Is Trying to Time the Market Worth It?

Investing articles can be long and boring.  How about I read the article and provide you with the important information for DIY investing success.

Here it is.

Trying to time the market means trying to pick a time to buy your stocks, bond or etfs.  Typically investors want to buy stocks or etfs when the market has gone down thinking they are getting a bargain.  So instead of buying when they have cash available, they sit and hold their cash waiting for that opportunity to buy low.

Does this strategy work?  No, unless you are a super investor like Warren Buffett and trust me, you and me are not Warren Buffett.

Furthermore, this article in the Globe and Mail shows that even if you are good at timing the market, the benefits of doing so are modest and therefore not worth the risk.  And the risk is huge, namely missing out on stock market rallies because you’re waiting for a better deal.

Here are some key points:  Note: Lucky means fantastic timing where you buy when the market is down and then starts to rise quickly afterwards (good luck getting that right every time).  Unlucky means buying at the yearly market high and then watching your investments go down shortly afterwards.

1.  “The difference between the lucky and unlucky cases is relatively small, with the unlucky portfolio worth 78 per cent of the lucky one at the end of 2018. The steady investor who bought at the start of each year wound up with a portfolio worth 89 per cent of the lucky one.
2.  Instead of trying to figure out the best day to buy each year – a virtually impossible task – investors might be better off looking for ways to reduce fees, taxes and other trading frictions.
3. Instead of worrying about market timing, most investors would be wise to contribute to their portfolios regularly”
If you’d like to read it, click below.