Tan Kin Lian's Blog: Market Timing

Tuesday, June 26, 2007

Market Timing

COMMENT POSTED IN MY BLOG

Mr. Tan, you seem to be an advocate of market timing, from most of your postings. Investors following your advice are in great danger. I think, Mr. Tan, you need to get your understanding of investment right.

Despite your many years as a CEO of Income and to be fair to you, your knowledge of investment is horrendous.

You better stick to insurance. Even in this area I also find your recommendations not appropiate sometimes. You have great knowledge in products but not planning.

You are sincere, there is no doubt at all. but this is not enough. Hope you take this in good spirit of sharing.

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REPLY

I posted a study by Plexus Asset Management. It showed the experience over the past 100 years in the United States. For a investor who made an investment at a time of high market P/E ratio, the return over the next 10 years is lower than for other periods.

If you wish to ignore this study, it is all right. In my case, I prefer to avoid investing a lump sum at a time when the market is high. I prefer to wait for a more normal time. It is all right, if you make small monthly investments, and take take advantage of "averaging".

7 comments:

Anonymous said...: The real returns for a risk-free asset such as T-bills are very close to zero whereas the projected real returns for stocks are closer to 5.7%. The study does not say the level of the market is high. Instead, it says equity returns will remain high compared to debt instruments.

I think there's a mis-interpretation of the study.; June 26, 2007 8:18 PM
Anonymous said...: I fully agree on the timing issue, be it on investment, courtship, work, etc. Of course, there are other factors as well, but for investment, market timing is a very important factor unless you have inner circle information.; June 27, 2007 9:53 AM
Anonymous said...: THERE ARE TWO TIMES IN A MAN'S LIFE WHEN HE SHOULD NOT time the market;
WHEN HE CAN'T AFFORD IT, AND WHEN HE CAN AFFORD IT.; June 27, 2007 12:44 PM
Anonymous said...: I think this negative comment is unfair to Mr Tan. Mr Tan has shed good light on various personal finance issues. In the insurance arena, he has advised us to buy term insurance and invest the difference - which makes perfect sense looking at the burgeoning stock market. He has also thought us not to invest in structured products which offer poor returns. I totally agree with his propositions.; June 28, 2007 12:20 AM
Anonymous said...: If you are require some money after some years (e.g. 20 years later for children education) and insurance, it may not be good to buy a term plan and invest the rest as Mr Tan said. At the 20th years, it may be a market down turn or the companies you bought are valued lowly by the market, and you are not able to get a decent returns - though the chances are low if the time is long. With an endownment fund, all reversionart bonus declared in the past years are guranteed, your are more assured of a reasonable returns and assured cash after 20 years.

Meng; June 28, 2007 6:42 PM
Anonymous said...: Like you said, the chances (of not getting decent returns) are low if the time (invested) is long.

An investor simply needs to put his money in an emerging markets index fund (etc ticker EEM) over the long term and watch his money grow. The returns far surpass the returns on any whole life plan or endowment plan.

Its a simple concept. Instead of spending S$200 a month on a whole life plan, an investor can consider spending S$20 a month on term insurance and S$180 on an index fund. That S$180 a month placed in a well diversified index fund will definitely surpass the returns on an endowment plan, many times over.; June 29, 2007 12:02 AM
Anonymous said...: Buy a term and invest the rest..This is a fantastic package; low risk and high return.( if you know how); June 29, 2007 8:21 PM