It seems the financial media is full of ‘professionals’ proclaiming their ability to time the market. That is, get out of the market when their ‘signal’ says to and get back in when their ‘signal’ says to. These ‘experts’ proclaim that because it happened in the past when this or this happened it will happen again and again.
During my years of watching the equity markets I have found that history does NOT repeat itself.
In order for history to repeat itself thousands of variables would need to perfectly align. While I cannot say this is impossible I will say it is extremely unlikely.
Below is an excerpt of an article on market timing. Weston Wellington is Vice President at Dimensional Fund Advisors. In it Mr. Wellington discusses the folly of investors and advisors and money managers trying to market time.
All timing strategies face a fundamental problem: Since markets have generally gone up more often than they have gone down in the last 90 years, avoiding losses in a down market runs the risk of avoiding even heftier gains associated with an up market. A successful timing strategy is the fountain of youth of the investment world. For decades, financial researchers have explored dozens of quantitative indicators as well as various measures of investor sentiment in an effort to discover the ones with predictive value. The performance record of professional money managers over the past 50 years offers compelling evidence that this effort has failed. Despite this evidence, the potential rewards of successful market timing are so great that each new generation sees a fresh group of market participants eager to try. Searching for the key to outwitting other investors may be fun for those with a sense of adventure and time on their hands. For those seeking the highest probability of a successful investment experience, maintaining a consistent allocation strategy is likely to be the sounder choice.
Weston Wellington September 2014
Remember short term success is no substitute for long term research.
While avoiding losses and participating in most of the gain sounds enticing. It will lead to poor results over the long term. Investors are looking for stock market returns with Treasury bill risk what they end up with is Treasury bill returns with stock market risk.
In my opinion investors would be better served by firing their broker/agent and hiring an investor coach/fiduciary adviser.
Your coach will help you remain disciplined during the inevitable equity market downturns.
While there are those that believe they can do it themselves. Most if not all find that they do not have the emotional strength to go it alone. If you think professional advice is expensive wait until you find out how much free advice will cost you.
Prudent process beats predictions over the long term.
Stop empowering Wall Street and take control of your financial future.