The Market Timing Secrets No One Talks About - March 24, 2020

Is the ability to time the markets more of a data-driven science or a 'gut - feeling' art?

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.

Giving up too soon at the first sign of inconvenience often leads to missed opportunities among numerous individuals who try to trade on their own retirement. For example, many investors have forfeited immense chances waiting for the Utilities stocks to correct, only see the latter achieve new highs, move higher and drive the buyer markets to record levels: ADOMANI, Inc. (ADOM), American Electric Power Company, Inc. (NYSE:AEP), The AES Corporation (NYSE:AES), Atlantica Yield PLC (AY), Avangrid, Inc. (AGR)

Investment emotional triggers (fear and greed) can lead to costly mental mistakes by investors who typically fall into the trap of being a market follower instead of a market leader.

Fruitful market timing requires three key parts: 1) A solid sign to guide you when to get in and out of stocks (or securities, gold or different kinds of investments). 2) The capacity to act on the sign accurately. 3) The control to follow up on it.

Many investors believe that market timing is a short-term investment strategy. There is a less known, more effective, longer-term market timing approach that has been used successfully by astute investors like Warren Buffet.

Rule 1: Attempting to time tops and bottoms is lose-lose situation.

Surrendering the objective to time the tops and bottoms gives you the adaptability to benefit and increase your odds to secure profits over the long-term, even if your calls aren't always right.

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

Warren Buffett has made his fortune based off this simple rule. He warns not to sell during small crashes, and weather the storm by focusing on the long term.

There is a big difference between a stock market crash and small correction. No matter what happens in the stock market, chances are that the stocks you own will eventually come back to their pre - crash value; hanging on to your original positions, or opportunistically averaging down, during market downs can be the shrew distraction to take. Warren Buffett takes this thought a notch higher and frequently goes on a buying binge when markets turn, purchasing additional shares of his favorite stocks at a major markdown and tuning in to his own recommendation of being greedy when others are scared, and being scared when others are greedy.

When It Comes to Trading Your Retirement, A Risk Adjusted Trading Strategy Should be Followed

It's just human that many surrender to emotions and attempt and game the framework 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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ADOMANI, Inc. (ADOM): Free Stock Analysis Report

American Electric Power Company, Inc. (AEP): Free Stock Analysis Report

The AES Corporation (AES): Free Stock Analysis Report

Avangrid, Inc. (AGR): Free Stock Analysis Report

Atlantica Yield PLC (AY): Free Stock Analysis Report

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