Should I be timing the markets? Decades worth of decisions, election timing, beating the index. It’s all about time in the market! Watch to learn more.
Is timing the market a good investment strategy?
“Should we try to time the market?”, we never get this question directly, but we get this question all the time. Meaning, as anything major happens, whether it be COVID-19, a tariff war, or a presidential election, clients want to know, “Should I go to all cash?” or “Should I take a ton of profits and sit this one out?”
We are always working to remind our clients that it’s not about the narrow windows of crisis that come and go. Rather, it’s all about decades worth of smart, wise, stewardess decisions based upon a proven plan, that gets them to their end goal. Its not about “Should I take my money out of the market because somebody is going to be elected?”
A Study of Timing the Market: Did they find it possible?
There is a study where over a thousand investors were watched and tasked with trying to time the market over a ten year period. The goal of the study being to see if they could beat a standard index by trying to time the market. In the end, not one investor actually beat the index by trying to time it.
In just about every situation, we would never attempt to time the market, it’s essentially trying to gamble by predicting the future. For great investors, gambling isn’t our thing. Trying to predict a market, not only if you get it right on a sale, you then have to predict when you buy back in, or visa versa.
As cliché as it might be, it’s not timing the market that matters, it’s time IN the market.
It’s about compounding interest and people making wise decisions early in their life. Now, that doesn’t mean that you don’t reduce risk in certain seasons, depending on what’s going on in your life. There may be a time to take profits and reduce back to a comfortable risk score. You can always look at different sectors, technology has done great this year. There could come a time to rebalance in what we call value stocks, things that aren’t quite the ‘growth companies’.
So there are absolutely times where we look at those things, but timing the market is just not a great strategy long-term.
