Excerpted from MarketWatch
March 17, 2010
Investment Newsletter Insights
Time for Market Timers
By Ari Charney, Portfolio Analyst
Although market timers often proclaim their ability to prosper during both bull and bear markets, the Hulbert Financial Digest has found that market timing systems tend to do best during bear markets. That’s because timing systems have a tendency to go to cash, which is extraordinarily helpful during bear markets, particularly the most recent one. Unfortunately, that same tendency to go to cash can significantly reduce returns during bull markets.
As an example, Cabot China & Emerging Markets Report used its proprietary “China-Timer” to sidestep much of the recent bear market, which enabled Cabot to lose substantially less than the overall market despite the fact that it focuses on especially risky stocks. Over the trailing 12-months, however, Cabot’s performance has significantly lagged the subsequent bull market. Nevertheless, Peter Brimelow notes that Cabot’s market timing combined with its fundamental stock selection has still led it to trounce the market over the past five years.