But I have seen some equity funds performance in 2007-08, they lost half the value! True enough, they gain it back rather quickly...but imagine this scenario.

Re-recession NAV: RM1.50

Recession low point NAV: RM0.75

If you managed to sell at RM1.50 and buy back at RM0.75, you get almost TWICE the units, and then from RM0.75 they will double in value to RM1.50 back again.

Of course you cannot time it to perfection or predict all funds to be like this, but I think there is a potential to make gains. Or maybe this is not how things work?

It can work if you know when to withdraw. Some people use a certain amount of profit say 15% profit, they cabut, some remove profit if they feel it cannot run higher (skimming profit). Some people feel that certain event may not work in their favour, so cabut early before the event happen (like Brexit).

Some stuff cannot time like China short circuit, terrorist attack.