Market timing or Time in the market: Myth busting

Myth: Time in the market is more important that timing the market.

This says that the longer you stay invested, the more chances of you making money. Again, only partly true. Good investors know that timing is all. While no one can call market peaks or troughs correctly all the time, we all can figure out whether the market is in a bearish phase or bullish. You must time the market by investing more in bearish phases and less at other times.

I found this piece of advice given by a very senior journalist in an economic daily. It sounds correct, serious, in the pink papers and therefore appealing. And it is absolutely useless piece of advice! The fact that it is appealing is the worry. ‘Good investors know that timing is all’ is such an attractive statement, that everybody will fall for it. Now, unfortunately, the market does not announce that ‘from 22nd Feb, 2009 to 19 Dec, 2009 the market will remain bearish (or vice-versa)’. Also if you have invested at 21000 index, does it mean YOU HAVE To invest when the index is 9500 also? Difficult question to answer. Most investors whom I meet invest when they have money, withdraw when they need money. My advise is simple “if you have money for the long term (say 10 years) invest in a good equity (or index) fund on a SIP basis”. If you have a short term view keep the money in a savings bank account, money market mutual fund, or floater fund.

To make money in the market, you need to learn about money, have a good portfolio, have a good portfolio manager, invest regularly and invest for a long period of time. If any one talks to you about market timing, tell them “I do not know anybody who knows anybody who has timed the market successfully – with a guarantee of history repeating itself”. So God help. Amen.

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