I am often asked, “Can’t we just take the money out of our portfolio when the markets are going down, and then put the money back in-
when it hits the bottom?”
While it sounds like a reasonable plan, it is absolutely impossible to actually accomplish.
Anyone that says they can time the market is either lying or delusional.
The perils of market timing have been quantified by Dalbar, a highly regarded financial services research firm.
In a study they conducted from 1995-2014, they looked at what various investments
vs. what average investors
That means that the average investor only captured about one quarter of the total return of the stock market. How does this happen?!
The primary issue the average investor faced? You guessed it - market timing.
Investors were switching in and out of funds at inopportune times.
Human beings are emotional creatures. Everyone knows that you should “buy low and sell high” but very few people actually do it. People panic. People make irrational decisions.
You need a plan and you need to stick to it. Stop thinking you can outsmart the markets.
You can’t.
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