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Time in the Market is More Important Than Timing the Market

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There are a variety of different ways in which a person can premise a stock market strategy. One such basis for a market strategy is getting into the stock market with the intent to stay in it for the long haul. Another such basis for a strategy is to attempt to time the market and make investment decisions based on what a person thinks will happen next. In the final analysis, experts and those with hands-on investment experience alike agree that the best course of action when it comes to investing in the stock market is to commit to time in the market rather than trying to time it.

Timing the Market: A Game of Chance

Although a person can spend time researching trends associated with individual stocks, and with the market more generally, in many ways trying to time the market becomes something of a game of chance. By entering and exiting the market based on projections, trend analysis, and even gut feelings can prove to be risky business.

There can be instances in which pulling out of a market based on timing considerations can allow a person the chance to avoid a loss. With that said, statistically speaking when a person utilizes a timing the market approach, he or she can also lose out on important market gains as well.

Time and again, more investors end up with less in their investment accounts by timing the market as opposed to spending time in the market. Thus, categorizing a timing the market approach as being something of a game of chance is a relatively fair assessment in many instances.

Missing Dividends

Another reason why spending extended time in the market is more advantageous than trying to time the market is associated with dividends. The reality is that some security investments do pay decent dividends over the course of time. The best way to capture and benefit from these dividends is to hold a stock for an extended period of time.

By taking a timing the market approach to investing, a person oftentimes misses the benefits associated with accumulating dividends paid out on securities. Indeed, there are situations in which a timing the market investor misses dividends with alarming frequency.

One important fact to bear in mind is that even during times of a market downturn, when many a timing the market investor bails from securities investments, some stocks not only continue to pay dividends but the amount of those dividends continue to increase. In other words, not only will a stock price ultimately rebound, the fact that dividends are paid during a market downturn, some of the loss in value is recouped via dividend payments that can remain in your investment account in some fashion.

Stress and Investing

A person works hard for his or her money. Thus, when hard earned money is invested in the stock market, there is a level of stress associated with that type of investment. The reality is that there are certain investment strategies that are far more stressful than others.

An investment strategy focused on timing the market nearly always is far more stressful than investing in the market for the long term. When a person is involved in a stock strategy that involves timing the market, he or she literally has to be tuned into the stock market each and every day.

The same level of attention to market trends simply is not necessary when a person makes an investment in the market for the long term. Short term market gyrations are not determinative of buy-sell decision making.

The stress involved with watching the stock market like a hawk on a daily basis can be significant. Indeed, a timing the market strategy can cast a shadow over a person' day-to-day life. The associated stress can be significant and negatively impact a person's quality of life.

Exiting and Never Reentering the Market

One of the negative aspects of using a timing the market strategy is that oftentimes a person sells stock or exists the market all together. This type of move is made with the intent to reinvest when conditions to do so seem appropriate. The reality is that in many situations, when a person divests of stock of leaves the market all together, he or she never returns.

While there can be situations in which investing in something else makes sense, there is a more unfortunate scenario. There are countless situations in which a person pulls out of a stock or the market all together, with an intent to return, and doesn't reinvest.

Cash is attractive and is appealing for many obvious reasons. Suddenly having access to cash can result in the funds being spent on something or another that has nothing to do with investing for the future. A sharp new car can be highly appealing. A fun vacation can be very tempting. Money intended for retirement or some other purpose gets used currently, a turn of events that can be harmful to an individual's future.

In the final analysis, the wise course to take is to invest in the stock market for the long term rather than to try and play the game of timing the market. Even honest day traders will tell you that odds are you will not get a leg up when you take an approach to stock investing that is predicated upon taking advantage to market gyrations.

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