Investing is easy - you buy a share, wait for it to go up and then sell it. If it doesn’t go up, don’t buy it - simples!
Markets go up and down - surely it should be possible to buy low and sell high - wait for the markets to fall again and repeat. Sounds good in theory but in my experience, its impossible to achieve in practice.
Of course, with the stockmarket on a roll this year, there will be plenty of financial pundits holding forth with their pearls of wisdom on where the markets are heading and sowing the seeds of doubt - the truth is, there are only two types who try to forecast the future direction of the market - those who don’t know, and those who don’t know they don’t know. My advice, for what its worth is to ignore the pundits and forecasters.
Warren Buffett knew there was a market bubble developing during the dotcom boom of the late 1990s but he could not profit from this knowledge as he could not tell when the boom would turn to bust.
I was recently reading some research on timing by Professor Malkiel, a long-time friend of Vanguard founder John Bogle. The tenth edition (revised) of his best-known book, "A Random Walk Down Wall St", was published last year (Jan 2012) - and since its first edition has sold over one and half million copies.
As investors, it's all too easy for our emotions to get the best of us, warns Prof Malkiel. Professional investors are just as likely as retail investors to get it wrong, he insists.
Over the 15 years from 1995 to 2010, investors who stayed fully invested secured an annual return of 8.05%, notes Prof Malkiel. Those who tried to time the markets, but missed the best 10 days in that 15 year period, achieved a return of only 3.15%. Those who missed the best 30 days achieved a negative return of -2.6%.