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Last Tips & Tricks

Timing the market, a dangerous game.

Stock investing tips by Mike Langevin

You‘ve probably witnessed a customer a little crazy at the supermarket (or you’ve been one) who runs from one checkout line to another in search of the fastest? What is funny is that they will often end up moving to the slowest register.This is usually the way people approach investments, they jump from one title to another in search of the one that will gain the most in the least amount of time.

 Market timing is a very dangerous game, especially when it is practiced by a beginner. This is a strategy that involves trying to predict the future movement of markets using different technical analysis. Since the past 100 years, the markets rise more than 75% of the time. While trying “to time the market“, you try to avoid the 25% of the time that the market is going through a correction. Several techniques have been created over the years to try and anticipate these changes of direction, but unfortunately none of them can provide effective signals to buy or sell.

In this universe of portfolio managers (investment managers) who are as numerous as the number of stars in the sky on a beautiful summer night, it is not surprising that a few managers can beat the index over a year, can we say that it was luck, or the result of their wisdom? Naturally the managers argue that this is the result of their knowledge. However, the issue of luck can not be disregarded completely. In fact, the top managers on a given year will rarely be able to repeat their feats the following year.

Basically, it is impossible to predict in advance what will be the best or worst periods in the stock market. Investors who try to time the market to avoid losses in the short term will probably only avoid making any gains. Over the long run, just a few missed upswings in the market could significantly reduce the performance of your investments.

In conclusion, simply put in place a strategy that will seek out undervalued stocks and you will then find stocks that will make significant gains and for good reasons. This is the closest an investor can get to in achieving market timing.

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