Saturday August 17,2024
Where to Find the Experts on Market Timing
You’re not going to catch the bottom…The risk is NOT that the investor is going to be caught in a 20% decline; it’s that he/she will be caught out of the next 100% advance.
…Nick Murray (the risk in timing the market)
Over the past few weeks, we’ve seen typical intra-year volatility, with the SP500 dropping approximately 8.5% and the tech-heavy NASDAQ 13.1%.** As the market fluctuated, we received many emails and calls asking if we should sell or buy, if the bull market is over due to the upcoming election, or about other causes. People were curious about the moves we’re making to address the situation, etc.
We don’t try to time or react to Mr. Market’s antics, and we generally avoid market timing, which, put bluntly, seems like a fool’s errand. However, with so many prognosticators promising ways to enhance wealth through trading, clients often ask if we should act during market volatility and therefore, we will periodically address it.
Successful investing hinges on how YOU manage market declines, not how your portfolio responds to them. Market timing is not a viable investment strategy.
This raises the question: can we name the world’s greatest market timer?
Debating the greatest tennis or chess players is common, and we can cite statistics about the best hitters in major league baseball or top football quarterbacks. However, market timers are rarely discussed. Has anyone created an impressive track record of market timing? It’s doubtful.
The point we are making: Market timing provides zero successful examples and is an activity that should be examined critically. To wit, if the world’s top economists, hedge fund managers, Wall Street traders, humble financial advisors and TV market ‘experts’ haven’t achieved notable success in this endeavor, it’s fair to ask whether any of the rest of us are likely to outwit the psychologically driven twists and turns of share prices.
Recent events further illustrate this point. Pundits and economists predicted smooth sailing for the markets and economy until a sudden 3% one-day drop in the S&P 500. Then, headlines warned of a bearish stretch, even as the market recovered and moved towards new highs.
As of 08/15/24, about 20 days after the volatility began, we’re back within 1.8% of the all-time high the S500 hit on 7/20/24.** Reliable predictions are hard to come by.
Your long-term financial success depends on conceiving and following your long-term plan, while failure may result from reacting to and trying to outguess short-term market movements. Invest wisely and stay mindful of the difference.
Be well,
Doug
**Source: https://www.cnbc.com/