Lessons from Market Timing

“Timing markets is the dream of everybody. Suppose I could verify that I’m a .700 hitter in calling market turns. That’s pretty good; you’d hire me right away. But to be a good market timer, you’ve got to do it twice. What if the chances of me getting it right were independent each time? They’re not. But if they were, that’s 0.7 times 0.7. That’s less than 50-50. So, market timing is horribly difficult to do.” – Professor Robert Merton, a Nobel laureate

Instead of timing the market, focus on what you can control – diversification, asset allocation, rebalancing, and tax-efficient investments. Dimensional Fund Advisors’ third quarter market report provides a lesson on discipline and long-term perspectives.