Now that the title of this article has grabbed your attention, is there a ‘bad’ or ‘good’ time to invest? Is there a ‘science’ to timing the stock market?
Consider the following and if ‘timing the market’ is a good investment strategy for you:
Tip #1 Invest- Whether you invest at the ‘top’ or ‘bottom’ of the stock market (price per share), just investing in the stock market can make a positive difference when you have ten or more years to invest. Not investing in the stock market will yield little, or no return on your investment when adjusted for inflation.
Tip #2 Watch for Market Shifts- Bull Markets (stock prices rising) last longer than a Bear Market (stock prices falling), in fact they last four times longer. Watching for a Bull Market provides you an opportunity for growth in your portfolio. Consequently, a Bear Market provides you an opportunity to purchase stocks at a lower prices per share than previously, but can make it harder for you to pick profitable stocks due to market conditions.
Tip #3 Take Advantage of a Bear Market- Investing at only stock market peaks versus only at stock market troughs produces a worse overall return over a period of 20 years or more. It pays to buy shares at a lower price by purchasing more during those times.
Tip #4 Consistent Investing Produces a Higher Overall Return-Commonly referred to as Dollar Cost Averaging, involves investing consistently (ex. monthly) a fixed dollar amount over a long period of time, such as 20+ years. Timing the stock market and only participating during certain conditions does not yield as high of return as investment consistency.
If investors emotions were not at play in the investment process, investment consistency and monitoring would outweigh ‘timing the market’ over a long period of time and produce higher returns. For additional information, visit Investopedia’s article Buy and Hold Investing vs. Market Timing.
An investment strategy involves consistency, monitoring, and an overall plan to achieve the goals that you want to achieve. By working together to develop and implement a financial plan, we remove the ‘timing factor’ that could impact your portfolio. Feel free to contact a Wealth Management Specialist at our Las Vegas office if you would like to schedule a meeting.