Visual proof that investors are bad at timing the market

You've pointed out the exact nature of the problem. They made a killing that day, and they probably will continue to make a killing as long as naive investors believe they can beat the market (whether with timing, or security selection, or both).

The only way around this is to educate investors about things like this. Because let's be honest: those guys at Wealth Magazine (at least the ones running the place, I presume) know full well their customers are wasting their money. But the fact is, it's revenue for them, and as long as that spigot is still flowing no way are they going to bite the hand that feeds them.

It's a conflict-of-interest situation, rather than a lack of knowledge on the part of the folks selling these financial services. You can be sure the guys (and they're usually guys) at the top aren't buying funds based on advice from Bill Cosby (no offense to the actor's other skills).

And how are those folks faring who didn't time the market for the past decade? On average, their funds are at the exact same place they were in 2001.

I work for a company (who I won't mention simply because I don't want it to appear that I'm shilling for them), who has used market timing since 1972 and over the past 40 years have consistently outperformed the market using three fairly simple market timing indicators. Not by leaps and bounds - generally just a few percentage points - but still outperforming.

Thats true, but we must remember that for folks who _did_ try to time the market many will have actually had negative returns because of failing timing attempts. For example, there was a massive outflow of funds from Equities after the most recent correction (as there usually is when the market performs badly), and those people who pulled out of equities did not get to participate in the record-setting rebound that happened soon after.

Comparing performance over any given time period to some arbitrary standard (in this case, "flat" is assumed to be bad) doesn't tell the whole picture. On the flip side, there are many instances where funds performed admirably but in a time when the markets as a whole did even better. Just as I wouldn't commend a fund for gains in a bull market, docking a fund or portfolio for being "flat" when the market as a whole was flat over the given time period is unfair.

I don't doubt that your company has outperformed (after all, you have the data and I don't). But for what it's worth, was it a slam dunk to assume 40 years ago that your company would have outperformed over the subsequent 40 years? That's the problem: picking winners before they're winners. Will you outperform for another 30 years (my own investment horizon?). Hard to tell.