Being that unique investor who has the power to constantly time the market and continually make a profit is the dream for most traders and investors.
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.
Missed investing opportunities by exiting at the first sign of trouble is a common pattern among many self-directed investors. Case in point: How many investors have missed huge opportunities waiting for the Medical stocks listed below to correct, only to see them reach new highs, climb higher and drive the bull market to record levels: Champions Oncology, Inc. (CSBR), BioSpecifics Technologies Corp (BSTC), Cantel Medical Corp. (CMD), TransEnterix, Inc. (TRXC), RadNet, Inc. (RDNT)
Dread and exuberance regularly propel investors into merely 'reacting' to market volatility, rather than envisioning market trends.
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.
Many investors think of market timing success as a win or lose proposition. But there is a less notable, rather straightforward, successful market timing approach that has been utilized effectively time after time by astute investors like Warren Buffet.
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: Don't sell during minor crashes - instead, have the patience to weather the storm, or even better, milk the opportunity to buy low.
Warren Buffett has made his fortune based off this simple rule. He benefits by focusing on the long - term and buying high quality stocks at a discount during large market corrections to profit down the road.
There is a major distinction between a financial crash and a mild market reset. 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.
When It Comes to Trading Your Retirement, A Risk Adjusted Trading Strategy Should be Followed
It's only human that many succumb to greed and try and game the system 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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Champions Oncology, Inc. (CSBR) : Free Stock Analysis Report
TransEnterix, Inc. (TRXC) : Free Stock Analysis Report
Cantel Medical Corp. (CMD) : Free Stock Analysis Report
BioSpecifics Technologies Corp (BSTC) : Free Stock Analysis Report
RadNet, Inc. (RDNT) : Free Stock Analysis Report
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