Michael on March 30th, 2009
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Market timing is dangerous.

You: You’ve said so before.

Indeed, it’s one of the key themes of my chapter about investing in Beyond Paycheck to Paycheck.  I bring the topic up again now for two reasons. First, because there are many people these days who, due to the yucky markets –

You: Yucky?

Yes, yucky.  Yucky is an increasingly used work in my house where there are two little girls under four years old.  Anyway, because the markets have been so poor for so many months (notwithstanding the last couple of weeks), I’ve spoken to several investors who have started to poo-poo the

You: Poo-poo?

Not that kind of poo-poo.

You: Pooh-pooh?

No, not Winnie either.

You: You have a strange house.

Thanks for the news-break.

Many investors have begun to look down upon the tried-and-true concept of buy-and-hold investing. One fact accelerating this trend is, that over a reasonably long period of the last ten years, bonds and money market funds have outperformed stocks.

You: Ugh.

I know.  Well, at least that was true two weeks ago before the recent market run-up.

You: What’s the second reason you’re bringing up the dangers of market timing now?

As I read through this week’s Carnival of Personal Finance and looked for the best article of the week, I read The Financial Blogger’s 3 Reasons Why You Should Not Do Market Timing.

TFB could have come up with many more reasons, but three is quite enough.  If you’re thinking about timing the market, take a deep breath, re-read this post, then read 3 Reasons Why You Should Not Do Market Timing and, provided you still have a long-term time horizon for investing, commit to staying rational, no matter the day-to-day pain.

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Think about bailing out the market?  Already done so? Have the last few weeks tried your patience (if you were out of the market), or give you (more confidence in your previous decision to stay in?)

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