Equity markets fall and rise for a multitude of reasons that no one can predict. So investors should not try to time the market moves. This is especially important for ordinary investors. Sophisticated professional investors such as hedge funds and other traders are able to reap fantastic profits from taking advantage of volatility in the markets but even some of the fail when the strategy backfires.
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To take advantage of the market gains, one is better off staying fully invested as opposed to repeated buying and selling. As no one can predict the movement of equity markets, even missing out a few days can lower one’s return substantially as shown in the graphic below. However it should also be noted that even staying fully invested does not guarantee a profit.
Source: Time-Tested Investment Strategies for the Long Term, American Century Investments
SPDR S&P 500 ETF (SPY)
Disclosure: No Positions