My grandfather used to say that we judge ourselves by our intent, but everyone else judges us by our actions. We can't know for sure, but it is highly unlikely that a sale of a small number of MSFT shares by Gates would be intended to "beat the market."

A rebalancer sells A to buy B because the portfolio goal is to maintain an even split between A and B on a long-term basis. The trigger is not a specific forecast of market behavior.

The two most common rebalancing triggers are specified intervals when the portfolio is rebalanced, most commonly quarterly or annually; and when an exposure to a holding exceeds or drops below a target threshold. Take a holding with a 20% target in a portfolio and apply a 30% "tolerance band." Rebalancing would dictate a buy when the position dropped to 14% and a sell when it represented 26% of the portfolio. A 20% band triggers trading at 16% and 24%.

Sometimes it is easier to see the differences in intent when one takes a view from a much higher vantage point than the transaction level. For instance, if we go all the way up to the practice level rather than just the portfolio level, we get clues about the portfolio manager's intent.

A practice that times the market will make wholesale changes across the board regardless of differences in client goals or how long clients have been with the firm. A timing operation will often pull everybody out or put everybody in based on a forecast. It also will execute transactions based on a new forecast, even if that forecast comes shortly after a new client's portfolio has been implemented.

With rebalancing, changes are only made to portfolios with allocations that are out of balance or whose trigger time has come. It is conceivable that an advisor might sell some securities to rebalance one client's portfolio while buying those same securities to establish a position for a new client or after another client has a cash inflow.

In fact, it's not unusual for client portfolios to become unbalanced because of cash flows in or out of various accounts. The transactions that occur because of these activities don't strike me as market timing.

When we look at the extreme ends of the spectrum with respect to the portion of the portfolio being transacted, the frequency of the trades and the motivation for the trades, we are more likely to get a consensus about what is and what isn't market timing. Or what is active versus passive or strategic versus tactical, for that matter. In between the extremes, however, there is plenty of room for debate.

I sometimes chuckle when I see people get wound up as they passionately advocate for a more active or less active approach. Empirically there is little to debate. The data supports the simple math. In the aggregate, the result of all the activity is negative because of costs. Some who are active will outperform. Over time, fewer and fewer outperform by less and less.

On a very important level none of that matters.