The Secret to Timing the Market

Investment decisions aren't always the best and there are definitely times when cutting your losses and selling is the best decision to make. However, don't act too quickly; make sure you don't simply sell after a few weeks or months because an investment is under performing. The markets have a somewhat emotional tendency as the ups and downs are perfectly normal given certain historic relevance.

Many investors define investing as the constant buying and selling of stocks, and they will be the ones to find themselves sitting in front of the ticker tape keeping a close eye on their investments. But remember, it's not market timing that is the key; it's time in the market. Never the less, you will find some investors attempting to decode market movements and trying to find the best time to buy and sell. Two reasons to avoid this type of captive trading tendency are market efficiency and taxes.

Despite its incredibly unpredictable nature and sudden drastic movements, the stock market is very efficient. Roughly every 6 years the markets have doubled. Markets have been through many down periods always followed by record highs. However, if you're one of those investors that believes in day trading, it takes a balanced mix of wisdom and luck to produce the same profit results as an investor that is in the market continuously. With this we can safely conclude that instead of buying and selling with the markets ups and downs, a more profitable approach is to stay in the market and make investment decisions based on the composition of your portfolio. If it makes sense, buy it; whatever that may be.

Taxes on the other hand, have a negative affect on your profit margin. Again, if you're one of those day traders, you're going to find that more of your profits are going to Uncle Sam. But if you buy quality investments and hold for the long term, you will pay significantly less in taxes. Keep reminding yourself that the longer you're in the market, the greater exposure you will have to its rewards.

Now your asking yourself "to buy or not to buy". Deciding when the right time to buy or the right time to sell is is difficult and often leaves investors second guessing their decisions. If you simply remember that the market will go up and down, you will understand that there really is no one particular great time to buy. Remember time in the market is the key. Whether you buy today, 3 months from now, or 6 months from now is really useless. Invest now! The longer you're in the market the longer your investment dollars are exposed to the possible upward movements of the market. So there really isn't a secret to timing the market, however there is an investment rule; it's time in the market that matters!


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