Market Timing in Investing

Buy low and sell high. This looks like the reasonable thing to do and without a doubt the dream of every investor. The problem is that, without being able to tell what is going to occur in the future, it’s pretty much impossible to do. In fact, according to studies that have been made, market timing supplies less than two percent of portfolio performance. Asset allocation, on the other hand, has been known to be responsible for over ninety percent of portfolio performance. Why is this so? Once more, it’s very widely believed that humans are not able to predict the future. And in order to effectively time the markets, you’d have to be able to know about the trends and factors that supply to investment performance.

As an individual investor, who has time to even try to time the market? Our investment universe is not an easy one to deal with and we have so many alternatives available to us that the body of research and information you’d need to try to practice market timing is ahead of the scope of most individuals. Investment professionals, financial analysts, economists, fund managers, etc. dedicate years of study and a lot of resources to understanding the different financial markets and how they react to each other and outside events. These resources are at your disposal through mutual funds and the kinds of funds a person is able to find in their retirement plan. By investing in these vehicles, according to a person’s own asset allocation strategy, they’re appointing these professionals to analyze the markets. Remember that using asset allocation as a part of your investment strategy cannot either assures nor guarantee better or worse performance and cannot protect against loss in declining markets.

Beginner Money Investing When to Get Into an Investment Allowing the Position Time for Development Being Aware of When to Sell a Position Market Timing in Investing