TU-Online

John Bradley:

Pros: You could earn a whole lot more money.

Cons: 9 times out of 10 you will loose money trying.

Unless you know what you are doing (and if you have to ask what it is I don’t think you do), then don’t try it. It’s a quick way to go bankrupt.

Shaun R:

It is not 9 out of 10 times you will lose money, It is 9 out of 10 people who trade lose money. But that is just like starting a business (which have over a 90% failure rate).

Only those who take time to learn how to invest properly will make money by timing the market.

In other words if you are dedicated to making money by trading then take the time to learn. If you do not want to take the time to learn you are better off buying and holding.

Thor:

Yes, but I agree it matters how you define “timing”.

Trying to time the market in the short term means you think you know better than all those that make up “the market”. The ability to do that is, at first, questionable. And second it’s risky. News can come that goes against you in the short term that is no fault of your own and no fault of your best efforts.

My worst case in that was after the stock bubble burst and considering seasonal timing I took money out of cash and bought stocks on Sept 1 2001. Less than two weeks later stocks were in the toilet after the terrorist attack. Luckily I still had some cash and bought stocks when the market reopened after being closed. By December I was showing a nice profit.

You assume the market will operate rationally. It doesn’t all that much in the short term. It is more rational in the longer term.

That said, I think you CAN avoid extremes and time your investments “some” and rarely, at the extremes. More to avoid losses but that promotes profits.

We had several years of warnings about the subprime crisis. Home prices started topping out in 2005 except for some boom cities. In 2006 they were declining in some places. In 2007 they were falling nationally.

They warned us long ago that never before in our history has so much debt been on an adjustable rate basis and if rates were raised there was a big risk. (red flag telling you to be concerned about interest rates).

They warned us that rising rates could cause subprime failures. They warned us those failures could drive down prices. They warned that falling prices could hurt all mortgages and cut out the HELOCs, home equity borrowing hurting consumers and the overall economy. And finally they warned us the banks could get in trouble with all that happening and credit overall could tighten further hurting our economy.

Then last May-June, facing all those warnings with some of it already coming true, the stock market went up 1,000 points in a month and a half.

That didn’t make ANY sense to me so I got out.

I saved a 12% loss from the point I got back in the Spring and made over 4% interest in the interim. So I am up 16% over a year while the buy and holder is still down 10% or more since the high last June.

But I am not what they consider “a market timer”. They want to time day to day, week to week. And “my” times may only come once or twice a decade.

But by avoiding some losses I have more money to reinvest and sometimes I buy on margin if I see extreme lows and I can increase my return to 30% or more by doing that, if successful.

I also saw the internet bubble as irrational. And I pulled money out a little early in 1999 and 2000. I avoided the losses that damaged so many.

But it is very difficult emotionally to act rationally when the market is rising on “irrational exhuberance”.

So YES, I think you can and should “time” at “times”, but only at those extremes.