Guide to Financial Planning: Part Two

TIME

Time in the market, not timing the market.

It is very, very difficult to predict the best time to enter or exit the market. The speed at which markets react to news means prices have already absorbed the impact of any new developments. When markets turn, they often turn quickly.

Investors trying to time the market are suggesting that they know more than the market itself, you could argue that is near impossible. Those who try to time markets will often miss opportunities and growth. There will always be an occasional investor who times the market successfully, that doesn’t make it the right thing to do.

History tells us that markets move in cycles, but nobody rings a bell at the top or sounds a buzzer at the bottom. Over short periods, markets can be more volatile and result in a wide range of returns (positive or negative).

According to Fidelity Investments: “the longer you stay invested, the greater the probability your investment will generate a positive return”

I would concur with that view. My rule is that if you know more than the market itself then by all means try to time the market. If you don’t know more than the market (and trust me, you don’t). Then time in the market is key.

 

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