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There is a time under the sun for buying and for selling

I RECEIVED an email from a financial adviser this week. The background is that the Marcus Today newsletter has for a while been advising people to hold cash rather than the stockmarket.

I RECEIVED an email from a financial adviser this week. The background is that the Marcus Today newsletter has for a while been advising people to hold cash rather than the stockmarket.

The email went along the lines that its not so difficult to make the call to get out of a market like the current one although there are regulatory, practical and other reasons why most advisers wont do this. But making the call as to when to get back into the market is more challenging. If you can show me that market timing has produced superior results compared to something as simplistic as buy and hold over a 10-plus-year time frame Ill be shocked and very impressed.

Should you have such results you might also wish to share them with Professor Burton Malkiel from Princeton, the 10th edition of his famous book, A Random Walk down Wall Street, has just been published. When he spoke in Sydney recently one of his many astute points was that no one gets market timing right consistently. But Ill be happy to be proven wrong!

MY REPLY It is all too convenient for the financial advisory industry to buy into the concept that you cant time the market. But, of course, the industry grabs onto anything that suggests you cant because it absolves them from ever trying, from ever giving any hard advice on when.

Without that responsibility, all the industry then has to do is say it always goes up in the end and get on with selling products and bugger the clients returns.

But with an annual return of just 5.64 per cent and inflation of 4.7 per cent over the past 75 years, all the stockmarket is giving you is 1 per cent plus dividends, less dealing costs, tax, financial planner fees, fund manager fees and the index fudge. Basically a real return that averages around zero or negative.

Because of that the stockmarket is all about which stocks and when, not all stocks and all the time. And until the industry pulls its head out of the sand and looks at that issue it is going to be operating a huge lie that charges fees to a client for no return.

The global financial crisis, the current market (and those Challenger Ads) have accelerated the realisation that average returns are not enough and that you have to do better than lie in the matrix expecting historic returns to repeat. We are going backwards doing that, and the only answer is to be selective about what to be in and when.

It staggers me that all the Benjamin Graham disciples do all this great work finding the best stocks then throw up their hands and declare that they cant time the market. Well, if they truly are some of the brightest people in the industry why dont they try? Instead they continue to peddle anachronistic 1950s lines like close the market for 10 years.

Theres so much good stuff out there, they never know, they might learn something.

Why else do you think Warren Buffett is buying bonds in distressed US investment banks in a GFC hes picking stocks and timing the market. Its all there is.

And, if your professor is truly right, then close the stockmarket, because its not worth investing in.

The professor is feeding us what we want to hear and, if we buy into the idea that you cant time the market, we will not produce returns for our clients except in a bull market and we will lose them money in a falling market. And after costs, we will lose them money in the long term.

We have to do better or well retire dissatisfied that we sold a lie the whole of our lives and no one really benefited from our services.

Marcus Today may be wrong being in cash now but even if it is, our subscribers have a rare point of view and there is tremendous value in that and those who have followed it, if nothing else, have had not a single sleepless night in this very unwelcome volatility.

So, well continue trying to time the market, and I suggest you value any broker and any analyst who does that. Because, if it turns out we cant, the only option we have is to keep selling you the (lie) dream.


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