Investor CAFÉ

Should You Be 100% Invested or 100% in Cash?

“How many insecurities traded on Wall Street today?” — Franz Pick

“Owners of sound securities should never panic.” — J. Paul Getty

Last Friday at the Orlando MoneyShow, I debated market timer Mike Turner on the subject, “The Economist vs the Mathematician: Buy-and-Hold vs Market Timing.”

There couldn’t be a bigger difference between our two investment philosophies. Even though the market had just gone through a treacherous sell-off, I remained 100% invested in the markets, while he was almost completely in cash watching for the next trend.

Turner thinks he has discovered the Midas touch, knowing “exactly” (his word) when to get in and when to get out of the market. His technical system promises to avoid major bear markets and still take full advantage of bull markets. His sessions are always full because he plays on investors’ two greatest emotions, fear and greed.

Based on years of experience as an applied financial economist, I am highly skeptical of anyone who says he can predict the tops and bottoms of markets. The toughest challenge for any investor or money manager is to decide if a sell-off like the one we just went through is merely a correction or the beginning of a full-scale bear market.

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