Stock Market Today

Investing is a process  of making decisions  today to achieve results that will not be known until tomorrow. Because nobody can control  everything that is going to happen tomorrow, nobody knows what tomorrow will bring. As such, most experts  agree that market timing is incredibly difficult if not downright impossible. They also warn against it because:

* It’s hard to say when the market or a particular stock is “high” or “low”.

* Commissions and or bid/ask spreads eat away at your profits when you trade frequently, especially on small transactions.

* In the last 40 years, the market returned about

11.3% annually. If you were fully invested the whole time, but got out completely for the 40 best months, your annual return would’ve dropped to 2.7%. If you miss the big moves, it hurts, and no one really knows when they’re coming.

But, buy and hold doesn’t work for most people because most people, for one reason or another can’t seem to stay in the game! Here are some reasons why:

* The market can easily move sideways or down for periods of 10 years – buy-and-holders can lose money for 10 years! Think of a retired household whose living expenses are paid from savings. Do you think this might impact one’s life style?

* Bear markets may seem insignificant when you have only $10,000 invested, but what about a hard earned portfolio of $500,000. Every time the market falls 5% you’ve lost $25,000. Now, imagine the market correcting by 30% over several months – you’ve now lost $150,000. The pressure to sell out and save your remaining $350,000 will be very difficult to resist.

* Most people give up and sell out very near the bottom. That’s what emotions will do for you. It’s very easy to say you’ll ride out a bear market while the market is soaring, but almost impossible when the market is crashing and all you hear from the media is how the market is going down to zero.

This is the problem with

Buy and Hold. It’s easy to stick with when the market is rising but impossible when the market is falling. If you think you’re different and can ride out a bear market you’d better think again about how emotionally painful it will really be.

Despite battling the odds of uncertainty, most money managers are practicing some form of market timing. But the truth is that most timers are trying to flatten out the risk and volatility in a portfolio, and are willing to trade some returns for stability.