Market timing has been a good risk-management strategy for me in the 2022 bear market. Pros and cons of this approach
By Market Observer • November 15, 2022
Photo by Firmbee.com / UnsplashWhen I talk to financial advisors and fund managers, a common advice they give is "Do not time the market" or "Market timing does not work".
They have a financial incentive to persuade their clients that market timing is bad.
Buy-side financial advisors/asset managers earn their fees based on how much assets they manage or AUM (asset under management). If clients sell their investments and move into cash, AUM drops causing fee income to drop. Small wonder financial advisers dislike clients who time the market and move into cash. Financial advisers are financially rewarded to advise clients to make new investments monthly regularly as their salary comes in. This way, AUM will grow on a steady and stable path. Fees will follow upward. In a bear market when the client is complaining of losses, it is in the interest of the financial adviser to advise the client not to panic and hold on to
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