[Ed. note: This post is best consumed in combination with the comments that follow. I consider it an important personal lesson in 1) tempering the investing piety (defined as accepting a particular investing philosophy with unthinking conventional reverence) that often accompanies a financial literacy conversion experience, and 2) hubris in expressing criticism toward the efforts of a fellow blogger. I was guilty on both counts here, was called on it in a very gracious manner, and plan to leave it as a public reminder of one of my less proud moments in hopes that I'll learn from it going forward.]
The White Coat Investor podcast recently interviewed Paul Merriman, who (if I understood him correctly) described how half his investments are mostly buy and hold passive index fund investing a la Bogleheads adulterated with some funds from Dimensional Fund Advisors, while the other half are invested via his personal market timing strategy.
Mr. Merriman alluded to having accumulated far more money than he and his wife will need or use in retirement, so perhaps the half invested according to market timing is his "fun money" that allows him to regard this sum as chips he's willing to lose at the roulette wheel in Vegas.
I'd not encountered Mr. Merriman nor his investing philosophy prior to the podcast, so this was my sole impression of what appears to be a congenial man dispensing avuncular wisdom based on his experience. I don't haunt the Bogleheads forum as often as I once did thanks to the recent explosion of physician finance blogs that occupy most of my reading time.
From WCI's interview, it sounds like Mr. Merriman's encore career following retirement has been to increase financial literacy through free workshops, and he seems enthusiastic and devoted to this higher calling.
Regarding market timing: I was surprised this would get any air time from WCI. Claiming that market timing "diversifies" the risk of one's portfolio of passive index funds is inaccurate verging on dangerous. It's unwise to mix discredited investing strategies with sound ones as if they had equal legitimacy.
I don't mean to underplay that we are all humans with frailty built into our hard-wiring. We are fundamentally inconsistent beings, and there are few thought purists among us who hold up under scrutiny of our actions. But to take a bad idea and provide it a large platform seems wrong, especially when it is politely tolerated by an interviewer who knows better.
As for WCI, I suspected he was trying to be a respectful host to a genuinely nice older investor and fellow Boglehead with whom he disagrees. He asked some softball questions along the lines of, "What makes you think you can market time successfully when so many others cannot?" These skirted the fact that market timing, by all reputable published data, is a matter of luck, not skill, and with a few spectacular exceptions (Warren Buffet) there is no persistence of performance over time. [Ed.: Please refer to comments below to witness the author eat a well-earned slice of humble pie.]
Some might claim that I am being intolerant; that what we need more of in our current world is civility and discourse among people of different religious and political affiliations. I'm all for crossing lines and having thoughtful discussions with folks we disagree with.
This is not about tolerance. This is about bad information. You want to diversify risk by alternating weekends at church, mosque and synagogue just so you optimize your odds of a pleasant afterlife? Be my guest, since the data are inconclusive.
Market timing, in contrast, does not work. It's a non-controversy. [Ed.: Please refer to comments for a more nuanced assessment.]
I was all in a huff on my moral high horse when, reading through the comments section from that WCI podcast, I came across a post from Dr. Dahle referring to Jack Bogle's endorsement of market timing (which he termed Tactical Asset Allocation). Even my exalted high priest proved a heretic to his own gospel of passive indexing.
This realization gave me a fresh perspective and helped me give up my crusade to expose the unfaithful. There's plenty of room for human inconsistency in the world of investing - and if someone else chooses to market time, instead of obnoxiously protesting their strategy and risk making an enemy, I can graciously make room for them at my table and eventually hope to persuade a friend by example.