Planning Briefs
Market Timing Is An Inexact Science
Published Monday, March 28, 2016 at: 7:00 AM EDT
The history of leading stock market indicators, like the Standard & Poor's 500 (S&P 500), is littered with stories about prices shattering new records as well as precipitous plunges in value. For example, soon after a new high is reached, a major correction could occur, reflecting the inherent volatility and uncertainty of the market.
This can end up being both good news and bad news for market timers.
Market timing is the practice of selling stocks and mutual fund shares ahead of projected declines and buying back those investments when the investor expects the stock market to climb. It's a tempting proposition, and when it works, it can reduce losses and position a portfolio for future gains. However, it usually doesn't work, and getting the timing wrong can result in big losses, from selling shares that would have recovered or from being out of the market when prices rebound.
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