So let's turn to some simple but sage advice from a long term successful investor and adviser, Burt Malkiel, to see what he has to teach about the folly of short term trading moves and attempts to 'time the market.'
The conclusion is simple --- market timing trading doesn't work to your advantage. In fact, it invariably works against you. I say he's right about that.
Market Timing Is Dangerous by Burt Malkiel offers this time tested and experience based advice to individual investors:
"I think one of the cardinal rules of investing is don’t try to time the market. And the reason is that you’ll never get it right. I’ve been around this business for 50 years and I’ve never known anyone who could time the market and I’ve never known anyone who knows anyone who could time the market. You can’t do it. It’s very dangerous.
And in fact, what makes it particularly dangerous is it’s not simply that you don’t know how to do it. It’s that when you do it, your emotions get behind you and you’re more likely to get it wrong than right.
What we know people do is they tend to put money into the stock market when everyone’s optimistic. And when everyone is pessimistic, they tend to take money out of the stock market. More money went into the stock market in the first quarter of 2000, which was the top of the Internet bubble, than ever before. And what it went into was into Internet stocks and into funds that bought Internet stocks.
And then the money came out in 2002 and early 2003, that was at the bottom of the market, exactly when it shouldn’t have come out. And then in the third quarter of 2008, during the height of the financial crisis, more money came out of equities than ever before. People were taking money out by droves. And that was exactly when they should have been putting money in.
And so when people try to do it, we have abundant evidence that it’s not simply that they get it wrong randomly. They do exactly the wrong thing. Don’t try to time the market. Nothing could be more dangerous. You’ll never get it right and you’re more likely to get it wrong than right."
Mr. Malkiel is absolutely right about the foolishness involved with short term market timing trading. Catching a falling knife is both difficult and dangerous. And always selling when prices are going lower and buying when prices are going higher makes no sense either.
So let's act smart by setting aside such foolish thoughts and resolve to be boring but successful long term savers and investors.
And by so doing, we'll let the 'smarter than we are' foolish folks out there engage in all the daily trading.
By so doing, they will also 'earn' the long term losses associated with that short term oriented methodology. The rest of us 'dummies' will take the long term gains.
That's my take.