In a classic “Classics II – Another Investor’s Anthology”, there is a piece of wisdom by Benjamin Graham and David Dodd which every investor should read and re-read.

“The old rule for the ordinary investor was that he should buy sound securities when he had funds available. If he waited for lower prices he would be losing interest on his money; he might "miss his market," even if prices declined; in any case, he was turning himself into a stock trader or speculator. Much of this view retains its validity. However, the time when the investor should clearly not buy common stocks is during the upper ranges of a bull market. For most issues this is tantamount to saying that he should not buy them at prices higher than can be justified by conservative analysis-which is something of a truism. But, as we pointed out previously, this warning applies also to the pur­chase of apparent "bargain issues" when the general price level seems dangerously high.

There remain two other major questions of investment timing. The first is whether the investor should try to anticipate the movements of the market-endeavoring to buy just before an advance begins or in its early stages, and to sell at corresponding times prior to a decline. We state dogmatically at this point that it is impossible for all investors to follow timing of this sort, and that there is no reason for any typical investor to believe that he can get more dependable guidance here than the countless speculators who are chasing the same will-o'-the-wisp. Furthermore, the major consideration for the investor is not when he buys or sells, but at what prices.

This is an aspect of the "timing" philosophy that has been almost completely overlooked. The speculator will always be concerned about timing because he wants to make his profit in a hurry. But waiting for a profit is no drawback to an investor, as compared with having his money uninvested until a propitious buying "signal" is given, unless he thereby succeeds in buying at a sufficiently lower price to offset his loss of dividends. This means that timing, as such, does not benefit the in­vestor unless it coincides with pricing. Specifically, if his aim is to buy and sell repeatedly, then his timing policy must enable him to repur­chase his shares at substantially under his previous selling price. We do not believe that the popular approaches to stock-market timing-e.g., the famous Dow theory- will accomplish this for the investor. . . .

A more serious question of timing policy, in our opinion, is pre­sented by the well-defined cyclical movements of the stock market. Should the investor endeavor to confine his buying to the lower reaches of the recurrent bear markets, and correspondingly plan to sell out in the upper ranges of the recurrent bull markets? In such a policy, timing and pricing would clearly coincide-he would be buying at the right time because he would be buying at the right price, and vice versa.

No one can tell in advance how such an investment philosophy will work out in the years to come. Presumably its theoretical justification must be sought in the market's past history. If this is studied with some care, the indications it yields will not be found too encouraging.

. . . For the first half of the past 50-year period [1900-1950] both the amplitude of the price swings and their duration were regular enough to support the idea that the investor could buy his stocks at well-defined cheap levels and sell them out at well-defined dear levels, about once every five years. But since 1925 the market swings have been much less homogeneous in their successive forms, and the time interval between one low (or high) point and the next seems to have widened considerably. In fact since the bull-market peak of 1919 there have been only three subsequent peaks in 30 years-in 1929, 1937, and 1946. Since the bear-market low in 1921 there have been only two well­ defined lows-in 1932 and 1942-plus a noncharacteristic market cycle between 1938 and 1942.

The Central Value of the Dow-Jones Industrial Average

We have made some hindsight calculations of results from the use of a "central-value method" of purchasing and selling, as a group, the stocks in the Dow-Jones Industrial Average. This method involves an actual appraisal of the Dow-Jones Unit, together with the decision to buy at a fixed discount below and to sell at a fixed premium above such value. In effect, however, it is not far different from a simple effort to wait for historically indicated low levels to buy and high levels to sell. On paper the results are rather attractive. But we do not believe that they can be projected into the future with any degree of confidence, or that they promise a sufficiently large gain to justify the risks they in­volve of "missing the market" and of losing investment income for a long period of time. These risks might make the enterprise an essen­tially speculative one, and apart from the mathematical probabilities of gain or loss, it would not be well suited to the psychology of the typical investor.”