CAN A TIMING STRATEGY BEAT A BUY AND HOLD STRATEGY?
The other strategy available is known as a timing strategy. A market timer tries to determine when to be in the market and when to be out of the market. In theory, the market timer will be out of the market when it is going down, but in the market when it is going up. As I stated earlier, part of Professor Markowitz’s research was to show that to beat the Buy and Hold strategy a market timer had to be correct 84% of the time. And this type of success rate was nearly impossible to accomplish. But after taking a careful look at Professor Markowitz’s research, I discovered something very interesting. Professor Markowitz reached his conclusion based on the assumption that a market timer is either in the stock market or is in cash. In other words, when the market timer thought that the stock market would head down, he moved his money to cash. When he thought the stock market would go up, he moved his money into stocks. Those were the only two investments considered – stocks or cash. But wha
