Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
If market timing works, why don’t you post success stories. Perhaps you can start with your portfolio including your return rates.
The entire history of the stock market is one big success story for market timing, Anonymous. The peer-reviewed research that I co-authored with Wade Pfau shows that beyond any doubt whatsoever. Market timing is price discipline, Price discipline is always a good thing. It always reduces risk while increasing return. How could it possibly ever play out differently?
The reason why we have such a strong desire to believe that market timing might not always work is that believing that takes us to a magical land where irrational exuberance doesn’t hurt. We want to believe that we can get something for nothing by creating lots of irrational exuberance. Our common sense tells us that it is not so. The peer-reviewed research tells us that it is not so. But we really, really, really want to believe, so we come up with this thing where maybe everything is the opposite of what the research and common sense shows it to be and market timing isn’t really required. Um — yeah, sure, it’s not! Stocks for the long run! Stay the course! Tune out the noise!
Believing that market timing is not required is like believing that brakes are not required on an automobile. It’s a belief that always ends in tears. But I suppose that, if you were making mountains of money selling cars without brakes, you might be inclined to block people pointing out the realities of what cars without brakes do to people from being heard on the internet.
It’s a scam, Anonymous. I mean, come on.
Rob
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