Plain Money ideas Plainmoney investing

Have you already missed the bottom?

A popular, but flawed, way of trying to benefit from the ups and downs of the stock market is to sell out at the top and buy in again at the bottom. This is known as “market timing” and it’s very difficult to make any money doing it.

The problem is that no one knows when a bottom or top occurs until long after the fact. Therefore, when the stock market rallied in March, unless you were already holding stocks you were too late to buy in at the bottom. How do you react to all this? My favorite strategy is “buy and hold.” If you don’t try to sell out at the top you don’t have to worry about when to get back in. My prediction: Within two years, the stock prices of March 2009 will look extremely attractive. “Market timers” will kick themselves for not having gotten back in then.

One warning: If you “buy and hold,” there will be times when you wish you had sold out. It’s not for the faint of heart. However, for those willing to stay in the market long term, the rewards can be substantial.