Market Timing

By | February 20, 2020
Market Timing

It has been said that time in the market is better than timing the market. Well, today I tried to time the market and I LOST! To see how much, keep reading.

Market timing is a strategy that I definitely do not recommend. For whatever the reason, I chose to employ the strategy recently in deciding when to sell my stocks. The emotions were getting to me, and I decided to make the hard choice today and sell all my stocks. I honestly felt like I was gambling for a little bit. So, lets dive in to see what happened. Don’t worry, this won’t be a long post.

Market Timing

According to Investopedia, market timing is “the act of moving in and out of a financial market or switching between asset classes based on predictive methods.” Well, I technically didn’t do that. However, I did have my stocks in the stock market and I was trying to sell them at the optimal price. I knew I needed to sell my stocks to help cover the closing costs on my new condo.

Here is why the strategy was risky and why I don’t recommend it. In general, there are different types of investors and different types of investment goals. Indeed, some people are traders and others are long-term investors. I wouldn’t say either strategy is good or bad. It just depends on a person’s goals, risk tolerance, knowledge, skills, etc. For me, I have adopted a long-term approach as a dividend growth investor.

Well, the usual suggestion is that if you have a short term goal, then that money shouldn’t be invested in the stock market. I knew that. But I just didn’t listen.



Selling Strategy

About a month ago, my dividend portfolio was at least $15000. Well, I looked at my balance within the past week and noticed that it had dropped to $14550. I kept watching the market everyday hoping it will go back up so that I can sell at $15000. It never came back.

The portfolio went down to $14200, and then climbed back up to $14370 before I chose to sell right around the $14300 mark. Had I sold my stocks last month, I would have not lost an additional $700 in the stock market.

I realized in the process that I was losing sleep over the money I had in the market. Suddenly, because I needed the money for closing, this was money I could NOT afford to lose. There is an old investment adage that says that you should only invest with money that you can afford to lose. This is an example of a situation where I should not be invested in the market.

When I first invested money into my portfolio, the thinking was that I would never sell and I was invested for the long-term. As the saying goes, life is what happens when you make plans. The fact of the matter is that my goals changed. I chose to buy a condo and thus I now needed the funds to help cover the closing cost.

$700 is a lot of money. But it could have been worse.

Conclusion

Market timing is a real strategy and for the savvy investor, maybe they can make it work. For me, I tried my hands at market timing and I just couldn’t’ make it work. Maybe the stock market will be higher tomorrow or by the time I close in about a month or two, but I just didn’t want to take the chance.

I’m still upset by the fact that I lost $700, but in the end, I thought I made the right decision.

Now, my immediate short-term goals are to a) close on the condo, b) buy furniture, c) obtain a line of credit to do velocity banking and d) start the long and slow process of rebuilding my dividend portfolio.

What did you think of this post? Let me know by commenting below.

8 thoughts on “Market Timing

  1. P2035

    Yeee same here. And I had even more interesting situation. I have a strategy for last year or so to accumulate cash and I received big chunk of it after switching jobs. Then I done something against my strategy – invested part of it and invested risky aiming for big dividend yileds, hence went for some REITs oil companies and MO. Oil and MO after my purchase declined ~15% in a month 🙁 also had fight with my other side that I invested big amounts without asking :/ lose lose either way. So my lesson learned – stick to your LT strategy. Its the ST deviations that makes you lose money 😀

    Reply
    1. Dividend Portfolio Post author

      Human nature is so hard to fight! But sometimes we have to learn the lessons the hard way. But you’re absolutely right….the short term deviations are what makes people lose money sometimes.

      Reply
  2. Engineering Dividends

    Hey DP. Well, I imagine you are feeling better about your sales now. 😃 It turns out you made the right decision given your need for money to close.
    I look forward to the reconstruction of your new dividend portfolio after the condo is all settled.
    Engineering Dividends recently posted…Portfolio Thoughts (Feb. 2020)My Profile

    Reply
    1. Dividend Portfolio Post author

      Thanks ED. Even if the stock market goes back higher than it was before, I definitely feel like I made the right decision given my goals. Also I hate the fact that I am out of the market. I plan on building my portfolio, even if it’s $50-$100 per month. Can’t wait. Thanks for the support.

      Reply
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  5. StevenG

    Yeah timing the market is very difficult. My wife got a feeling in late 2007 to take her money out of Morgan Stanley. That feeling yielded her about 10%. She put in her bank account. We all know what happened to the market for the next 18 months. I told her if she gets that feeling again let me know.

    Reply
    1. Dividend Portfolio Post author

      Fair enough. And that’s especially true these days. Crazy times we live in. Stay safe and thanks for the comment.

      Reply

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