Peter Tuchman
speaker
483 appearances
9 recordings
1 series
first heard Dec 2024
last heard Apr 2025
Peter Tuchman’s voice in public audio — every appearance, attributed to the second.
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Appearances
And there's some people when President Trump got elected the first time they went to cash. And both of those groups made a huge mistake because over the time the market went up. So money going in and out of the market is the most obvious market timing. It's a disaster. It really hurts returns. But a lot of people go, that's not really me. I don't market time.
But what they do is they say, I'm going to wait to see who wins Congress or who's the next president. Or is there going to be a war? the war in Ukraine going to expand, and then I'll invest. That's market timing. All of those things are falling into that trap. And the problem with market timing is the market has a very big upward bias.
Over time, the market tends to go up, just like the price of a ticket to Disney World or a meal at Chipotle goes up over time. There might be little brief periods of time where the prices come down, but in general, inflation carries things. So the more you're going in and out of the market, the more likely you are to underperform We know statistically 80, 90% of people that market time lose.
So the odds you're going to win with that kind of strategy are very low. Once you've identified the goal you're trying to accomplish, it needs to be automatic regardless of where the market is. Just continue to invest, keep buying every pay period that you can.
I mean, the biggest part's education. So, Nicole, what you said is spot on. Sometimes what looks high now might not be high in the future. And the reason that's the case is one in 19 days, the market hits an all-time high. Very frequent. So a lot of people go, oh, I'm nervous about investing now. It's an all-time high. All-time high is generally the norm.
the market is usually at or near an all-time high. And so the best way to safeguard is education. If you really understand, hey, the market does not go up and down. The market goes up with brief periods, sometimes severe and dramatic, but brief periods of pullbacks. Just like prices in the grocery store go up and down, they go up. Just over periods of time, they might come down, right?
So if you can educate yourself on that, then you automate your savings. That's the best combination of protecting yourself against that market timing mistake.
So an investor is basically saying, I'm going to buy things, I'm going to hold them for the long run. And a trader is saying, I'm going to buy Coca-Cola today, but next month I'm going to sell it, and then I'm going to buy Pepsi, then I'm going to sell it, then I'm going to buy Nvidia. And so you're constantly moving, buying and selling a variety of stocks.
The issue with buying and selling stocks is the overwhelming majority of professionals that buy and sell stocks to try to beat the market, lose to the market. So if we're talking about, depending on what time period we want to look at, 70% to 95% of professionals losing the market over a 10-year period, the odds that the regular retail investor is going to beat it are probably significantly worse.
On top of that, you pay a lot more taxes when you're actively trading. You oftentimes find yourself with pockets of cash that aren't invested while you're trading. You start to add those things and you lag the market significantly.
even more so this is a kind of an exercise in futility if you're trying to own a bunch of stocks for the long run you want to find a basket of stocks and you want to own them for the long run there's a lot of ways to do that but this idea that you're going to pick and choose and pick and choose and buy and sell you're going to create a lot of taxes you're going to have what we call in the industry cash drag and even despite those things you'll probably underperform the market over time so you spend a lot of time to diminish the probability of doing well
That's right. If your own situation, things come up, obviously, we have to place trades to meet your needs if that's the situation. But otherwise, rebalancing or moving from bonds to stocks in a down market, those kinds of moves, those are disciplined. And we're not market timing. We're not buying and selling individual stocks day to day. We're saying, oh, COVID happened. The market went down 35%.
and I'm with 70% stock and 30 bond, and then my stocks are down, I'm going to rebalance today to get back to 70-30. That kind of trading makes a lot of sense.
I think a lot of people look at volatility and they confuse that with risk. As one example, they go, oh, a stock market is risky or investing in the S&P 500 is risky because look after 9-11 or the tech bubble or 809 or COVID, it went down 34 to 53%. That's really risky. That's really just volatility. That's things going up and down in price. Risk is really the risk of loss.
The market went down, it came back and went on to new highs every single time. There's been over 100 market corrections, drops of 10% or more. The average correction is 14%. All 100 plus had the same outcome. The market recovered and went to new highs. It's been dozens of bear markets, a drop of 20% or more. The average one's a 34% drop. Every single one, same exact outcome, recovery, new highs.
So confusing risk and volatility is one of those measures that I don't think is relevant. And I think it scares people away from investing that otherwise would do very well if they just understood, hey, this happens all the time and you get these recoveries.
I think when I think about metrics, I'm looking at indexes and trying to compare your returns to indexes. For example, if you're a large cap investor... The S&P 500 is an index of large company US stocks. If you're a small cap investor, the Russell 2000 is an index of small stocks. If you're using a low cost manager, you want to compare them to those indexes.
If you're using index based investing, which I love, then you want to make sure you're using an index that has high tracking rate. And so really being able to compare apples to apples is the best way to really measure results as an investor.
So the idea is to basically put on a piece of paper, here's where I am, here's what I'm trying to do. And based on what I'm trying to do, here are the things I should own. I should have this much in stocks, this much in bonds and so on. And here's how much I'm gonna save and put in these buckets over time. And that marries you to a plan that makes sense for you.
versus reacting to the market if you start reacting to the market then we're going to make the behavioral mistakes so one of the big ones is recency bias which is people all i remember is what happened recently like with your sports team whether they're you might feel more confident or less confident just based on what you happen to see on tv over the last couple weeks instead of maybe looking at all of the games and all of the totality of what's happened with investing we tend to look at what's happening right now and we magnify it for example
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