The trouble with market timing…

Market timing is notoriously difficult. Yet investors still attempt it - with consistently poor results.

From October 2011 to March 2012 the S&P 500 rallied almost 21%, a period in which US investors redeemed tens of billions from equity funds and invested more than $90bn into fixed income portfolios. In the fourth quarter of 2011 alone, nearly $60bn was withdrawn from equity funds, while the S&P 500 returned over 11%. The question is: if poor market timing is a persistent and costly problem for investors, what can be done? The obvious answer is to attempt to curb the worst of investors’ irrational behaviour. But how? Finance theorists have advanced understanding of human and financial m...