Analysis of market timing by Wim Antoons, head of Asset Management at Bank Nagelmackers, and member of the External Advisory Board Europe at Brandes Investment Partners, has been published by the Brandes Institute, reaffirming a number of widely held beliefs about the approach, but also noting some subtle differences as to the effects of when market timing is done.
Among the key findings of the research include:
Long-term odds are not in favour of marketing timing strategies
- It is more important to forecast bull markets correctly than to get bear markets correct
- A strategy of trying to invest on the ‘best days’ and avoid the ‘worst days’ would be virtually impossible to execute
- Any market timing strategy is likely to increase both trading and opportunity costs
- Mutual fund investors have tended to underperform the returns in the funds in which they invest, largely due to poor timing of buy/sell decisions
- Investors face behavioural challenges in market timing as they tend to be poor forecasters, yet are overconfident in the accuracy of their forecasts
- In general, market timing is detrimental to a sound and disciplined investment process; any tactical asset allocation (market timing) should be strictly disciplined and limited in scope.
Click here to read the full research: Brandes_Market Timing Paper 2017
For further information on the Brandes Institute, visit https://www.brandes.com/Institute