Market Timing and the Lure of the Forbidden

Conventional wisdom says that market timing is impossible and attempting it will probably reduce your returns. As an iconoclast I'm drawn to challenge that as a bull in the ring is drawn to a waving cape. A big reason to question this piece of conventional wisdom is that the mutual fund industry is pushing it, both on their own and through their minions in the financial press. The industry of course has a vested interest in people not timing the market because they don't like the expense of handling transactions, and if too much money moves around it could disrupt operations, though not as drastically as the poor dears would like us to believe.

Putting aside mutual fund propaganda, I've studied the argument that market timing can’t work, and I don't buy it for several reasons. The simplest reason is that I’ve seen market timing systems work astonishingly well for many years at a time. Maybe no system will work forever, but they can work well long enough to make a lot of money. I tried for years to come up with my own systems for timing indices and individual stocks and never could figure out any system that worked for holding periods over one day, so I’ve turned to professionals with better minds and computers than mine and subscribed to a timing service. I follow it absolutely for mutual funds and exchange-traded funds. I will buy and hold stocks when the timing service is bearish, but I am definitely more cautious when a sell signal is on.

My subscription terms don’t allow me to report signal changes but I will say that the timing service is currently bearish.