You really thing market timing is “not hard”? Sure it’s possible, especially in hindsight.
Who here can say that they got out of the market before the crash and then bought again at the bottom? And thinks that they can continue to do that going forward. Dollar Cost Averaging may be boring but it’s a hard strategy to mess up. And I’ve never seen studies suggesting that market timers are doing any better on average.
Head over to bogleheads.org – You’ll learn everything you need to know about index fund investing. They’ll also critique your portfolio and recommend changes.
I’m not saying picking the top and the bottom, I’m saying getting reasonably close to the top and bottom of the economic cycle. A year before Lehman went bust was when I sold out of everything and went to cash. It was obviously in bubble territory, Americans as a whole were way over leveraged. Sure, I was 6 months before the market peak, but close enough.
If you’re investing for the long term, you should have a view on the long term trends and when to sit out. Keep saving the money every month but be a little proactive about when you move from cash to an index fund.
Christ on a pogo stick, dollar cost averaging would have you buying the index the month Lehman went bust when it should have been obvious to the most obtuse investor that the index was going to get a lot worse for a long time before it got better. Again, put the money away every month and wait 6, 12 or 18 months after the Lehman crash and you would be better off.
Here’s another market truism, a stock or an index that drops 50% has to double to get you back to breakeven. Indexes generally don’t double all that quickly.
Almost every market timer study is limited to pretty short timeframes. Goes back to my original point, no one in the industry would tell you to do nothing and check back in a year and re-evaluate if it’s time to get back in. For the industry, every piece of news is a reason for a sales pitch.