Mark Hulbert: Market Timing Is a Fool's Errand

Tuesday, 12 Aug 2014 11:16 AM

By Dan Weil

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Trying to time the stock market is always a tempting proposition, but rarely a winning one, says Mark Hulbert, founder of Hulbert Financial Digest.

You may think that with the S&P 500 having dropped 3 percent from its July 24 record high, now is a good time to dump your stocks.

But, "even if the market has topped out and you sidestep a decline by getting out of stocks now, the odds of long-term success still are against you," Hulbert writes in an article for MarketWatch. "Trying to time the market is by and large a losing proposition, even for the pros."

Editor’s Note:
Retire 10 Years Earlier With These 4 Stocks


Hulbert Financial Digest studied the performance of 81 stock-market timing newsletters during the last 15 years. Just 11 of them made money in the bear market of 2000 to 2002.

"These market timers have lost so much since then that, on average, they are in the red over the entire period since March 2000, having chalked up a 0.8 percent annualized loss," Hulbert writes.

If one would have used a buy-and-hold approach using the Wilshire 5000, their annualized return, including reinvested dividends, would have been an annualized 4.2 percent.

The problem, Hulbert notes, is that market timers "didn't get back into stocks during subsequent rallies until it was too late."

Some investors don't think stocks are in for an extended decline, "For the most part the market has been pretty resilient over the last week or so," Michael James, managing director of equity trading at Wedbush Securities, tells Bloomberg.

"It has been able to shrug off a lot of negatives and not go lower than it had."

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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