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.
Timing the market is often a key component of actively managed investment strategies, and it is almost always a basic strategy for traders.
The advantages of timing the market include enhanced profits, cut-down losses and avoidance of volatility.
However, it also has many disadvantages, including opportunity cost, time-consuming market observation, high transaction and commission costs, higher tax rate, and mistakes in determining entry and exit timings.
Each investor has to weigh them depending on their expectations and needs. While some people might benefit from it, others might not find it very profitable.
In this video, Warren Buffett talks about why he never times the stock market and never cares about the short-term market gains and losses.
Warning: This video is to show you Buffett’s opinion 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)
