A case study in market timing

I’ve been getting a lot of calls in the last week or so from clients who are spooked by the IMF report that said there could be a sharp reprice if AI fails to justify the hype. They want to move to cash for the moment and get back in later.

Firstly, we don’t know if there is an AI bubble. Yes, prices are high but that is why we invest, for the value tomorrow to be higher than the price today. That is how we make the gains. Secondly, engaging in market timing is an extremely difficult thing to do.

You need to be lucky twice

You got to get out of the market at the right time. You don’t want to be sitting in cash while the market continues to surge. What if you admit you made a mistake and you buy back in high only for the markets to fall soon afterwards.

If you do get out, when do you get back in? No one rings a bell when the markets hit the bottom. It is likely that there will be a surge, a dip again and another surge. How do you know if the surge is going to be sustained of if there is going to be a crash again? The markets showed signs of recovery a couple of times in 2008 before Lehman Brothers declared for bankruptcy in September 2008 and the markets fell a further -38%!

A real life example of timing the market

This is a real life case of trying to time the market and switching in and out of funds. Mark started investing in the S&P 500 in 2017. His pension payments were ad hoc and didn’t have a pattern. If there was spare cash in his business account, he threw it into his pension. After a number of years investing, he then made the following trades:

1. November 2023: Sold his entire position
2. January 2024: Added more money to his account, left it in cash
3. May 2024: Bought back into the market
4. June 2024: Sold his position
5. July 2024: Added more money to his account, left it in cash
6. September 2024: Bought back into the market
7. January 2025: Added more money to his account, left it in cash
8. January 2025: Sold his position, bought into a leveraged NASDAQ ETF
9. September 2025: Sold his position
10. October 2025: Bought back into the leveraged NASDAQ ETF

So how is Mark doing? He’s doing well. He’s up 68% overall on his investment to date. But…

…if he had just invested in the S&P 500 and made no switches, he would be up 80%.

It is extremely difficult to time the market. We don’t know the future. While we know that there will be a crash at some point in the future, we don’t know when it will be, what will cause it, how bad it will be or how long it will last. If you don’t need the money for a while yet, just keep on buying quality assets and don’t worry about the ups and downs of the market, you will make good returns in the long run by doing nothing.

Steven Barrett

03 November 2025