The large brokerage firm spends a lot of time and resources trying to convince the investor that timing the market is impossible. I believe that they do this because they don’t want to waste man power trying to teach their brokers about it. They prefer to spend their man power trying to find more clients with money to invest. After they have you hooked, they allocate the money into a “basket” of funds that are designed to perform fine over the next 20 years all the while telling you that 3 years is a “long” time frame. Once this is done, they get their commission and/or fees and start the process all over again.

You, as the client, have to have strength of guts in order to stand against the major market corrections that will occur in that 20 year time frame.

You’re sweating it out, but the broker and the brokerage firm continue to make money through their service fees from the fund companies. You on the other hand, are dealing with stagnating money. This approach doesn’t require much thought once the money is allocated. This allows the broker to go on the hunt for another client with money in their pockets. This business model is an awesome tool for brokerage companies. If you find this hard to believe, take a gander at their annual reports. The upper levels reap in millions a year, yet the firms are still earning plenty of profit. Believe it or not, this money comes from somewhere…hint, hint.

I believe that this approach doesn’t work for the average investor. Most investors aren’t going to be hanging on to a single investment for 20 years, which is what most brokerage houses base their allocations on. Also, most investors aren’t going to hold onto a portfolio that is dropping like a load of bricks. Usually, the investor ends up calling the broker and forcing them to sell. This usually occurs at a bad time for you.