A New Year, Time for a Change?
~ By Herb White, MBA, CFP ~
There’s always a lot to do when the new year rolls around making resolutions is usually high on the list. It’s also a time when investors reassess their portfolios and look at other investing options that potentially will provide them good returns in the markets. Many believe the new year is just simply a good time for trying something new in their financial lives. They wonder about “market timing” and whether this year it might be right for them. On the surface it may indeed sound like a good option to make extra income in 2017. But is market timing right for you? For most investors, the answer is probably not. Here is why:
What Is “Market Timing”?
Using forecasts and market analysis, an investor who employs market timing attempts to predict what the markets will do in the future. Investors will move in or out of the market, or perhaps switch between asset classes, concentrating on one, depending on market performance expectations and hoping this timing will result in better wins. If the investor can successfully predict the ebbs and flows of the market, he or she stands to profit well.
What Are the Drawbacks?
Who can predict the markets with accuracy? If you are considering market timing, to be successful, you will need to be as equipped to read the markets as well as professional mutual fund managers do. This is a time-consuming venture that requires an investor to do a significant amount of preliminary and ongoing research, relying heavily on technical indicators and economic data. Market timing can often take years to become proficient. And, even with a lot of effort and experience put into the endeavor, the results are never guaranteed. Simply put, most individual investors do not have the time or expertise to time the market with a high degree of accuracy.
Another drawback is that, even after having done a lot of research and feeling confident you’ve “timed the market” and concentrated all your investment dollars in one area, there is the chance that, with your investments allocated to only that one asset class – stocks, bond or money markets – you could be “out of the market” at a particular time and end up missing out on the best-performing market cycles. Indeed, even a few months of being out of the market can significantly impact your portfolio’s earnings.
Instead, Make Time Work for You.
“Buy and Hold”
For many investors, especially those with long-term goals, the preferred strategy for achieving favorable outcomes is to utilize a buy and hold investment strategy. Such a strategy can take advantage of the potential power of compounding, meaning any earnings their investments make can be reinvested to also potentially earn them money. Investors utilizing a buy and hold strategy will want to keep an eye on their investments by reviewing them on a regular basis.
Are you considering a change this year? It’s always a good idea, especially at the beginning of a new year or with major life changes occurring, to reassess your financial strategies and needs. As someone who is heading for retirement, or perhaps are in retirement, if you are concerned about your investments, now is not the time to jump into some new strategy, such as market timing. You will want to be armed with enough information to make good decisions, and take a steady approach to investing. Talk to your financial advisor for smart strategies that are right for you.
Herb White
Tune in to “America’s Wealth Management Show” sponsored locally
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Provided by courtesy of Herb White, MBA, CFP©, a CERTIFIED FINANCIAL PLANNERª with Life Certain Wealth Strategies, 8400 E Prentice Ave, #715 Greenwood Village, Colorado, www.lifecertain.com, (303) 793-3999. Securities and investment advisory services offered through Woodbury Financial Services, Inc., Member FINRA, SIPC and a Registered Investment Advisor. Insurance services offered through Life Certain Wealth Strategies, which is not affiliated with Woodbury Financial.
