Try to time the market: get lousy returns

More evidence pours out each year that investors get worse returns than the mutual funds they invest in.  The reason isn’t high fees, but the actions of investors themselves.

Basically, investors try to time their purchases of mutual funds.  

They buy mutual funds that have “been working” and sell the one’s that “haven’t been working.”  

They “go to the sidelines” when markets look scary, like they did in 2008-2009, and only put their money back to into stocks after “the coast is clear.”  

They try to buy into “alternative” investments, or speculate in commodities, or decide to jump into and out of foreign markets.

All of this action causes them to buy and sell at the wrong times, thus dramatically reducing the returns they receive relative to the underlying performance of the mutual funds they choose.  

The solution is to stop trying to buy and sell at all.  Instead, investors should do enough homework to pick the best investment choice, and then stick with it.

Will their net worth go up and down with crazy market swings?  Yes.  Would such investors get better returns?  Also, yes.

Sometimes the hardest decision is the decision of what not to do.  

Investors should decide not to buy and sell in an effort to time the market.  They would end up much better off if they did.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

Try to time the market: get lousy returns