Buy and hold v.s. market timing

The last few weeks have been painful for me–being on the sidelines while the market stages an impressive rally.   I don’t expect to call things right all the time, and there are worse things that just not making money for a month, but it’s not fun missing the call.

In the typical buy and hold portfolio things have a different feel.   No position is a large percentage of your total assets, assets are selected specifically so that don’t (at least theoretically) correlate with each other,  there is usually something good to say at the end of each day.  After a day like today, you might say that you have exceeded the January highs,  on a down market day you might console yourself that at least some of your money is in bonds.  But the bottom line is that you have mush.  You’ll be lucky to match the market on good years and you are still exposed to large downsides during the bad years.  In spite of a extended bull stretch SPY is just a few points where we were in late January–not exactly a stellar return so far in 2010 for buy and hold.

As it now stands, since I got out before the late January blow-off and I participated in half of this recent run-up  I’m still ahead of no-timing investing.

I still can’t commit to this market going up much in the next few weeks.  Volume has been light, there have been no recent corrections,  the economy is taking its time recovering.  If we track 2004 as we have been, we will see a correction in the next few weeks.   It seems that more patience is required.