Market Timing Works
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…only if you are lucky. I was reading some back posts by one of my favorite bloggers out there, Canadian Capitalist, on a topic that I have been thinking about a bit these days. In his post he speaks about market timing and how difficult it is to do it right. Given that we just hit the anniversary for Black Monday I am sure many investors were holding their breath when buying or selling securities. I have to admit when I entered the trade to buy a small-cap ETF for my dividend portfolio the thought crossed my mind to hold off just in case it happened again. I caught myself and entered the trade anyway as I have never been able to correctly time the market in the past and this month was going to be no different.
In the book, The Little Book of Value Investing (aff) there is a very interesting quote that really blows away the case for anyone who thinks that they can time the market. It goes like this:
…between 80 – 90% of the investment returns on stocks occurs 2 – 7% of the time – Christopher H. Browne
Think about that for a moment – on the high end of the scale you need to ensure you open a position and subsequently close it on exactly the right 25.55 (365 X 7%) days of the year to get the bulk of the returns. I consider myself a pretty smart guy, but not that smart. I prefer to invest my money in good quality dividend stocks and let it ride, reinvesting those dividends quarter after quarter.
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5 Comments on this post
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FourPillars said:
Amen to that!
Mike
October 24th, 2007 at 8:55 pm -
Richard said:
Here is a very interesting blog article on market timing: http://prcycle.com/blogs/ascherbina/2009/02/22/can-investors-successfully-time-the-market/
February 22nd, 2009 at 1:13 am -
Market Timer said:
For most investors, timing won’t work, because they are using the wrong tools that are based on price. You have to analyze TIME, and that is a spectral analysis. I’ve been timing the market since 1980 when I first read Hurst’s book on market cycles.
There is a 6.5, 9, and 19 period cycle in the market these days that has been NAILING the the turns. I also nailed the March 9th bottom, and the 2007 top.
Just another point of view, but I don’t miss those big moves, because they always start with a smaller move…of which I’m a player.
November 11th, 2009 at 10:17 pm
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