Why I’m Timing the Market and You Should Too

If you don’t know why I am timing the market then you have not opened your 401k statements lately. If you are like most people you listened to the experts and probably put your retirement money into a diversified portfolio with every intention of holding it for the long term. Well the stock market has proven that the diversification and buy and hold pundits are full of hot air. These same pundits claim timing the market is a fool’s game. I say they have lost all credibility and a substantial amount of the investor’s money, so why should we continue to listen to them.  That is why I am timing the market and you should too.

If you have lost a significant amount of your retirement funds in the stock market there are a few reasons you should try timing the market also known as market timing. Have you considered what these lack luster markets have done to your plans of retirement? Once you considered that, what will you do to get your retirement plans back on track without risking what you have left? What is timing the stock market and how will it help me? Should I continue to trust the same people that have nothing for my investment portfolio over the last ten years?

You do not need to be a financial planner to know that 10 years of flat returns is not helping you reach your retirement goals. If your investments have made you nothing in the last 10 years how much longer will you have to work before you can retire? Will you have to take a part-time job just to keep food on the table? These are real possibilities. You should take the time to find out the answers yourself. Chances are you won’t like the answers.  

What will you do to get your retirement plan back on track? You could take a chance on riskier investments and hope you get paid handsomely for the risk you have taken. However I think we both know hope and chance are not much of an investment strategy.
You could continue to listen to the same “experts” that recommended you buy and hold a diversified portfolio. Fool me once shame on you, fool me twice shame on me. You do not have to take my word for it. Look at these recent clips from major financial publication.

This is from Kiplinger’s Personal Finance August 2009
“We’re not as dead set against market timing …, but neither are we ready to throw in the towel on buy and hold. We think buy-and-hold investors could incorporate some mild forms of market timing to improve their results.”

Or this from the Wall Street Journal July 10, 2009
Failure of a Fail-Safe Strategy Sends Investors Scrambling-
”Asset allocation, a bedrock of investing for decades, appeared to fail miserably in 2008. The conviction shared by most investors — that they should spread their money across myriad asset classes to minimize losses — was shaken as nearly all markets tumbled in unison.
The financial crisis has sent many financial advisers, academics and investors back to the drawing board. Mr. Mahler told the group he was rewriting the playbook he had followed for much of his 41 years in the markets. “Asset allocation did not work,” he says. “Everything went into the abyss.””

So what is market timing? Timing the market is no holy grail. It is not about picking the exact top of the market or the exact bottom. That would very tough to do on a continuous basis. Timing the market is about using time-tested strategies to keep you in the market during long market advances and keeping you out during severe market declines. Timing the market can be done using a combination of technical, sentiment, fundamental, breadth indicators and seasonality. These indictors can give clues to when the market it riskier than average and when the additional may not justify being in the market. One added benefit to market timing is that you will not be in the market all the time. If you are not in the market you have zero stock market risk.

The ball is now in your hands. Will you continue to follow the same Wall Street gurus that have done nothing for you over the past decade? Lets not forget what they have done to your dreams of a comfortable retirement. The choice is yours, do nothing, or get serious and take an active roll in managing your retirement investments. By timing the market you can begin to repair the damage done to your investment portfolio and retirement dreams.

 

Technorati Tags: