Market Timing
Q: My portfolio was recently up over 17%, only to drop 5% in the past two weeks. What is the strategy to prevent the loss of our profits? Do you ever move into an all cash position?
A: Market timing is the attempt to predict the future direction of the stock market so you can move money in and out of stocks accordingly. In theory, it's brilliant—who wouldn't want to move to cash ahead of a market downturn, then buy in again at lower prices? In practice, it's exceptionally difficult to do accurately, and most of the people who try it end up poorer for the extra effort (as well as emotionally frazzled from constantly trying to predict what the market will do next). SMI's model portfolios don't make any attempt at market timing. Instead, we encourage you to determine an appropriate stock/bond allocation based on your season of life and risk tolerance, then stick with that allocation regardless of what the market is doing. It's true that at times the market can feel like a roller-coaster. But as Upgrading's short- and long-term track records show, staying fully invested during the rough patches—even extended bear markets like 2000-2002—hasn't kept the strategy from establishing an impressive track record. 
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