Market Timing- trying to make money in stocks by predicting their short-term movements.
Market timing is another myth that many people believe is an investment style. The theory sounds simple enough, but investors have under-performed time and time again trying to time the market. It is human nature to react with emotions when seeing large swings in the market, but acting on emotions leads to disastrous losses.
Market timers invest in the market on an upswing and divest before it goes down. If it were possible to know when the markets' swings this technique would be beneficial, but employing this theory is impossible.
As the Efficient Market Theory states, all available information from today is built into the price of a stock. Investors cannot foresee tomorrows events. No one can. Today's stock price is determined by everything that millions of buyers and sellers know today. Tomorrows price is unknown because it is determined by tomorrows events.
Wall Street wants investors to believe that they can foresee tomorrow's events. If this were true, would these Wall Street investors not be celebrities by now? Would their pictures and faces adorn every financial publication available? In reality, walking by a newsstand simply reveals empty predictions and wild conjecture.
Capitalism works. Stocks have a return over time. Investors must be willing to buy and hold a well- diversified portfolio that is properly allocated.
Put Down Your Crystal Ball
Here at MPM we do not have a
crystal ball that can tell the future.
We can not tell you what stock to buy
or where the market is heading. We
invest in sensible low cost DFA funds
to build asset class portfolios.
Dalbar Study:
