Everything You Need To Know About Timing The Stock Market

You can't reliably time the stock market. That's all you need to know.

It is not crazy to think that over some long investing career, through many stock market/economic cycles you'll end up timing one or two exactly right. "Not crazy to think" isn't a reliable investment process.

Here's what you can do. Buy more, whether it's a function of rebalancing or with new cash after large declines. With the S&P 500 down 20%-ish, is that the bottom? I have no idea but deploying a little more after that sort of decline will look good in a couple of years or so even if it looks terrible two months from now. 

Then at some other interval down past 20% from the top, buy more. Maybe that's at 25% from the top or 30% or something else but something. Again, will down 30% be the bottom? I have no idea but buying some down 30% will look good in a couple of years or so even if it looks terrible two months from now. 

When the S&P 500 was down about 15% I reduced the extent to which client portfolios are hedged which has the same effect of buying more. By removing part of our hedge we look a little more like the stock market than we did. Still hedged, not as hedged. If we get to a decline somewhere between 25% and 30% I will do more. At this point, I'm not sure we'll get there and I am not sure if a next trade in that range would be to buy or remove more hedge. At this point I think I just need to know when to take a next step and to start thinking about what that next step might be. 

If you still believe in American capitalism, I do, then you know this will stop going down at some point and then start to work higher. If you know this, then some sort of plan to rebalance or re-equitize makes sense. The point is not that you're expecting to nail a bottom but that buying an asset that is now noticeably cheaper than it was and that will go back to where at was, certainly at the index level even not every stock comes back.

The mindset is crucial here. Not speculating on when the bottom is in, but a systematic process for handling large declines in equity prices as part of a long term investment strategy.