The easiest way to tell if someone understands financial markets is to find out whether they believe they can time the market. If they believe they can predict the market, they don't know what they are talking about.
[edited - removed ending]
You are astoundingly unlikely to know more about any stock from reading the newspaper, seeing their chart on Google Finance, or consuming their quarterly reports than a team of PhDs who did nothing but study that stock for the last year, and accordingly are vanishingly unlikely to trade stocks in such a fashion that you do better than the market once you account for fees and tax impact.
It gets to why these comment threads can sometimes have people talking past each other. Someone will say "You can't time the market", and mean 'you' in the same way Patrick does, but someone else will come along and think the statement meant "no one can time the market". Then the discussion goes off into a whole rabbit hole about quant hedge funds and the like.
"You are astoundingly unlikely to create something better and more-secure from seeing a blog-post, reading some Wikipedia articles, etc. than a team of PhDs who did nothing but study mathematical theory, cryptography, and code-breaking for the last few years, and accordingly are vanishingly unlikely to create a new scheme which is more secure than existing standards once you account for performance and maintenance."
If you have a reasonable way of distributing software updates, signed-DH with an AES-based AEAD with termination detection for transport authentication, and a signed hash tree for data authentication, is going to be more secure than RANDOM_SECURITY_STANDARD.
Thankfully, there are some good well-written implementations of that (https://www.tarsnap.com/spiped.html, https://nacl.cr.yp.to), but picking a standard randomly will not get you them.
This is the comment equivalent of a loaded question. Or it's like those people who dismiss those arguing against them because of who they are rather than what their argument is.
for example, I'm heavily invested in the market but recent events are leading me to consider halfing my investment rate to be more cautious. I'm not going to take any money out or stop investing but by your def I'm "timing" the market, but really I'm "timing" my life. I don't feel confident that I can afford the risk, and I'm lowering my exposure rate.
The important point I haven't seen mentioned is that the money you put in the market should not be needed for 10 years. Not money you plan to buy a house in about 5 years, or maybe use to get married about 10 years from now. From 1929 to 1933 the DJIA went down 88% before starting to recover. Ten years is really too short a time horizon, you should have a 20 year perspective or longer. If you had invested the day before the 1929 crash and kept your money in the whole time you would not have broken even, adjusting for inflation, until 1957 - 28 years later.
Would I be market timing if instead of moving out of the market to avoid the Trump winning risk, I borrowed money to buy shares in an election market?
https://iemweb.biz.uiowa.edu/quotes/Pres16_quotes.html
If Trump wins, I triple the money I put into election shares but lose in my 401k. If Trump loses, the increase in my 401k will cover my loss in the election market.
Time in the market beats timing the market - the adage is as old as time itself. Not sure that knowing it makes you understand the markets especially well. Similarly, not sure that not knowing it says anything about you either.
And... just to go a step further. My comment included the word 'easiest' to describe how to find out someone doesn't know what they are talking about. IMO, if someone starts talking about timing the market, I know right away that they do not know what they are talking about.
Other indicators are much harder to diagnose. A self proclaimed market timer is just the easiest to identify.
I had a friend in college who played World of Warcraft. When the first expansion was announced, he invested $10,000 in Blizzard stock. His reasoning? "It's going to be awesome and sell a lot of copies!"
He didn't understand that the stock price at the time he made the purchase already reflected that information (that there was an expansion coming out soon).
That's not always the case, just making the point that rebalancing a portfolio is not necessarily the same thing as trying to time a particular market.
You could see cash as a specific kind of market as well with your definition. I'm sure there were time periods when holding cash was your best option.
Edit: Clarified that both are local.
Rebalancing is not timing the market, unless you're changing your ratios.
Let's say I want 80% equities and 20% cash. The market bombs, and now I have 50% equities and 50% cash. If I thought all the information was already priced into the market, then reallocating to get back to 80/20 makes sense. Not rebalancing would be more like timing the market, because I would be assuming that the current value doesn't represent some "true value" of the market.
> The question still remains: When would you move to other asset classes?
Somewhat regularly, but not constantly because that takes time and has transaction costs. The specific time doesn't matter.
> I'm sure there were time periods when holding cash was your best option.
Definitely, it's just very very hard to identify which periods they are until after they've happened.
People also unwittingly imply have actions where, if you asked them, they'd say they couldn't predict the market, but they'll say things like "I'm waiting for the market to cool off"