Here’s a long article from Philosophical Economics blog on tactical asset allocation and marketing timing. The piece is in favor of periodically shifting the allocation of a portfolio. Most things you hear and read on the subject favor a buy-and-hold approach. As I said, it’s a long piece and apparently is the first of several. It’s worth your time.
In my view, the reason that market timing is so heavily discouraged is two-fold:
(1) Market timing requires big choices, and big choices create big stress, especially when so much is at stake. Large amounts of stress usually lead to poor outcomes, not only in investing, but in everything.
(2) The most vocal practitioners of market timing tend to perform poorly as investors.
Looking at (2) specifically, why do the most vocal practitioners of market timing tend to perform poorly as investors? The answer is not that they are poor market timers per se. Rather, the answer is that they tend to always be underinvested. By nature, they’re usually more risk-averse to begin with, which is what sends them down the path of identifying problems in the market and stepping aside.