Market timing

This article (excerpts below) was on Real Clear Markets 2-Feb-10

Stock market's real return? Paltry

by Anthony Mirhaydari

I'm not saying all this just to scare you; any investment return is subject to inflation, and stocks still beat most other investments.

But these studies lead me to an alternative investment approach that does much better than the conventional buy-and-hold wisdom and helps boost returns over these meager averages. There is a better way.

Use the simple 10-month moving average of the S&P 500 to time exposure to stocks. This calls for you to buy stocks when the S&P 500 crosses over its 10-month average and sell when it crosses beneath, investing the proceeds in safe, defensive assets such as cash or bonds.


MSN Money offers a 12-month overlay (which will reduce the sensitivity of the trading signal and help prevent false triggers). You can find the landing page for the S&P 500 Index here. You don't have to check on it every day. Just spend a few minutes looking at the moving average during times of market unrest. If you want to monitor the more sensitive trigger used in the study, Faber also maintains a collection of charts on stocks, bonds, commodities and real estate at his Web site.