How To Effectively Time The Stock Market | Timing The Market

I’m often asked questions like:

- Should I be timing the stock market?

- Should I buy on the lows and sell on the highs?

- Are there key market timing signals that I can study to be a successful investor?”

1) Obviously, there's no direct, clear or concise answer, but with an investment philosophy such as ours, we believe that you're likely better off to stay invested and not worry about any market trend signal.

-One of the strategies we've used is legging in, which is when you buy over a pre-fixed period of time.

2) Let's look at an example:

-A couple is about to receive a $2 million inheritance and they've got maybe 300-400K in RRSPs.

- This inheritance would represent a solid 5x more assets than they currently have. Our goal is to protect the capital and limit any market timing risk.

-Utilizing a legging in strategy will allow us to allocate their $2 million inheritance over a period of 6 months to 2 years.

3) This will help mitigate risk and avoid putting their cash/assets in the market in a very short time window. Avoiding downside risk in the event of a correction or in a draw down is key to protecting your capital without missing the possibility of an upside in the market.

4) Why does this matter?

- Let's say the market drops 5% or 10%.

- This represents a buying opportunity and we would be legging in.
If the market drops 5%, we leg in a portion of the assets and if the market drops 10%, then we leg in a further piece.

- if there’s a period with a crash or a bear market and the market drops 20%, 25% or 30%, you would’ve been buying all the way down so it's not necessarily market timing.

- Our legging in strategy helps to mitigate any market timing risk.

5) If you're simply investing your annual RRSP proceeds or your TFSA proceeds and you want to put that money to work, we would suggest not worrying about stock market timing as it’s impossible to predict if the market is going to be up a year from today or tomorrow.

- I'm sure your parents probably told you to do this, but in case you don't know, it's possible to reduce market timing risk by buying once a month for 12 months.

- It's a common strategy that I feel many people have heard of and know about, and yet we often don't see it being leveraged.

- An example of how this may work: If you know you're going to be making 50K in annual contributions and annual savings, then you could try to spread that out.

6) Once again, take a look at legging in a portion of the 50k. If there is no dramatic market correction, you will be fully invested at the end of the 12 months and have benefited from buying on some dips in the market.

[RobTetrault]

Thanks for watching the video!

[paulargueta]

It only took me 43 years to learn that the difference between those that became SUCCESSFUL, and those who didn't, was their ability to HOLD ON and PERSIST in the face of less than desireable, often bleak, circumstances and/or environments. Just. Hold. On.