Alternatives to Market Timing

Four ways to fiddle without making all-or-nothing bets.

As hard as it is to time markets consistently well enough to make it worthwhile, we are sympathetic to the idea that there must be a way to mitigate losses, such as the steep, 55% decline in Standard & Poor's 500-stock index between October 2007 and March 2009. The question is whether you can take advantage of timing strategies without betting the farm on all-or-nothing moves into and out of the market. There are several options:

Tactical asset allocation. Asset allocators shift money among stocks, bonds, cash and other investments according to their view of market conditions. They tend to make incremental adjustments rather than all-in or all-out moves. Some base their allocations on moving averages and some on so-called technical indicators. Others use fundamental measures, such as dividend yields and price-earnings ratios. Unfortunately, this strategy is available in just a handful of no-load mutual funds, none with a particularly good track record.

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