Market timing

Market timing is the attempt to predict favourable moments to enter and exit the market, selling ahead of falling prices and buying ahead of rising ones.

For most investors this proves detrimental to returns. One reason is that a large share of the long-term return comes from a small number of unusually strong trading days. An investor who is out of the market in between and misses those days forfeits a substantial part of the long-term gain.

Because the best days can rarely be identified reliably in advance and often follow closely on weak phases, staying invested throughout (buy and hold) is generally regarded as the more robust path.