Arbitrary Timing the Market Question – Answered

Here’s a question I answered this question on Quora about timing the market:


Is it a good idea to wait about a year into a bear market before investing again – since bear markets last about 1 year in average? I know it’s pretty much impossible to time the market but still, historically didn’t that work out?


Though you may be right, There is no arbitrary time to “buy back in.”

And I also disagree with the “no way to time the market” concept. So with that said, I think you asking this question is warranted.

You don’t need to be a brilliant hedge fund manager. There are systematic ways to exit and re-enter a market that are not surgically precise all the time, but give investors an advantage.

Investors Business Daily, which is accessible to anyone (it’s $300/yr – if you’re asking about investing you have the 300) has an offense/defense indicator that is pretty good.

Furthermore, these signals can give false starts both ways so they tend to frustrate the “looking for a one click solution” type of person. And frustrate can be an understatement.

Buy and hold is easy

And it has worked for the long term (just don’t say it to Japanese stock investors). And there are periods, like the last 9 years or so, that is has outperformed other strategies.

However it won’t always outperform. And this is why people even consider other strategies. You also have current portfolio allocation models – like target funds and lifecycle funds- base on some kind of stock/bond allocation. How would they look if we went into a 10 year cycle of rising rates and poor stock performance? I will leave that thought for another answer – but it’s important to know that in real life financial planning, we don’t live forever and market returns can have a heavy influence on quality of life in retirement.

Why consider anything but buy and hold

Timing of returns is important and simply assuming the future from the past, though it has worked, is not consolation for me enough to risk retirement.

Not buying and holding is not “easy”

Over time and in certain markets, some value tilted strategies and trend driven strategies have outperformed. The reason I and others believe this is true is because strategies like these – strategies other than buy and hold – require patience and discipline, beyond which the average person is willing to exercise. But they do work and can help limit risk.

However, if you ask simplistic questions like the one above, which you could look up yourself just by reviewing historic market returns, you will miss the point.

The Point

The real point and questions to ask are:

  • what are you trying to accomplish?
  • by when?
  • are you willing to put in the work and research and be ok being wrong while learning?
  • are you trying to be a professional investing high achiever?

The answers to these types of questions can help you decide which way you should go.

Begin with the end in mind!

See more of my Quora answers HERE.

Thanks to SeniorLiving for the photo!