Market Timing: Everywhere we turn, we are "advised" to "Buy and Hold", rather than try to "time the market". We are told that the only way we are assured of fully participating in all the spectacular market rises is to remain fully invested at all times. That is precisely the same technique to ensure that we also fully participate in all the spectacular market crashes. If a stock paid 5% a year in dividends, a 100% rise in price is equal to 20 years worth of dividends. A 50% decline in price is equal to losing 10 years of dividends. It gets more dramatic the lower the dividend. Even a casual perusal of the financial pages will yield many stocks that move, up or down, 50-100% each year. No one, realistically, expects to buy the bottom or sell the top. However, consider if, by whatever market timing technique employed, one were able to accomplish all purchases in the lower third of the annual price range and all sales in the upper third, one would be able to claim the middle third as profit. How much annual ROI (return on investment) would that amount to? Would such a goal be worthy of ones' time and effort? You decide. Market timing: Like so many other things in life, timing is everything! |
