Financial pundits have long intoned a mantra that timing the market is a fool’s game that cannot be won. Conventional wisdom stipulates that one should buy and hold a diversified portfolio of investments across multiple asset classes and develop the self-discipline to stick to their buy-and-hold strategy through stock market ups and downs. Moreover, conventional wisdom holds that the stock market will always go up over the long term, so eventually disciplined investors will make money.

The fallacy of conventional wisdom is the use or implication of the word “eventually” in the same sentence containing the statement “stock markets always go up over the long term.” Consider the plight of “disciplined” investors who bought in at the peak of dot-com frenzy in March 2000. They have experienced 8 years of pain waiting for their ship to come in. The NASDAQ lost nearly 80% of its value and is currently less than halfway back to its March 2000 levels. Or consider the plight of “disciplined” investors who bought at the peak of the Japanese Stock Market in 1989 when the Nikkei Stock Index reached an intraday high of 38,957.44. Almost 20 years later the Nikkei stands at less than a third of its 1989 peak. These are but two examples from scores in global stock market history.

Who has the fortitude to follow conventional wisdom and put their financial future on hold for 5, 10, 20 or more years just to get back to break-even? Just because they were unfortunate to make a sizeable investment at the market’s peak, why should they be doomed to wait out the comeback? Critics of market timing are adamant that it is impossible to time the market successfully compared to a buy-and-hold strategy over the same period.

Is it true that markets are totally random? Of course not. Markets move in cycles and there are a variety of mathematical indicators that can be used to measure these cycles.  But the problem with many market timing models is that their developers come up with algorithms that are optimized to work great with one set of historic market data from a particular time period but do not work reliably when applied to other markets or “live” time periods. This type of mistake is often referred to as “curve fitting.”

While they are few and far between, successful timing models (1) work across many different markets and time periods; (2) exhibit investment returns that are greater than or equal to long term stock market returns and (2) generate lower volatility and less risk than a buy-and-hold strategy.

Who will history show to have played the fool’s game - disciplined subscribers to proven market timing systems or determined buy-and-hold investors who stay the course regardless of portfolio drawdown and however long it takes to break even after the ravages of a protracted bear market?