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Yes, You Can Time the Market. Find out How - July 03, 2020

Zacks Equity Research

Have you ever dreamed of being that one in a million investor who has the talent to perfectly time the markets?

Indeed, even among those investors who don't try to consistently time the markets, many think they can still call a top and act opportunistically. It's at these times when an investor who speculates often sits on the sidelines and looks for better opportunities to put money into the market.

Individual investors who focus their efforts on timing the market typically miss chances. For example, many investors have overlooked chances to benefit from buying the Finance stocks at the first opportunity, by attempting to buy them during a pullback only to see these stocks accomplish new unsurpassed highs: Ameris Bancorp (ABCB), Kingstone Companies, Inc (KINS), MFA Financial, Inc. (MFA), Cedar Realty Trust, Inc. (CDR), American Assets Trust, Inc. (AAT)

Anxiety and eagerness regularly lead investors into psychological traps because most investors take cues from past market moves and trends instead of attempting to anticipate potential market moves.

Successful market timing requires three key ingredients: 1) A reliable signal to tell you when to get in and out of stocks (or bonds, gold or other types of investments). 2) The ability to interpret the signal correctly. 3) The discipline to act on it.

The popular image of market timing is that it calls for making drastic, all-or-nothing moves at the precise, exact market top or bottom. There is a less well-known, rather simple market timing approach that has been used successfully by savvy investors like Warren Buffet for decades.

Rule 1: Never try and time tops and bottoms.

Forget tracking for market tops or bottoms to expand your odds for success with a longer timeline and give yourself the flexibility to eventually profit, regardless of whether your calls are spot-on or way off-base.

Rule 2: Try not to sell amid little crashes - instead exploit the opportunity by buying.

Warren Buffett has made his fortune based of this straightforward guideline. 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 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 idea one step further and often goes on a buying spree when markets turn, essentially buying additional shares of his top stock picks at a big discount and listening to his own advice, 'Be fearful when others are greedy and greedy when others are fearful.'

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, think about this: Nobel Laureate William Sharpe found in 1975 that a market timer would need to be precise 74% of the time to beat a passive portfolio. Even a slight outperformance probably wouldn't be worth the energy - and given that even the experts generally fail at it, market timing shouldn't be your exclusive investing strategy of choice, especially using assets earmarked for your retirement.

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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Ameris Bancorp (ABCB) : Free Stock Analysis Report
 
MFA Financial, Inc. (MFA) : Free Stock Analysis Report
 
American Assets Trust, Inc. (AAT) : Free Stock Analysis Report
 
Cedar Realty Trust, Inc. (CDR) : Free Stock Analysis Report
 
Kingstone Companies, Inc (KINS) : Free Stock Analysis Report
 
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