| 1. I've heard timing systems sound great, but performance figures are based on theoretical models that are tuned to historical data. In reality, they switch too often. And they have to be right twice: getting out of the market and getting back in. And they don't beat buy and hold. Right?
Yes, many timing systems are guilty on all counts. Past data are used because it gives us a means to discover patterns and relationships that affect investment performance. The trap is to generalize as much as possible, so that future patterns are recognized when similar to past patterns and adaptable when not.
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