An alarming amount of mutual-fund managers are playing a dangerous game: timing the market. Striving to tempt investors spooked by the market crash last fall, these fund managers are promoting their ability to avoid big losses by trading in and out of the stock market at just the right time, labeling their moves “tactical allocation” for “dynamic funds”.
However, while attempting to time the market, these funds frequently deliver spotty performances, charge high fees and accumulate large trading costs.
To be fair, a study from New York University’s Stern School of Business suggested that the best-stock pickers during economic expansions also show some market-timing ability in recessions. Still, academic research raises doubts that the typical fund manager can successfully time the market in the long-term.
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