Creating & Preserving Wealth

The Time Table Investor

How patience drives value, and other boring concepts of investment success

by Joel Litman

Professor Joel Litman is Chief Investment Strategist at Valens Research, a boutique data and consulting firm for Institutional Investors. He is the Founder of Altimetry Research, which provides data and publications to individuals and advisors. Visit

Allocating investments based on the “100 minus your age” rule? You’re likely leaving money on the table. Rules of thumb like this leave most with significant portfolio underperformance. Concepts like “conservative” or “aggressive” when applied to investors also make for terrible asset allocation decisions. The fact is, the concept of “risk” needs to be time-delimited and focused on not losing money.

With that in mind, over long periods of time, staying in money markets is incredibly risky. Over very short periods of time, equities are. One can certainly find relatively short periods of time that gold, bonds, or T-bills may outperform. However, nothing grows wealth like business ownership. The performance of equity returns aren’t even on the same planet as the others. Millions of dollars made in equities versus thousands or only hundreds in the common alternatives.

Investors need more than rules of thumb

Registered Investment Advisors (“RIAs”) make a living helping individuals invest with more refined strategies and far more effective strategies for asset allocation. Our work with RIAs has provided us some important insights into the world of this kind of advisory.

What do they tell us? Of course, investment allocation across categories is more important than the individual securities within each category. However, when it comes to timing those investments against the market, the world is a challenging place.

RIAs realize that the financial press is paid for sensationalism. People don’t click on websites that say, “stay the course, keep dollar-cost averaging.” Instead, they respond to every “market bubble” headline when the markets are up, and every “market collapse” headline when markets suffer a down day or month.

How many clients demanded their cash at the end of the rocky market period in 2018, just before the markets shot up 30% in 2019? And please don’t get me started on that Shiller cyclical P/E calculation that has been screaming “Red Alert -Market Expensive” for four or five years.

The financial press is no friend to the financial advisor. Fear and greed sell headlines… and it makes the job of the RIA frustrating to say the least.

We began providing our institutional research to RIAs precisely because it is macroeconomic signal-based, not opinion-based or headline-based. A hedge fund managing billions of dollars can afford to put these signals together and avoid the financial press. That’s not easy for an advisor guiding a hundred million dollars of funds for families or community organizations.

The larger and better run institutional investors have access to uncanny signals for maximizing the bull markets and hedging against the bears. Those signals are quite boring. They don’t generate headlines. And so, they wouldn’t make it into the financial press, even if the press had the wherewithal to compute them.

The methods we walk through here come directly from the best of the institutional investors. It’s boring. It’s like watching paint dry. However it works, it’s powerful, and it’s backed by 200 years of market cycle research around the world by hundreds of CPAs and CFAs (Certified Public Accountants and Chartered Financial Analyst charterholders) who can compute the signals necessary.

The Timetable Investing strategy is based on the simple idea that patience drives value. The longer one can wait, the longer equities have to outperform everything else...

For advisors of families and individuals, we call this Timetable Investing.

What is Timetable Investing

The Timetable Investing strategy is based on the simple idea that patience drives value. The longer one can wait, the longer equities have to outperform everything else. The shorter timing one has, the more they should rely on less volatile, but less powerful, asset classes.

This is needs-based analysis and can only be created specific to the particular financial needs of the family, individual or organization.

Four separate “time buckets” drive the entire strategy:

0-2 YR Bucket: Money Needed To Spend in the Next 0-2 Years
This includes an investor’s “safety net” and other necessary expenses, over and above income levels, within the next two years. The fact is, if a baby is on the way in six months or a wedding in a year and a half, the money for this simply cannot be in the stock market. Time is not on one’s side in this case.

Capital preservation is king for the 0-2 year bucket. Money markets and T-bills, where one is likely losing to inflation, unfortunately, is what makes sense. Even bond funds have shown historical volatility that can punish one severely for this near-term need of money.

2-5 YR Bucket: Money Needed To Spend in the Next 2-5 Years
If you’re going to help with your daughter’s freshman year tuition, and she’s a sophomore in high school, that’s this bucket. Any spending over income levels planned for two to five years from now goes into this 2-5 YR category.

Bond funds serve this bucket better. The timing of the spend allows for a better return than the inflation-levels of money markets. Unfortunately, less than five years is not enough to take advantage of the incredible returns of stocks… given their equally serious five-year or less track record of volatility.

5-10 YR Bucket: Money Needed To Spend in the Next 5-10 Years
The third bucket is dedicated to mid-term financing goals. This is money that is reserved for spending five to ten years from now. If you know you’ll be buying a house in 8 years, that money is in this bucket. And this bucket is best served by a fifty-fifty blend of stocks and bonds.

10+ YR Bucket: Money Not Needed For At Least 10 Years
The goal of every investor is to get as much money into this bucket as possible. That’s why this methodology is so individualized. If one has fewer near-term spending needs, one has more opportunity to invest in the ownership of businesses through the incredibly efficient and effective stock market.

This money should be 100% in stocks. Ten years is enough time to suffer the ups and downs of the market and benefit from sharing in the profits and growth of equity ownership.

In fact, over the past 120 years, it’s very, very difficult to find a period where stocks didn’t beat everything, particularly if dollar cost averaging is used when buying.

Becoming a Timetable Investor

Implementing the strategy above can be straightforward, with proper use of low-expense ETFs or funds. However, there are nuances that can make this strategy far more effective. The time period for dollar-cost averaging can vary. Lump-sum moves from savings into equities don’t make sense. However, should the time period be 6 months or shorter or 18 months or longer?

The market regularly provides gifts, like in late 2018, where an 18-month averaging would have left a lot of money on the table. On a Uniform Accounting basis, the methodology used at more than 200 of the 300 top institutional investors, price-to-earnings ratios fell to bargain levels. Certainly not the scary market bubble numbers that the financial press was publishing based on as-reported calculations.

On the other hand, in June of 2008, when the markets were down about 12%, credit markets provided the greatest equity sell signal of any market cycle. Any raising of cash should have been done then, not in 2009 when it was too late.
The timing of entry of these four investment buckets into their respective asset classes can change dramatically at the peaks and troughs of the market. Unfortunately, the as-reported earnings and multiples do little to help. The greatest of investors certainly don’t rely on this for their investment strategies.

Also, few equity investors and advisors understand the complexities of the credit markets sufficiently to use them for signals for impending bear market doom. Simple rules like “Age minus 70” and “risk-averse” or “aggressive” monikers for asset allocations leave families and individuals with poor investment strategies.

Timetable Investing provides a necessary respite from the noise and “daily blips” of the market. Coupled with the tools of institutional investors, it can be invaluable to the investment advisor.

This chart is a stark reminder that over time, equities beat bonds, bills, and gold. It’s not even close: