2006-04-03T13:04:00.000-07:00

Market Timing Facts vs. Market Timing Fiction ( Mutual Funds )..thephrase market timing has been terribly misusedand
misunderstoodby market commentatorsanalyststraders and
investors.

A stockmutual fundcommodityis purchased with the
expectation it will be worth more over time. It is sold when
theexpectation is that its value will decrease over time. Any
analysis intended to create a profitable return on investingis
a form of market timing.

thefact isno one buys a stock expecting it will be worth less
over time. They choose a time to buy itbased on fundamental
or technical analysisand expect that over time it will be
worth more.

Market timers usually use index mutual funds covering one or
more of many possible markets. They can time theS&P 500the
Nasdaq 100Goldsmall capsbondsU.S. dollaretc.

Timers purchase theindex fund with theexpectation that it will
increase in value. They sell theindex fund when they expect it
will decrease in value.

Just about everyone trading thefinancial markets isin one way
or anothera market timer.

At FibTimerwe specialize in trading index fundsas well as
sector fundsexchange traded fundsand even selected stocks
which tend to trend well and work profitably with our timing
strategies.

Tell Us Another Story

At FibTimerwe believe that some of theworst advicewhich is
given to thevast majority of investorsis to select an index
fundset up an automatic deposit program to make monthly
deposits into itand then do nothing until you retire. At that
timeso thelogic goesyou will be rich from thehuge profits
derived from your investments.

Buyandhold say theexperts. Buyandhold say theadvisors who
profit from your investment purchases though commissions.
Buyandhold say most mutual fund companies who profit from load
fees so numerous in variety it would take too much space to list
them all here. Buyandhold say TV commentators and newsletter
publishers whos clients already own thestock.

Imagine for a moment an investorfollowing such a buyandhold
strategywho planned to retire in 2002.

Depending on theindex fundthevalue of his or her retirement
funds would be worth 50% to 80% less after the20002002 bear
market. They are probably still workingpostponing retirement
and hoping themarkets will get back to their prebear market
highs. For their sakeswe hope another bear market does not
devastate them again.

Andt wo years after that bear marketmost index funds are
still far below where they were.

...themarkets will always go up and downand themajority of
stocks in themarket will follow thecurrent trend. Change is
inevitable! But those mutual fund traders who spent a little
time watching themarketswho used even a simple 200 day moving
average to determine that their fund investments were no longer
performing well and exited to cashavoided most of thelosses
and made money in money market funds.

Market timing doesnt work? Suretell us another story.

Change Is Inevitable

Market timing is based on thefact that 80% of stocks will
follow thedirection of thebroad market. It is based on the
fact that themarkets trend over timehave been doing so
since thebeginning of freely traded markets.

It is based on thefact that change in thefinancial markets
is theone thing we can count on to always happen.

Simply saidthemarkets will always go up and downand the
majority of stocks in themarket will follow thecurrent trend.
Change is inevitable!

And here is thekey.

While over theshort termfinancial markets can seem very
chaotic. Going up one day and down thenextseemingly with no
rhyme or reason. Over timethey trend in huge up and down
moveseasily seen on historical charts. And those long term
moves can be traded profitably. Trend timers (trend traders)
have been doing it for years. Quietly making huge sums of money
while most investorsfollowing theemotional dictates of fear
and greedlose.

Either Take ActionOr Go Along For theRide

thebest tools for making entry and exit decisionsin order to
profit during upward trends and safeguard capital during
downward trendsare technical analysis tools. Fundamental
analysis does not take into account whether a stock is in a down
trend or up trend. It is of little use to market timers. What
counts is price. Is price rising or falling? Is it trending?
Technical analysis can give us theanswer.

As mentioned abovea simple 200 day moving average would have
kept mutual fund investors (and most individual stock investors)
from losing their shirts in the20002002 bear market. It also
would have moved them back and had them fully invested in the
subsequent advancing markets. Moving averages are very simple
technical analysis tools. You either use a methodology that
takes you out of declining marketsor you tank right along with
thedeclining markets (along with all theother buyandhold
investors).

Obviously there are better tools than the200 day moving
average. Not everyone wants to wait until a mutual fund has
dropped below its 200 day average and already taken a loss. Much
depends on a traders time frame. Are they aggressive,
conservativeor active? Their emotional ability to handle
losses is also a factor.

Gains can also be enhanced by aggressive traders who are willing
to use bear funds during declines. In thecase of the20002002
bear marketbear index funds made over 100% with FibTimer
strategies.

But regardless of a traders choice of fundswhether or not they
are aggressiveconservativeor just dont want to lose their
shirts when themarkets tankmarket timing is theonly answer.
You either use a methodology that takes you out of declining
marketsor you tank right along with thedeclining markets
(along with all theother buyandhold investors).

There is little choice. Either take action or go along for the
ride.

We are market timers here at FibTimer and have been for a very
long time. We have realized theprofitsand have also been
through theups and downs of many market cycles; bullbear and
sideways.

Exceptional results are made by following solidtested,
nondiscretionary timing strategies for long periods of time.
Poor results are theconsolidation prize for those who follow
conventional wisdompark their brains on hold for decadesand
let themarkets decide whether they retire richor
unfortunatelypoor.

About theauthor:
EditorFibTimer.com market timing services

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2006-03-14T07:30:00.000-08:00

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