[rmrm]

My issue with this line of thought, is that while completely true, it also doesn't mean a whole lot. It is completely dependent on it being the US stock market. And during a period for that stock market that had a number of incredibly important items go it's way. Its not backfitting because it happened, but we only find it meaningful because we happened to have been here during it. For any number of reasons, including just how the universe works, that doesn't mean anything going forward.

[lotharbot]

> "It is completely dependent on it being the US stock market."

Not really. It's only dependent on stock prices inherently reflecting all of the information buyers and sellers have about their expectations, including expected risk and reward. Trying to "time" the market basically means trying to find a signal other buyers and sellers haven't figured out, or at least not enough of them to cause prices to shift accordingly.

Which isn't to say it's impossible. You can be among the first to notice something is awry. It just probably won't be "the P/E is off"; lots of people look at that. It'll be something like in the last housing bubble -- "huh, I noticed housing prices are way out of reach for median income earners, so I looked into loan practices, and apparently risky loans are being repackaged and sold off in a way that masks the risk" and then watching things like loan default rates like a hawk, and then selling as soon as loan defaults started affecting the market.

[rmrm]

My point was that entire countries economies and political systems sometimes fail. That hasn't happened in the US in the same way as it's happened elsewhere. But if it had, then "timing" the market, by which I mean selling it, would not have been suboptimal.

Maybe I define market timing differently. Holding a healthy cash position for future investment and selling investments from time to time based on either their valuation or prospects, whatever that is called, is not a bad idea.

I contrast that with being 100% invested in index funds at all times, forever. That might backtest well, but that doesn't mean it will forward test at all well.

[linkregister]

Indeed, it doesn’t even always backtest well. There are several 10 and 15 year periods where negative real growth occurred in stock market indices.

Sure, with a 30-year horizon, everything smooths. But entering a market at the wrong time has severe implications.

That said, it is far more probable that a reluctant investor misses growth opportunities by failing to invest than by investing at the wrong time.