Article

How you can save time by not timing the market?

07 Aug 2019

The concept of “timing the market” is as old as the stock exchange itself. There are tales of investors who move in before a “big leap” and get out before a crash. Prima facie it looks a time-efficient option, but research and experts say otherwise. “Forbes”says, if saving time is your priority, then it’s better to put “time in” the market rather than “timing the market”.

What is timing the market?

Market timing is the art of buying and selling stocks or switching between asset classes by trying to predict future market price movements.

The Why and the How

The proponents of market timing argue that it is the purest form of market trading. “Timers” are those that try and “time” their entry and exit to gain maximum benefits as opposed to holding shares for a longer period. They believe that a predictive analysis of the market can help get the “best days” of a year and earn maximum profit. Similarly, they try to predict a major crash and offload their shares just in time.

Proprietary software is available to help investors “time the market”. These use predictive algorithms, incorporating several indices, to give out signals marking good and bad periods.

Some popular products are: -

  • Extreme Hurst
  • Price Memory
  • Smart Channel
  • Price Wizard

Indifferent results - a waste of time!

Whatever the “timers” say, history and math refute.

Stock market graphs are similar to those produced by a random number generator. It takes a very thorough study of market dynamics, the nature of individual asset types, company performance and global dynamics to even get a hint of how the market is going to respond the next day.

A Wall Street Journal study says, that a group of PhD economists analysing the market on a daily basis perform as well as a group of monkeys throwing darts in stock selection.

Timing the market also costs you in other ways.