Market Timing  |  AUG 1999

What Market Timing Is - And Isn't by Paul A. Merriman

What Market Timing Is — And Isn’t Market timing is supposed to be great at reducing your risk while letting you profit in the bull moves, but is it all it’s cracked up to be? This market timer discusses the pros and cons. Market timing — and market timers — are often treated in the media as barely a step above snake-oil salesmen. It’s easy to become defensive in response. But confession is good for the soul. So here’s an insider’s look at what timing is — and isn’t. I could claim that market timing has a big impact on long-term returns. But it doesn’t; timing is much less important than asset allocation. In the long run, a broadly diversified buy-and-hold equity portfolio has pretty high odds of achieving a 12% compound return. Timing may improve that — but you can’t count on it. The biggest way timing adds value is by offering a smoother ride, trying to avoid or minimize interim losses that result from volatility.

by Paul A. Merriman