BLOG: The “Market Timing” Myth

Part III of the “The Illusions of Investing” series with Paul and myself addresses one of the most widespread illusions held by investors, that of credible “market timing”, by which an individual or group can confidently schedule investing decisions for a guaranteed profit or, in effect, “predict” whether or not the market will go up or down at a particular moment. While there are always examples of well-timed investing decisions, not to mention good luck, the idea of reliably timing the market for success is both infeasible and unhealthy for investors.

Any attempt to move investments based on a prediction or “forecast” should be regarded with some suspicion. Many of us, for instance, have encountered the phrase “tactical asset allocation” in the course of our interactions with fund/asset managers, often as it is accompanied by some reference to finding just the right moment at which to get in or out of the market. However, tactical asset allocation is ultimately nothing more than just a better-testing name for the concept of predicting market behavior. As evidenced by the millions of individual investors who have chosen poorly when deciding when to enter or exit the market, the widespread practice of market timing or tactical asset allocation has contributed to the remarkably low* returns reported among individuals who invested in equity-based mutual funds over the past three-and-a-half decades. 

Professional management of an investment account should not be confused with constant activity, let alone the loftier notions of predicting market trends on a global or even national scale for consistent success. The outlets that do peddle these types of overactive strategies, whether it is the broader actively-managed mutual fund complex or the competing trading platforms that preach do-it-yourself investing, are often far more interested in wrangling business for themselves than providing proper guidance to those looking to invest. 

Time and again, the assessment of investment managers’ success with market timing remains overwhelmingly negative. Even among the most accomplished investment professionals, no evidence establishing a viable connection between attempts to time the market and consistent financial gain has been found. From every available indication, market timing just does not work. Remember, “it’s not timing the market; it’s time in the market that produces returns”.

Visit sfgwa.com today to learn more about the best practices for investing and securing your family’s financial future. You can also follow along as Cory and Paul debunk a host of popular investing myths throughout their “The Illusions of Investing” series; the complete list of installments can be found at https://sfgway.com/podcast-blog/. 

*The average individual investor invested in equity-based mutual funds only returned 4.28% from 1985-2017. 

Related Posts

  • Podcast Episode 49: Sending Your Money to College

    Listen Here EPISODE SUMMARY Parents and future parents get a little touchy when it comes to this topic. Is it your moral obligation to send your child, and pay, for their college? By sending your money off to college, you might actually be jeopardising your own balance sheet, and putting more strain on yourself as you reach old age. Your…

  • Podcast Episode 54: Speaking Bankanese with Al Davis & Bill Lawrence

    EPISODE SUMMARY Why do you need to understand the way banks speak? When it comes to your money, it’s important to be able to translate what banks are saying to you into English, and avoid being the prey in a predator system. Today, Paul invites Al Davis and Bill Lawrence to help us decode this ‘Bankanese’ language, and make sense…

  • PODCAST EPISODE 340 – Can You Really Protect Your Property Investments?

    In this episode, Paul discusses how to arrange your investments to protect your real estate portfolio. Too many investors fall into survivorship bias, seeing only the winners in real estate while ignoring those who took on too much debt and lost big. Paul explains why real estate returns often appear stronger than stocks or bonds, the risks of overreliance on…

  • PODCAST EPISODE 222: What Elon Wants to Teach Kids Can Help You!

    WHAT WAS COVERED [Tweet “Self-serving bias is thinking, ‘our failures are situational but our successes are our responsibility.’ This can negatively inform how your financial practices are mis-informing your outcomes. #YourBusinessYourWealth”] [Tweet “Naïve cynicism can actually be a profit complex, we all think there is a clear path forward to profit while others are obtuse and obscure.#YourBusinessYourWealth“] [Tweet “Psychological reactance comes…

  • PODCAST EPISODE 189: Brock Blake CEO of Lendio – Saving The American Dream

    EPISODE SUMMARY While March for many people was a month that spelled disaster, Brock Blake saw an opportunity, not to simply chase the American dream of financial gains through business, rather save it. In this episode, Paul and Cory speak with CEO of Lendio Brock Blake, on how March was the moment his company catapulted into its position and purpose….

  • PODCAST EPISODE 202 – The White Coat Window

    EPISODE SUMMARY Doctors know what is coming when they are done with school or residency: a high paying job. This moment in time has been dubbed the “White Coat Window”. However, as an entrepreneur and/or business owner, you may find yourself in this window of increased income without a plan. Listen to Paul and Cory as they discuss how to…