You Can Time the Market, Badly

Can you time the market? Sure, some people are successful at market timing, but most people aren’t. Here’s a chart which shows the relative weighting of emerging market stocks.

emerging marketsRecently, fund managers are underweighting their allocations to emerging markets. Guess what sector of the markets has outperformed the S&P 500 of late? That’s right, emerging markets.

So if most seasoned, professional fund managers are underperforming the markets in their efforts to time the markets, what’s the likelihood that an individual investor will outperform the market? Not good.

A more prudent approach would be to buy a basket of index funds; establish a reasonable asset allocation amongst those funds and then rebalance your portfolio periodically. By rebalancing I mean bringing the allocation back to its original levels.

Source: The chart is courtesy of Josh Brown

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