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December 9, 2024
Imagine that you’ve just received a paycheck, income tax refund, or work bonus. You’re not sure if you should invest it now, or wait and try to time the market. Is there a good rule of thumb to follow? There are two general investor mindsets to consider.
The passive investor who values time in the market doesn’t try to guess when prices will rise or fall. Instead they invest in the market knowing that their timing may not be perfect, but eventually the market will rise over time and they will profit. The investor who values time in the market will stick with their investments until the original reasons for buying change. Reasons may include – they’ve reached their intended savings/return goal, they’re ready to retire, etc.
Timing the market describes an investor who is trying to time their trades based on predictions about future market movements. These active investors believe they can outsmart the market by picking when to buy low and sell high. Day traders are a common group that fall into this mindset. They believe strongly in market timing, technical analysis, and other high risk high reward strategies.
In summary, time in the market beats timing the market. Use automation tools to help.
Nobody can accurately predict price swings, so be wary of any market timing advice. Strive to maintain positive mental health by automating your investing strategy to maximize time in the market vs timing the market. Tools like Satoshi’s Index can be a great resource to help automate your crypto investing strategy, by scheduling investments at regular times, and by showing you what coins the rest of the market is buying. In our next post we’ll dive into when the best time to invest is, how to reduce timing risk as much as possible, and why dollar cost average investing is the preferred strategy for the passive investor that values spending time in the market.
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