Investors tend to get emotional when they see highs and lows in the market — selling on impulse rather than strategy and thinking they can time the market," says Jon Stein. As proved time and again, vigorous trading to catch the market at just the right moment is one of the worst things an investor can do. "Market timing gets a bad rap for good reason: it’s usually unsuccessful," says David Ott at Alpha Architect. "In 1966, Jack Treynor and Kay Mazuy were among the first academics to formally address whether mutual funds were successful at their market timing efforts. They analysed 57 open-ended mutual funds between 1953 and 1962, and only one fund successfully timed the market. The researchers concluded that mutual fund managers could not anticipate major market movements. Since then, variations of this study have been conducted many times that include investment clubs, pensions, newsletters, professional market timers and asset allocation funds. The results vary by study, but the ...
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