When investing, you should be focusing on time, not timing. Most investors focus on timing because it’s what they’re conditioned to think investing is.
In the stock market, we’re taught to buy low and sell high – making profits when prices rise. Of course with options, you can make money from surges and declines in stock prices but you’re still relying on timing to make money.
The point of timing is to time an investment to beat the market – buy low before everyone else does and sell high before the price nosedives. The problem is, timing is futile.
Some investors get lucky once in a while but nobody can time the market consistently. Their instincts may be right one time, but chances are: the other nine times will fail.
How many times have you found yourself muttering:
“If only I had bought it sooner?”
“If only I had held onto it longer.”
“If only I had sold sooner.”
Regret is the most common emotion when it comes to timing-based investing. Even the experts fail at the timing.
A 2017 study found that mutual funds that took a more timing-based approach vs. a more conservative hands-off approach underperformed by 14.1 basis points.
In another study, mutual fund managers that took a timing-based approach underperformed the buy-and-hold funds by nearly five percentage points a year over the past 30 years by mistiming moves in and out of markets. While the S&P 500 Index had returned an average of 9.96% over that period, the timing-based fund realized just 5.04% a year.
If the so-called experts can’t do it, what chance do the rest of us have?
While everyone else is focused on timing, elite investors are more interested in time. To them, the key to wealth is time, not timing. Investors who focus on time have two key investment objectives:
- Cash Flow.
- Appreciation.
By leveraging time, cash flow from tangible assets like real assets, and productive businesses can be reinvested to compound wealth. Tangible assets also reliably appreciate over time because they have intrinsic value – value separate from what people are willing to pay for them.
Investors focused on time want to let time do its magic so they seek investments with long lockup windows. Long-term investments take emotions out of the equation. There is never second-guessing like there is with timing. Instead of experiencing the common emotion of regret with timing, investors focused on-time experience calm and confidence in knowing their wealth will compound and grow over time.
If you’re locked into an asset like commercial real estate that with almost certainty will appreciate over 5, 7, 10 years, you don’t wonder if you timed an investment right and if you’re going to make money.
Long-term investments offer reliable cash flow and appreciation that almost ensures that you’re going to make money.
Illiquid investments prevent the mobs from dragging down values as they let emotions rule and causing them to jump in and out of investments on the slightest whims – and dragging prices with them like with the stock market. Illiquid investments prevent this behavior and protect you from yourself by preventing emotions from getting in the way.
Many experts are warning that the stock market is a bubble right now. There will be investors who will get the timing wrong and collectively lose trillions when the market crashes. There are no underlying economic fundamentals justifying stock values right now.
That’s the problem with timing – you are trying to anticipate something as abstract as investor sentiment to make money from price movements. If past bubbles have taught us anything, it’s that you never know when the pendulum of investor sentiment is going to swing.
Anticipating investor sentiment and predicting where the market is heading is a fool’s errand. Not even the experts can do it. That’s why I’m not interested in timing the market along with all the abstract factors that go along with it.
I’m more interested in time and what time can do for me with cash flow and appreciation.
I’m more interested in assets that are priced based on basic economic fundamentals such as profits and not just what the public is willing to pay for them.
This is why I’m more interested in time and not timing.