GLOSSARY TERM
Market Timing
Market timing means trying to predict the best moments to buy or sell investments based on expected market moves.
What does this mean in practice?
A person using market timing may wait to invest because they think prices will fall soon, or sell because they expect the market to drop. The goal is to buy low and sell high. The problem is that doing this consistently is very difficult, even for professionals. Waiting can also be costly, because money that stays in cash may lose purchasing power over time due to inflation. Selling can create other costs as well, including fees and, in some cases, taxes on gains.
Example
Someone keeps cash on the side, waiting for the “right moment” to invest. But while they wait, the market rises and inflation reduces the value of their cash. Or they sell after prices have gone up, trigger taxes on gains, and then miss the recovery that follows.
Why it matters
Market timing often leads to delay, stress and emotional decisions. For many long-term investors, steady investing and staying invested is usually a more reliable approach than trying to guess short-term market moves.
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