Here is a very good question from a viewer on market timing letters:
Hello John,
I read your blog every day and I believe you have incredible market insights.
I have a question for you about market timing. I am looking in to subscribing to a market timing newsletter and I was wondering in your opinion which newsletter do you think is better Jim Rohrbach's Investment Models, Inc. or Bob Brinker's Marketimer?
Or would your opinion be to stay away from these type of newsletters all together?
Thank you for your opinion.
J. Saria
Thank you for your kind words. I work very hard at bringing investors information that they will not normally hear from Wall Street until its too late. If an investor can spot opportunities when others see disasters, and avoid train wrecks before they happen, this is undoubtedly the key to safe and successful investing.
These comments are obviously a good lead in to your question about market timing. Here's what I think:
Market timing is important, but actually plays a secondary roll to the real key to investing success which is asset allocation. Once an investor has their personalized asset allocation model in place, then market timing can play an important roll.
Here's an example. Let's assume your personalized asset allocation model (based on your goals, risk tolerance, age, and future needs) is identified as "Moderate", and calls for your investments to be weighted as follows:
25%- Cash (cd's, moneymarkets, savings, etc)
25%- Fixed Income (Bonds)
50%- Equities (Large, Mid, Small Caps & International)
I feel market timing services are the most valuable when they tell you when to reduce or increase your exposure to Equities and Fixed Income. If you can get this part right, the majority of the battle has been won.
If your asset allocation model calls for an Equity exposure of 50%, an investor needs to realize that this is the maximum amount an investor should put in the stock market. So, in essence, this 50% allocation means that 100% of the equity position is invested.
If a market timing service calls for the Equity portion of an investors portfolio to be reduced by 50%, then the investor with 50% allocated to stocks needs to reduce their 50% equity exposure to 25%.
As far as performance and investment recommendations are concerned, I would be more inclined to pick my equities from newsletters that have better track records than the timing services. For example:
Louis Navellier's "Emerging Growth" letter (www.navellieremerging.com) has gained over 4,064% in the last 20 years (or 20.5% per year, compounded), as confirmed by a leading independent newsletter rating service, The Hulbert Financial Digest.
In comparison, Bob Brinker's "Marketimer Portfolio I since 1988 reports an 18 year increase of 1,063%.
While I can't get exact performance results from Jim Rohrbach's Investment Models", for the last 20 years, my scratch pad calculations are saying that PA Mutual performance was +14.89%/ year, and the Nicholas gain was up 8.5%/ year. Since I don't know what these portfolio's are, I may be off base.
The bottom-line is this; timing services are wonderful when they tell you when to reduce/increase your exposure to the market. There may be better investment advisories like Navellier's Emerging Growth. This newsletter is for investors who invest in individual stocks.
For No- Mutual Fund, ETF, and Individual Stock investor, I am putting the final touches on my Sector Rotation newsletter.
As I was coming up with idea's for newsletter, I contacted the Navellier people to see if we could substantially outperform the market by applying the Navellier stocking picking system to Mutual Funds and ETF's. The results from our backtest were phenomenal.
The data that we received showed that dynamic results could in fact be achieved by applying the Navellier System to No-Load Funds and ETF's as well.
I am anticipating that my web based newsletter will go public within 3-6 months. I'll keep you posted.
Hope this helped.
