Oct 7 2015, 06:50 PM
QUOTE(wongmunkeong @ Oct 7 2015, 04:51 PM)
pardon me for butting in - interesting subject close to my heart 
While i agree that one can't get "the lowest low" & "the highest high"
AND buying LUMP SUM based on "volatility" is a bit.. daft..,
IMHO, there is a statistical / probability way to hedge one's investing's ins & outs.
Standard Deviation (SD in short)
If an investment's cost (usually called price) moves waaaaay too far from it's SD,
then there is a higher probability that the reverse will happen.
In simple talk - some calls this reversion to mean / "return to norm".
eg.
if S&P500 has fallen to below -2SD, probability is high that if one buys then and can hold it,
one's probability to make $ is >95% ( https://en.wikipedia.org/wiki/68%E2%80%9395...%80%9399.7_rule )
eg2.
of course, the reverse is also true
if S&P500 has risen to above +2SD, probaility is high that if one buys then...
Again no 100% probability lar
but, hey, it's like a lelong or crazy cost vs value gauge.
The only issue is - does one use 1yr, 3yrs, 5yrs, 10yrs cost or price data to calculate the SD
Vs current cost or price?
Personally - i look at 1yr, 6yrs & 9yrs SD
Gives me a good idea of recent, the mid and the longer term.
Then i buy MORE (on top of my value averaging) or i buy LESS / divest & move into another investment heheh
Just a thought and open to bettering the concepts above via ding-dong (argument, discussion, blah blah
)
Time to buy AmCommodities. While i agree that one can't get "the lowest low" & "the highest high"
AND buying LUMP SUM based on "volatility" is a bit.. daft..,
IMHO, there is a statistical / probability way to hedge one's investing's ins & outs.
Standard Deviation (SD in short)
If an investment's cost (usually called price) moves waaaaay too far from it's SD,
then there is a higher probability that the reverse will happen.
In simple talk - some calls this reversion to mean / "return to norm".
eg.
if S&P500 has fallen to below -2SD, probability is high that if one buys then and can hold it,
one's probability to make $ is >95% ( https://en.wikipedia.org/wiki/68%E2%80%9395...%80%9399.7_rule )
eg2.
of course, the reverse is also true
if S&P500 has risen to above +2SD, probaility is high that if one buys then...
Again no 100% probability lar
but, hey, it's like a lelong or crazy cost vs value gauge.
The only issue is - does one use 1yr, 3yrs, 5yrs, 10yrs cost or price data to calculate the SD
Vs current cost or price?
Personally - i look at 1yr, 6yrs & 9yrs SD
Gives me a good idea of recent, the mid and the longer term.
Then i buy MORE (on top of my value averaging) or i buy LESS / divest & move into another investment heheh
Just a thought and open to bettering the concepts above via ding-dong (argument, discussion, blah blah
) 
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