For many investors, the global stock market crash of 2008 show why timing the market is necessary, Since 1997 market crashed, the Asian financial crisis 1997, the technology crash 1999 and the sub prime-led financial crisis 2008 and many Asian Markets fell by as much as 50% from their peak to bottom each time.
The Strategy
The stock markets long term upward curve is filled with many short lived peaks and valleys isn't it smarter in the market only when price are going up?
If you believe in timing the market, the answer is Yes. You should only invest at the low and get out at the top. Then park your money and cash is till stock hit another low before reinvesting and selling high, you will make a lot of money.
But there's only one problem with this strategy : Nobody yet knew how to do it right!
But to benefit from this strategy, you have to get it right not once, but twice. You have to chose a correct entry point (when to exit the market is high).
Right point to buy
When the market is nearing or at it's bottom, it's the best time to invest. But most the people around you wont't be talking much about the market. If they do, it's most likely that they would be complaining about how much they lost from their stock or unit trust.
When they share with your honor stories of their huge losses, it is extremely difficult emotionally to ''enter'' the market at point. Further more, it's likely to be when the underlying economy is in a recession, when their are plenty of bad news.
To buy at right time is tough because you feel that you're wrong in the short term, even if you have made right decision at the right time. The market full further before recovering. The timing may be right if you're prepared to wait patiently for the recovery.
But most get impatient or start second-guessing themselves if the market does not immediately go up after they buy in on dips. That's why it's not easy to buy at the right time.
Right point to sell
To time the market properly, you have to sell when the market is high. But when the market is at it's peak, most will be boasting about their big gains, and it's only human nature to think the gain will grow even more and get good times will continue (or at least that they will get out in time!).
The will many factors to enter the market , at precisely the wrong time! instead of getting out of the market, many called market timers will enter the market at this point.
The reality
Retail investors tend to go with their emotions, As a result, they end up buying, when prices are expensive, and selling, when prices are cheap. Instead of following ''buy low,sell high'' , they end up doing the opposite.
To succeed in timing the market, you need a good grip on your emotions and good sense of the history of stock markets. But if you think it's to be difficult to overcome the pitfalls, it's best to explore other investment strategies.
The Strategy
The stock markets long term upward curve is filled with many short lived peaks and valleys isn't it smarter in the market only when price are going up?
If you believe in timing the market, the answer is Yes. You should only invest at the low and get out at the top. Then park your money and cash is till stock hit another low before reinvesting and selling high, you will make a lot of money.
But there's only one problem with this strategy : Nobody yet knew how to do it right!
But to benefit from this strategy, you have to get it right not once, but twice. You have to chose a correct entry point (when to exit the market is high).
Right point to buy
When the market is nearing or at it's bottom, it's the best time to invest. But most the people around you wont't be talking much about the market. If they do, it's most likely that they would be complaining about how much they lost from their stock or unit trust.
When they share with your honor stories of their huge losses, it is extremely difficult emotionally to ''enter'' the market at point. Further more, it's likely to be when the underlying economy is in a recession, when their are plenty of bad news.
To buy at right time is tough because you feel that you're wrong in the short term, even if you have made right decision at the right time. The market full further before recovering. The timing may be right if you're prepared to wait patiently for the recovery.
But most get impatient or start second-guessing themselves if the market does not immediately go up after they buy in on dips. That's why it's not easy to buy at the right time.
Right point to sell
To time the market properly, you have to sell when the market is high. But when the market is at it's peak, most will be boasting about their big gains, and it's only human nature to think the gain will grow even more and get good times will continue (or at least that they will get out in time!).
The will many factors to enter the market , at precisely the wrong time! instead of getting out of the market, many called market timers will enter the market at this point.
The reality
Retail investors tend to go with their emotions, As a result, they end up buying, when prices are expensive, and selling, when prices are cheap. Instead of following ''buy low,sell high'' , they end up doing the opposite.
To succeed in timing the market, you need a good grip on your emotions and good sense of the history of stock markets. But if you think it's to be difficult to overcome the pitfalls, it's best to explore other investment strategies.
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