For those going long like stockstradr, how do you time the market going back up? While it’s clear there’s going to be a huge correction for the next few years, don’t you miss buying all these stocks now at a lower price through dollar cost averaging? From the studies I’ve seen in academic and financial planning articles, it’s very difficult to time the market. What about modern portfolio theory and the efficient market hypothesis? Have these been completely discredited in this new, brave (subprime meltdown) world?
When the market turns bullish again (in a few years), you’ll probably still be shorting. Moreover, the majority of the gains occur in just a few huge days of the year, so you won’t be able to time it when it goes up again. That means, and again I’m a relative novice, that most people who time it will take initial lossess seeing the market decline, but will not be ready to get back in when it (unpredicatably) recovers.
Don’t get me wrong, I’m a total bear on real estate, but we can follow the mortgage reset table, etc. In the financial markets, there seems to be too much uncertainty and noise to time it correctly, i.e. government intervention, international events, commodity prices, M&As, etc.? Maybe, I’m just of the old school (though I’m only 33).
