I have to admit that my investing strategy is rather boring. You see, I’m a buy and hold type of guy. I know that in the long run, and by long run I mean decades from now, my investments will be worth more than they are worth today unless we have a very large disconnect from the last century or so.
Yes, my investment strategy is boring. It’s not sexy. It may seem downright insane to some people that constantly worry about the big dips in the market. Some people think they can get out ahead of these dips and save some money by reinvesting once the markets finish going down. There probably are some people much smarter than I am that can time these things. However, I, like you, am just an average investor and don’t even entertain the thought. Why? I’m glad you asked!
Market Timing Isn’t For Me
If we could all time the market perfectly, we’d all be rich! Notice how we aren’t all rich? That means we can’t all do it. There is a very small population that has a small chance of getting these timing moves right and I’m not in that population.
The problem with trying to time markets to increase your return is that you have to be right twice. You have to be right the first time by selling at the top or pretty darn close to it. If you sell too soon, you might leave a TON of money on the table. If you sell too late, you’ve locked in your losses and likely missed your chance to make more money by timing the markets. If that isn’t bad enough for you, keep reading.
Anyone can be lucky once. The chances of being lucky twice in a row are much slimmer. You must now be lucky twice and reinvest your money at the bottom to be the perfect market timer. Invest too early and you’ll still be losing money. Invest too late and you’ll miss some of the biggest gains in most stock market bounces. If you miss just a few of the best days for the stock market for any given year you could easily miss out on a majority of the investment returns for that year.
I Know Myself Well Enough To Know Timing Won’t Work For Me
I don’t study the stock markets with every spare minute of my time and honestly rarely have a clue why big moves are being made at any given time. I don’t have the intuition to know when to get out of the market before a huge bubble is about to pop or to know when we’re about to reach the bottom and jump back into stocks with everything I have.
I know myself and that’s why I don’t even try to time the market. Could I seek out a bit better of a return if I simply did a little bit of market timing? Possibly, but I’d be constantly second guessing myself and it isn’t worth the hassle to me. Plus, I bet you I’d get it wrong 95% of the time and end up losing more money than I’d ever stand to gain.
What are your thoughts on market timing? Are you brave enough to try to be right twice and time the market? Let me know in the comments below!