Diversify across time

Timing techniques (when to buy or sell) are very popular and many novices believe that they can make tons of money using them, paying good money to learn in the process. Research shows that these techniques are ineffective. Honest old hands will tell you that they are wrong half the time.

It is prudent to accept that you cannot time the market. The better alternative is to spread out the investment in small chunks over months or years.

Example: Let’s say you have $120,000 to invest in stocks. You decide that 12 months is a reasonably good period to spread out, so you invest $10,000 (or thereabouts) each month over a year.

Better still, save and invest as you go. During your earning period, when your cash in hand reaches a certain amount (say $10,000), you buy. This means that you spread your total investment over a 15 to 20 year period, or even more, depending on when you retire

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s