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In Rogue Investor, I dedicate an entire chapter called "Pigs Get Slaughtered" to market timing. During periods of market uncertainty like we are currently experiencing, the subject of market timing becomes popular. Everyone wants to reap the benefits of a bull market and then sell just before the bear market. When the bear market is over, market timers can buy at the bottom and then sell again when the next bull market is over. Sounds great.

Does it work? The answer is no. In addition to being an investor, I am a scientist. Like any good scientist, I use the scientific method and require that facts support any proposed theory. About 10 years ago when I started researching investing methods, I studied the facts regarding market timing. After over a decade of research, I have not found anyone that has been able to consistently use market timing to out perform the top buy and hold investors. Bill Gates did not use market timing to make his fortune. He just started Microsoft and held onto his ownership in the company for decades. Warren Buffett did not use market timing to create his fortune. In fact, when you survey the 100 richest people in the world, none of them used market timing to create their fortunes.

The difficulty of market timing is related to several factors. First, financial markets over the short term move in reaction to unpredictable events. Second, major stock market moves occur very quickly. Miss a few weeks of the best stock market performance each year and you will vastly under perform the market averages. A landmark study completed by the University of Michigan determined that major stock market moves occur less than five percent of the time. The effect of taxes and commissions also is rarely taken into account by market timers. Unless your money is in a tax deferred account, you must pay taxes every time you sell. When taxes are taken into consideration, the more you buy and sell, the lower your overall return.

The final problem is how accurate you have to be. Let's say you are really lucky and moved your money out of the market in March 2000. When do you move it back in? Most people thought that the market bottomed after September 11, 2001. However, they were in for a surprise when the market went down even further last summer. The truth is you would have to be accurate over 70 percent of the time moving your money in and out of the market to beat a buy and hold investor over the long term. This is virtually impossible. A widely respected investor called Mark Hulbert actually took the time to track many of the so-called market timing gurus to determine if they really could beat the market as their newsletters claimed. When the smoke cleared, the results were telling. Over even small periods of time, less than 10 percent of the market timers actually beat the market, and even then it was by a very small percentage.

Stop worrying about the market and start spending your time locating quality companies that you can own forever. When you look at the richest people in the world, this is how most of them made their money.

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Company Profile: Daktronics (DAKT)
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I have discussed Daktronics before. However, because Daktronics is relatively unknown and is doing so well, I thought it would be good to discuss this company again.

Daktronics is the recognized leader in programmable scoreboards, timers, electronic highway signs and just about any other form of electronic sign. While other companies are struggling, Daktronics just reported excellent sales and earnings growth. As the cost of technology has decreased, the demand for technologically complex advertising has increased. Daktronics is filling this void by supplying electronic signs to casinos, state and federal highways, and sporting events. High schools are even starting to use Daktronics' technology for their scoreboards and timing devices.

This small company (total market value is less than $250 million) is located in South Dakota. By hiring the brightest engineering and science students from nearby South Dakota State, Daktronics is able to create a highly educated staff that is trained specifically for the company. The results have paid off. Sales and earnings growth over the past five years exceeds 20 percent and the company continues to grow rapidly. Daktronics could be one of the top growing companies over the next 10 to 20 years.

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Tip of the Month
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Look for small, rapidly growing companies with limited debt, and a good investment is usually not far behind.

Last month I asked: What are the two most important things you need to do to sell a house quickly, with almost no hassles?

     (1) Price the house to sell. Many people make the mistake of trying to price their home above market value. I have a little hobby I do from time to time. I look at all of the homes in my area for sale and find out how much each owner is asking. Because I know the market fairly well, I can tell if the price of a home is too high. Almost without fail, homes priced too high do not sell and the owner eventually must lower the price. This is after six months have gone by and the owner has had the pleasure of showing the house to about a thousand people without any buyers. Do not fall in love with your home and then mistakenly think you have a gold mine that everyone else wants. Unless your house has very unique features, buyers will just find another one if your price is too high. I have been able to sell two investment properties without a realtor by not pricing the home above market value. This saved me thousands of dollars in realtor commissions and many hours of my time. Both investment properties sold in less than a week with one small $25 newspaper ad.

     (2) Put your home up for sale in the early spring. I am always amazed at this one. Many people try and sell their homes in the fall or winter. If you do this you can expect to get less money for your home and it will take longer to sell it. Typically, people buy houses in the spring and early summer. This is because families do not want to move during the school year and no one wants to look at houses when it is cold and dreary. Sure, there are exceptions. In Florida or California, weather is not as much of a factor. But the timing of the school year is still important to many home buyers. I have used this strategy every time I have sold a home and have advised many other people to do the same. I have never been disappointed with the results and no one has ever told me they had difficulty selling their home in the spring if the price was reasonable.

The conclusion: Stack the odds in your favor by pricing your home near market value and putting it on the market in the early spring.

Next month's question: What home improvements yield the most value when you sell your home?

Disclaimer: There are no guarantees in investing. I make no assurances regarding the investment information presented in the Rogue Investing Report.

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