"There is a time to plant and a time to reap" .... Ecclesiastes.

"There is a time to be aggressively invested and a time to await the time to be aggressively invested" .... BeatTheDow

The companion Feature Article "Can You Afford Not to Time the Market?" emphasizes the importance of risk management to your financial well-being, especially if you are nearing retirement or have a large nest egg to protect. We know of no better way to control risk than to respect market timing signals. By respecting market timing signals we don't mean blindly following a single signal, but rather heeding the status of a handful of different signals. We currently track 21 timing signals, all of which are in sell status as of June 2006.

Other approaches to risk management, such as applying percentage stop-loss rules, or using trailing stop-loss prices, are effective for managing individual stock holdings but are of limited value for managing mutual fund holdings. (Stocks may be sold based on "stop-loss orders" but mutual funds may not.) The use of market timing signals offers a scientific approach to risk management because the results are reproducible, easily measured and applicable to funds and large groups of stocks, such as those comprising the Dow, S & P 500, or Russell 2000 Stock Indexes.

For purposes of this article, we selected three ProFund index funds, three timing signals, and a timeframe confined to the current four-year cycle (see the Featured Article entitled "The Four Year Cycle" for the rationale behind using a four-year cycle for analyses). Our purpose was to illustrate the significant recent gains achievable from using timing signals to trade index funds (either in bull fund vs. money market fund combinations, or in bull fund/bear fund pairings). Because the timing signals employed derive from Russell 2000 Stock Index (R2K) performance, we selected a 1 beta R2K index fund (SLPIX), a 2 beta R2K index fund (UAPIX), and a -1 beta R2K index fund (SHPIX). The -2 beta R2K index fund (USPIX) was not available at the begining of our chosen timeframe, so we omitted it from our analysis.

For benchmark purposes, the table below shows the performance of the three funds, plus a money market fund, on a buy-and-hold basis (i.e., without timing). All the numbers in the table represent the value to which $100 invested on June 30, 2002, would have grown (or shrunk) by June 20, 2006, as a result of employing the various timing strategies.