The big goal in investing is to time the market correctly. There are entire series of books and very smart people devoting their lives to figuring systems to time the market just right. There is yet a proven system that has consistently timed the market beyond just happenstance and pure luck. The complexities of the market compounded with the human factor make it impossible.
If there truly was a way to time the markets, nobody would sell it. There would be no need. They’d keep it to themselves, and make their money quietly without alerting too much attention to their methods.
1. If you could accurately predict the market’s short-term gains, you’d be the wealthiest person in the world. There are many wealthy investors in the world, but their riches have been successful and time-proven methods, not by short-term timed trades.
• Wealth is always built over time, even in a short-term market trades.
• Some investors actually make their money independently of whether their predictions are right or not.
• All it takes to lose big is to make a few misjudgments and errors. It’s too risky to risk some lucky wins to a system that fails more often than it succeeds. You’re better off gambling where at least the odds are known.
2. You could miss big opportunities. Timing the market often leaves people jumping off too soon or buying in at the wrong time. You also face a high opportunity cost. While you’re waiting for the right moment, your money isn’t invested anywhere, effectively wasted.
• It just takes a few big days to miss out on huge amounts of money. For the period of 1993-2013, the S&P rose by an average of 9.2% each year. Even just missing 10 of the best days in a year, the annual return would only be 5.4%. It’s not just those big days, but the compounding interest those days would give you.
3. Repeated buying and selling attracts too many fees. If your trades are small, you could be losing money, even if you time it right. The fees to buy and sell could take the minute profits out of your pocket. Don’t let the small losses take away from the big gains you could make by avoiding the temptation to jump in and out.
4. Consider the inevitability of Taxes. If you do end up making some money, when you take it out, you must pay taxes on what you’ve earned. You really have less money to reinvest now. This is another advantage of the long-term investor; they don’t pay excessive taxes.
5. Long-term buy plans have been proven to remain successful. When you consider how much a long-term investor can make over a 10 year period with consistently smart choices, it’s a staggering amount. There are few investors who can actually outperform the index funds. Regular monthly investments are the key to long-term wealth growth
It’s so tempting to think that you can game the system and time the markets for faster yields. It’s not sexy to own a value stock or even real estate for 10 years, but it is lucrative over the long-term.
The emotion of timing the market might be fun, but it’s just not effective. Don’t be swayed by “experts”, because your money is as good as gone. Stay safe and stay wealthy.
Should you be looking to get educated more on this, block your date on 11th February and attend our Show Me The Money Event.