World’s Worst Market Timer: A Story and A Lesson

By Justin Carbonneau Imagine this: 80 years ago, you won a prize that promised 13 payments of $10,000 to be paid out over time. You think you’ve finally got lucky, hit the big one. That is, until you read the fine print: Terms & Conditions You must invest the money in the U.S. market, as represented by the S&P 500. You can’t touch the money once invested. You can’t look at the investments’ performance until… Read More

Morningstar: You Can’t Time the Market

Morningstar’s director of investment research, Ian Tam, discusses the importance of staying invested during “critical months” in a recent video. Tam explains the “critical month” concept as the notion that an index’s performance is “often dependent on a very short period of performance history.” He offers data related to the 2000 tech bubble which shows that “had you missed the one best month of performance within that given year, your performance that year would have… Read More

Morningstar: Minding the Gap in 2019

A recent article in Morningstar reports the findings of the firm’s annual Mind the Gap study in which it evaluates the cost to investors associated with the timing of investments. “Specifically, we can say the average investor lost 45 basis points to timing over five 10-year periods ended December 2018,” the article reports, adding that while that might not sound like much, “the bottom 10% or so of bad timing might well be 5 or… Read More

Ken Fisher Says Time, Not Timing, is Key to Investment Success

In a recent article for USA Today, investment guru Ken Fisher warns that it’s impossible to miss market downturns and that “even the greatest investors are wrong maybe a third of the time.” But there’s good news, he adds: “You don’t need perfect timing to achieve marvelous returns. Time in the market beats timing the market—almost always.” He offers the example of three hypothetical investors placing $10,000 in U.S. stocks each year between 1977 and… Read More

Beware of Binary Market Indicators

By Jack Forehand (@practicalquant) —   Whenever the market declines, the news is filled with information that can lead investors to panic. That is no surprise since doom and gloom sells. Even with the small pullback we have recently had (we can’t even call it a correction since the market hasn’t declined 10%), there has been no shortage of negative headlines and calls for impending doom. I have previously written about the dangers of letting these headlines… Read More

Mark Hulbert Offers Stock Trading Secret

In a recent article for MarketWatch, financial analyst and journalist Mark Hulbert describes what he calls the “market-timing industry’s dirty little secret: bear markets and increased volatility are good for business.” The explanation, according to Hulbert, is that it’s difficult to add value when the market is going straight up. “Who needs a market timer during conditions like those?” he queries. But when volatility kicks in and investors get nervous, subscriptions to advisory services tend… Read More

Investors Spooked by the Market Tumble Should “Buy and Hold”

Highlighting the fact that future stock market movements are “unknowable” and that trying to predict them can be “dangerous,” a recent Wall Street Journal article quotes the legendary investor Peter Lynch: “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” The article says research data shows how individual investors lose over a “percentage point a year through timing errors,” and adds… Read More

You Can’t Time The Market – But Many People Should

By Jack Forehand, CFA (@practicalquant) — There are few topics that are more controversial in the stock market than market timing. Most long-term investors will tell you that market timing is impossible. Given that in order to time the market, you not only need to know when to get out, but also when to get back in, you can see why they think that. And on top of that, many market declines are just corrections… Read More

Questions to Answer Before Dashing into Cash

Keeping some cash on hand might be a good idea if you’re going to need it soon, say many financial experts, but it could be a bad strategy for long-term investors reacting to fear of a market correction. This according to a recent article in The Wall Street Journal. The question is, the article points out, how much cash to reserve and where to put it? A move to cash, the article argues, should be… Read More

Market Timing, Even by Experts, Pays Off Only Modestly

The advice typically given to investors is to “ignore the level of the stock market and never attempt to time it. Meanwhile, “writes Bloomberg columnist Nir Kaissar, “the industry’s brightest lights are doing just the opposite.” Kaissar cites participants in the recent CNBC Institutional Investor Delivering Alpha Conference who argue that a market correction is in the offing. These include Paul Tudor Jones, Jeffrey Gundlach, and Howard Marks, to name a few. “So, which is… Read More