Magazine article The CPA Journal

Market-Timing Is Harder Than It Looks

Magazine article The CPA Journal

Market-Timing Is Harder Than It Looks

Article excerpt

When the stock market is at a high, clients may ask you whether it is a good time to exit the market. Many investors believe it's within their grasp to have the best of both worlds--to be in the market when things are good and get out before problems develop. Certainly, you can anticipate bear markets and recoveries accurately you can increase your return tremendously. But analysis indicates that the forecasting skill required to do so is far greater than most imagine.

Think back no further than 1991 for a good example. The U.S. stock market had been down the year before, and many predicted another bad year -- to mark the end of the Eighties, so to speak. Heedless of these warnings, stocks went ahead and climbed 26.3% not including dividends, making for one of the best years on record. But you had to be in the market consistently to reap the reward. A full two-thirds of it came in the 21 trading days beginning on January 16--the most frightening day of the year, when Operation Desert Storm was launched; the rest came during the year-end holiday season. If you were on the sidelines during those few days--28 out of a year's total of 253--you missed all the appreciation of stocks in the best year of the Nineties to date.

Indeed, the main factor working against market timing is that stock gains tend to come in brief, intense bursts. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.