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The Market Timing Secrets No One Talks About - May 13, 2020
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There is no better feeling for an investor than trusting your gut or doing your research and timing the markets correctly, right?
Indeed, even among those investors who don't try to consistently time the markets, many think they can still call a top and act opportunistically. It's at these times when an investor who speculates often sits on the sidelines and looks for better opportunities to put money into the market.
Giving up too soon at the first sign of inconvenience often leads to missed opportunities among numerous individuals who try to trade on their own retirement. For example, many investors have forfeited immense chances waiting for the Consumer Discretionary stocks to correct, only see the latter achieve new highs, move higher and drive the buyer markets to record levels: Century Casinos Inc (CNTY - Free Report) , AMC Entertainment Holdings Inc (AMC - Free Report) , AMC Networks Inc (AMCX - Free Report) , American Woodmark Corporation (AMWD - Free Report) , Anta Sports Products Ltd (ANPDF - Free Report)
Anxiety and eagerness regularly lead investors into psychological traps because most investors take cues from past market moves and trends instead of attempting to anticipate potential market moves.
Accomplished market timing requires three key components: 1) A dependable sign of when to get in and out of stocks. 2) The capacity to act upon signals quickly and accurately. 3) Have the stomach to act on market signals, no matter how counterintuitive the move may be.
The popular image of market timing is that it calls for making drastic, all-or-nothing moves at the precise, exact market top or bottom. There is a less well-known, rather simple market timing approach that has been used successfully by savvy investors like Warren Buffet for decades.
Rule 1: Never attempt and time tops and bottoms.
Surrendering the objective to time the tops and bottoms gives you the adaptability to benefit and increase your odds to secure profits over the long-term, even if your calls aren't always right.
Rule 2: Don't sell during small crashes - ride the storm out, or better yet, take advantage of the opportunity.
Warren Buffett has made a great part of his fortune due to this simple rule. He cautions not to sell during little crashes, and encourages enduring them by concentrating on the long haul.
There is a noteworthy distinction between a complete market meltdown and a common 10% market correction. If you own shares of a company that is well - established and has strong fundamentals, they are probably going to rebound to their pre - crash prices eventually, thereby rendering holding on a wise decision. Warren Buffett takes this thought a notch higher and frequently goes on a buying binge when markets turn, purchasing additional shares of his favorite stocks at a major markdown and tuning in to his own recommendation of being greedy when others are scared, and being scared when others are greedy.
A Risk Adjusted Trading Strategy Should be Followed for Your Retirement Assets
It's just human that many surrender to emotions and attempt and game the framework by timing the market. But, think about this: Nobel Laureate William Sharpe found in 1975 that a market timer would need to be precise 74% of the time to beat a passive portfolio. Even a slight outperformance probably wouldn't be worth the energy - and given that even the experts generally fail at it, market timing shouldn't be your exclusive investing strategy of choice, especially using assets earmarked for your retirement.
Chasing alpha, outsized, short - term returns through market timing and other high - risk bets is acceptable only within a small part of your investable resources, however for your long - term retirement assets a 'risk-adjusted' investment discipline is what largely bodes well.
If you'd like to learn how to 'super-charge' your retirement assets, get our free report:
Image: Bigstock
The Market Timing Secrets No One Talks About - May 13, 2020
There is no better feeling for an investor than trusting your gut or doing your research and timing the markets correctly, right?
Indeed, even among those investors who don't try to consistently time the markets, many think they can still call a top and act opportunistically. It's at these times when an investor who speculates often sits on the sidelines and looks for better opportunities to put money into the market.
Giving up too soon at the first sign of inconvenience often leads to missed opportunities among numerous individuals who try to trade on their own retirement. For example, many investors have forfeited immense chances waiting for the Consumer Discretionary stocks to correct, only see the latter achieve new highs, move higher and drive the buyer markets to record levels: Century Casinos Inc (CNTY - Free Report) , AMC Entertainment Holdings Inc (AMC - Free Report) , AMC Networks Inc (AMCX - Free Report) , American Woodmark Corporation (AMWD - Free Report) , Anta Sports Products Ltd (ANPDF - Free Report)
Anxiety and eagerness regularly lead investors into psychological traps because most investors take cues from past market moves and trends instead of attempting to anticipate potential market moves.
Accomplished market timing requires three key components: 1) A dependable sign of when to get in and out of stocks. 2) The capacity to act upon signals quickly and accurately. 3) Have the stomach to act on market signals, no matter how counterintuitive the move may be.
The popular image of market timing is that it calls for making drastic, all-or-nothing moves at the precise, exact market top or bottom. There is a less well-known, rather simple market timing approach that has been used successfully by savvy investors like Warren Buffet for decades.
Rule 1: Never attempt and time tops and bottoms.
Surrendering the objective to time the tops and bottoms gives you the adaptability to benefit and increase your odds to secure profits over the long-term, even if your calls aren't always right.
Rule 2: Don't sell during small crashes - ride the storm out, or better yet, take advantage of the opportunity.
Warren Buffett has made a great part of his fortune due to this simple rule. He cautions not to sell during little crashes, and encourages enduring them by concentrating on the long haul.
There is a noteworthy distinction between a complete market meltdown and a common 10% market correction. If you own shares of a company that is well - established and has strong fundamentals, they are probably going to rebound to their pre - crash prices eventually, thereby rendering holding on a wise decision. Warren Buffett takes this thought a notch higher and frequently goes on a buying binge when markets turn, purchasing additional shares of his favorite stocks at a major markdown and tuning in to his own recommendation of being greedy when others are scared, and being scared when others are greedy.
A Risk Adjusted Trading Strategy Should be Followed for Your Retirement Assets
It's just human that many surrender to emotions and attempt and game the framework by timing the market. But, think about this: Nobel Laureate William Sharpe found in 1975 that a market timer would need to be precise 74% of the time to beat a passive portfolio. Even a slight outperformance probably wouldn't be worth the energy - and given that even the experts generally fail at it, market timing shouldn't be your exclusive investing strategy of choice, especially using assets earmarked for your retirement.
Chasing alpha, outsized, short - term returns through market timing and other high - risk bets is acceptable only within a small part of your investable resources, however for your long - term retirement assets a 'risk-adjusted' investment discipline is what largely bodes well.
If you'd like to learn how to 'super-charge' your retirement assets, get our free report:
Will You Retire as a Multi-Millionaire? 7 Things You Can Do Now.