What Is Market Timing?
Attempting to predict market movements and buy/sell accordingly.
The Full Definition
Market timing is the strategy of moving in and out of the market based on predictions about future price movements. Research consistently shows that even professional fund managers cannot reliably time the market over long periods. Missing just the 10 best trading days in a 20-year period can cut your total return nearly in half. The consensus among long-term investors: time in the market beats timing the market.
Real-World Example
$10,000 invested in the S&P 500 in January 2000 and left untouched for 20 years grew to roughly $64,844. Missing just the 10 best trading days during that same window cuts the ending balance roughly in half — and nine of history's 10 best trading days have occurred during recessions, exactly when panic tends to drive investors to sell.