Article Summary: Years ago at a foreign exchange course we were asked to participate in a practical simulation game. Prior to commencing the game one of the participants had a moment of clarity. Participant: 'So, what you're saying is that we should buy low and sell high?'
Organiser: 'Well ... Yes.' Participant: 'Oh, that's easy!' What seems so easy in theory is anything but in practice. It's a valuable lesson which few learn until late into their investing lives. Timing your entry and exit from a market is an appealing concept that seems a simple and smart way to add value.
(c) John Raymond Leske
Years ago at a foreign exchange course we were asked to participate in a practical simulation game. Prior to commencing the game one of the participants had a moment of clarity.
Participant: "So, what you're saying is that we should buy low and sell high?"
Organiser: "Well ... Yes."
Participant: "Oh, that's easy!"
What seems so easy in theory is anything but in practice. It's a valuable lesson which few learn until late into their investing lives. Timing your entry and exit from a market is an appealing concept that seems a simple and smart way to add value.
What is it that makes it so difficult to turn this theory into reality?
While the market consists of a series of trends (up and down), it is rarely a straight path between the top and bottom. This adds significantly to the degree of difficulty of the task. There are always minor trends within each major trend and this makes the task of distinguishing between minor and major turning points a tough one.
Unfortunately, no one rings the bell when a major turning point occurs. More often than not, it is months later that we identify the end of a trend. By then, the value of the market timing strategy is significantly diminished.
A successful market timing strategy requires you to reliably predict both turning points. If you intend to exit the market, you need to determine your strategy for re-entering. Choosing the time to re-enter is as difficult a task as choosing when to exit.
Consider the attached chart showing recent movements in the Australian sharemarket since about May 2007 and the difficulty of the market timing strategy.
Years ago at a foreign exchange course we were asked to participate in a practical simulation game. Prior to commencing the game one of the participants had a moment of clarity.
Participant: "So, what you're saying is that we should buy low and sell high?"
Organiser: "Well ... Yes."
Participant: "Oh, that's easy!"
What seems so easy in theory is anything but in practice. It's a valuable lesson which few learn until late into their investing lives. Timing your entry and exit from a market is an appealing concept that seems a simple and smart way to add value.
What is it that makes it so difficult to turn this theory into reality?
While the market consists of a series of trends (up and down), it is rarely a straight path between the top and bottom. This adds significantly to the degree of difficulty of the task. There are always minor trends within each major trend and this makes the task of distinguishing between minor and major turning points a tough one.
Unfortunately, no one rings the bell when a major turning point occurs. More often than not, it is months later that we identify the end of a trend. By then, the value of the market timing strategy is significantly diminished.
A successful market timing strategy requires you to reliably predict both turning points. If you intend to exit the market, you need to determine your strategy for re-entering. Choosing the time to re-enter is as difficult a task as choosing when to exit.
Consider the attached chart showing recent movements in the Australian sharemarket since about May 2007 and the difficulty of the market timing strategy.
Article Source: http://www.upublish.info
About the Author:
John Raymond Leske
Wealth Foundations is an independently owned personal financial advisory firm that offers wealth management and strategic financial planning services. For more information, visit Wealth Advisers.
Keywords: John Raymond Leske, wealth management, wealth management australia, wealth management services, wealth advisors, strategic financial planning, independent financial planning, strategic wealth management, personal wealth
**NOTE** - John Raymond Leske has claimed original rights on the article "Market Timing? ... that's easy!" ... if there is a dispute on the originality of this article ... please contact us via our Contact Form and supply our staff with the appropriate details of dispute.
John Raymond Leske Article Feed : http://www.upublish.info/rssauthor/38331.xml
Author
