A Strategy with a Better Image Than Playing the Lottery but Only Slightly Better Odds

Having 'a system' at a casino is about as useful as having a rake during a tornado. There are periods where you feel like you are making an organized pile (of leaves or chips), but eventually the wind (or the odds) is going to blow them all way. Maybe if you knew exactly when the wind was going to start blowing and in what direction, you would have a better chance at making that neat little pile. But then again, probably not.

How much information do you need to know which way the market is going to move? And when would be the right time to capitalize on your information and get your money invested? OR, are your efforts just like pushing leaves into the wind?

It's more than likely than there is no amount of information that will give you everything you need to have a good batting average of market speculation. A 2013 Barron's article by Mark Hulbert reviewed the success rate of 100 market-timing experts to determine how close they were to predicting both the top and the bottom of the '08-'09 crash within a one month window. 96% were wrong (Barron's). These are the experts. In fact, missing only a few of the top performing days can wreak havoc on your portfolio. Missing just 10 of the best days of the S&P 500 over the 20 year period from 1995 to 2014 lowers your returns from 9.85% to 6.10% (Business Insider). Missing the best 20 lowers the return to 3.62% (Business Insider).

And even if an investor can perfect a timing strategy they would need to work quickly, as the best days happen within two weeks after the worst performing days (Business Insider). If a market timing strategy could be perfected, the amount of hours that would be needed to develop the strategy would require a person to take on the task as a full time job. For most people, this just isn't plausible.

Instead, save time by understanding your goals and creating a portfolio that meets your risk tolerance and time horizon. Focus on a long term strategy with proper diversification and rebalancing and understand the value of patience instead of chasing short term returns. No rake needed.