Indexor

The Dangers of Timing the Market

David, I simply grin when these same old stale statistics, created by the mutual fund industry, who only earn fees as long as investors REMAIN FULLY INVESTED in their funds (no conflict of interest there), show that "It's time IN the market, not timing the market."

Or DALBAR (who make their living consulting to the mutual fund industry) updates their "If you only miss the 40 best days" argument. Punk_Ash already gave you a perfect answer. Why look at only HALF the equation? Instead of only missing the 40 BIGGEST UP days, also add to that missing the 40 BIGGEST DOWN days as well. The numbers will surprise you.

Both DALBAR and the mutual fund industry have misled the general investing public on this topic for a very long time. Even after yesterdays largest ever one-day gain of 936-points, wouldn't you (and your clients) be better off if you had sold your mutual funds in early January, as the market began selling off? Yes you both would be SUBSTANTIALLY better off.

I suggest you look up the name Mebane Faber. Find an article he published here within the last six months in which he provides a link to a study he conducted that was titled: "A Quatitative Approach to Tactical Asset Allocation." Using a very similar methodolgy, our real world experience allowed us to sidestep the carnage beginning in October of 2000 and got us back in during March of 2003. Again, we exited early in January of 2008 and remain on the sidelines until the markets tell us to return.

Please take a another step forward and get beyond the boiler plate mutual fund "educational research" that is so widely available. Think for YOURSELF and do your OWN research and you may find there really are better and safer returns available to you and your clients than from the "Buy-and-Hold" methodology that only guarantees profits to the mutual fund, in good markets AND bad. As Mebane stated in his article, it is possible to achieve "equity-like returns with bond-like volatility and drawdown" which is what most mutual fund/ETF investors strive to achieve.