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 92: Confessions of a 401(k) Freak

    EPISODE SUMMARY Michael Fennessy is the Regional Sales Director for Ameritas and an expert when it comes to 401(k) plans and inspiring business owners and their employees to save for retirement. For the past 14 years Michael has helped a variety of companies from small business owners to Fortune 500 companies with implementing employee benefits. For the past four years…

  • Podcast Episode 36: Illusions of Investing Part 2 – When Track Records Don’t Matter

    LISTEN HERE EPISODE SUMMARY This week, Paul dives into another investing illusion. Be sure to check out last week’s episode on stock picking and what your typical mutual fund won’t tell you. On this episode, Paul discusses why you can not trust the track record of a mutual fund, asking what does your mutual fund have in common with someone…

  • PODCAST EPISODE 279 – Thinking Accurately About Money

    WHAT WAS COVERED [Tweet “We can talk about currency, we can talk about all kinds of different ways that money is represented. But money is two things. One, it’s a tool, and number two, it represents the value of our health. #YourBusinessYourWealth”][Tweet “I don’t know if I’ll ever have enough money to retire. So I’ll probably just work forever. Like, they…

  • PODCAST EPISODE 318 – White Coat Investor Disagrees with Ernst & Young (Part 4)

    In this final installment of our four-part deep dive, we conclude our review of White Coat Investor’s critique of the Ernst & Young whitepaper on insurance products. If you’ve stuck with us from Episode 315 through now, you know this has been a winding journey through annuities, whole life policies, investment assumptions—and plenty of eyebrow-raising takes. Today, we wrap it…

  • PODCAST EPISODE 204 – Why Pausing Can Bring You Value

    EPISODE SUMMARY Business usually doesn’t move forward if you’re not moving. However, sometimes pausing is the only way forward when you need to evaluate what direction you are going. Learn how to get value out of pausing to evaluate your goals and your aims from Paul and Cory in this episode. WHAT WAS COVERED TWEETABLES [Tweet “All of our goals…

  • PODCAST EPISODE 218: When Your Parents Didn’t Save Enough, Are Active Fund Managers Worth Their Cost?

    EPISODE SUMMARY When Actively Managed Funds Are Worth It(By Kiplinger) Judge OKs $5.4 million settlement over Transamerica retirement plan(By Des Moines Register) What to do when your parents didn’t save for retirement(By CNBC) WHAT WAS COVERED [Tweet “When you make a sweeping generalization it’s hard to be proven wrong #YourBusinessYourWealth”] [Tweet “When reading any article, you should integrate what you see…