The short answer is to outperform “Buy and Hold” with less downside risk and with less time in the markets. Let us explain how we intend to accomplish this:
The stock market has a tendency to make "major" up moves or "major" down moves for a certain period of time; then for a while the markets go nowhere, making only "minor" up or down moves at best. It is our belief that the most money can be made during the times of  "major" moves. Therefore, the purpose and design of our system is to be invested at those times when our indicators point to  "major" up or down movements, and "enjoy" a Money Market account when our indicators point to a “trendless” market. The point being, that we are disinterested in capturing every infinitesimal percentage move of the market, we are happy to make our 80% of fruitful rallies and maintain our cash position while awaiting the next investment opportunity. By doing this again and again, we will be well ahead of  “Buy and Hold” and thus would incur less downside fluctuations. As a natural concomitant to this strategy, we would be in the market for lesser periods of time and we would therefore be exposed to fewer occasions of risk.

MARKET-TRADING VS. BUY AND HOLD

Our model is designed to outperform a “Buy and Hold” strategy of an average diversified Mutual Fund, Index Fund (like the S&P 500), or ETFs (like the QQQQ, SPY or IWM) over the long term and to do so with less downside fluctuations and with greater ease. We agree that there are other ways in which money can be made by investing in the stock market. One of those potential ways is a simple “Buy and Hold” strategy, namely, if you buy an Index Fund or a diversified Mutual Fund and hold it for a long time, you might have a return of 11-13% a year (The historical performance of the S&P 500 from 1985-2005 is 12.5%). The problem with this example is: 1) This is not a satisfactory return, and 2) The downside fluctuations inherent in this type of performance are massive, e.g., in the last bear market (2000-2002) alone, the pendulum swung approximately 40% from the high to the low. We are not satisfied to see our account values go down 40%. Consequently, our system is designed to tell us when to get out protecting our profit, not losing money, sitting in cash, (and may even sell “short”) and to go back in hopefully at a lower price and thus we are able to outperform a strategy of “Buy and Hold.”

Here is how TimingStock compares to Buy and Hold, tracking maximum drawdowns and time spent in the market, using the QQQQ as an example.

In addition, when you invest without an “exit” strategy, you are at risk to make the wrong decisions with respect to when to sell. Even if one considers himself to be a long-term investor (or a “Buy and Hold” investor), there is a chance that they will sell at the low, because as the market declines, one loses confidence or becomes jittery, and oftentimes will sell at or near the low. (-Historically, there are tremendous mutual fund outflows near a market bottom, and tremendous inflows near a top. Some traders even use this statistic as a contrarian indicator-) And this is where it becomes of paramount importance to have a system that has a built-in, proven risk management umbrella in the event the market goes against your position.