Is it possible to time the market? // Stock Market Timing Strategies Stock Market Basics
welcome to looking at the markets with me David Moadel
today's question we're going to try to answer is is it possible to time the
market
wouldn't you like to know I think we all want to know
well let's explore this everybody wants to time the markets
it seems and here are some opinions on apple stock on the day of an earnings
report and that's today I took these from a website called stocktwits which
is a message board where people opine on stocks and the markets in general and as
you can see I blocked out the names but yeah for every person who's bullish on
Apple
there's somebody who is bearish on Apple this guy over here is bullish says it's
going to go up and then right underneath him as a guy who is equally bearish says
it's going to have a big miss today and then underneath underneath that is a guy
who's super bullish is loading up on Apple calls today and then underneath
that is another guy who is equally bearish thinks that Apple's earning
report today will be the nail in the coffin for the markets and for apple
so all these people trying to time the markets
well they can't all be right all right either
Apple is going to go up or it's gonna go down
which one is it everybody's trying to time the markets
so how's that working out well you know they might be right
some of them might be right in the short term but as a long-term strategy if you
just keep trying to time the markets over and over and over
how's that gonna work out for you well I looked up a little bit of research and
here's a nice chart which shows that if you had you started with ten thousand
dollars and you kept trying to time the markets for example if you try to time
the markets right before earnings reports coming out how would you do with
that compared to if you just put ten thousand dollars in the S&P 500 and just
left it there
well as we can see the blue line is how you would have done over the years
if you just put your money in the S&P 500 and just left it there you would
have done okay
over time whereas if you had consistently tried to time the market
right before earnings reports over and over and over
well you can see you would have done a lot worse a lot worse
ok compare you know billions of dollars versus millions of dollars
ok now granted this is going back a long long time going back to the eighteen
hundreds but just goes to show that ad trying to time the markets may not be a
viable strategy if you're going to do it over a long period of time
trying to time the market often leads to buying at a high price and then selling
at a lower price for example a few
this is from today's price action from SP why the spiders which tracks the S&P
500 and as you can see the market went up a little bit and if you tried to time
the markets you might buy around here and then you know what happens next
right
the market goes down you start to panic a little bit but you stay in there
because you're hoping it will turn around and then boom goes down fast
and if you sell here you'll be selling for a loss and that's no fun
and if you do this day after day after day small losses can really add up to a
big loss
ok and that's not even the full story
yeah or going short at a low price and then buying back at a higher price
trying to time the market can also lead to that
so here's the same day you remember we were about here
well you saw the markets going down and maybe thought all right well I'll just
I'll buy some put options or I'll short
I'll short the DTF
I'll short the spiders and then goes up and up and up and up and then you cover
your short position here or you sell your puts here and that's another loss
so market timing can bite you
both ways going down and then going back up
people will claim to be able to time the market of course they'll be glad to show
you how for a hefty price and i took this from a a website and i had no
trouble finding websites that wanted to sell me their my market timing software
or alerts or market timing system or strategy they had so many different
names for it
here's one that offered a unique market timing software you can gain an edge
over the market and if you buy it now you can get a 60 day that's about two
months trial subscription for only 25 hundred dollars hey how about that
yeah well I don't know if you consider that a bargain but somehow i don't
consider that a particularly good deal
oh and by the way do you like the way they auto renew every two months so that
way if you're not paying attention then after 60 days they'll charge you another
2500 and then after another 60 days another 2,500
yeah you know I'm not a big fan of the auto radio feature at least not in this
case
well what is the research show research shows that the ability to time the
markets is quite rare and that's if it exists at all and I got this from a
credible source in an academic source this was not from just some you know
website that somebody slept together and i'll just go right to the bottom line so
you don't have to read the whole thing this is a 25-page report with plenty of
you know statistics and the bottom line and is that using two very different
approaches
we found over all that asset class timing skills amongst multi-asset class
funds is rare existing only among the tiny minority of funds tiny minority and
it's rare
ok so you know that that's not too confidence-inspiring if you're looking
for that you know somebody some magician some guru who can time the markets
well good luck with that
so what's the takeaway well instead of trying to time the markets
i recommend putting together a trading plan based not on hopes and predictions
but on probabilities and capital preservation and if you'd like some help
putting together an investing plan or trading plan if you need to talk to
somebody about finance the markets stocks options and so on
I'm here to help you so feel free to contact me anytime
my email address is David Modell @ gmail.com and by the way if you liked
this video feel free to give it a thumbs up
you can leave comments i'd really appreciate that very much thank you so
much for your time and I hope to hear from you soon
yeah