Ep. 14 – 21 Questions (Series) – 13. Do you believe in technaical analysis or market timing?

Welcome to the Real Retirement Financial Planning Podcast. This series covers the 21 Questions to Ask Your Financial Advisor. The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser. Responses to Jason’s questions I read from other advisor websites lacked depth. “Yes,” or “no,” sometimes needs more context and a greater explanation into the whys. The goal of this series is to target the essence of what I think Jason is trying to protect you from, and help you make a better educated decision.


21 Questions to Ask Your Financial Advisor

13. Do you believe in technical analysis or market timing?  

Jason wants a “no” here. 
At MARGIN, after personally studying technical analysis, we don’t believe in it, nor in our ability to “time” the market. Technical analysis is the study of price and indicators that generate “signals” to trade into and out of the market. Price does provide an additional lens, but too much of it is viewed in hindsight through the windshield. Let’s take a look at moving averages as a “buy” or “sell” signal for example. Unfortunately, following a trigger like moving averages, can lead to selling a stock right before it rebounds, or buying a stock, and then having it retreat. Transaction costs, taxes, and additional risk are often an afterthought in a quest for something that usually isn’t consistently there: a crystal ball of outperformance.
Does the firm you work with “know” just the right time to get you in and out?
How much in taxes, transaction costs, and lost gains does it really cost you to try and “time” the market?
Do you look for just the “right” time to get in and out?