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Why not sell at the top and buy back at the bottom? |
Mark Meyerowitz,Owner,
Meyerowitz Investment Management
Mr. Meyerowitz has been investing since high
school, in the 1970s.
After graduating from Brandeis University in 1977; Mark built up his small family business into a large local retailing company.
From the mid 1990s to early 2003, Mark was a broker with Smith Barney and with Edward Jones; two of the largest invest firms in the nation.
Mark and his family have lived in West Orange, NJ since 1987.
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 It
would seem to make sense- if the indicators show that the
market is topping out, sell. When the indicators show the
market is bottoming and turning back up, buy. Unfortunately,
this is easier said than done.
There are a number of risks that you assume if you try this
market timing strategy. First, the topping out move or the
bottoming out move could be false. A check of charts shows
that there are numerous times when the markets zig and zag,
but then continue on their dominant direction. You could think
that you are selling at the top, only to watch your former
holdings sail away without you. To board a ship already at
sea is much more expensive than to board at the dock. Even
worse, if you buy into a false move at the "bottom" you could
be putting your money back into a declining market.
Second, it is better to stay in your good positions because
nobody really knows when the true change in direction will
come. If you think that you are smarter than the market, you're
not. Long term, our stock markets tend to spend a lot more
time going up than they do going down.
Third, if you are out of your positions and the market moves,
there is a good chance that you will miss the most profitable
days of the new move. By the time you convince yourself that
the new move is real, you are paying much higher prices.
The stock market is no place for someone who is trying to
prove that he is a genius.
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