Timing the market means knowing when to buy at the lowest price and sell and the highest price. If it was really that easy, however, then everyone would be doing it. In actual fact, knowing exactly when to buy and when to sell it incredibly complicated. Whilst some investors still believe it is impossible to properly time the market, many more feel it is the key to strong investment and stronger returns on those investments. It involves a lot of patience and a lot of predictive insight, but the benefits often outweigh the challenges.
Below, we’ll examine exactly why timing the market is possible, why it’s so important for investment purposes and what top tips investors should keep in mind.
Never take days off
Whilst it might seem tempting to miss a day every once in a while, if you decide to take a personal day on a day where the market takes a significant shift, it could be crushing to your portfolio. Missing even a handful of days can turn gains into losses, which is why many investors feel it is important to stay invested.
Get a team behind you
Work with an investment management firm to help understand how to time the market with greater efficiency and greater results. Financial forecasting can be a powerful tool, but even the most dedicated financial professionals won’t always be able to predict exactly which sectors will perform well month-by-month.
Don’t bounce around too much
It can prove tempting to jump in and out of sectors as they rise and fall, but a more accurate way to time the market is to play the long game and track emergent patterns instead of one-off shifts. Jumping on a hot stock because everyone else is doing it might prove tempting, but chances are if you already know it’s hot, you’ve already missed the boat.
Don’t let investing rule your entire day
Whilst it’s obviously important to keep a close eye on the market, it can be also possible to keep too close an eye on it. Reassessing and rebalancing is certainly something all investors should consider at least a couple of times a year, but if they are keeping too close an eye on the markets, it can be tempting to do so more often. Make changes when the market opens, then turn off your notifications for a while and do something else.
Have a short and long game
Know the difference between short-term timing and long-term timing. Short-term means buying and selling by the day, by the week or by the month; long-term is based on movements often over many years. There is little value in stocks on a minute-by-minute basis, of course, but keeping track of your investments daily is certainly recommended.
Ultimately, the market is always going to be unpredictable, but timing the market is something that will come more naturally the more you try it. Buy and hold strategies might be more stable, but they are also less exciting and as long as you keep an ear to the ground, market timing should be a strategy you try at least once in your investment career.