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Market Timing or Not?


Read an interesting article on “The Market Timing Myth” by Brett Arends of WSJ.

Basically, he says that investors have been persuaded and conned by the investment industry to stay invested no matter what. Because you cannot time the market and if you miss the big days when it rises, you will lose a huge percentage of the gains.

The reason is that the industry doesn’t tell you that if you miss the 10 biggest loss days, it makes it even better for your stock portfolio.

The caveat is that it doesn’t give you, the investor, reason to start day trading and try to time it day to day.

His weapon or way to try to time it is to use the Shlller PE which takes into account cyclically-adjusted prices with earnings ratio. The inflexion points of the peak is your sell signal. Reason being that earnings are artificially inflated.

And while it is not stated when you should come back, I guess looking at the graph there that you should try to get back into stocks when it is below 15.

I wonder what he thinks we should all do now? Buy or dump? What do you think?



1. The Market Timing Myth- Brett Arends. Wall Street Journal

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