Investing is a little like sailing. A good sailor can navigate rough weather to move toward a goal. A skilled investor is like a good sailor, adjusting for different conditions and moving toward the goal.
Timing the market
Chances are you have heard people refer to the bulls and bears in the stock market. When the stock market is experiencing an upswing and investors are charging out to buy, they are considered bullish on the stock market. On the other hand, a bear market is a prolonged period of decline in stock prices when investors are not buying – they are considered to be hibernating like sleeping bears. If you find yourself vacillating from bull to bear as you read about current economic and political events, you are not alone. The market reflects this kind of mind changing every day.
We would all like to be able to "buy low and sell high."Unfortunately, too many investors panic when the market drops. They sell low, miss the benefits of an investment's recovery, and buy back in when the price has risen. In most cases, a market decline, for long-term investors, is a time to stay in the market. In fact, a buy-and-hold strategy is considered by many financial advisors as one of the best ways to weather the market, especially for long-term goals such as investing for retirement, to consistently make money in the market. A buy-and-hold strategy does not assure a profit and does not protect against possible loss. Remember, the value of your investment will fluctuate so that, when sold, it may be worth more or less than your original cost.
Timing the market is a risky business.Many people, including financial advisors, may not have the ability to time it successfully. Attempting to time the market often results in being in or out of the market at the wrong times. If you miss a few good days, you can significantly decrease your earning power.
Stick with sound choices based on personal risk tolerance and time horizon.Forget about short-term fluctuations and refocus on the long-term benefits of staying with your good investment choices. And don't be swayed by unrealistic expectations created by short-term gains. Remember, building your wealth or your retirement nest egg is a long-term process. Investments that sound too good to be true usually are. So before you decide to part with an investment, think about why you chose it in the first place.