Submitted by srekai t3_zyr7v3 in personalfinance

The general advice has always been to keep your money invested in the market for the long term since the S&P has provided an average of 10% returns annually.

But since the economy is also cyclical, there are downturns and upswings. Obviously it's very hard to know when these occur and by how much in the present.

However I'm wondering if it's worth trying to capitalize on the momentum swings up and down to exceed the average gains. For example, we had a pandemic boom followed by a huge drop off. Had someone sold near the peak and then reinvested now, they would be getting almost 25% more during this period compared to purely holding.

I know that selling your assets at a profit also has tax implications. But the essence of my question remains. Is it worth trying to analyze the market dips to achieve this? Is it too difficult for a layperson that doesn't invest full-time to accomplish this?



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nkyguy1988 t1_j27hg67 wrote

Professionals can't do this with success. What makes you think you can?


Werewolfdad t1_j27ip0a wrote

Professionals with armies of quants behind them.


samo1366 t1_j2ab3ub wrote

That’s the trick - you don’t hold your money, you hold other people’s money.


srekai OP t1_j27javy wrote

I never said I could. Just asking whether or not it's worth considering. Explicitly said it's very hard to ever know.


[deleted] t1_j27kxvb wrote



nkyguy1988 t1_j27l63a wrote

No. It's not worth considering. The point of my rhetorical question is that if it was so easy, everyone would do it. Of course it's easy to look back and see the low and high points but in the moment is the hard part.


AdditionalAttorney t1_j28uysg wrote

It’s not. Past performance and indicators don’t imply future. So there’s nothing to analyze until after the fact.


unittestes t1_j27ig39 wrote

If you can predict the market with 51% certainty then you can turn $1 into a billion in less than 10 years


[deleted] t1_j27jzxb wrote

What if I continue to predict the market with 35% certainty? What then?


sockalicious t1_j27p0si wrote

The downside of this method - popularly called 'market timing' - is that you can lock yourself out of gains if you get it wrong. The conventional wisdom is that "Time in the market beats timing the market."


Nayelia t1_j27n9c3 wrote

Higher returns come with higher risks. Do you really understand the risks? Also short-term capital gains (realized within 1 year) are taxed higher than long-term gains in the US.


kepachodude t1_j299oc2 wrote

In any given decade of the market, there’s bound to be 2-3 “bad years” for investing. But we are not fortune tellers. Nobody in the world knows what’s going to happen tomorrow, next year, or next decade. You just keep investing and in the long run… you’ll come out on top. If you read Common Sense Investing by John C. Bogle (founder of Vanguard and index funds), you’ll learn and understand that is an absolute fact.


tactical808 t1_j297td3 wrote

This is where asset allocation comes into play. The “general” rule on social media is to have an emergency fund, then invest the rest in 100% S&P500 index funds. We know not to touch the emergency fund. But, if your investments are 100% equity (stocks in the S&P500) how do you rebalance?

Asset allocation adds in a cash and bond position to your investment portfolio so you have three areas to invest your money; cash=opportunity funds, bonds=income, and stocks=appreciation/growth. Everyone’s allocation should be unique to their risk tolerance and your portfolio should be rebalanced periodically (every 6 months or annually works well).

We have a 15% cash, 15% bond, and 70% stock allocation. As stocks were going up in 2020, rebalancing told me to sell stock positions and rebalance my cash and bond positions. As stocks tanked earlier this year, my rebalance had me buying more stocks and reducing my cash and bond positions.

Asset allocation follows buffets, be fearful when others are greedy and greedy when others are fearful. You can never time the market efficiently and emotions always come into play. But, having an asset allocation in place and rebalancing to the set allocation removes all of that. You simply sell/buy what is needed to get back into balance.


stocktadercryptobro t1_j29atky wrote

Put money into cash generating investments. Regardless of the market, you're good.


TableBeDusty t1_j2aexy4 wrote

I wouldn’t right now, it’s pretty volatile rn. I would suggest using money in cook groups


buildyourown t1_j2amujj wrote

Don't try and time the market with your nest egg. It's not a horrible idea to buy after a giant market drop.