Book: Yes, you can time the market

Over the weekend, I was reading the book "Yes, You can time the market" by Ben Stein and Phil DeMuth. It is quite an interesting book to read, especially the concept presented in the book. The authors are trying to prove that you can actually time the market, despite the conventional wisdom. Don't get it wrong. It is about time the market on long term basis, not short term.

The analysis presented is interesting. First, take the S&P 500 index as basis, chat the ratio like PE or dividend yield against its 15 years moving average. Using lump sum investment and dollar cost averaging approach, compare buying regardless of the market timing against buy the stock when particular point fall below the moving average. It shows market timing actually work(when buying the market, not individual stock).

I think the basic principal is quite obvious. Buying good stock is not enough, you have to buy it cheap enough, in order to enjoy good return on your capital. By combining the buy low and long term compounding strategy, it actually make more return than just buy and hold regardless of buying time.