This is what happens when you think you get the right to sell the actions in the stock market when it falls

We have been in which the bags go down a few days.In fact, there is already talk that correction has arrived after months of increases, and that it is time to sell the actions to wait back to the increases.

However, although it may seem an adequate strategy (sell when it begins to fall and buy when it starts up), we cannot predict the future and we will possibly be doing the opposite.Empirical studies say it is not right at the Market Timing

If the bag falls... mejordo nothing

Let's imagine that we are experts in hitting when the market begins to fall and when it starts up.And that we achieve, every year, choose the best time to enter the market, at its lowest moment.Instead we have our nemesis, which does just the opposite, buy at the time the market is more expensive.

Pues si se analizan los datos del S&P500 desde 1976 hasta 2018 se puede ver que invirtiendo 10.000 Each year we would have obtained a 7.9% annual profitability.On the other hand our nemesis 7.1%.There is no big difference.

Instead being out of the bag has a huge risk. JP Morgan estudió cuál sería la rentabilidad de una inversión realizada en el año 2000 hasta 2019 en el S&P500.Annualized was 6.06%.But if the investor was lost the 10 best days (and we are talking about 10 days of 5000), profitability fell to 2.44%.And if the 20 best days were lost, the profitability was void (0.08% per year).

Therefore trying to do Market Timing does not provide great gain, but a great risk.In the end you have to be able to predict whether the market falls have really come to stay and get hooked on the increases at the right time.Are we humans capable of doing so?

The ability to get the right moment

The truth is that there are a multitude of studies that indicate that humans are quite bad right.Market Timing strategies usually not only do not achieve their goal but achieve otherwise: buy expensive and sell cheap.And when we realize that the low bag we are already selling too late and when we want to enter we have already missed the important increases.

Hitting the moment is very complicated and therefore the best is...do nothing.Faced with the fall with the original investment strategy.And what is the best strategy?Long -term.

Long -term

The best strategy of investing in the stock market is to invest in the long term and with diversification (both companies and regions).When there is money available to invest, regardless of the moment (in fact it is better to do so, suddenly, than to distribute the investment to average the price).

This strategy, the story tells us, is the most successful to raise profitability.There will be bad times, even bad years, but in the long run the bag rises and the climbs will compensate for the descents.If we try to anticipate the market, the most normal is that we reach less profitability than those who simply maintain their positions.