Investors must learn a fundamental truth; you don’t win by doing what everyone else is doing. For many years, “everyone else” has been more or less following the exact same strategy of buy and hold. But even the staunchest buy and hold defenders are finally singing a different tune.
Unfortunately, too many people are peddling concepts as bad as (and oftentimes worse) than buy and hold. Among these is the idea of market timing. This concept of market timing is not only being hawked as a supposed cure for the buy and hold blues, but as a panacea for all investment woes.
Both logic and evidence tell us it’s impossible to time the market over long periods with any consistency. So why do so many financial advisors claim they can do the impossible, especially in light of the fact that the data proves trying to time the market actually does more harm than good?
The answer is simple and obvious. Salespeople have very different objectives than academicians. Academicians analyze facts in an effort to reveal the truth – and salespeople, well let’s just say that too many are less concerned with the truth than with their own financial bottom line.
There are only two reasons someone would try to convince you that you can make money by timing the market. They are either delusional and have convinced themselves they can do what no one else can – or they’re willing to sacrifice your security for their own greed. Admittedly, this is a strong statement, but the data doesn’t lie.