It's time in the market, not timing the market!

Potential pitfalls of mistiming the market can be significant

Market timing is a strategy that involves determining the optimal times to buy or sell assets to maximise profit. It's based on predictive methods and often uses technical indicators or economic data. However, this strategy can be risky and difficult to execute effectively.

The Cost of Timing the Market

The potential pitfalls of market timing can be significant. For instance, mistiming the market even by just a few days can drastically impact an investor's returns. According to 20 years of data from JP Morgan, missing out on the 10 best days in the market could result in losing over 50% of the end portfolio value compared to a long-term investment plan.

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The Pitfalls of Timing the Market

Missing 60 of the best days could mean losing 93% in value compared to the original portfolio worth if the investor had stayed invested.

?The Best Days in the Market

Moreover, many of the best days in the market occur during periods of turmoil and heightened volatility, often shortly after the worst days. This makes timing the market even more challenging and risky. By contrast, staying invested through highs and lows has historically generated competitive returns, especially over longer periods.

While market timing might seem like an attractive strategy, it requires considerable skill, temperament, and a consistent track record. There are no bullet-proof signals for timing the market and attempting to do so can significantly affect your investment returns. Therefore, a long-term investment plan might be a safer and more beneficial approach.

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Want to discuss creating your own custom investment strategy?

When markets fall, the natural instinct is to sell. But we’ve seen how costly it can be to miss the stock market’s best days. It’s important to have a plan of how long you plan to stay invested, with that plan matching the goals of what you’re trying to achieve. Speak to GSB Capital for more information about creating your own custom investment strategy. We look forward to hearing from you.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.

THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP AND YOU MAY GET BACK LESS THAN YOU INVESTED.

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This post originally appeared on?GSBcapital.com