Monday, April 20, 2009

Market Timers Still on the Sidelines

Serious market timers sold completely out of stocks at some point during the recent market crash. Some have bought back in at least partially, but others remain on the sidelines with cash.

Since March 9, the TSX composite index has risen 24.7%. This represents between 2 and 3 years worth of average stock markets gains. Stock prices may yet reverse after this recent rally, but what if they don’t?

Will the market timers return when the TSX gets to 10,000? If not, then maybe 11,000? No bell is going to ring to let everyone know that the sharks are gone and it’s safe to get back in the water.

For every market timer who crows about selling high and buying back in at low prices, I’m betting that there are two or more less talkative market timers who sold low and will ultimately buy back in at higher prices. I’ll stick to my strategy of staying fully invested through the ups and downs.


  1. CC: You're right that market timers have to get it right twice to outperform the market. If the markets never again get back down to the March 9 lows, then any market timer who is still out of the market has already missed the optimum buy back date.

    1. The comment above is a reply to Canadian Capitalist's comment:

      The S&P 500 is up even more. I have no idea if this rally is for real but I read somewhere that the first uptrend of a new bull market is almost always a significant rally off the bottom. And you're right that the market timers who got out successfully might miss it. Market timers have to get two things right: getting out and getting back in. It remains to be seen if the ones who crowed about the first are successful in the second.