During the process of consolidating my investments, I learned a lesson in investing which is, “short-term timing doesn’t work.” – Especially for newbie investors who aren’t much knowledgeable to make big decisions regarding buying and selling. It is not just my personal opinion but the common wisdom that the timing the market doesn’t work. No matter how hard we try to make huge profits by timing buy and sell orders in the futures market is too risky. For instance, if I asked a newbie investor to tell me whether a particular stock or market will rise or fall on next week, he/she would only be guessing. Now, tell me, would you put your hard-earned money just on guessing.
Or even better, let’s take an example from my own life – not long ago, I decided to sell a large stake in Nifty50. So, in order to get my asset allocation right, I wanted to transfer my money into bonds. But, when the time comes to sell, I couldn’t time the market. I didn’t have the heart to pull the trigger because what I was seeing that my fund was 23% up and it was surging from the past few months. At that moment, I thought it would be right to hold it and let it go at least 26 or 27 percent.
So, what I did – I held my fund for another day. It rose. I held it for another day and then another but on the fourth day the market went down – and my fund followed with it. And in the process of holding, I lost 5 percent from 25 percent. It was the moment I realized that I should have sold that fund. The next second I made up my mind to book my profits and sell it! The moment I sold, the market began to rise again. And it rose to 7 percent in just 3 days.
And then I thought – I should’ve held on.
This is the biggest problem with trying to time the market. You can’t be so sure where the market is going to be the next day. Over long-term, the stocks have returned on an average of about 10 percent but in short-term it is so volatile that you can’t be so sure. It swings up and down.
Although market timing is not a bad thing even many professional investors and financial experts use this strategy to book profits in short-terms. It’s just you’re better off if you’re not solely relying on timing the market for returns. Try to focus on the broad performance of the market instead of trying to make out of price fluctuations in short-terms.
To be honest, it is my perspective, and I’m only talking about newbie investors or amateurs who don’t hold much experience and skills to manage such volatility. In the end, it is all your decision.
If you have any questions for me, then please don’t forget to mention in the comment section below.