Mutual Funds | Market Timing With Your Mutual Funds

Timing the market is difficult. To succeed, you have two decisions to make sound investment: one for sell and buy one. If you get the wrong in the short term that are out of luck. In addition, investors should realize that:

1. Stock markets rise more often than down.

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

3. Most of the gains posted by the exchange of securities are recorded in a very short time. In short, if you miss one or two good days in the stock market is deprived of most of the profits.

Not many investors are well-timers. "The pension trust portable," 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 the median money manager adds any value by selecting investments that outperform the market. The best money managers added more than 2 percent a year due to stock selection. However, the median money manager lost value by the time the market. Therefore, investors should realize that the time to market can add value, but there are better strategies for its use in the long run, 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 his investment decision. Investors who invest emotions tend to overreact: they invest when prices are high and sell when prices are low. Professional money managers, who can remove the emotion from their investment decisions, can add value for the moment their investments properly, 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 background of Tactical Asset Allocation. These funds are intended to add value by changing the mix of investments between cash, bonds and following strict protocols and models, rather than market timing based on emotion.