October 26, 2014
Why is “Timing the Market” a really bad idea? Why do people try to do it? Alternative?
Why is “Timing the Market” a really bad idea? Why do people try to do it? Alternative?
You will never know when the right time to get in or out will be, and if you do take your money out when you think it is at a high what are you going to do with that money, you dont want to let it sit in the bank. If you buy and sell alot you will miss out on the return of the market because you are not in the market the whole time. People think they are smart and can predict what the markets are going to do, they cant and are better off just leaving there money along and just keep feeding it and once a year or every few years re-balancing there portfolio.
You are getting smarter by the day, Garrett. Let’s review.
People who time the market think they can get in and get out of whatever market (stock, bond, international, commodities, etc.) they are trading in and benefit by buying low and selling high. Reality and research tells us something different. You can’t and you should not try.
You must be right twice when timing the market. You must be right when you sell and when you buy. Research tells us the average person does a really bad job of accomplishing this feat. It should be avoided at all costs and that means owning many markets (diversification) as you feed your accounts over time (dollar cost averaging). Buy and hold as you stay the course will serve you well for many decades. Go to the investing basics tab on this website to learn more. Awake!