That depends very much on exactly what you mean by "time the market".
It is impossible to reliably predict whether the market will go up or down on any given day. It is also impossible to reliably predict exactly when a market will hit a peak or trough. Dollar-cost averaging is a great strategy to reduce the risk associated with the inability to "time" markets in this sense.
But it is completely possible to recognize that a particular asset (or class) is over- or under-valued, as long as you have good enough information. You can't necessarily predict how long it will take for its value to be more accurately reflected in the price (another sense in which you "can't time the market"), but you can recognize that certain assets are on sale or commanding a premium price, and therefore get a good price on/for certain assets.
Portfolio rebalancing is, in part, meant to help capture this. Investing more in assets that have fallen behind, and less in those that have gotten ahead, is a (very rough) mechanism for selling high and buying low. Value investing is even more about this -- explicitly putting money into assets when it is cheap to do so, and selling assets that people are putting money into when it's expensive to do so. The idea is not to "time the market" in the sense of knowing exactly what day the market will turn, but simply to take advantage of really good deals (in the long-term sense) when they present themselves.
Agreed - I believe there are some ways to time the market. For example, if you want to make a 5-10 year investment, then doing so in the S&P500 when it is significantly down will yield better returns (on average) than doing it at a random time:
http://saffell.wordpress.com/2008/10/26/does-timing-the-mark...
It should be noted that your 10, 20, and 30 year charts actually show an advantage to investing in off years; your conclusion that "there is no significant advantage" is mistaken.
On the 30 year chart, the peaks on the 20-50% line are a couple percent above the peaks on the all line. Boosting returns from 7% to 9% over 30 years, or from 12% to 14% over 30 years, results in over 70% more total wealth after compounding. The visual difference is not as striking on the 30 year chart as on the 5 year chart, but that's because you're presenting annualized rather than total returns.
The argument against market timing I've always liked comes from Malkiel's Random Walk:
> During the decade of the 1980s, the Standard & Poor's 500 Index provided a very handsome total return (including dividends and capital changes) of 17.6 percent. But an investor who happened to be out of the market and missed just the ten best days of the decade—out of a total of 2,528 trading days—was up only 12.6 percent. [...] market timers risk missing the infrequent large sprints that are the big contributors to performance.
The "ten best days" argument is a good argument against short-term timing (you could, at random, miss just those 10 days and nothing else if you're trying to guess good and bad days.) But it's not a very good argument against the particular type of long-term timing discussed in this sub-thread. The 10 best days tend to be clustered somewhat, but often interspersed with several bad days; if you're simply looking for a good price and then buying, you're not going to miss the 10 best days without also missing a large number of bad days. Missing both the best and worst 10 days of the decade gives you almost exactly average returns. Furthermore, the 10 best days tend to occur in the "short sprints" that follow a down market; the strategy described above says to buy in to a down market, which means you'd hit most of those 10 best days -- and, quite likely, miss at least a few of the 10 worst days, generating net above-average returns. (The parent post's graphs showed this exact result: buying into the market after a largeish downturn gets you great returns, long term.)
Invest in S&P 500 ETF (SPY) starting at inception
Growth of $100,000 from 1/29/1993-8/30/2010
Buy and Hold: $324,330.15
10 Best Days Removed: $156,354.12
10 Worst Days Removed: $692,693.90
10 Best and 10 Worst Days Removed: not listed, but very close to Buy and Hold (the green line in the chart)
Rob Bennett's followup comments are quite good, as well.
That depends very much on exactly what you mean by "time the market".
It is impossible to reliably predict whether the market will go up or down on any given day. It is also impossible to reliably predict exactly when a market will hit a peak or trough. Dollar-cost averaging is a great strategy to reduce the risk associated with the inability to "time" markets in this sense.
But it is completely possible to recognize that a particular asset (or class) is over- or under-valued, as long as you have good enough information. You can't necessarily predict how long it will take for its value to be more accurately reflected in the price (another sense in which you "can't time the market"), but you can recognize that certain assets are on sale or commanding a premium price, and therefore get a good price on/for certain assets.
Portfolio rebalancing is, in part, meant to help capture this. Investing more in assets that have fallen behind, and less in those that have gotten ahead, is a (very rough) mechanism for selling high and buying low. Value investing is even more about this -- explicitly putting money into assets when it is cheap to do so, and selling assets that people are putting money into when it's expensive to do so. The idea is not to "time the market" in the sense of knowing exactly what day the market will turn, but simply to take advantage of really good deals (in the long-term sense) when they present themselves.