| The phrase "market timing" has been terribly | | | | since the beginning of freely traded markets. |
| misused, and misunderstood, by market | | | | It is based on the "fact" that change in the |
| commentators, analysts, traders and investors. | | | | financial markets is the one thing we can count on |
| A stock, mutual fund, commodity, is purchased | | | | to always happen. |
| with the expectation it will be worth more over | | | | Simply said, the markets will always go up and |
| "time." It is sold when the expectation is that its | | | | down, and the majority of stocks in the market |
| value will decrease over "time." Any analysis | | | | will follow the current trend. Change is inevitable! |
| intended to create a profitable return on investing, | | | | And here is the key. |
| is a form of market timing. | | | | While over the short term, financial markets can |
| The fact is, no one buys a stock expecting it will | | | | seem very chaotic. Going up one day and down |
| be worth less over time. They choose a "time" to | | | | the next, seemingly with no rhyme or reason. |
| buy it, based on fundamental or technical analysis, | | | | Over time, they trend in huge up and down |
| and expect that over "time" it will be worth more. | | | | moves, easily seen on historical charts. And those |
| Market timers usually use index mutual funds | | | | long term moves "can" be traded profitably. |
| covering one or more of many possible markets. | | | | Trend timers (trend traders) have been doing it |
| They can time the S&P 500, the Nasdaq | | | | for years. Quietly making huge sums of money |
| 100, Gold, small caps, bonds, U.S. dollar, etc. | | | | while most investors, following the emotional |
| Timers purchase the index fund with the | | | | dictates of fear and greed, lose. |
| expectation that it will increase in value. They sell | | | | Either Take Action, Or Go Along For The Ride |
| the index fund when they expect it will decrease | | | | The best tools for making entry and exit |
| in value. | | | | decisions, in order to profit during upward trends |
| Just about everyone trading the financial markets | | | | and safeguard capital during downward trends, are |
| is, in one way or another, a market timer. | | | | technical analysis tools. Fundamental analysis does |
| At FibTimer, we specialize in trading index funds, | | | | not take into account whether a stock is in a |
| as well as sector funds, exchange traded funds, | | | | down trend or up trend. It is of little use to |
| and even selected stocks which tend to trend | | | | market timers. What counts is price. Is price rising |
| well and work profitably with our timing strategies. | | | | or falling? Is it trending? Technical analysis can give |
| Tell Us Another Story | | | | us the answer. |
| At FibTimer, we believe that some of the worst | | | | As mentioned above, a simple 200 day moving |
| advice, which is given to the vast majority of | | | | average would have kept mutual fund investors |
| investors, is to select an index fund, set up an | | | | (and most individual stock investors) from losing |
| automatic deposit program to make monthly | | | | their shirts in the 2000-2002 bear market. It also |
| deposits into it, and then do nothing until you | | | | would have moved them back and had them fully |
| retire. At that time, so the logic goes, you will be | | | | invested in the subsequent advancing markets. |
| rich from the huge profits derived from your | | | | Moving averages are very simple technical analysis |
| investments. | | | | tools. |
| Buy-and-hold say the experts. Buy-and-hold say | | | | Obviously there are better tools than the 200 day |
| the advisors who profit from your investment | | | | moving average. Not everyone wants to wait until |
| purchases though commissions. Buy-and-hold say | | | | a mutual fund has dropped below its 200 day |
| most mutual fund companies who profit from | | | | average and already taken a loss. Much depends |
| load fees so numerous in variety it would take | | | | on a traders time frame. Are they aggressive, |
| too much space to list them all here. Buy-and-hold | | | | conservative, or active? Their emotional ability to |
| say TV commentators and newsletter publishers | | | | handle losses is also a factor. |
| who's clients already own the stock. | | | | Gains can also be enhanced by aggressive traders |
| Imagine for a moment an investor, following such | | | | who are willing to use bear funds during declines. |
| a buy-and-hold strategy, who planned to retire in | | | | In the case of the 2000-2002 bear market, bear |
| 2002. | | | | index funds made over 100% with FibTimer |
| Depending on the index fund, the value of his or | | | | strategies. |
| her retirement funds would be worth 50% to | | | | But regardless of a traders choice of funds, |
| 80% less after the 2000-2002 bear market. They | | | | whether or not they are aggressive, |
| are probably still working, postponing retirement | | | | conservative, or just don't want to lose their |
| and hoping the markets will get back to their | | | | shirts when the markets tank, market timing is |
| pre-bear market highs. For their sakes, we hope | | | | the only answer. You either use a methodology |
| another bear market does not devastate them | | | | that takes you out of declining markets, or you |
| again. | | | | tank right along with the declining markets (along |
| Years after that bear market, most index funds | | | | with all the other buy-and-hold investors). |
| are still far below where they were. | | | | There is little choice. Either take action or go along |
| But those mutual fund traders who spent a little | | | | for the ride. |
| time watching the markets, who used even a | | | | We are market timers here at FibTimer and have |
| simple 200 day moving average to determine | | | | been for a very long time. We have realized the |
| that their fund investments were no longer | | | | profits, and have also been through the ups and |
| performing well and exited to cash, avoided most | | | | downs of many market cycles; bull, bear and |
| of the losses and made money in money market | | | | sideways. |
| funds. | | | | Exceptional results are made by following solid, |
| Market timing doesn't work? Sure, tell us another | | | | tested, non-discretionary timing strategies for long |
| story. | | | | periods of time. Poor results are the consolidation |
| Change Is Inevitable | | | | prize for those who follow conventional wisdom, |
| Market timing is based on the "fact" that 80% of | | | | park their brains on hold for decades, and let the |
| stocks will follow the direction of the broad | | | | markets decide whether they retire rich, or |
| market. It is based on the "fact" that the | | | | unfortunately, poor. |
| markets trend over time, have been doing so | | | | |