. . . Yrs to Go said:
By "underweighting" these asset classes I'm taking a directional (speculative) bet on the market - one that has not yet worked to my advantage. However, my experience with long-bonds (and real estate) recently has reinforced my belief that you should maintain exposure to most areas of the market because you simply can't tell where performance will emerge. I was pretty convinced 5% in the 10-yr was the top-tick in the bond market. Now we're bouncing around 4%. No reason bonds can't go to 3%.
I don't try to make calls of where market tops or bottoms are, and I'm not sure anyone really can.
And I agree that bonds could go to 3%.
But if you really were convinced that long bonds were expensive at 5% and sold some there, I hope you don't give up now and rebuy at 4%. Unless perhaps you've made a permanent decision to never market time again....
I would categorize your comments more along the lines of rebalancing, which I practice. But buying or selling asset classes (with the intention of overweighting / underweighting) based on some perception of value can't be anything other than timing. I think my Alpha in this regard is probably negative (although I did miss the tech bubble).
For others, I'd advise a fixed asset allocation, with rebalancing. To me, it isn't market timing if you really keep the same asset allocation over time. (But not all would agree)
For myself, I make big moves based on my perceptions of valuations, which I agree is a form of market timing.
The point I was trying to make earlier was that in most instances I would have been better off not tinkering with my portfolio. I imagine most other investors are in that boat along with me.
Bernstien and others agree that most people, even most smart people, hurt themselves with their timing moves, buying high and selling low.
It seems to me like your moves were decent attempts to sell high, and in the long run I'd believe there's over a 50% chance those moves would pay off.
I guess if you believe your alpha is negative, you should stop market timing. IMO one should have strong convictions in one's investing style.