Market timing is the strategy of making buying or selling decisions of financial assets by attempting to predict future market price movements.
The prediction may be based on an outlook of market or economic conditions resulting from technical or fundamental analysis.
This is an investment strategy based on the outlook for an aggregate market rather than for a particular financial asset.
Timing the market is often a key component of actively managed investment strategies, and it is almost always a basic strategy for traders.
Active strategies such as momentum trading are an attempt to outperform benchmark indexes. Active investors believe they have the better than average skills.
Passive strategies like buy and hold and passive indexing are useful because they could help minimize transaction costs. Passive investors don’t believe it is possible to time the market.
For the average investor who does not have the time or desire to watch the market daily, there are good reasons to avoid market timing and focus on investing for the long run.
In this video, Vanguard Group founder Jack Bogle talked about why he believed timing the market is a bad strategy.
Warning: This video is to show you John Bogle’s view about timing the market. Please do your research before doing any investment. A good balance between return and risk is the key to investment success.
Source: Finance Jane (Shared via CC-BY)