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Getting Back to Basics - Part 4

Getting Back to Basics - Part 4

| January 27, 2021

Market Timing Madness


What is Market Timing?

Market timing is the strategy of making buying or selling decisions of financial assets by attempting to predict future market price movements. The prediction may be based on an outlook of market or economic conditions resulting from technical or fundamental analysis.


The Madness of Market Timing

In reality, no one can predict the future. Common wisdom of today tells us that attempting to time the market does not really work. As hard as many investors have tried, earning immense profit by attempting to buy and sell around future market pricing is a concept which can be described as elusive, at best. However, some investors can profit from making smaller, reactive choices in investing based on market timing. One of the greatest costs of market timing is being out when the market unexpectedly rises upwards and being in during an unexpected drop. Attempting to “beat the market” tends to be a futile endeavor. At best, an investor can make significantly more gains by focusing on time in the market rather than focusing on market timing.


Focus on Time in the Market

While it is true that market timing can sometimes appear to be a beneficial strategy, disappointment in the results is inevitable. It is comparable to sports commentators attempting to predict which team will be the big winners at the beginning of a season, only to be proved incorrect when their chosen teams ultimately lose in the end. For those investors who do not wish to subject their money and assets to such a high-risk strategy, time in the market can be considered a good alternative to market timing.


Buying and holding does not equate to ignoring your investments. Regularly evaluating your portfolio with your financial advisement team is always necessary because the market changes over time. A regular investment portfolio check-up, say annually, will ensure that you are making the right decisions and that your money is exactly where it should be to reach your financial goals.


Time, not timing, is your friend. The most effective approach in reaching your financial goals is to seek information, ask questions to your financial advisement team, and make decisions with the experts at your side. Above all else, your short-term and long-term decisions should reflect your individual financial needs and goals. You have to decide what level of risk you are comfortable and capable of living with now and in the future. Going over your portfolio with your financial team here at Grover Financial Services regularly will help you determine what investments will prove to be the right ones for you.


Thank you for joining us in our month-long discussion of “Getting Back to Basics”. Sometimes we think that we can beat the market by predicting the future because of our level of experience. Dialing it back and looking at the basics can help to center us and allow us to make informed decisions in your portfolio and investment strategies.

P.S. If you enjoyed what you've read here and found it beneficial, we encourage you to share it with your friends and family. I firmly believe that an educated investor is more confident, which leads to healthy finances and fewer sleepless nights.