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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Wednesday, August 09, 2006

Dangers of Market Timing

We have spoke many times on this blog about marketing dangers. This will be another illustration.

Examining investors who attempt to market time run a significant risk of missing periods of huge returns. This, typically will have a negative effect on your portfolio.

Take $1 in stocks at December 31, 1925. By the end of 2000 it would have grown to $2,587. However, if you missed the 40 best months of returns your would only have $15.33. Even Treasury bills beats that at $16.56 over that time period.

Now successful market timing can make you a lot of money, however, it is extremely difficult to pull that off with any consistency.


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