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move your money to the safe haven of a money-market fund and away from the soon-to-fall stock market. Conversely, when an interest-rate decline is sensed, back to the market you go just in time to catch the predicted rebound. In theory this sounds great, but in practice it seldom works. The various indicators, at best, can be termed unreliable, or perhaps more important, it is our ability to select and evaluate the proper indicators that is unreliable. The advocates of market timing dispute this and offer proof of their wisdom through back-tested models. 'If you had followed our formula, here's how you would have fared over the last twenty years.' They never mention that the reason you would have fared that well is that the system they're offering was back-tested so thoroughly that it, in essence, was indeed developed to yield good performance figures over the last twenty years!
"Even if developing a consistent, accurate, market-timing formula was really possible, it wouldn't be sus-tainable for the simple reason that the market operates on a divergence of opinions—those of buyers and those of sellers. Accurate and consistent market timing would eliminate that divergence. To tell the truth, I think it's somewhat silly that market timing gets as much attention as it does when you consider the actual, not the back-tested but the actual, track record of its proponents.
"Sector-fund switching works in a similar fashion to market timing. On the advice of an expert, usually self-proclaimed, you move from a mutual fund that invests in an industry about to decline to a mutual fund that invests in one about to rise, thereby always catching the major upswings in the various industries."
"Even I can see the unlikelihood of someone possessing