Timing the Market is Crucial
By Dale Gillham | Published 25 June 2018
When it comes to investing, timing the stock market is crucial for your long term success. However, there is a common misunderstanding that "time in the market" is how you make money when investing.
But all successful traders know that it’s not time in the market but timing the stock market that makes you wealthy overtime. Let me explain.
Would you hold a share in something that is depreciating in value? Logic dictates that you would probably sell that share. If something was going up in value and has potential to keep going up, would you buy it? Again, logic dictates that you probably would.
If you knew that a stock in your portfolio was going down and was not going to rise back up anytime soon why would you sell it? I find this is the case with most investors, as they will hold onto a position which they see long term value in even if it is going down.
That is why timing the stock market is important because you should be focusing on assets that are appreciating in value, not depreciating. There’s no reason why you can’t buy back your position when it starts looking more promising.
Timing the stock market also helps to manage your risk and in most cases mitigate it. A good trader will be able to identify that now is not the time to get into that stock but further down the track it might be.
Being able to recognise market timing also helps you to pick your entry and exit points when trading. You will be able to identify when to enter and when to exit. This means that you will be trading on conformation rather than speculation and believe me it will do wonders to your portfolio’s performance if you are able to time the market.
At Wealth Within, we preach what we teach. We have a Direct Equity Managed Account Service where we individually manage portfolios for our clients.
It can take up to 6 to 12 months to fill the portfolios for clients. Rather than entering into a position which has already had its run, we wait for good opportunities to rise.
Timing the market is a vital tool for investors. Those who are able to time the market will ultimately have greater success as an investor in the long run than those who do not.
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