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Stock Market Timing

Stock market timing is a strategy of making buy or sell decisions of financial assets such as stocks, ETFs, mutual funds, etc., based on technical or fundamental analysis of market or economic conditions. Critics and proponents have passionately debated the validity of stock market timing for years. Critics say stock market timing is nothing more than a form of gambling based on pure chance because they do not believe in the possibility of predicting future financial prices.

But critics of stock market timing either slept through or never took high school physics where they taught Sir Isaac Newton's First Law of Motion. Newton's First Law of Motion states that objects in motion tend to stay in motion unless acted upon by an unbalanced force. So how does Newton's First Law of Motion relate to stock market timing?

Charles Dow, who co-founded Dow Jones & Company, founded the Wall Street Journal and created the Dow Jones Industrial Average, advocated that financial markets and economic trends follow Newton's First Law of Motion. In other words, once a trend begins, it has a tendency to stay in motion. Charles Dow went on to create a stock market timing strategy now commonly referred to as the "Dow Theory" which is followed to this day by thousands of investors. 

Like Charles Dow, we understand the relevance of Newton's First Law of Motion to stock market timing. We developed the Sage Investment Strategies Timing Model (SISTM) to recognize and take advantage of market trends in motion. Unlike most stock market timing systems, our SISTM evaluates investments across a broad spectrum of asset classes such as large cap and small cap US stocks; international and emerging market stocks; US and international real estate stocks; energy, precious metals, industrial metals, agriculture and livestock commodities; short term, intermediate term, long term, inflation protected and foreign bonds; foreign currencies; and money market funds. By combining the use of multiple asset classes with our successful stock market timing strategy, our SISTM produces superior results. Here's how we do it.

Each asset class has its own cyclical trend. While some asset classes may be uptrending, other asset classes are downtrending. Our SISTM determines which investments to buy, when to buy and when to sell, removing all emotion and doubt from the investment selection process. Moreover, our proven SISTM generates substantially better risk adjusted returns than buy-and-hold strategies and reduces portfolio volatility and huge drawdowns that accompany prolonged market downturns.

In 2008, a year of devastating losses for most stock market investors, the S&P 500 Index fell by 38.5%. Using our stock market timing SISTM, Sage Investment Strategies portfolios produced the following results:

SIS Basic Portfolio: -0.5%
SIS Diversity Portfolio: -0.9%
SIS Leveraged Diversity Portfolio: +4.1%
SIS Long & Short Portfolio: +9.6%

Depending on the strategy they followed, our subscribers enjoyed returns in 2008 that were 37.6 to 48.1 percentage points better than the S&P 500 Index.

Was this just a "lucky" year for our SISTM? You be the judge. The current results of our stock market timing strategy are displayed in a graph and table below which compares our results (the solid lines in the graph) to both the S&P 500 Index (black dashed line) and a hypothetical investor portfolio containing 60% stocks and 40% bonds (gray dashed line). 

To help you analyze our results, here are some definitions of terms used in the table above:

Standard deviation (52-Wk Std Dev) measures volatility over the past 52 weeks. The larger the number, the more volatile and risky is the investment. In the table above, notice how volatile both the S&P 500 Index and the hypothetical portfolio of 60% stocks/40% bonds are compared to the Sage Investment Strategies portfolios.

Maximum drawdown (52-Wk Max DD) measures the worst drop in value over the past 52 weeks. It represents the percent difference between the highest value and the subsequent lowest value of a portfolio or benchmark. In the table above, notice how large the drawdowns are for both benchmarks compared to the four Sage Investment Strategies portfolios.

Sharpe Ratio (52-Wk Sharpe) measures how well the return of a portfolio or benchmark compensates the investor for the risk taken. Positive numbers are better than negative numbers and higher positive numbers signify better risk-adjusted returns. In the table above, notice how much the Sharpe Ratios of the Sage Investment Strategies portfolios exceed the Sharpe Ratios for the two benchmarks, indicating significantly better risk-adjusted returns. 

While few investment newsletters publicly disclose their returns, standard deviation, maximum drawdown and Sharpe Ratio, Sage Investment Strategies is always transparent about its results. Moreover, we're so confident that our proven stock market timing strategy can help you that we're giving away a 30-day FREE trial of the Sage Investment Strategies weekly newsletter. 

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