Few financial advisors recommend market timing, calling it a “fool’s mission.”  With retail investors such a small part of the market, they cannot compete with the hedge funds and others guessing the exact top or the exact bottom of any stock, much less the market.

That is why most advisors recommend a “buy & hold” strategy, meaning that you should have a portfolio of mutual funds that is widely diversified across asset classes and is rebalanced to some pre-determined allocation on a predictable periodic basis.  That is one extreme.

Another extreme is making large investment decisions based on the breaking news.  This requires access to news quickly, a pre-determined execution plan, and the ability to trade immediately.  This is an even greater “fool’s mission.”

I prefer a middle course, which is a more fluid asset allocation of good mutual funds across the preferred asset classes, rebalanced as economic or financial conditions warrant. 

I don’t see the logic in making bets on what will come from the budget talks underway at the White House as I type this.  In April, we predicted a weak stock market until the high level of uncertainty could decrease, which we expected by Fall.  As appropriate, we’ve increased cash or shifted more to “value” stocks or bought reverse volatility ETFs for downside protection.  We will sleep well tonight!

Managing risk should reflect business conditions and the business cycle, not breaking news!