“It is time in the market, and not timing, that is important.” It is one of the popular axioms in the stock markets but we should not take anything for granted and certainly not in financial markets. As the usual disclosure reads “what worked in the past may or may not work in the future.”
Suppose a person bought at the index highs of January 2008. Now after more than 4 years, he is still waiting to see profits. If he took long positions in even the bluest of the blue chips like BHEL, Bharti etc, he still might be staring at big losses. In global markets too there are examples of significantly long periods of negative returns. From a life time high of 38916 in December of 1989, Japanese index Nikkei is currently trading at around 8,500. Agreed that examples like Nikkei are one-off but what is the guarantee that this scenario can’t play again in some other market.
So time in itself is no guarantee of profits but timing, if right, can certainly guarantee profits. I am not against long term investments but long term investors too should keep in mind timing of their entry and exits. Now timing is easier said than done but still one cannot deny its importance in stock markets. Tools of timing can be different for different kind of market participants. It may be economic cycles, weather patterns, and valuations etc for fundamental investors and chart patterns, indicators, and support/resistance etc for technically oriented ones.
[Contributed by Jitender Yadav. My thanks to Jitender for providing these posts to the blog]