Sunday, October 13, 2013

Timing the Market

Now, as much as I relish the idea of passive investing and just collecting monies at the end of the month / quarter / year, I think that market timing is something that all investors have to question themselves about it at one point or another.

Sure, you can be paralyzed and have inaction. Basically, your choice of not investing results in a large opportunity cost, and well, you can also think of it as the cost of being liquid and safe.

Not only in inflation eating away at your money, but it is also not earning you anything.

But let's look at the flipside for a while shall we. What happens if you invest your money at the wrong time in the market? Epic major drawdown, that's what can happen.

So, sure conventional wisdom tells you that in the long run, your assets will appreciate over time. However, I am also a firm believer of a true value, and that price fluctuates around this mean. If you purchase stocks that are so extended from it's mean, you're bound to generally outperform the market.

Sure, the underlying asset is fantastic. But the value of this asset can be translated into price, and you can be paying too much for a fantastic asset. There has to be a upper limit of price on any asset, and anything purchased above that is just not logical.

I am very pleased to stumble upon this particular find, which I will share with you. It is the $OEXA200R technical indicator. There is accompanying documentation here and a recent update here.

In essence, it is a pretty simple indicator, and I think that's the appeal it has to me. It is also somewgat a leading indicator, so it gives forewarning before something happens. I think this is actually the indicator that I've been looking for to give me an idea of what is going on in the US stock market. With that said, I think it has given me renewed patience to sit tight and wait for the market to make a correction.

In the mean time, I think I will finally start investing into the bond funds that I was talking about. I think that although interest rates are going to increase, I actually think that they will remain low for quite an extended period of time.

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