I was walking home with my dad one evening and he said he was feeling peckish and said he fancied cooking himself a boiled egg when he got home. I asked him how does he get it right so its not hard boiled and yet not under cooked. How do you get it right, how do you time it perfect?
He explained that its extremely easy and anyone can do it. First you need a metal saucepan and you fill 3/4 with water. You then switch on your microwave. Once the water is boiling you add the egg and let it boil for 2 1/2 minutes. You get a perfect egg every time.
So now im puzzled and i confirm with my dad that he uses a metal saucepan and the microwave! "yes" he answered " how else would i get it perfect every time?" . "Dad" I say, and i go on again to repeat the whole process just to confirm a third time. He says "Surly you know how to cook an egg and i don't have to keep explaining how to boil an egg?" . I'm like Um yes dad you do, "please can you explain the saucepan and microwave bit" He goes on say in a bit of a huff. "look once the water is boiling on the stove you turn the microwave on for 2 1/2 minutes and when the bell tings you take the saucepan off the stove and take the egg out" . "Oh bloody hell dad that's ok then , you use the microwave as a timer and you don't put the saucepan in it!" He goes on to say "No that would be stupid who would put metal in a microwave?". I replied "yes your right dad , use a timer to cook and time the perfect egg and yes a microwave is a perfect timer".
Timing the market and is it as important as timing a boiled egg?
If your a day trader then its all about timing no matter the method used whether it be trend lines, patterns or cycles: its all timing. Time scales can be from 1 minute ,1 hour to yearly charts . Normally though they are scalping if they are under 8hrs and and day traders normally work using the daily and larger charts (but using the lower frames for a more precise entry). Some people are really good at market timing but personally im pretty poor at it.
Currently there is talk about the S&P and its going into a bear market with a possible recession to follow, I have have no idea what will happen except one thing. That one thing is the way i will trade for my passive income dividends. While i might have a couple of £K to invest i can certainly say its far more important to time the boiled egg correctly than to time the market.
| Source: SchwabCenter for Financial Research |
| Figure 1: Range of S&P 500 returns, 1926-2011 |
From the chart the 1 year period can produce some fantastic results of 54% gains but also some huge losses at -43.3%. But the longer your in the market and holding then the losses are decreased to the point of where no one loses once 20 year holding periods are reached.
How I'm timing the market
The simple answer to this is that im not. Im just buying dividend paying companies on a regular basis and while the markets drop then im buying them at cheaper prices. Im not really bothered that some of my stocks are deep in the red with the worst at -25% (5% of my portfolio) , because the companies are sound and pay me to hold. Its all about the income , the passive income, to keep the passive income growing no matter the market position.
Conclusion:
Every month i add around £500 minimum to my account and i add to old positions if they are looking cheap or buy new ones. I look for companies undervalued no matter the position of the overall market. I'm simply not skilled enough to time things perfect except maybe now a boiled egg.
As Dory would say in the film Nemo " just keep adding , just keep adding". She never looked back and succeeded in the end; though she could not see the light straight away.
Did / do you ever day trade to boost your portfolio and have you had long term success?
Do you worry about market news?
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