The Truth About Market Timing

By May 22, 2018April 14th, 2020No Comments

The debate about whether investors can regularly ‘beat’ the market by timing when to buy and sell is not new. At the most basic level, individual and institutional investors have the same goal: to buy low and sell high. For market-timers, this means trying to spot the highs and the lows in advance.

It’s no secret that trying to consistently generate alpha through aptly-timed trades is incredibly difficult. Especially when accounting for tax consequences and trading fees, investors may not end up ‘beating’ the market at all. There’s also an opportunity cost: sitting in cash waiting to enter the market, and then again after selling when you’re trying to get back in.

At Darrow Wealth Management, our investment strategy emphasizes diversification and discipline, rather than speculative bets on short-term market swings. Instead, we focus on what we can control, like limiting cash balances and fund expenses. Over time, we believe this puts investors in the best position possible to reach their goals.  

To explain why, we’ve used some real charts of the S&P 500 and invite you to try your hand at market timing.

Market Timing: Does it Work?

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