Timing the market vs Time in the market

One oft repeated cliche that irritates me no end is this – do not try to time the market focus on time in the market instead. As I said in one of my posts before, it does not matter how many people say a wrong thing how many times, it will still remain wrong. Read on to find out why this is so.

To begin with what is timing the market? It is essentially trying to buy equity assets at a time when they are at a relatively less expensive state. If you understand this then you will see why people who are asking you not to time the market are so totally and completely wrong. Surely we are not saying that we should buy equity assets in a pre-determined manner irrespective of what their prices are? Heck, we do not even buy our groceries that way, why should we buy equity like that? Some will tell you that you cannot determine when the price will be the lowest so there is no point in trying to time things. The next famous cliche that follows such a discussion is, Do not try to catch a falling knife. I find that equally irritating.

The whole point of equity investing is the skill in understanding how to time the markets and more importantly, how to decide the purchase price of the stock that you want to have. If you do not have that skill and then complain that the markets are no better than a gambling Casino, then you really have only your own ineptitude and blind faith in some so called experts to blame for it. While there is no absolute right buying price or selling price for a particular stock, the critical decision is to have some triggers for both buying and selling. So yes, I will be timing the market and I better do it well. Buying at a low price and selling at a high price is the essence of equity investing. Do not confuse it with buying at the lowest price and selling at the highest price, that is an Utopian state you will never get into. Read this post to get a better idea.

So, now the question is how do you know the right time to buy a stock? The best way is to have knowledge about the economy, the sector in which the stock is and the specific company in question. Understand the basic logic of pricing by reading this post and also the next one. Finally if you want to read about how I buy stocks follow this post carefully.

Time in the market is of course a given. Long term holding of stocks can be enriching but it is important to buy them at the right price too. There is no real in-congruence between the two, you need to do both of these.

I will try and do a series of posts on how to build up your own equity portfolio soon.

Interested readers may pls follow my blog on email by clicking on the relevant button on the right hand panel. I will shortly be stopping the practice of posting the links in different Facebook groups. Following the blog will ensure you get intimated whenever there is a new post.


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