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Market Timing Viewed in Perspective

The reality about market timing is that it does not always work. Market timing will outperform buy and hold most of the time for most people. The reason is that no one company can be bought and held. Certainly not General Motors. Your portfolio holding Lehman Brothers, Delta Airlines, Washington Mutual, or Enron into bankruptcy certainly would not have made you a happy investor. You certainly could not hold all the Dot Com stocks that went out of business in the 2000 Internet crash. The Nasdaq Composite index is still 60% below its high in 2000. I’m sure that anyone holding Internet stocks wishes they used market timing.
The other reason that market timing will work is that real life requires that you use some of the money you invested for college, retirement, gifts to children, and other investment opportunities.
People will tell you that if you missed the 10 biggest days up or the 20 biggest days up how poor your performance would have been. They fail to tell you that if you missed the 10 biggest losing days in the market or the 20 biggest losing days in the market how much better your returns would be.
History shows that Buy and Hold does not work.  Buy and Hold did not work from 1898 – 1930. It didn’t work in the 25 years from 1929 to 1954. It didn’t work from 1999- 2009.
Suppose you were counting on Buy and hold returns during the last 10 years. How did those Buy and Hold returns work out for your child’s college tuition?
Market timing takes work and discipline. The best of any great market timing systems will go through short periods of underperformance. There are many excellent market timing systems that would not let you down for 18 years or 25 years.    
Even Indexes are market timers. The Dow Jones Industrial has changed their 30 components many times. Market timing? Other indexes like the S&P 500 are not the same index today as it was years ago. Companies come and go. Don’t let your money come and go.
 For more on market timing, visit