Stock Market Timing is Everything

Buy-and-hold investors haven’t done so well over the past decade. Generally speaking, if you bought stocks ten years ago and held to today, you are sitting at break-even as seen in the chart below. However, if you knew how to buy near “A” on the chart, and sell somewhere near “B”, you would have doubled your money over a five-year period. If you chose the right stocks, you would have tripled your investment or more.

However, most investors don’t know how to do that. Most investors buy at the wrong time and sell at the wrong time. They don’t see the freight train coming in time to avoid getting run over. On the other hand, when stocks are bottoming out and starting to climb quickly, they wait too late to start buying again. They just got beat up badly and now they want more confirmation the market will keep going up before they get in. Meanwhile the market climbs, leaving them behind.

That’s exactly what happened with a fund I was in during the late 1990’s. The fund manager was aggressive and he made money fast while stocks were going up. Then he lost money fast when stocks went down in the 2000-2002 recession. It might have been ok if he had stayed aggressive and made money when stocks started to rise again, but he got conservative at the bottom and failed to make back the money he lost. Needless to say, I sold all shares in the fund…. permanently.

In 2000, I started buying stocks aggressively on margin at the very end of the bull market and lost several thousand dollars before the end of the year. In 2000 I learned the meaning of the words, “margin call.” My friend had more money in his portfolio. He watched the value of his account drop for two and a half years before he could take it no more and sold everything – almost near the exact bottom. A bull market began soon after.

Investors need to learn how high stocks tend to go over what time period and how far and how fast they fall. No one knows the future with certainty, but there are often signs that trouble is ahead with the economy and that we should at least proceed cautiously.

Learning more about investing in stocks and reading the economy can help you improve your returns. A little knowledge goes a long way in the stock market. We give free stock picks at:

http://tradergstocks.blogspot.com/

Many profitable returns,

Gregg Killpack