Market Timing Strategy
Market timing has a bad reputation... which is not completely justified. Opponents say that you cannot be smarter than the market. They argue that you can be lucky a few times but not consistently.
The problem is that the term “market timing” is used for a variety of investing strategies. When you discuss the merits of a market timing strategy, you first want to distinguish between short-term and long-term strategies.
My experience and accomplishments are in long-term market timing.
Long-Term Market Timing
Another term for long-term market timing is “trend following” or “trend investing”. Long-term here refers to a period of many months or even years.
Investors seek higher returns by timing when they buy and sell their assets. They want to buy assets when their price is relatively low. These trend investors buy at the end of a long-term bear market and beginning of a long-term bull market.
They sell when the assets are relatively high in price; when the market is at the end of a bull market and the beginning of an expected long-term down-turn.
Since nobody can predict the future with certainty, long-term market timers use proven market trend indicators. These indicators are based upon objective calculations and are more often correct than wrong.
Warning: never start using a market timing strategy if you cannot accept that reality occasionally turns out different than what you expect. In those situations, be prepared to correct quickly.
Long-term market timers count their gains and profits over a period of years and multiple trades. They do not judge if their strategy is working based on a single trade.
Asset Markets and Funds
Long-term timing of the market can be used as a profitable investing strategy for a number of different asset classes:
Personally I apply the trend following approach to stock market index funds and some commodities like “gold”.
My recommendation is to stay away from investing in individual stocks unless you have the time, knowledge and insight to invest in these companies.
Market timing has got its bad reputation from the short-term bets that some people like to take. These traders seek the best moment to buy and sell during a day. Or they look at a time frame of a couple of days.
My recommendation is to leave this approach to the professional traders. They have a set of advanced tools and the personality that gives them a chance to make this work. Many are still losing money. Very, very few casual investors will make money in the long-term by using a short-term market timing approach.
For most people, such a short-term strategy is a guaranteed road to sitting the whole day behind your computer screen, losing money and getting stressed.
Strategy for Long-term Timers
If you are interested to grow your savings in the long run, you have come to the right place.
I use a long-term trend following approach to invest and grow my savings. By timing the moment when you buy and sell stock market index funds, you can get much better investing returns than when you just buy and hold these funds.