Market timing & macroeconomic forecasting

 

1. Market timing

Market timing refers to moving funds in anticipation of market fluctuations using technical analysis or economic indicators. The vast majority of successful investors, economists and professors of finance say market timing is impossible.

Many people approach their investments as market timing, and some actually make a profit. However, that number is very small, and even for those investors, it is very difficult to consistently produce high returns in the long run.

Market timing has many disadvantages compared to an investment strategy of buying and holding stocks for a long time in many ways. First of all, the goal of market timing is to make the most of the fluctuations of stocks to make a profit, but aligning the short-term stock price direction is just a game of probability. Although we set our own standards for past price fluctuations in terms of volume and support lines, it is impossible to consistently keep pace for 10 years with high probability. Only after seeing losses is the process of revising the bar for volume and support, trying new things, and seeing and fixing losses again.

Market timing Investors need to pay attention to the market price every day, although it depends on the short term investment period. Also, due to frequent transactions, high transaction costs and taxes are paid. What's more, it is difficult to get the exact timing of buying and selling.

2. Macroeconomic forecasting

Macroeconomic forecasting is also a problem that many investors try. Economic indicators predict whether the economy will stagnate or recover or rise, inflation will occur, or deflation in the short future, and whether the base rate will rise or fall accordingly. In conclusion, it is also impossible to get the right timing.

Interpretation of economic indicators results in multiple opinions depending on the perspective of the person interpreting the same data, and it is not known which one is accurate. However, it is data that can be used for reference to some extent in asset allocation, and you can refer to it to match the appropriate proportion of asset allocation. You should never move excessive funds on certain assets due to poor macroeconomic forecasts.