The problem with tactical asset allocation is that it looks, sounds, smells, tastes, acts and feels so much like market timing that calling it anything but market timing becomes an issue in itself. Like Michael, advisers who practice the art of market guessing spend an inordinate amount of time trying to redefine what they’re doing rather than just calling it what it is – market timing.Other common names for market timing include opportunistic investing, sector rotation, active asset allocation, top-down allocation, bottom-up allocation, global modeling, algorithmic positioning, defensive investing, and the list goes on. New wrapping paper is used every year but the fruitcake never changes.
This debate is important because more advisers are using market timing strategies. A 2011 survey by Cerulli Associates found that 61 percent of advisers are now using some type of timing in portfolio management. That’s up over 8 percent from 2010. Unfortunately, advisers remain notoriously bad at market timing according to CXO Advisory Group’s Guru Grades. Quality does not correlate with quantity.
I haven’t yet said how I feel about market timing. Well, here’s the way I look at it. I’d rather be certain of a good return than hopeful of a great one. If you play with fire, you’re going to get burned.
Market timing in any form does not work long term. Investors are looking to avoid any volatility and seek those advisers who luckily picked the market top. There is no correlation in an advisers ability to repeat past performance.
Please comment or call to discuss how this affect you and your future.