Sometimes, as you may have noticed, even the experts get things wrong. These experts say stay in the market to catch the best 10 days, but they’ve got it completely backwards. Today, I’ll show you what the experts miss about…
“timing the markets” – and how you can flip it to your advantage.
Investors are also told not to try to time the market. And for most people with a 20-30 year time horizon saving for retirement, that is sound advice.
In those cases, the tools for withstanding the inevitable pullbacks in the market are allocation, diversification, and a systematic process for putting capital to work such as dollar cost averaging or a time-based approach, such as committing to investing a certain amount on a monthly or quarterly basis.
Here at Options360, we are fairly active and the very fact options come with an expiration date means there is always an element of “timing” to our trading.
When most people think of market timing, it’s about initiating trades; buying a dip or shorting the top. However, what I’m talking about is the opposite; it is knowing when to sit on the sidelines during unfavorable environments and avoiding the urge to force trades.
When financial advisors try to explain why one shouldn’t try to time the market, they usually point to a chart or table which shows the returns of the S&P 500 (SPY) compared to if you had missed the best 10 days of each year or avoided the 10 worst. It’s compelling, especially over the past 10 years as remaining fully invested returned some 650%, while missing the 10 best days returns just 300% or less than half.
But this is what I consider…
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