Market Timing: the wrong move
Another mistake investors frequently make is to attempt to time the market. It is tempting to rush to sell stocks when the media bombards us with bad news during a bear market or to jump in when stocks are surging.
Unfortunately, trying to pick the right time to enter and exit the market is nearly impossible as many studies have shown. Much more effective is to have a properly diversified portfolio that enables investors to ride out bear markets and survive to enjoy the fruits of bull markets.
Major market movements can be compressed into days, so trying to time them exactly can wipe out years of potential gains. The following table shows why market timing does not work.
| Bull market time period | S&P Return (annualized) | |
| 8/82 - 8/87 | 26.3% | |
| 8/82 - 8/87 less 10 top days | 18.3% | |
| 8/82 - 8/87 less 20 top days | 13.1% | |
| 8/82 - 8/87 less 30 top days | 8.5% | |
| 8/82 - 8/87 less 40 top days | 4.3% |
Source: Investing DeMystified: A Self Teaching Guide, Paul J.Lim, McGraw Hill