hand is large, most people will tend to spread it over a period of time. 12 years is out of question, even if you were to do what is called DCA – Dollar Cost Averaging, we are talking about 12 months.

      2. Personal example
      I had a similar situation personally about a year back. There was a sudden windfall and I did a lot of research on the topic. Again same conclusion, mathematically I was better off investing in lump sum but psychologically I was tempted to perform DCA – buy stock at the average price over the next year or so. Here is what I actually did:

      I invested a part of it in the stock market (partial lump sum) and I invested the rest of it in Peer to Peer Lending ( P2P lending eliminated the ‘idle cash’ problem for me. Also it has medium term time horizon. Most of my notes are 3 years in duration. So the investment starts to pay off from day 1 and everything is paid out within 3 years. Read my post on P2P and let me know if you have any questions.

      • A note here, while on average this is true (on average the market goes up more often and more than it goes down – drops tend to be deeper but shorter than rises and don’t generally wipe out all of the gain since the previous major drop because in general the economy is expanding and the assets that remain benefit from a survivor bias) it is a gamble. For example coming into 2015 I suggested to people I knew that the market was quite expensive as a whole and unlikely to see the continued rise that had been pretty steady since 2009. Though there weren’t clear major risks that would signal a massive drop in prices returns that had been high the last few years were likely to look considerably flatter. The situation would have been far worse but similar in early 2008.

        The problem here is the risk of essentially doubling down in ignorance. There’s only two logical protections against this:

        – knowledge so you understand where the market is at and the likely near to mid term impact

        – diversification/asset allocation

        In short I’d say yes invest immediately but split the assets up between non correlated investments to diminish the risk of concentration.

        • Cannot agree more about the diversification / asset allocation part …. whether lump sum or DCA, some diversification is mandatory…. how much? It will depend on your time horizon and risk appetite

          • I personally reject the concept of risk appetite I think it’s a misnomer sold by financial planners and banks based on an inaccurate definition of risk. Banks etc say risk and mean beta (volatility) when real risk is the probability and severity of losing money. So if we’d like to say “volatility appetite” then sure. Time horizon definitely plays into the volatility conversation.

            Real risk should always be contextualized on a returns basis and you should pick the best risk weighted returns period. At least that’s the smart thing to do. Put another way there isn’t a single day you should buy a lottery ticket as an investment, which is what a lot of people will do taking a negative risk weighted return due to the slim hope of a high pay off. Preservation of capital before return on capital is a better mantra in the big picture.

            The interesting question in the current environment where bond yields are so low (and likely to remain that way long term) and the general market is likely to have low average returns for the next few years is where should you allocate your capital at all to get the best risk weighted returns?

    • No questions are silly, only answers can be.

      I did not use a symbol ticker, the data is for the actual index. Like you know, all the ticker symbols like SPY and VOO attempt to track the index. So this data is for the actual index (so the calculations would have taken into account all the 500 underlying stocks).

  4. Bobby, great site and equally great article. Agree completely on the market timing front – makes a lot of sense to invest in at all possible opportunities. However, when you look at actual returns, S&P has generated close to zero returns since 1999, adjusted for inflation. Even without any adjustments, the returns are meager.

    Now, this might be an extreme scenario and long-term averages maybe more acceptable to look at. However, what defines ‘extreme’? For an investor at the height of the 1999 exuberance, THAT was the right time to invest. This person would have earned more money in a bank account without any heartaches and burns.

    When I look at historic returns the period 2000-2010 is the only decade to have generated negative absolute returns. Also, in all decades since 1950, the average total return per decade is around 11 per cent. The return in this decade so far (2010-2015) has been 12.5%, more than twice the long-term average. Does this not suggest that we are in for a market fall? Even if it is not certain, doesn’t historic data suggest that a correction is due? If so, shouldn’t one wait for that correction or look at alternative markets? In broader terms, does this not speak against not timing the markets – something that has been proven by your analysis to be a great thing (and something that I intuitively believe in)?

    • This is an argument for dollar cost averaging and asset allocation. While it’s true that the 10 year return from the peak of Dec 2000 till Dec 2010 was effectively zero (negative inflation adjusted return) stocks rose during a lot of this period so if you put in money the whole time month after month you were up. Also, those numbers don’t include dividends, which represent about a third of typical returns and by sitting out of the market you are missing out on those.

    • Vamsi, appreciate your kind words.

      To address your specific questions about market fall/ correction, here are my views:

      “Does this not suggest that we are in for a market fall?” Sure, but I heard that 3 months back, 6 months back, 1 year back, and even before that. Markets crash every now and then, but in my opinion, it is not possible to gauge the exact timing. I believe in the following philosophy – if you have the money to invest and you have a long enough time horizon, you should just invest.

      “If so, shouldn’t one wait for that correction or look at alternative markets?” In my opinion No – since you do not know whether the crash will happen tomorrow or 2 years from now, your cash at hand will not generate any returns (idle funds scenario). Secondly, what if the market gains 20% in the next 2 years, and then falls 10%, you will still be buying more expensive stock as compared to today’s prices.

      Here is what I practice and preach – work hard to figure out your asset allocation, choose low cost ETFs wisely, and then just stick to ‘it’ until your time horizon or risk appetite changes.

  5. Hi Bobby,

    I am very happy to have come across your blog and need some help and insight into my financial situation.

    I am a homemaker and lost my husband almost a year back. I have few financial decisions to make and it would be great if you can offer your guidance and help.

    Since I do not choose to share it here can I know if there is a way to reach out to you.


    • Hi Spn,

      My heart feels for you. Personal losses are unbearable but I assure you that we will bring your finances back on track. Go ahead and start giving me some background information and asking me questions?

      My request will be to have a discussion here on the blog itself – do you know why? Because however unique we think our situation is, there are always hundreds and thousands of people in the same situation looking for similar answers. So let everyone benefit from our discussion.

      Needless to say, we will not use any Personally identifiable information (PII) – real name, exact address, or phone number. So you will just be a profile and there are thousands (if not more) people who can fit that profile.


  6. This is an awesome blog post; I found it linked from Quora. Thank you!

    I started a software company a few years ago, and it’s starting to return pretty well, and so I am now starting to look in to longer-term money management & wealth growth and all that fun stuff.

    On the sheer # of transactions over transactions over time, even at $6 x 3 buys per month x 12 months per year x 30 years, that’s still only ~$6,500. Hardly a meaningful amount when you’re talking about a total of $2.8 million in play, so…does it matter?

    Yet still, assuming every dollar counts, there are commission-free purchasing alternatives, even at the low-end, such as:

    Do you have an article, opinions, or recommendations about stock trading tools, pros and cons, for different levels of the investor’s sophistication, different tools for different focus & goals, etc? Or, simply an overview of one or a few recommended tools, with your explanations?

    Apologies if this exists already – I couldn’t find it in the search, perhaps because I wasn’t totally sure which search terms to use.

    • Sean – thank you for your generous appreciation.

      It’s awesome to hear that your software business has picked up. These are the years my friend, these are the years – life (for most of us) will go in ‘ups’ and ‘downs’ These ‘up’ years are the years to power save!

      About $6,500 … like you said every dollar counts… in fact every dime counts… therefore this website is called one more dime 🙂

      You already know about Robinhood, there are some others that charge very low… for example charges $1 (or 0.5 cent per share, whichever is higher) – for people whose average trade is less than 5,000 – 10,000, it is usually $1.

      There are some others, like that do not charge a commission if your balance is more than $50,000.

      But let us mathematically examine ‘When is paying a commission worthwhile’? Let us take someone who wants to invest paycheck to paycheck. So either he invests $x on Feb 1 or wait till Feb 16th and invest $2x (x from the first paycheck and x from second).

      Assuming average market returns to be 8% annual and the commission to be $6 like in your example:
      Scenario 1 – invest x on Feb 1, the ‘expect gains’ by Feb 16th = (x * .08 ) / 24. For simplicity, I am saying there are 24 fortnights in a year. Net of commissions, that amount is ((x*.08 )/24) – 6

      For this number to be greater than 0, x has to be greater than 6 *24 / .08 = $1,800.

      So if you are investing $1,800 or more from every paycheck, then it does not make sense to wait 15 days for another paycheck to come.

      By the way, this number becomes $1,440 if you assume 10% annual return.

      You know the best way to avoid trading commissions (to a very small extent) is to enroll in DRIP (Dividend Reinvestment Programs)

      You are right, I do not have the article about “stock trading tools, pros and cons, for different levels of the investor’s sophistication, different tools for different focus & goals” – if you can elaborate a little more on what exactly are you looking for, I will be more than happy to share my views.

      Two tools that I really love are Personal Capital and Credit Karma

      • Great; I also saw your note about offering sub-$2 margin rates. And I recently started a TD Ameritrade account FWIW, mainly due to the reviews on

        I also started using Personal Capital based on your blog post review about it, and really enjoy it. I have been historically using for my transaction tracking (and to track tax-related items each year), but the web UI is so old and slow at this point that even opening Personal Capital is a revelation. 😉

        The one feature that has that Personal Capital seems to lack is the ability to edit & create rules for future incoming Transactions. Personal Capital has multi-item editing, however (which does not), and is under active development (which does not appear to be), in addition to all of the investment tools (which doesn’t even touch), so I think it will be a nice improvement for 2016.

        In terms of the blog post: 24 hours later, I have some more precise thoughts:

        – The math you presented here is, I think, really quite clutch, and especially in line with your comment about every dime! In fact, maybe a smaller/simpler article dedicated to the math of: “If I am not trying to ‘time’ the market, how often should I buy stock?” In this post, you could present different scenarios & investment levels, guidance on the LEAST frequently you would recommend purchasing (imagine if you only have a couple hundred bucks to invest per paycheck), etc.

        – seems like a good aggregation of reviews of online brokers. MUCH of it is geared toward more sophisticated traders, however, so, although I followed its recommendation (for now), I can’t say I feel fully-informed and confident in my choice. (Thankfully, it seems easy enough to switch later?)

        – Related to the above, perhaps it is that more sophisticated traders are already well-served (and in fact probably have their own biases, opinions, and sources already). It also doesn’t make much sense to start competing with them (and similar outlets) in the “creating the best review of a brokerage system” game. Perhaps, then, instead, a helpful blog post might be something like: “First Time Investors: How to select a Brokerage Tool” – providing guidance based on fees (matched with various anticipated investment amounts – see my next point) and the ease of use / accessibility of the toolset they provide (I’m assuming these are the two most important things for first-time investors – they are for me, I think).

        (You might also make some basic suggestions re: ETFs vs. individual stocks, how much real estate vs. stocks might one want to hold, your opinions on when to visit an in-person financial advisor or brick & mortar brokerage firm, etc. For this type of post, if you develop more than one, you might call these recommendations “Day 1” or “Year 1” recommendations – a tag and/or button on the top banner of your page called “Getting Started” might be awesome, too. Much of what I’ve read in your blog is either theoretical / philosophical, or VERY SPECIFICALLY practical to a narrow circumstance – which I think is a really incredible combination, and hard to find. But I still find myself asking, “but how do I start?” Yesterday, this resulted in: feeling overwhelmed, clicking around the internet randomly, opening a brokerage account without feeling confident that I selected the correct institution or even account type, then buying a few weird stocks for companies that I think are cool, and calling it a day. This was great and fun and all, but it felt a little bit like I’d been tossed in to open water (and the stakes are similarly high!) – and, like learning to swim for the first time, having a life jacket would make that a lot less stressful.)

        I’m not sure if either of those types of posts speak to you. I know your blog is not “stock investing 101” – and not exclusively focused on stocks – but, for me, I would personally have found this type of guidance very helpful yesterday (Day 1), and still today as well (Day 2), and would share it with friends. That small ramp might allow a lot more readers to appreciate your advice.

        Either way – count me as one of your appreciative readers. I’ve subscribed to your feed and expect to continue reading each post you write, regardless of any of the above!

  7. Hi Bobby,

    I want to join my voice with Abhay and thank you for this great post. I, too, landed on your blog for the first time, but I like your writing style. Your explanation is clear and concise. Keep it up the good job!

    • Hi Lana – Thank you for your writing. Your feedback is important to me.

      Please feel free to share if you have any questions regarding anything to do with personal finance – income, taxes, investments, cash, bank, credit, mortgage, etc.


  8. Hi Bobby, I stumbled upon your site a couple weeks ago and I’m impressed! High quality, thoughtful content! Thanks so much!

    I’d like to learn about leveraging invested capital — for example, an overview of common ways to go about it (securities based lines of credit, margin accounts, mortgage, etc.), requirements of each method (assets? net worth? income? credit score? type of capital permissible? capital must be held by the lending institution?), other pros and cons.


    • Hi Brandon, thank you for your kind words of appreciation. I am glad that my work is proving to be useful.

      A good starting point to learn about using leverage is Playing the game of credit.

      A good starting point to understand margin in securities is One More Dime _ Margin Handbook

      In Mortgage, 80% LTV (Loan to Value) is standard, though many lenders allow 85% for primary residences now a days (2016). Lenders also have special loan programs for specific groups of people (for example – specialized professionals), I bought my house at 100% LTV (2014).

      I would be happy to answer any other questions you have?

  9. Bobby, thanks for the references! I’m not sure how this post ended up as a comment on this page — I actually submitted it via the “Request a Post” as a suggestion for future content.

    • Brandon – you are welcome.

      I did receive it as a request for future content and noted it down in the ‘list of upcoming posts’.

      I am getting a large number of requests and I also do thorough research before I write about something. I spend an average of 40 hours for each post I write.

      It can easily be a while before I can come up with an entire post but I wanted to get back to you quickly with some initial feedback, hence I made it a comment.

      Please go through the reference material and come back with questions, I am here to help.

  10. Would it be possible to state the amount invested from your own pockets for each strategy? I want to gauge what percentage is actual market return and whether the time and effort put into it is worth it.

    • Sure Julius – the amount invested is the same in each strategy.

      In each scenario/ strategy, I assume $100 being given to an individual to invest every day (actually every day the stock exchange was open). There were 6,848 trading sessions in the 28 year period – and one received $100 on each of those 6,848 days. Total amount invested $684,800.

      The ONLY difference between the strategies was – you either invest as soon as you get the money or wait for a ‘good opportunity’ to buy.

      My analysis showed that you make the most money by investing as and when cash became available rather than waiting for a ‘good’ opportunity.

      (Since most people do not get $100 every day, they get some lump sump each pay check – I defined that in my Scenario 7 – one gets $1,100 every 11th trading day – I thought 11th trading day was a good approximation for the fortnightly pay check)

  11. Hi Bobby, I would like a clarification on your method.

    Let’s say Investor A uses Scenario 2 (Buy daily) as his strategy and Investor B uses Scenario 1 (Buy at 10% drop). In a particular 5 consecutive days, Investor A would spend $100 daily on Day 1 to Day 5, thus spending $500. At the same 5 consecutive days, Investor B only invested at Day 5 because Day 1 to Day 4 did not meet his requirements. Following your calculation, would Investor B spend only $100 on Day 5 or would he spend $500 (because he saved the $100 he got daily from Day 1 through Day 4 to use when the market meets his requirements)?

    For investor B, spending $100 vs $500 on Day 5 would definitely cause different end result. I wanted to make sure that the differences between Scenario 1 and 2 (and any other scenarios) are not caused by this condition.

    • Hi Ray,

      In your example – Investor B will spend $500 on Day 5. The analysis would be out-rightly flawed if investor A and B are both able to spend only $100 when they buy (because like you mentioned, investor B will necessarily buy less frequently than investor A).

      My analysis assumes that both the investors A and B get $100 every day – one of them buys stock without worrying about whether the market is high or low AND the other accumulates the cash so that he can buy in bulk when the market drops.

      If you look at Cell H4 – that has 0.37 units of stock that was bought at $100.

      In contrast, Cells G4 – G 424 are zero -> no stock was bought from the beginning till 29-Jan-1990, a total of $42,100 cash was accumulated ($100 per day) and on 30-Jan-1990, 121.5 units of stock was bought at once.

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