Urban Myth: You can't time the markets

You can't time the markets, so stay fully invested with a diversified portfolio. That's the advice from financial magazines, stock brokers, and other "experts." 

Bullshit. Why in the hell would you want to ride out a bear market (an average of 37 percent decline) when you could be in cash? 

Another nice little piece of advice: The market always comes back.

Sure it does. The market turned over in late 2007 and declined 53 percent (based on the SP500 EFT SPY) and didn't recover fully until late in 2013. That is about 6 years. I don't know about you, but I don't want to wait 6 years to get back to even. If you're near retirement or actually retired, you just can't. 

Why do they tell you to be fully invested? Simply because it's in their best interests, not yours. 

Stock brokers, mutual funds, banks, EFTs, and just about anyone who makes fees off of you owning stock certainly doesn't want you to sell. For one thing, the higher the balance of the fund, the more money they make. Everyone charges fees, so if you're not invested, you're not paying fees. 

Secondly, they will advise you to re-balance your portfolio. This means selling certain stocks or funds and buying others. More fees for them. Paying fees is part of the cost of doing business, but let's not get carried away.

Another factor for funds is their position size. It takes time to move a lot of shares. As William O'Neil, founder of Investor's Business Daily, said:

"The erroneous belief that no one can time the market evolved more than 30 years ago when most mutual funds that tried it weren't successful at it. This is because they had to both sell exactly right and then get back in the market at exactly the right time, but due to their asset size problems, it took weeks to raise cash and weeks to re-enter the market. Therefore, the top management at these mutual funds imposed rules on their money managers that required to remain fully invested (95%-100% of assets)".

The average person, with average intelligence, through patience and a little study, can see trends. No, you can't pick precise moments when a bull market becomes a bear, but you can see trends. That's all you need. Whether the escalator is going up, or the escalator is doing down. 

I once had that mindset, of always being invested, until I was introduced to a financial advisor in Dallas named Ken Moraif of Money Matters. He wrote a book that I highly recommend, called Buy, Hold, and Sell. He'll even tell you in a free newsletter when to Buy, Hold or Sell.  It's easy to understand and will enlighten you. 

Also, Taylor Dart, an author I follow on Seeking Alpha, has written a pretty good piece on this subject. I highly recommend you get familiar with the concepts presented. 

Don't be afraid to sell.