Your Ideal Life Tip: It’s Impossible to Time the Market
06 Aug 2015
I once had the opportunity to meet Peter Lynch, the venerable manager of the Fidelity Magellan Fund, when he spoke at a conference. You may recall that during the tech boom of the ‘90s, day trading was popular. Lynch’s take on day trading was that people would be better off going to a casino—the results are about the same, and there’s a lot less paperwork.
It is virtually impossible to time the market, and part of the reason is that the market has a technical side and an emotional side. There is a definite mathematical element to it, without a doubt. A whole sector of the financial industry is dedicated to charts and graphs and trends and breakout points. For some people, it’s a passion.
The market, however, is an auction. Whenever you have an auction, you are dealing with emotion, and not everybody is playing by the same rules. If everybody was a technician and played strictly by the technical aspects of the market, things would be more predictable. But it only takes a few flies in the ointment to screw things up. It could be internal or external forces. It could be the decisions made by the players in the market or within a company, or it could be a foreign crisis or industry change that impacts a company’s value and stock price.
At Cornerstone Financial Strategies, we tell our clients to stop watching the financial “news” networks and the 24-hour news flow about the financial world. I think it’s a waste of time, and viewers get the wrong impressions. The commentators know nothing about your particular situation—your values, goals, and resources.