Market Timing

Market timing is the act of moving investment money in or out of a financial market, based on expectations for a change in valuations.  To the extent that investors can predict when the market will go up or down, they can, in theory, make trades that capitalize on these movements.

Timing the market is often a key component of actively managed investment strategies, particularly for traders and other short-term investors.

The problem is, in order to be successful, you have to be right nearly all of the time. History tells us that almost no one is consistently that smart.  While theoretically feasible, nearly all market professionals agree that getting market timing right, for any substantial length of time, is a difficult task.

For the average investor, there are good reasons to avoid market timing.  Instead, consider the potential advantages of “time in the market,” instead of “market timing,” taking the long view, perhaps with the help of an advisor(s).

Note that over the past nearly 100 years, the U.S. stock market has risen, albeit with some major fluctuations, at an approximately 10% average annual rate.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA