I think you might be a little confused if you think anything to do with the market is a can't lose.
In the first place anytime any investment you own goes down you just lost money at least on paper -- sure recharacterize it and you don't have to pay the taxes, but if it keeps going down you eventually will have to sell it and pay the piper.
fd
Geez, are you all in FDIC insured CD's?
Your original concern was being out of the market for a day or two during the conversion or recharacterization. That doesn't have to happen. No market losses there, and no need to "time" the market.
A loss during the conversion process is a
good thing, not bad. If the market drops 50% after a Roth conversion, you recharacterize it back into a tIRA. At that point you're back to where you were with your tIRA at the beginning of the year, except it's now in two accounts. There was no extra loss due to the Roth conversion and recharacterization, just the "normal" loss you would have had in the tIRA. You immedately Roth convert different tIRA shares that are now worth 50% less. If you convert the same dollar amount as before, you now have 100% more shares in the latest Roth IRA. 100% more shares for the same taxable amount. That's a good thing. If you convert the same number of shares as before, then your tax liability for the conversion is now 50% of what it was for the first Roth conversion. Same shares in the Roth for half the tax cost. That's a good thing. You can always minimize the conversion tax hit or maximize the number of shares that are Roth converted. That's the no lose part. You can't make a giant timing mistake due to market changes. You can decide if it is worth $X to recharacterize and Roth convert again, and it's not hard.
Let's take the second scenario. Your investment goes down 5% after converting it, so you recharacterize it back to the TIRA, now the investment goes up by 20%, stuck in the TIRA - wouldn't it have been smarter to have just left it in the Roth?
fd
I think there may be a misunderstanding here that I was talking about converting all IRA assets to a Roth account in one big event. For tax purposes, this is a bad idea. I'm just converting maybe 10% of my IRA assets per year, and none of DW's yet. Some of your questions are very valid in that case.
You can Roth convert as much as you want and as many times as you want during the year, up to the total of your IRA's. However, you can't Roth convert the same shares twice within the same year. So once they're recharacterized back into a tIRA they're kind of out of commission for the year. There is no immediate tax consequences. At the end of the year you can recharacterize whichever accounts you don't actually want to leave as Roth conversions. Again, with no immediate tax consequences. April 15th of the following year you pay the tax for the Roth conversions you let stand.
So, you Roth convert by transferring shares from a tIRA into a new Roth account at the beginning of the year. The market goes down 5% and you decide to recharacterize that Roth account. First you create a second new Roth account and convert the same dollar value into it as you did for the first Roth conversion (transfer more shares than before). That gives you more shares in your second Roth account than the first even though the dollar value (and tax cost) is the same, because the market went down. The same day, or a few days later you can recharacterize the old first Roth conversion account. That old account is now a normal tIRA account. It has the same shares in it that you originally transferred from your old tIRA account, so it is like that first Roth conversion never happened, both in terms of shares in tIRA's and tax costs.
In fact, after all this, you have all the same shares you started the year with, and you haven't had to pay any transaction costs. You have been able to transfer more of those shares into a Roth account than you did at the beginning of the year. And you owe taxes only on the second Roth conversion, the same amount you would have owed for the first conversion if it hadn't been recharacterized. No share changes, other than location. No additional gains/losses and no shares bought/sold due to the conversion/recharacterization.
Now the market goes up 20% after the conversion/recharacterization and your tIRA and new Roth both go up 20% with it.