Avoid market timing and chase performance from "summary" of Random Walk Guide To Investing by Burton G Malkiel
Timing the market is notoriously difficult, and investors who try to do so often end up worse off than if they had simply stayed the course. It can be tempting to try to predict when to buy and sell based on market trends and performance, but this approach is fraught with risks. Research has shown that even seasoned professionals struggle to consistently time the market correctly. The problem with market timing is that it requires accurately predicting not just the direction of the market, but also the timing of those movements. Even if an investor gets the direction right, they may still lose out if they fail to time their trades correctly. This is why experts recommend a long-term, buy-and-hold strategy rather than trying to time the market. Chasing performance is another pitfall that investors often fall into. This involves buying assets that have recently performed well in the hope that they will continue to do so in the future. However, past performance is not a reliable indicator of future returns, and assets that have done well in the past may not necessarily continue to outperform in the future. Instead of trying to time the market or chase performance, investors are better off focusing on asset allocation and diversification. By spreading their investments across different asset classes, investors can reduce their overall risk and potentially improve their long-term returns. This approach allows investors to capture the returns of the market as a whole rather than trying to outsmart it.- The key to successful investing is to have a well-thought-out investment plan and stick to it through market ups and downs. By avoiding the temptation to time the market or chase performance, investors can improve their chances of achieving their long-term financial goals.
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