Private Family Wealth Management

Wednesday, September 7, 2016

"Timing" The Market

There are many academic studies that will show that over the long-term, trying to consistently time the market (buying the lows and selling the highs) is not as successful a strategy as a simple "buy and hold" over the same time period.

Agreed!

And that is the argument for the "core" of any portfolio.

It still doesn't excuse the fact that investors have parked close to $6B in an RBC balanced mutual fund with an MER of 2.36%

What am I missing?

Do people actually look at the costs associated with owning this stuff? It riles me up!

But, I digress....

There is a place in a portfolio for "timing", when it is done by the professionals:

If you have new cash to invest and a re-balancing of your portfolio concludes that a certain % of that cash needs to be invested in the S&P 500 ETF (as an example, not as a recommendation), but all the metrics suggest that it is close to its all-time highs and very expensive, why not wait? (especially if you are already exposed to that asset class).

If you are paying a fee for having your money managed, wouldn't you expect your manager / advisor to at least make that consideration? It can make a difference.

There are advantages to be had by being tactical. Not the whole portfolio, mind you, but just a certain portion.

It is what sets the good managers apart from the pack: the ability to pick their spots (to buy and to sell). It is what I would expect if I were paying a manager to manage my money. I would want some value for the fees that I pay.

So have a "core" of your portfolio fully invested, but have a portion of your portfolio that is tactically managed (by someone who knows what they are doing).