"We've long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children." - Warren Buffett, 1992 Berkshire Hathaway Shareholder Letter

"Thousands of experts study overbought indicators, oversold indicators, head-and-shoulder patterns, put-call ratios, the Fed's policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can't predict the markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack...." - Peter Lynch, One Up on Wall Street

So what makes market timing so difficult? Buffett and Lynch argue pretty clearly that it's impossible to forecast short-term movements in the market. However, in this time of 24/7 media coverage, it's easy to become convinced of the "obviousness" that the market is overvalued or undervalued or maybe somewhere in between. And your gut instinct may be correct - but for a market timing strategy to work, you've got to be right twice - you've got to know when to buy AND sell.

Moreover, if your timing is the slightest bit off in terms of when you buy or sell it will cost you. For many retail investors who typically sell after the market has dropped, or buy after a down market has turned, by definition they will miss market peaks and troughs. What's the impact of this? Consider the following:

• Had you put $1,000 in the S&P 500 at the end of 1981, your stake would have grown to $25,584 (including reinvested dividends) by the end of 1998. But if you had missed the 30 best days (defined as the days with the highest percentage gain) of those 4,400 trading days, you would have ended up with $4,549, 82% less. (Source: Dow 100,000: Fact or Fiction.)
• Had you invested $1,000 in May 1970 and held for 14 years, you would have $3,000. But if you had missed the five best days, you would only have $2,000. (Source: Against the Gods: The Remarkable Story of Risk.)

When you couple the need to guess the direction of the market consistently - no mean feat in and of itself - with the need for pinpoint accuracy in timing, it's pretty clear why market timing is eschewed by most professional investors. Are there some that have been successful at timing the market? There are, but my strong sense is that there are many more professional investors who have succeeded with strategies based on value investing with a buy-and-hold approach.

Note: In giving credit where credit is due, I'd point out that the above quotes and examples are from a column written for The Motley Fool by Whitney Tilson on December 27, 1999.