Mark Hulbert has been evaluating investment newsletters and trading systems for over thirty years. He takes a disciplined and realistic approach to evaluating the performance that can be produced by following the "expert's" advice. So when he endorses a newsletter or trading system, it is worth considering.
On the MarketWatch website, he published a column describing a timing scheme developed by Norman Fosback, formerly of the Institute for Econometric Research and currently the editor of Fosback's Fund Forecaster. The trading program, the Seasonality Timing System, is based on and consistent with academic research findings that there are significant excess returns associated with end of the month and holiday trading. The timing program invests in the market during those periods (about 1/3 of the trading days), and is invested in money market funds the rest of thee time. Hulbert has tracked a hypothetical portfolio since the early 1980s, and reports that the portfolio would have gained 1.4% annually. The index the hypothetical portfolio invested in returned 11.1% with a buy-and-hold strategy.
I am generally skeptical of timing systems. This one has a strong academic rationale, and has been verified in real time by an independent third party applying reasonable constraints. And the performance has been exceptional. It is certainly worth considering.
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