The pitfalls of market timing

In a series of famous experiments, researchers trained pigeons to peck at coloured lights by rewarding them with food pellets. The green light delivered food 60% of the time, but the red light deliverd food on only 40% of pecks. Over time, pigeons experienced the probability differences of winning food from each light, and adapted their choices. This is similar to the experience of an investor trying to decide on a month-by-month basis whether to be in or out of the market. Most developed world equity indices - for example, the MSCI World USD - post gains about 60% of months, with los...