Timing The Market vs Time In The Market

The average holding period for stocks has decreased significantly over the years. In the 1960s, it was around eight years, by 2017,it had dropped to less than eight months. This trend perhaps reflects the increased frequency of trading and short-term investment strategies.

Has the internet impacted this?

The simple answer to this is, yes. The introduction of the internet and the way in which we can quickly access our investments our phones and laptops means we now have information and real-time market data, quite literally in the palm of our hands, every second of the day.

This wealth of financial news, expert opinions, and insights it has certainly made it easier to stay informed and up to date, but has it made the concept of timing the market any easier, or just more enticing?

Timing the market vs time in the market

When it comes to investing, you have two options; timing the market or time in the market. Both of these strategies offer rewards but come with potential challenges too.

When trying to time the market, you have to predict the perfect time in which you should buy and sell a certain share, whether that be based on market trends, the current price of the stock and/or other factors. Whilst this approach may sound appealing, even with the most sophisticated software, the most powerful minds and a large amount of luck, it’s extremely difficult to know when to invest and when to sell.

Subscribing to the time in the market philosophy isn’t as simple as some make out either!  You have to accept that markets are volatile and regardless of the latest shock headlines in the media, you need to stay invested with a view on the long-term goal. There’s less thrills with this approach too! With less chance of making a quick profit traded against steady growth over time and usually a sounder night’s sleep!

The importance of having a long-term strategy

A long-term strategy will allow you to navigate inevitable market fluctuations with a steady hand. In comparison to a short-term strategy, a long-term approach enables you to hold onto assets for extended periods of time, gaining compounding returns which overtime can potentially leave you with a significant increase in wealth. This approach to your investing will also allow you to minimise the possible detrimental impact of transaction costs and taxes, leaving you with more capital invested.

So I Just Invest And Wait?

Not quite!  Panic selling is the arch nemesis of a long-term investment strategy. However, an unwillingness to accept when to cut your losses, can be equally harmful.

Different investments perform well or poorly in different market conditions. And of course, conditions rarely stay the same. That’s why your portfolio should contain a blend of investments that work well indifferent environments, not just recent ones, and be monitored regularly to ensure you remain on track to achieve your goals.

At Skybound we have decades of experience of navigating these ups and downs, and as part of our ongoing support, we will guide you through the headlines and get rich quick investment schemes.

‍

Past performance is not a guide to future returns. Investment in securities involves the risk of loss and the advice herein cannot be construed as a guarantee that future performance will be reflective of past returns.