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CIO Blog

By Paul Hrabal, Chief Investment Officer of One Fund

January 19, 2010

Bad Timing

One of our firm’s core investment principles is that trying to guess when the market will go up or down – and buying and selling your investments based on your prediction – does not work.

If there was ever any doubt that market timing doesn’t work, the last couple years puts that question to rest.

The stock market declined throughout 2008 and into early 2009, then rose through the remainder of the year.

An investor that just held their stock investments through that rollercoaster ride typically did twice as well as those who sold as the market slumped and then bought again as the market went back up.

As a New York Times article recently pointed out:

“From March 9 [2009], when the rally began, to December 17, the S&P [500] advanced nearly 65%. But if you sold out of your stocks during the 2008 downturn and came back into the market less than a month after the rally started – say, on April 1 – you would have earned a 37% return.

“In other words, you would have missed out on 40% of your potential return.”

And it wasn't just this time around.

Over the last 30 years, if you missed the 10 best days in the stock market you would have lost over 50% of your potential return¹. That's just 0.02% of the more than 7,500 trading days in that period.

As history points out again and again, time, not timing, is the best way to capitalize on the stock market's gains.

¹ Source: S&P 500 Index, 1/1/79 - 12/31/08. Data is historical. Past performance is not a guarantee of future results.

Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus. Please read the prospectus carefully before you invest.

An investment in the Fund is subject to risk, including the possible loss of principal amount invested. Other Fund risks include asset allocation risk, foreign securities and currency risk, emerging markets risk, small-cap, mid-cap and large-cap risk, trading risk, and turnover risk that can increase Fund expenses and may decrease Fund performance. The Fund is, also, subject to the risks, which can result in higher volatility, associated with the underlying ETFs that comprise this “fund of funds”. Newly organized, actively managed Funds have no trading history and there can be no assurance that active trading markets will be developed or maintained. Brokerage costs will reduce returns. When the Fund invests in Underlying ETFs, in addition to directly bearing the expenses associated with its own operations, it will bear a pro rata portion of the Underlying ETFs’ expenses (including operating costs and management fees). Consequently, an investment in the Fund entails more direct and indirect expenses than a direct investment in the Underlying ETF.

Distributed by Foreside Fund Services, LLC.