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Why do people say you can't time the market?

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Jul 6, 2008 9:27 pm


  Going against the grain is right!  I feel like that has been my whole, short career to this point.    My observations thus far:   1. Becoming "standard mutual fund broker" which seems to be how training is geared doesn't seem to make much sense to me, especially with wirehouse production goals.   What is your strategy to meet your goals?  The fact is, as anon has stated, your job is to gather assets.  Period.  How you do it is completely up to you.  It is good you have a healthy amount of skepticism.  However, I'm afraid that if you keep trying to reinvent the wheel, you won't be around to buck the system.               2. If you ask the same fact based question to multiple people in the office, you will get multple answers.   Agreed.  Here's the thing - no matter what you say about whether or not timing can work, it still is just an opinion.  In our line of work, it is expected that you have an opinion.  But opinions can be dangerous.    3.  The more successful brokers are the less dogmatic and formulaic on what approach breads success relative to the "company line" model.   The most successful reps I know have asked for more business/appointments/referrals than unsuccessful reps.  You can be pitching the least sexy product imaginable but if you pitch it enough times, you will be successful.    Cold calling seems a lot less successful when you come at a business owner with, "I'd like to setup some time to discuss your finances and retirment planning" like "standard mutual fund broker" would say.  I have found leading with a hot product, way to save time, or helping companies prevent liability has worked much better in getting appointments.   I agree.  Adding value to a business owner will always lead to more appointments.  However, I'm puzzled about your "leading with a hot product" comment.  Wouldn't that be the definition of a standard fund broker?    I have found that some people in the office will discourage you from strategies that differ from "standard mutual fund broker" like employing options strategies, structured investments, etc.  Even if 95% of what you do is mutual funds, to me these strategies make sense in some situations.     What makes sense when you first start out is doing the things that need to be done to be successful.  Namely, getting in front of enough people.  In the end, the products don't matter.  However, if you are forced to stare at a computer screen during your work day because you're employing options strategies and whatnot, you will lose sight of your primary occupation.  Your primary occupation is as a marketer.    It is important to me to try to differentiate myself from the thousands of other brokers out there.  I think that is what is going to really drive my future success and that is why I am trying to break out of the model a bit.    In addition, it has been a bloodbath for the standard mutual fund brokers in my office (mostly the new guys), especially if they don't have anything else in their arsenal.   You keep talking about differentiating yourself.  You will be different because you survived your first three years.  What products you use to do that is up to you.  Frankly, I differentiate myself because I know more about life insurance than a business owner will ever care to know.  Nobody else is able to add value using life insurance than I do.  But I know that I can be the most knowlegable person in the world about life insurance and still fail.  I know that I need to make the contacts every single day.   Keeping my head down and my numbers high by doing things my way seems to be the best path forward for me.      Well said.  It is good you have alot of different techniques and products in your back pocket, but you need people to talk to first.  Schedule 5 appointments a day and you will not fail.[/quote]    
Oct 18, 2008 8:22 pm

First, I suggest you learn the different definitions of “Efficient Market” - weak, semi-strong, and strong forms.

  2- Market timing means the overall allocation of the portfolio as it is split between bond and equitites. If you 'time' the market you are basically moving between 100% in stocks or 0% in stocks at any given time. I know this seems extremely counter intuitive, but that is the methodology financie professors use to test various market timing approaches.   3- Whether market timing works or not depends on whether you believe that equity prices follow a random walk. All the evidence suggests they in fact do so.   4- You can, however, have a 'view' that future returns will be affected by some thing or event that will impact their E(r) based solely on historical returns. Hence, deviation from a strategic allocation to meet more taqctical considertions (e.g. 'over weight' consumer non-discretionaries in a recession -- if you believe they are NOT already priced to reflect the markets expectation of a recession and the fact that every broker in the world is making the same recommendations.   In conclusion, both theory and research support the notion that market timing in the long run is a fools errand.  This doenot imply though, that active asset managers have no value added, even recognizing that the measurement of 'alpha' is more complicated than calculating the intercept term of a linear regression.