# Market Timing for the Long Term: Does this method have value?



## zac (23 July 2011)

Since the beginning of the year ive been researching madly on Investment, be it Shares, Funds, Property, Debt etc.

To give you an idea of where ive come from, in the beginning of the year I met with a few Financial Planners from varying institutions and all of them offered me to sign up for an (actively) Managed Fund.

Through my research I realised thats actually a con as such. All of the planners compared results to the Index, being the All Ords.
So I did further research and came to the conclusion over Managed Funds that an Index Fund is far superior to the Lay investor.

I further researched and realised rather than sending an application to the institution with a cheque for them to activate your fund on whatever day they happen to process it I realised ETF's (for my purpose) were better.

ie the other week I timed the market when it was at approx a 9 month low.

Anyway my question is, is it a viable and smart way every 12 mths or so (to avoid short term capital gains) when the market is bullish, after a nice run to pull the money out and sit it in a high interest bank account to wait for the market to become bearish.

i realise there is unpredicatability in that and firm rules are needed as you could withdraw too early and miss a huge bull run of a further 20% for example.

Im just keen to see others thoughts on that, as the market is never linear.
For now my take on it is, withdrawal when its close to a yearly high,
Let the market drop 10% then enter again. It may drop further ie GFC level but is this viable to gain a few extra percantage points of gain in the longterm????


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## zac (23 July 2011)

*Re: Market Timing for the LongTerm, Does this method have value?*

Ok I just realised my 1st flaw in this.
Even long term capital gains tax is going to eat this method.
The tax loss will probably be worse than any potential interest or good market timing.

BTW ive also a direct share portfolio where im trying to beat the Index.


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## ENP (23 July 2011)

*Re: Market Timing for the LongTerm, Does this method have value?*

Your example says sell on the 52 week high and buy in after a 10% drop.

So say you bought today at a theoretical price of $100. 2 months later, it is at the 52 week high of $105.

You sell because it has reached your "sell" criteria. 

However, after you sell, the market keeps rising and gets to $150. 

You wait for the 10% drop you were talking about which would be $135.

You buy back in at $135. 

You made a $5 profit which would be taxed, you had your money in the bank earning not much while the market rose to $150 so you missed out on it. 

Then you got back in at a much higher price of $135 compared to $105 from before. 

Seems silly to me...


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## Julia (23 July 2011)

*Re: Market Timing for the LongTerm, Does this method have value?*

Zac, suggest you spend around $30 in the ASF Bookshop and get "Secrets for Profiting in Bull and Bear Markets" by Stan Weinstein.
What you are describing is the start of trend following.  I think you're on the right track.
If you read this book you will see how to develop the idea further.  Good luck.


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## zac (23 July 2011)

*Re: Market Timing for the LongTerm, Does this method have value?*

Cheers Julia,
Thanks heaps


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