Schannep Investment Advisors, Inc.
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Market timing is a strategy that involves moving in and out of the market periodically in an effort to miss portions of the downward moves in stocks, while being in the market for significant portions of the upward moves. In theory, market timing would allow investors to reduce their risks during downtrends in stocks and bonds, while still earning at least market rates of return on the upside.

Wall Street brokerage firms, mutual fund families and most financial advisors have maintained that market timing doesn’t work. They have relied primarily on studies that only show the negative effects of being out of the market and missing some of the “good days” when stocks move higher. Most illustrations demonstrate the effects of performance based on the timing system missing out on the ’10 Best Days’. The question should be asked, “But what happens if you miss some of the ‘bad days’ in the markets by using a market timing strategy?” Well, now we know the answer!

The S&P 500 Index performance from April of 1984 through December of 2002 showed the Index produced an average annual return of 9.66%. The table below shows the effect of missing various combinations of best and worst days in the market over that 18+ year period.
 

The S&P500 is an unmanaged index generally considered to be representative of the U.S. Stock Market.  Individuals cannot invest directly in an index.