5 Reasons Why Trying to Tim the Market is Wrong | Author: Kalpen Patel | The Capital | June 2021
Hi everyone, thank you for coming back to my blog. I hope you found my last blog interesting and useful, in which I introduced “Important Introduction to the Protection of Shareholders’ Rights and Interests‘.
In this blog, I will explain why trying to seize market timing is a bad idea, and what potential returns you might lose if you stick to a short-term investment strategy instead of a long-term investment strategy.
It is every investor’s dream to grasp the market opportunity. A PhD in Finance and Mathematics is dedicated to market simulation. However, no one has developed a market timing system that has proven to be successful. The variables involved are too complicated, and the influence of human factors is too great.
Avoid listening to financial experts saying that today is a good day or a bad day to enter and exit the market. If they have been correct, they won’t bother to tell you. On the contrary, they will not add billions of dollars.
Considering these reasons, why not time the market the next time you consider doing this:
There are many wealthy investors, but few do this by predicting short-term changes in the market.
· Some wealthy investors become wealthy through long-term holdings.
· Hedge fund managers and mutual fund managers are rich, but they get paid regardless of their performance.
· Some short-term investors make a lot of money, but they lose money more often than they make money (Some large gains can offset multiple losses. This is a gamble).
· In short, no one can consistently grasp market opportunities, and you are unlikely to be the first.
When most people try to time the market, they exit prematurely. Eventually, the market fell, but they waited too long to re-enter. You also face a high opportunity cost, because when you sit there waiting, your money is of little use. Research shows that staying in the market is more profitable than jumping in and out.
· Missing a few days of good days has proven to be a major disadvantage. From 1993 to 2013, the Standard & Poor’s Index rose by an average of 9.2% per year. If you miss the best 10 days of the year, your annual rate of return is only 5.4%. This is not just the benefits you missed, but also the compounding of the benefits you missed.
Depending on the number of stocks you own, you will lose some money every time you buy or sell. Can you get enough benefits from market timing to offset these additional costs and tax blows? I doubt it very much.
Every time you sell and receive proceeds, you are forced to pay taxes on those proceeds, which means that you can reinvest less funds.Long-term investors enjoy great tax incentives because The less you sell, the less tax officers will cut you in the future. Avoid underestimating the impact of taxes on the assets you hold.
View long-term charts of the U.S. stock market or any other stock market. Over time, the returns are incredible, and regular investment is the key to getting rich.Few investors can go beyond simple Index fund, Just invest regularly in this simple index fund every month.