Newsletter Trackers and the Hulbert Record
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For over three decades, Mark Hulbert's Hulbert Financial Digest tracked the actual performance of hundreds of investment newsletter-based tactical models — systems that told subscribers when to be in the market and when to be out. The database, covering roughly 1980–2015, is one of the most comprehensive records of real-world tactical allocation attempts ever assembled.
The result was unambiguous: almost none of the tracked models outperformed a simple buy-and-hold strategy after costs over long periods. Some models outperformed for a year or two — enough to attract subscribers and generate credibility — but sustained outperformance was extremely rare and, when it occurred, was statistically indistinguishable from luck.
Hulbert's database also documented a consistent pattern: the models that attracted the most subscribers were those that had recently performed well, and subscribers typically arrived after the good performance rather than before it. By the time a tactical model had a large following, its best period was often behind it.
The DALBAR Investor Behaviour Gap
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DALBAR's annual Quantitative Analysis of Investor Behavior is one of the most cited studies in behavioural finance. Each year since 1994, DALBAR has compared the returns earned by the average equity fund investor against the returns of the average equity fund itself. The gap is consistent and large: the average investor earns approximately 2–3% per year less than the average fund they hold.
The cause of this gap is not fees — which are already netted from the fund's return figure. It is investor behaviour: moving money in after markets have risen and withdrawing it after markets have fallen. This is tactical allocation at the retail level — systematically executed in the wrong direction, at the wrong times, in response to news and emotion.
The DALBAR gap compounds severely over time. At 2% per year, an investor who earns 6% instead of 8% over 30 years accumulates roughly 40% less wealth.
The Forgotten Accounts Study
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Fidelity Investments conducted an internal review of client account performance from 2003 to 2013 to identify which accounts had performed best. The finding became widely reported: the best-performing accounts were either those that had been forgotten (the holder had not checked or traded the account) or belonged to clients who had died. Both categories shared one characteristic: zero transaction activity.
While this study has been questioned for methodology and may have been anecdotal, it illustrates a well-established principle in academic research: for most investors, more trading produces worse outcomes, and the illusion of control through tactical adjustment is more costly than the volatility it is designed to avoid.
The Cost Asymmetry
There is a fundamental asymmetry between market timing and passive holding. A passive investor makes no decisions and incurs minimal costs. A tactical allocator must be right on both the exit — selling before the decline — and the re-entry — buying before the recovery — to outperform. Each decision is difficult. Together, the probability of both being right is low. Charles Ellis captured this in his 1975 paper "The Loser's Game," arguing that for professional investors collectively, the attempt to outperform the market is not a winner's game — the aggregate costs of active management (research, trading, fees) are a tax on the market's return that, in aggregate, must be borne by active investors.
The evidence does not suggest that market timing is theoretically impossible. It suggests that it is practically very difficult, that costs erode most or all of any gross advantage, and that the average outcome of tactical allocation attempts is materially worse than passive holding.