Market Timing: Empirical vs. Emotional
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A Superior Approach
By applying purely empirical market timing to our ETF market proxies, Marketpolygraph overcomes the limitations inherent in both active and passive mutual fund management strategies.

Active Management Over a long period of time, the majority of actively managed equity mutual funds (a basket of stocks that are bought and sold by fund managers over time) have failed to outperform the market. Any given mutual fund that has outperformed in the past will likely not continue to do so in the future. Numerous studies by independent university researchers have demonstrated that actively managed top performing mutual funds are just as likely to underperform as outperform the market several years into the future.

Passive Management With passively managed/index mutual funds (a basket of stocks that simply follow a target index) managers have nowhere to hide in falling markets. As a result, index funds underperform when stock markets decline as index managers must stay fully invested with their weightings matching those of the target index. Although index funds perform best when the broad indexes continue to rise, they still have trouble surpassing the benchmarks. Despite rising markets from 1982 to 2000, the year 2000 memorably demonstrated that long-held gains generated by index funds were subject to significant and permanent losses as the markets fell from their highs.

A Straightforward Alternative
Marketpolygraph's market timing e-mail updates offer a compelling alternative to individual stock and mutual fund investing. The many advantages include:

Direct Performance Appraisal Marketpolygraph research is scrutinized with every single market timing e-mail: every unambiguous ETF buy and sell, short and short cover, hold, and withhold research notification can be immediately assessed for effectiveness. In contrast, performance assessment of mutual funds may prove more difficult given their quarterly (or lower) rate of reporting consistent with the industry's overwhelming buy-and-hold bias. Furthermore, our research can be benchmarked against the performance of members' mutual fund portfolios, and/or against the general market. Mutual fund investors are free to wait for improved returns at some unknown point in the future—Marketpolygraph is keen to realize them in the present.

Disciplined Leadership Metatechnical Theory entails a vigilant daily analysis of the market which in turn produces very nimble ETF market timing updates for our members. Marketpolygraph generates not only buy and close signals, but unambiguous short and short cover signals thereby maximizing the total returns available to members throughout the year given the routine occurrence of market declines. For example, since 1900, there have been over 285 "routine declines" of 5% or more in the stock market, over 90 "moderate corrections" of 10% or more, over 40 "severe corrections" of 15% or more and over 25 "bear markets" of 20% or more. After an initial buy or short research notification is issued, Marketpolygraph maintains a proactive stance by providing updates as the market warrants including additional real-time transaction opportunities, potential near-term market behavior and/or anticipated holding periods. Even in the event of a signal error, Marketpolygraph's principles-based analysis of the market every trading day ensures that such instances are readily contained—on a scale of hours-days, rather than weeks-months-years. Marketpolygraph will also from time to time suspend all buying and selling activities—fortunately, the market is consistent in its ever-changing trend.

Minimization of Overall Effort By following Marketpolygraph's unambiguous research notifications, a much simpler investment strategy unfolds. Membership in Marketpolygraph does not entail any of the following investor responsibilities: knowledge of fundamental and/or technical analysis, individual investment portfolio creation and maintenance, expertise in day trading tools and techniques, attendance in specialized seminar courses or tutorials, extensive independent readings, and/or continued vigilance of daily/quarterly industry/company news, including analyst and annual reports. The essential requirement is unchanging: a basic ability to execute simple equity trades.

Minimization of Overall Risk Marketpolygraph limits risk given the following:

  • Exhaustive, objective analysis of the market every day in strict adherence to the principles of Metatechnical Theory. Subjective analyses are completely excluded.
  • Utilization of specific ETFs that best serve as proxies for the general market. Unlike individual stocks, the inherent diversification of these ETFs shields them from the threat of wide price swings and exposure to scheduled/unscheduled news and analyst reports etc. By definition, ETF bankruptcy is altogether eliminated.
  • When warranted, the reduction of overall long or short holding times in order to limit the significant erosion of gains that were incurred by buy-and-hold approaches in the following periods: 1969-70, 1973-74, 1987, 2000-2002, 2008 and 2011.
  • Full inclusion of trading costs (including Marketpolygraph membership fees) in order to fairly present Marketpolygraph performance.

Growing Unease with Mutual Funds

"For decades, the mutual fund industry, which manages more than $13 trillion for 90 million Americans, has employed market volatility to produce profits for itself far more reliably than it has produced returns for its investors."
David F. Swensen
Chief Investment Officer
Yale University Sunday Review
August 13, 2011


"One of the great mysteries of the fund world is how so much money has been invested in terrible mutual funds."
Rob Carrick
August 21, 2008


"There was once a small number of fund managers with genuine market-beating abilities...But virtually none remain today."
Mark Hulbert
July 13, 2008


"I've said that retail mutual funds are the best way to save...No longer."
Ric Edelman (2007)
The Lies About Money
New York: Free Press


"Canadian mutual funds have the highest management expenses in the world...Over the last five years, only 10 per cent of actively managed Canadian equity funds outperformed the S&P/TSX composite index while only 14.1 per cent of U.S. equity funds outperformed the S&P 500, according to data from Standard & Poor's."
Don MacDonald
June 2, 2007


"90% of their returns tends to be beta or market exposure that could be more easily replicated through low-cost index funds or ETFs."
Jonathan Chevreau
December 20, 2006


"Most investors trail the market because they are burdened by commissions and fund expenses."
Jonathan Clements
The Wall Street Journal
June 17, 1997
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