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| Market Timing: A Risk You Shouldn't Take |
| When you hear people talking about market cycles, you may ask yourself: Why not just jump into investments when the cycle is favorable, and back out when things are about to go sour? In this way, you could seemingly get all the upside performance with none of the downside loss. |
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| Unfortunately, it's not that simple. People who attempt this are called "market timers." It's a risky strategy, and most investment professionals view market timing as little more than gambling. That because market timing fails far more often than it works. In addition, investors who employ a market timing strategy often fall short of their investment objectives because they often buy high and sell low. Furthermore, they run the risk of missing out on periods of rising returns–which doesn't happen to those who stay invested |
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Market timing also makes it likely that you won't be in the market when you really need to be–on those days when the market turns hot, and people who are already invested reap the benefits. Consider these statistics:
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| Only by staying invested in stocks through the entire 84-year period could you have been sure to get market exposure during those crucial hot months. |
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| If you are a market timer, you believe that you can predict when every good day will be. But in reality, jumping in and out of the market increases the odds that you will be out of the market exactly when you should be in it–when you could be earning the most on your investments. |
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