Valuation-Informed Indexing #621: The Purpose of Market Timing Is to Avoid Irrational Exuberance, Not to Outsmart the Market for Profit

I’ve posted Entry #621 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Purpose of Market Timing is to Avoid Irrational Exuberance, Not to Outsmart the Market for Profit.

Juicy Excerpt: But it’s hardly reasonable to rule out market timing in general because one foolish form of the practice rarely produces good results. Driving drunk is a terrible practice. We all know it. But few of us conclude that we need to give up driving as a result. We distinguish the foolish approach to driving, which truly doesn’t work, from the reasonable approach to driving, which helps us to get to places we need to get to. So it should be with market timing. Practicing long-term market timing permits us to maintain the same risk profile when stock valuations (and thus the long-term return offered by stocks) change. That always works. No one has been able to identify a time-period in U.S. history when it did not.