Who is right?

The answer is easy. The one who makes the most money. Money is the score. In the PGA golf tournaments the players turn in their scorecard at the end of the round. In market trading the players turn in their financial statements at the end of the year.

For the past 10 years those who have been playing the Buy N Hold game lost 24% of their money if they had an SP500 index fund with no timing.

One technical indicator for the same period made 300% and most technicians had profits every year.

Why is there so much difference? In fact why is there any difference at all when the numbers clearly show that that Buy N Hold for the long term is a loser. Here’s why.

Market timing means that at some point the investor will sell and many during the sell period will have their money in a money market fund. Brokerage companies do not make money when a customer (investor) has his money in that type of account.

No brokerage company ever tells their brokers to sell a specific company no matter how badly the stock is doing. The company at some future date might have an IPO (Initial Public Offering) and they would remember the broker who bad-mouthed them years before. Truth doesn’t matter. The brokerage would rather have the little customer lose his money than possibly offend some company.

Economists are supposed to know all about everything financial. And they really think they do. Their long Greek formulas insulate them from reality. If their prediction is wrong they change one of the letters. If they were so smart why aren’t they all millionaires? Do not take investment advice from an economist. It is the only job I know where they can be wrong all the time and not be fired.

I call what almost all economists predict about the economy as “no timing”. The information they use is all historical and I don’t know any that use anything but linear projections. Linear predicting is based on looking straight into the past and assuming similar events will occur in the future. When I graduated from my crib I found that wasn’t true.

Any good and proven timing method (and there are many) can be researched on the Internet. Few brokers know even one. Do your research and find one that gives slow signals. Maybe once or twice a year. All the good methods had investors out of the market at the end of 2000 and the beginning of 2008.

All good timing methods have an exit strategy to protect investors’ principal. Ask your broker or fund manager what is his exit strategy. If he doesn’t have one I will bet you lost money in 2008. Don’t let it happen again.

Implement your timing program before the next market crash.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2010 Williamsburg Investment Co. All rights reserved.