Why Market Timing Doesn't Work

by Benjamin Beck, CFP® Benjamin Beck, CFP® | February 14, 2023

You may or may not know that at Beck Bode we invite anyone – whether they be a prospective client or team member – who is evaluating an opportunity to work with us to read a book called Dancing with the Analysts, written by my mentor and veteran investor, David Mallach. The reason we ask them to do this is that the book allows readers to understand the basics of the Strategies we employ to manage people’s money, using a simple story in novel form.

Every now and then we run into folks who grumble about the time it takes to read a book.  “Is it really necessary?” they ask. Even though it’s not a requirement to read the book, most people do complete the exercise. They report back with questions, astonishment, and sometimes a look of knowing, like they finally accessed some information that was heretofore hidden from them. It provides a great basis for our conversations moving forward. 

Then there are the folks who say they don’t like the storyline, the main character, or they have some issue with the writing style. That kind of feedback also provides an opportunity for great conversations. It turns out you don’t have to like the book; you just need to read it. In addition to shedding light on our investment strategies, it offers many more lessons.


Investing Involves Risk 

I remember back in our days at Merrill Lynch, when my business partner Jim and I had first started working together, we received a referral from an existing client. Our clients said that friends of theirs had asked them what they “did with their money,” so they told them about us and our process with a strong recommendation that we be introduced to each other. 

The prospect was a man in his seventies, who came to our discovery meeting without his wife. By all measures, the first conversation with him went well, he was curious, asked good questions, and was open with his answers when we asked questions in return. Given where he was in his financial life, his goals, and his desire for his assets to produce income, Jim and I agreed that it would be more appropriate to send him the sequel to Dancing With The Analysts, which is called Walking With The Analysts. That book speaks to the Income Growth Strategy we employ here at Beck Bode. We don’t send that book out too often, but every now and then when it makes sense. 

We sent the book by mail. Back then, just like we do today, I followed up with a note to see if he received it, asking what he thought of the book. No response. I can’t remember now how much time passed, but after a couple of weeks, Jim and I received a package at Merrill Lynch. I went down to the mailroom to pick it up and noticed it was from this very same man. When I opened it, I discovered the book we had given him. Paperclipped to the front cover was a handwritten note that said, paraphrased, “Ben and Jim, I appreciate your time but I’m sending this book back to you because I don’t wish to have any more contact with your firm.” Essentially, he didn't like the storyline, and because he didn't like the story, he was rejecting the investment strategy that it contained within it!

What a miss! This guy couldn’t see past the story to learn the lesson. I’m not the smartest guy in the world, but I can tell you that all the books in the series are flawed. The dialogue is not perfect, the philosophy is oversimplified, and the storyline could certainly use improvement. All of that is true. What else is true is that in their imperfection, the books highlight human nature. One of the many things that the books highlight is that humans often have to learn lessons the hard way. Rational thinking may make sense, but humans are emotional creatures and as much as we wish we didn’t have to learn lessons the hard way, sometimes we must. 


Most Investors Lack the Discipline to Stay the Course Amid Market Volatility

Whether you read Dancing With The Analysts, Walking With The Analysts, or any of his other books, Mallach introduces us to imperfect people. He shows us an array of characters that are emotional beings – from the real estate agent to the high-flying stock jockey. However good (or not) their intentions may be, these characters are only able to see a small part of the big picture, and that is their flaw. Even Austin initially lies to Johnny and gives him a tiny portion of his fortune to manage because he is fearful and insecure. The protagonist, too, is human and thereby imperfect. The writing is imperfect, too, and that’s part of its beauty. 

So what are you going to do? Write a perfect book about perfect people who do perfect things, where nothing bad happens? It’s entirely unrealistic. Or will you acknowledge the fact that this whole life is a journey, and we have no idea what the hell will happen tomorrow…?

There’s a beautiful quote by Harry Truman, “The only thing new in the world is the history you don't know.” I think it applies so well to this conversation about imperfect people and an imperfect story. Sometimes the only way you can learn a lesson is to get burned.

 People who have been burned come to us all the time.

The book shines a line on the fact that even though we are not perfect, and life is not perfect, we can still really do well as we face into reality. By facing into reality we learn what has been known to humankind, but which we need to experience individually ourselves. When we acknowledge that we are imperfect we can acknowledge that perfection will not happen. We can acknowledge that we have no control. 


​​Market timing doesn’t work… but everybody wants to find out for themselves

There’s even a bit of relief with this acknowledgment: I don’t have to control everything, because I can’t control much. All I can do is control what I can control. At Beck Bode, that level of control shows up in our disciplined approach. We don’t know what the markets will do, but we have a tried-and-true process that, if we stick to it, can get us through rough waters, through windy weather, and through times when there is no wind to fill our sails. 

If you’re looking for a perfect book, a perfect time to get in or out of the market, or a perfect anything you have a misguided view of how the world really works. You don’t have to be perfect to have a good life and to do good. All you have to do is to be brave enough to be open to the possibility of getting better. 

And that’s something all of us brave ones can do together. 

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Ben Beck is Managing Partner & Chief Investment Officer at Beck Bode, a deliberately different wealth management firm with a unique view on investing, business and life.

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