Thursday, December 14

Market Timing With Your Mutual Funds

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A good investor can time the market carefully, choose a good investment, or use a combination of both to increase their rate of return. However, any attempt to increase its rate of return for the moment the market implies a higher risk. Investors who are actively trying to time the market should realize that sometimes the unexpected happens and you could lose money or give up an excellent performance. 

The time to market is difficult. To succeed, you have to take two successful investment decisions: one for sell and buy one. If you receive or bad in the short term is out of luck. In addition, investors should realize that: 

1. The stock rise more often than it goes down. 

2. When stock markets decline tend to decline very quickly. That is, short-term losses are more serious than the short-term gains. 

3. Most of the gains posted by the stock exchange was published in a very short time. In short, if you miss one or two good days in the stock market to give up most of the profits. 

Not many investors are good timers. “The Portable Pension Fiduciary”, by John H. Ilkiw, noted the results of a comprehensive survey of institutional investors such as mutual funds and pension funds. The study concluded that a median money manager added value by selecting investments that exceed the market. The best money managers added more than 2 percent per year due to stock selection. However, half lost money manager value market timing. Therefore, investors should realize that the time to market can add value, but there are better strategies that increase long-term returns will incur less risk, and have a greater chance of success. 

One of the reasons why it is so difficult to time correctly is due to the difficulty of removing the emotions of their investment decision. Investors who invest on emotions tend to overreact: they invest when prices are high and sell when prices are low. Professional money managers, which can remove the emotion from their investment decisions, can add value by the time their investments successfully, but most of its excess return rates are still generated through stock selection and other investment strategies. Investors who want to increase your rate of return through market timing should be considered a good tactical asset allocation funds. These funds are designed to add value to change the investment mix between cash, bonds and following strict protocols and models, rather than market timing based on emotion.


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