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The Keys to Successfully Timing the Markets - September 24, 2019

Zacks Equity Research

In the long-run, does consistent market timing really matter to be a successful investor?

Indeed, even among the individuals who don't seek to be the ideal market timer, many feel they can call a top and act in accordance. It is these tendencies that make investors sit on the sidelines and hang tight for a better chance to put money into the market.

Lost chances by those who attempt to time the market is a common mistake among those who trade their own accounts. How many traders have lost investing opportunities by choosing to wait for the Medical stocks to correct or reach attractive entry levels? Only for them to continue to move higher and achieve new all-time highs: Hanger Inc. (HNGR), VBI Vaccines, Inc. (VBIV), Caladrius Biosciences, Inc. (CLBS), Adverum Biotechnologies, Inc. (ADVM), AAC Holdings, Inc. (AAC)

Investment emotional triggers (fear and greed) can lead to costly mental mistakes by investors who typically fall into the trap of being a market follower instead of a market leader.

Fruitful market timing requires three key parts: 1) A solid sign to guide you when to get in and out of stocks (or securities, gold or different kinds of investments). 2) The capacity to act on the sign accurately. 3) The control to follow up on it.

Market timing is commonly perceived as the ability to guess the exact market top or bottom and make moves accordingly. However, there is a less common, rather straightforward market timing strategy that has been utilized effectively by insightful financial specialists like Warren Buffet for a considerable length of time.

Rule 1: Why trying to time the tops and bottoms of the market is a dead end.

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: Make an effort not to sell in the midst of little crashes. Muster the courage to trust your gut and buy best in class stocks at a discount.

Warren Buffett has made his fortune based off this simple rule. He cautions not to sell during little crashes, and encourages enduring them by concentrating on the long haul.

There is a key distinction between a small correction and a market crash. If the companies you own are established and successful, they are likely to return to their pre - crash price before long, making holding on the wisest decision. Warren Buffett takes this thought one step further by often buying outsized positions in value stocks he likes across the board when markets turn, essentially leveraging his bottoms-up analysis and stock picking acumen.

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 consider this: Nobel Laureate William Sharpe found in 1975 that a market timer would have to be accurate 74% of the time to beat a passive portfolio. Indeed, even a slight outperformance most likely wouldn't justify the efforts - and given that even the specialists for the most part come up short at it, market timing shouldn't be your exclusive methodology for investing, particularly when it comes to building your retirement nest egg.

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.

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Hanger Inc. (HNGR) : Free Stock Analysis Report
 
Adverum Biotechnologies, Inc. (ADVM) : Free Stock Analysis Report
 
Caladrius Biosciences, Inc. (CLBS) : Free Stock Analysis Report
 
AAC Holdings, Inc. (AAC) : Free Stock Analysis Report
 
VBI Vaccines, Inc. (VBIV) : Free Stock Analysis Report
 
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