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Computerized Investing > Third Quarter 2010

Buy-and-Hold Versus Market Timing

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by Wayne A. Thorp, CFA

The market collapse of 2008–2009 has led some investors to question the merits of “buy-and-hold” investing. This is not surprising, seeing that this was the second time in this decade the market has fallen by more than 45%. It has also led to renewed interest in ways of sidestepping such market meltdowns—namely, market timing. For proponents of Burton Malkiel’s “random walk” theory, market timing is a fool’s errand. They argue that you cannot use past market activity to predict future movements.

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