Three Market Timing Strategies
by Daniel J. Traub
Does market timing work? It depends on how you measure the results, according to this market timer.
Here are three simple market timing strategies to help you understand the basics of market timing.
Market timing may be the fastest-growing investment strategy of the 1990s. In 1993, Society of Asset
Allocators and Fund Timers (SAAFTI) members reported growth rates in managed assets ranging from
25% to more than 200%. Driving that growth has been increasing awareness and visibility of professional
market timers, a continuing assault on the efficient market hypothesis and general investor uncertainty.
Today's investor faces a classic catch-22; since the last bear market in summer 1990, the best returns have
come from the stock and bond markets. Yet bear markets exist and their impact over the years has
resulted in the buy-and-hold investor spending more than 60% of the market's gains just making up lost
Does market timing work? The answer may depend on how you measure the results. Market timers
typically measure results on a risk-adjusted basis (excess return of a portfolio given the level of risk
assumed). A SAAFTI study of 25 investment advisors managing client assets with timing strategies
indicated that the advisors were successful in producing superior risk-adjusted returns. Market timers
regularly lead the rankings of investment advisors, particularly in the low-risk category.