Timing The Markets - Hot Topics Q&A

Q. I am a 45 year old surgeon, who plays a lot of golf - when time allows!

Recently, a new golfer has joined my club who is always saying that the best way to invest is to 'time the markets' by knowing when to sell and when to buy.
   
At the nineteenth hole he inevitably collars me or one of my friends, and proceeds to boast about how cleverly he does this time after time and makes a killing.

When I am allowed to get a word in, and state that I simply 'buy and hold', he laughs. Are their people who can do this?
  

A. We haven't come across this issue for a while.

It is true to say that some fund managers (or golfers) will say they can time markets, but there is no evidence that this can be done consistently. However there are gamblers out there who doubtless get a thrill from trying and occasionally getting it spot on, but invariably also getting their fingers burnt.

It is also a very dangerous game to play. The statistics show that the market returned 11.74% pa between 1986-2006. If you were out of the market for the best 5 days, your return would be reduced to 10.40%, and if you missed the best 25 days over this 7,300 day period, your return would be reduced to 6.72%!

Also, all major studies show that market timing accounts for only 2-3% of the returns clients experience. Whereas, Asset Allocation, which is how you split your investment between bonds property, equities and cash, counts for 90-95% of returns.
   
We are with you - buy and hold and get your Asset Allocation right. Market timing is not our 'cup of tee'!