we can all clearly see this chart has a pattern to it. Why not be aware of it? That is all I am saying. We can't just close our eyes and compare our performance to the S&P500 and say it's impossible to time the market in the long run.
If it really is that easy, then why has no one ever been able to consistently beat the market?
With all that money at stake, and all the expertise out there, and all the improvements in technology and mathematical modeling, if it's really so simple to just "see the patterns in the charts," then why has NO ONE been able to consistenly beat the market, year after year, even by just 1%?
It's because there aren't actually any patterns. The market is efficient, and as soon as any "patterns" evince themselves, everybody flocks to it and it no longer works. I'll give you an example.
Here in Canada, the deadline for investing money in your RRSP (Canadian 401(k)) is February 28th. That's the last day you can put money in your RRSP and still deduct it from your previous year's income taxes. So every February, the banks all run advertisements encouraging people to stuff some cash in their RRSP's. Consequently, buying activity increases in February, and drops off in March. With more buyers, prices are driven up. Makes sense, right?
So a smart investor would buy a bunch of stock in January, to sell to the herd in February as prices are driven up, then wait until March when buying activity dies down (and consequently, prices recede), and then buy their shares back at a discount (or, at least, less than they sold them to the suckers for in February).
Easy enough, right?
Now, a REALLY smart investor would recognize this pattern, and know that in January, all the smart investors will be loading up on stocks in January to sell to the February lemmings. So these REALLY smart investors will actually buy a bunch of stock in December, and sell it in January to those who are buying stocks to sell to the February buyers.
But of course, the SUPER-DUPER smart investors would buy in November to sell to the December buyers who are planning to sell to the January buyers who are going to sell to the masses in February.
And so on.
My point is, once a pattern becomes known, it no longer works. In the example I just outlined above, the end result is that market activity is smoothed out over the whole year, and as it turns out, there is not actually any noticeable "spike" in prices in February.
Because the market is efficient. Timing doesn't work. Trying to outsmart the market doesn't work. Minimizing expenses and buying to the whole market (to ensure you get the market average return, thus beating 50% of all active traders/managers) works.