Timing the market so that you sell high and buy low is much more difficult than it sounds. So much so that many people lose thousands of dollars because they cannot actually time the market. The stock market has averaged 7% year over year for the past 40 years, however there have been some pretty wide swings during that time with losses and gains. Investing in blue chip stocks that are here to stay is better than trying to time the market.
Trading too often can rack up huge trading fees and one wonders if these fees eat all or most of your profit. Don’t forget there is a fee for buying as well as selling, so your profit needs to cover this cost before you actually make any money.
Reacting to the market in a panic mode or in a bull market can also cost thousands of dollars if you sell low and end up buying high. Anyone who sold in 2008, locked in all of their losses and if they stayed out of the market they also missed an over 100% gain in the value of stocks since. Invest wisely, diversely, blue chip and dividend paying stocks and you will have a better chance of weathering any storm.
Making emotional decisions can be equally bad. Talk to an adviser, a family member or someone you trust before making any financial decision. Emotional decisions without facts usually leads to bad decisions.
Working with the wrong adviser who is focused on trading is going to cost you money. An adviser who is pushing the latest mutual fund because they will receive back end commissions does not always have your best interests in mind. Personally evaluate all recommendations and make your own evaluation before proceeding.
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