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What is Market Timing?

How This Investment Strategy May Be Harmful to Investors

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Definition:

Market timing is an investment strategy where the investor makes investment decisions, to buy or sell investment securities, based upon predictions of the future.

Is Market Timing Wise?

The question of whether or not market timing is wise for the mutual fund investor can be answered by asking another question: Is it possible to predict the future? The short answer is 'No.' A market timer, however, believes it is possible to buy stocks or mutual funds at high prices and sell at low prices based upon their assessment of future market and economic activity.

Timing the Market vs Time in the Market

Most would agree that market timing may be possible over short periods of time but it is more difficult to consistently and accurately predict stock market movements over long periods of time. For the average investor a diversified portfolio of mutual funds, held for the long-term, is the best strategy.

Timing the market most often loses to time in the market.

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