Timing the Market

Sacrificing long-term gains with a short-term mindset

Today, I want to discuss timing the market.Market timing is the strategy of making buying or selling decisions by attempting to predict future market price movements. Common wisdom today tells us that timing the market doesn’t work. As hard as investors may try, earning massive profits by timing buy and sell orders around future market price movements is an elusive concept. However, some investors can still profit from timing the market in a smaller, more reactionary way.

While this is great in theory, in practice it is seemingly impossible to make work on a consistent basis. According to Business Insider , the average return of the stock market over the last decade has been around 9% growth each year. Since this is an average, you could see 20% growth one year and a negative return another. If you were to invest $10,000 with a 9% return, compounded semi-annually, your balance would grow to $24,000 over a ten year period – a 21% gain. A ‘time the market’ approach may create higher gains in the short-term, but you also may see higher volatility and swings in rate of return, you may guess wrong on a hot stock tip or fees and taxes may reduce your short-term gains. For these reasons, timing the market may actually hurt your lifetime return compared to a long-term investment strategy, and because there is so much risk in attempting to time the markets, you should never invest more than you can afford to lose.

Retirement Planning Customized for You

At Safe Harbor we believe success comes from focusing on longer term investment goals  and making sure you are always correctly allocated in your investments based upon your current risk level. A steady long-term investment approach has proven to be more effective because it creates value over time and puts your money to work toward your retirement goals. 

Safe Harbor Retirement Group can create a unique, long term investment solution   tailored for you. If you have any questions or concerns about timing the market or any other financial topics, please feel free to call us at 614-760-0670  to set-up a complimentary no-obligation with us. We have 4 office locations in Ohio to meet with you and provide a complimentary meeting to review your current financial position.

Posted on Bookmark the permalink.