THE RHYTHM OF TIME

'Timing the market' and 'time in the market' are distinct investment strategies and must be used sagaciously by investors

As an asset class, equity markets offer a much-needed diversification that is essential for the creation of sustainable wealth over the long-term. Investment guru Warren Buffett has created wealth by successfully investing in the stock markets, adhering to a long-term perspective and weathering market fluctuations.

Equities are influenced by a complex interplay of both domestic and global factors, encompassing the economic conditions and performance of industries, both domestically and internationally, as well as geopolitical developments and global events. The dynamic nature of these multiple, ever-evolving factors make equity investing exciting, but also overwhelming when market fluctuations are not always rational in nature.

To build wealth through equities, it is important to understand the two contrasting strategies: timing the market versus staying invested in the market for a long period of time. Both approaches have their own set of advantages and disadvantages, and it is essential to understand both strategies to choose the most suitable method for oneself.

TIMING THE MARKET

‘Timing the market’ is an investment strategy that involves buying stocks, futures and options (F&O) in anticipation of a rise in stock prices and then selling before prices drop. Alternatively, this can also be achieved by short selling, where an investor sells stocks when prices are high and buys them back when prices fall, resulting in a trading profit.

To surmise, timing the market involves making investment decisions by forecasting stock or market price movements. This strategy attracts investors as it offers the potential for rapid wealth creation, compared to a long-term investment in the equity market.