Trying To Time The Market Can Be Very Costly

By: ispeculatornew
Date posted: 08.06.2013 (3:00 am) | Write a Comment  (0 Comments)

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timingIt’s an email that I get over and over. I have trouble answering it every time. As many of you know, I’m very much a believer in the risk of a financial collapse, I’m very skeptical about many things such as Western governments ability to fulfill their promises and I do think very difficult times will come. Could markets drop by 20-30% or even more? Absolutely. Every time I buy the market in my longer term retirement accounts that thought crosses my mind. I do however keep buying and have done that since I opened the account.

I did not stop right before the credit crisis hit when we hit market peaks. I didn’t stop either when Bear Sterns and Lehman collapsed and many started wondering what would happen to our economy. It’s not a great feeling to buy when you feel like it’s possibly the start of a new depression era.

But you know what’s even worse?

Trying to time the market for years, waiting for that big drop to buy only to see the market do this:

SPX

 

Two years ago, when the S&P500 was getting ready to test the 1000 level, I was thinking it could go much lower. I did keep buying though and when I look at this chart, I’m SO relieved. Yesterday I got an email from a reader who’s been waiting for a pullback for 2 years and now has a lot of cash. Ouchhh. Timing the market is an extremely risky trading strategy for a long term retirement account and I just see much more downside than upside in doing it.

Focus On What You Control

We control many aspects of our retirement income. We control:

-how much we invest
-asset allocation
-which stocks to buy
-etc

We don’t control the overall market. In general, companies are making more money every year except so the main driver of the overall market is the market’s P/E ratio which you can try guessing, I’m not against the idea of timing the market in more speculative accounts but I’d never consider it with my retirement portfolio.

If you are one of those who does try to buy at that right moment, I’d love to hear from you. What do you wait for? Does it ever feel or seem like the “ideal” moment?

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