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Timing the market

09.22.2022 · Posted in Writing and Speaking

Would you have been much better off if you had

timed it just right?

2022 has not been a good experience for investors with some commentators saying that

The first six months of the year has been the worst six month period for at least 50 years.

A little over 5% of the funds in New Zealand have shown a positive return during the six

months to June 2022 according to research house Morningstar but what we do not know

is what type of fund this 5% had invested in because it is almost certain that if they had

been invested in growth funds then they would have joined the other 95% of funds which

have shown a negative return.

So are you able to time the market perfectly every time?

The short answer is “No.”

The reason why this is so is that the odds of getting it right every single time is stacked

against you.

If there was a method of timing the market perfectly every time then someone would

have discovered it by now and you can guarantee that they are not going to share their

secret with everyone.

we all have an opinion of some kind n what the markets will do; at the end of the day the

markets are driven by market sentiment.

One cannot expect to be an expert on the markets overnight; it is no different to being

knowledgeable about anything else. It all takes time and a bit of reading but knowledge

does not involve just reading and listening; it involves doing. That is, investing; there is

no better teacher than your own personal experience.

Warren Buffert

 recommends against obsessing over finding a perfect time to buy a

stock.

“Don’t worry about what the market is doing or might do, or what the economy is going

to do,” says Buffet. “Instead, think about the things you can control. Why am I investing?

When do I need to use the money? Then set up an investment plan for your personal

circumstances-because your goals can’t wait, but emotive headlines can.”

There is no doubt that investors jump on a bandwagon when a particular stock is rising.

The market is driven by emotion but whether a particular stock will rise or fall is not the

only consideration. There is the matter of taxation. If stocks are held for a short period

then sold your tax status may have changed to a trader but this area is a bit murky. A

capital gains tax is in force in some countries so some of your gains could be reduced by

a tax liability.

from time to time you might read of stories of investors who made a killing by timing the

market just right but you never hear of the occasions of when these same investors

who tried the same thing since and got their fingers burned. Greed eventually gets the

better of speculators.

Timing the market correctly can sometimes be down to luck and that’s something to

keep in mind if you see an advert from some guru who made a one time killing. Anyone

can achieve a one off success but it is doing it consistently which is the problem. It is for

this reason why spreading your investment among various forms of assets is the best

way forward.

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