Trying To Time The Market!
When assets are moved in the portfolio, based on a forecast or prediction about the
future, this is market timing. For example, you’ve become convinced by economic
forecasts that the market is heading down over the next twelve months. You
decide to sell your stocks and put all of the money into cash. That is market
Market movements are random.
No one knows what the market will do tomorrow or over the next twelve months.
It bears saying again: Nobody knows with any degree of certainty what the future
will bring and if they did they wouldn’t tell you. Let’s look at another example.
Because of a war, you or your stockbroker predict that international stocks are
going to lose big, so you move all of your stocks into the United States.
Once again,this is market timing.
This doesn’t “feel” like speculating. It often feels like
wise stewardship of your assets. If over the last two years, you have watched
your portfolio take large losses in any one asset category, and every news
program, investing magazine and stockbroker says this is the time to get out –
it feels like prudent investing.
Nothing could be further from the truth. In
many cases, if not most, staying disciplined and staying the course is the best
thing to do. That assumes that you currently have a prudent mix of assets. This
is a huge assumption, because most people don’t.