Does it ever pay to 'time the market'?
Have you ever heard the phrase 'to time the market' and wondered what it means? Timing the market refers to an investment strategy where investors try to invest just before prices go up, and withdraw their investment just before prices go down.
If you're generally well-informed and you follow market news, company updates and are interested in global trends, it's tempting to feel that you can tell where the markets are headed. But if you're wondering whether you should try to time the market yourself and trade fast based on these feelings, the answer you'd receive from most financial advisers is an emphatic 'No!'.
Every once in a while, an investor might get lucky and make massive returns on a change in the market that they've predicted. That's generally all this is, though - luck. It is almost impossible for investors to make this strategy work most of the time, and it's certainly not a good idea to rest your financial future on a lucky guess.
No one knows what the markets may do
Even seasoned traders and financial professionals can't predict the future, so making decisions based on potential market movements might not benefit your portfolio. Markets are unpredictable and things can change very quickly. This means that it's very difficult to know when to sell your assets and when to hold on to them. Investing is all about patience and trust in a solid, long-term strategy. In other words, not timing the marketing but time in the market.
Emotional investing could damage your portfolio
Trying to predict market movements and making decisions based on those predictions is an emotionally motivated move. Bringing too many emotions into your investment strategy could hurt your chances of achieving long-term financial success. Investors who react emotionally to market fluctuations are more stressed. They also find that they don't enjoy the same peace of mind as investors who have implemented a well-developed long-term investment strategy.
What should I do instead?
You're better off following a disciplined investment strategy that is balanced, diversified and regularly monitored. It's also a good idea to consult with your financial adviser. Together, you can review market movements and make informed decisions about whether to stick to your investment or to shake things up. Avoid making investment mistakes like trying to time the market - you'll be much more at ease and your financial future can be much more secure.
This document is meant only as information and should not be taken as financial advice. For tailored financial advice, please contact your financial adviser. Discovery Life Investment Services Pty (Ltd): Registration number 2007/005969/07, branded as Discovery Invest, is an authorised financial services provider. All life assurance products are underwritten by Discovery Life Ltd. Registration number: 1966/003901/06, a licensed life Insurer, an authorised financial service provider and registered credit provider, NCR registration number NCRCP3555. All boosts are offered through the insurer, Discovery Life Limited. The insurer reserves the right to review and change the qualifying requirements for boosts at any time. Product rules, terms and conditions apply.
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