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Yes, You Can Time the Market. Find out How - November 28, 2019

Zacks Equity Research

Is the ability to time the markets more of a data-driven science or a 'gut - feeling' art?

In fact, even among long-term investors who don't attempt to time the markets, being able to call the top of the market is a skill that many think they possess. This misguided confidence is often driving investors to sit on the sidelines and wait it out for better market opportunities.

Lost chances by those who attempt to time the market is a common mistake among those who trade their own accounts. How many traders have lost investing opportunities by choosing to wait for the Auto-Tires-Trucks stocks to correct or reach attractive entry levels? Only for them to continue to move higher and achieve new all-time highs: Gentherm Inc (THRM), Aisin Seiki Co. Ltd. Unsponsored ADR (ASEKY), Auto Trader Group (ATDRY), American Axle & Manufacturing Holdings, Inc. (AXL), Brilliance China Automotive Holdings Ltd. Unsponsored ADR (BCAUY)

Investment emotional triggers (fear and greed) can lead to costly mental mistakes by investors who typically fall into the trap of being a market follower instead of a market leader.

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Fruitful market timing requires three key parts: 1) A solid sign to guide you when to get in and out of stocks (or securities, gold or different kinds of investments). 2) The capacity to act on the sign accurately. 3) The control to follow up on it.

Many investors think of market timing success as a win or lose proposition. But there is a less notable, rather straightforward, successful market timing approach that has been utilized effectively time after time by astute investors like Warren Buffet.

Rule 1: Why trying to time the tops and bottoms of the market is a dead end.

Forget tracking for market tops or bottoms to expand your odds for success with a longer timeline and give yourself the flexibility to eventually profit, regardless of whether your calls are spot-on or way off-base.

Rule 2: Try not to sell amid little crashes - instead exploit the opportunity by buying.

Warren Buffett has made a great part of his fortune due to this simple rule. He cautions not to sell amid little crashes and to instead endure the temporary hardship and profit by concentrating on the long haul.

There is a noteworthy distinction between a complete market meltdown and a common 10% market correction. If the companies you own are established and successful, they are likely to return to their pre - crash price before long, making holding on the wisest decision. Warren Buffett takes this thought one step further by often buying outsized positions in value stocks he likes across the board when markets turn, essentially leveraging his bottoms-up analysis and stock picking acumen.

A Risk Adjusted Trading Strategy Should be Followed for Your Retirement Assets

It's only human that many succumb to greed and try and game the system by timing the market. But consider this: Nobel Laureate William Sharpe found in 1975 that a market timer would have to be accurate 74% of the time to beat a passive portfolio. Even a slight outperformance probably wouldn't be worth the energy - and given that even the experts generally fail at it, market timing shouldn't be your exclusive investing strategy of choice, especially using assets earmarked for your retirement.

Actively trading for alpha, outsized, short - term gains through market timing and other high - risk trading strategies is fine with a small portion of your investable assets, but for your longer - term retirement assets, a "risk -adjusted focused" investment solution generally makes more sense.

If you'd like to learn how to 'super-charge' your retirement assets, get our free report:

Will You Retire as a Multi-Millionaire? 7 Things You Can Do Now.


This report can help you maximize your retirement nest-egg without the high risk of attempting to successfully time the markets. Click here for free report>>
 
Gentherm Inc (THRM) : Free Stock Analysis Report
 
American Axle & Manufacturing Holdings, Inc. (AXL) : Free Stock Analysis Report
 
Brilliance China Automotive Holdings Ltd. Unsponsored ADR (BCAUY) : Free Stock Analysis Report
 
Auto Trader Group (ATDRY) : Free Stock Analysis Report
 
Aisin Seiki Co. Ltd. Unsponsored ADR (ASEKY) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research