asdfasd wrote:
I don't think that is the point. The point is that according to that concept (no matter how you find the top/bottom) selling at the top and buying at the bottom will be more profitable. But I do know what flagpole is trying to say, but people think that way if they aren't looking for a huge profit. So does flagpole hold on no matter what because he does not know how to time the market? That seems like a good conservative approach. A riskier approach will likely result in a big payday.
I mean I could be totally wrong with that line of thinking. I am no expert but I can gladly take a correction.
If you want to play with trying to time the market looking for a "big payday" then you should do so only when...
1) You are already putting 15% or more into retirement accounts.
2) You own your home outright.
Then, go ahead.
Doing that with all of your invested money though is foolish. Timing the market just does not work. Study after study has proven that those who jump in and out of the market do worse overall than people who stay the course. And this doesn't mean just Buy and Hold either...you can buy different funds, get out of some funds, whatever...but you need to have a consistent presence in the market.
It sounds so easy to look back and say "If I sold at 14,100 and then bought back in at 6400 and then sold at 16,175 and bought back in at 15,200, and I kept doing that, I'd be rich". The problem is that NO ONE can market time like that. The OP took money out at 15,000 in JUNE, betting that it would go below 13,000, so he's been out for half a year now. NO WAY would I want to give back what I've gained since June.
Statistically the best investors are women...why? They don't chase peaks and valleys. They put money in like clockwork and don't have some macho need to try to "earn as much as possible". They have it right.
Don't buy low and sell high...you don't know when low is and when high is.
What you DO know is:
1) The stock market goes UP 73% of calendar years, and ALWAYS over time it goes up, beating inflation to a pulp.
2) When most people are getting OUT of the market as it drops, that's the time to BUY MORE. Wait! Isn't this market timing? NO. You keep your invested pile in there at all times until you are ready to retire, and if there's a big drop and IF you have extra money you don't need right then, you put in more. We do that all the time with sales at stores...why do we shy away from buying stocks when they've dropped a ton? INDIVIDUAL stocks, maybe as that might indicate a weakness in that company, but if you spread out mutual funds over different types (growth, value (income), international), and you have many of them so that you are diversified, you are greatly protected.
So, do this:
1) Emergency fund in place of 3-6 months of expenses.
2) Debt free but for a home OR a large student loan.
3) 15% into retirement accounts minimum.
4) Pay off house early.
5) IF you are 100% debt free including a paid for home, and you continue to have money in mutual funds in your retirement accounts (continuing to invest in them too if still working) now you can buy individual stocks if you want...buy no fewer than 5, have ~20% in each one, and make sure they are all in different sectors of the market.
You put money in your investment like clockwork...NEVER stop doing that. It's easy to be a quitter, and quitters don't win. Studies show that when people take money out of the market or stop contributing to the investments that they will just SPEND that money rather than save it to invest later (as they say they will) when they think the market has dropped enough.
The biggest problem with waiting for the market to drop before you get back in is that since 73% of years are UP years, that's a losing proposition waiting for it to go down significantly. Yes it will go down in a certain year, but did it just go UP three years in a row before that?
When you are out, you miss out on dividends, money that you would have put in that statistically you won't save to do so later, and then just growth.