Can You Time the Market?

Hindsight is so clear. A stock chart can tell you exactly when you should have bought and sold. Reliable market predictions, on the other hand, are impossible. If you could spot a peak (or trough) as it’s occurring and time your sale or purchase accordingly, you could make a fortune. Problem is, nobody can do it.

So although it can be tempting to take your profits and run when the market is advancing sharply, it may be better to hold on and see what happens. Then, a least twice a year, rebalance your portfolio to restore your original mix of stocks and bonds.

If you start with 60% stocks and 40% bonds, and a roaring stock market skews the balance to 70/30, just sell a few stocks and buy bonds. This is called disciplined rebalancing. It automatically forces you to buy low and sell high, without requiring a crystal ball.