Timing the Market – Is it a Good Idea?

If you were to ask most experienced investors, they would most likely tell you that it is a bad idea to time the market. And I agree. Except, when most people talk about timing the market, it is often without a long-term investment approach. Timing the market is often talked about trying to buy and sell at times that will make you the most money. The context is most often for day traders. People who are trading stocks and investment funds on a regular basis in an effort to beat the markets. Unfortunately, this results in people investing money with their emotions in tow. Any experienced investor knows this to be a bad idea. You need to keep your emotions separate – as much as possible.

While the traditional sense of timing the market is never a good idea, there are ways to time the market and have it work for your favor.

Long-Term Investment Strategy

One of the best ways to make timing the market work well for you is to do it within a long-term investment strategy. Technically, you would only be timing your entry into the market, but in a way, it is still timing the market. The best way to make a profit in the stock market is to have liquid cash available and buy into the dips in the market. When people are selling for fear of losing further (which makes sense for people soon to be retiring), you can buy up stocks at a price that is almost guaranteed to be higher in years to come. Buying more stock in a recession then is a way of timing the market. It’s not as specific as the traditional sense, but it can still work in your favor.

Set Return

Another way to make timing the market profitable is to not get too greedy. Many investors fail when they try to time the market because they keep convincing themselves that they will sell when it gets just a little higher. Or, when a stock starts to drop, they tell themselves that they can’t sell now because the price was just higher. They wouldn’t be getting the highest return. While we certainly don’t advise you to try and time the market, but if you are going to try and buy in at the right time, or do so within a long-term investment strategy, maybe think about setting realistic goals that you would like to see.

The market will continue to fluctuate for the rest of time. You can use this to your advantage if you are willing to wait for the ups and downs and you are realistic about your returns. If you are trying to beat the market or see 20% or more in returns in a short period of time, it probably isn’t going to work out for you.

One Response to Timing the Market – Is it a Good Idea?

  1. Thank you for writing about this topic.

    At dinner parties and other social gatherings I have numerous people approach me asking which direction the market is about to go. Unfortunately there is no such thing as a crystal ball when it comes to the market and as you know, there is no one indicator that accurately predicts which way the market will move.

    Your best bet is to buy great businesses monthly or during market pull backs. I define a market pullback as a 10% or more decline in the S&P 500.