Evidence Based Investing 101: Refrain from Market Timing

One of the principles from Evidence Based Investing, our investment approach at Pyrmont, states that all investors should refrain from timing the market. The reality is that from one year to the next, nobody truly knows what market segments are going to outperform. While some will claim to have secret intel or their own special strategy, historical evidence continues to show us that nobody can truly predict the future of any market. In instances where predictions are correct, in most cases, that is down to luck and not judgement, even though praise will be heaped on those who made the correct predictions.

If asset class is considered, there is no pattern that drives annual returns, so it’s a pointless task to attempt to guess what is likely to happen. This means that it also doesn’t make sense to move into and out of the market. While those who made predictions that are correct often align with the movement of the market and claim they “saw it coming”, those who don’t benefit from movements in the market understand why it happened.

It has also been seen throughout history that after a downturn, in a short space of time, stock prices will rebound, so it makes sense for investors to remain invested as opposed to attempting to time the market. Through a diverse portfolio, investors are in a position where they can see returns wherever and whenever they might happen. This is an Evidence-Based approach that mirrors the whole market.

Therefore, it’s not about trying to be right or wrong but it is about having a portfolio that is diverse enough for investors to benefit from it without the need to concern themselves with market timing. Not only does this make sense from a financial perspective but following this important principle from Evidence-Based Investing will always lead to a better, more balanced (and enjoyable) investment experience.

Have you ever attempted to time the market to gain some benefit and failed? Or perhaps you simply want to learn more about evidence-based investing and how you could benefit from it? At Pyrmont Wealth Management, we believe in following an evidence-based investment strategy that’s rooted on years of research and a pragmatic, life-centred approach to your finances.

Contact us today to learn more about how you could benefit from evidence-based investing and how to set right investment strategy that helps you grow and preserve your wealth.

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