Market Timing vs Risk Management

Question from an investor: “What do you think the market is going to do?”
My answer: “I have no idea…but when it does it, I’ll be ready.”
Question from an investor: “So you’re a market timer?”
My answer: “No…I’m a market observer.”

Interestingly enough, Barry Ritholtz published an article today called Predicting Market Tops vs Observing Conditions that I suggest everyone read. So are you a market timer, a risk manager, or neither?

Market timing is moving money in and out of investments, trying to catch market tops and bottoms. Risk management is the process of moving money in and out of investments based on lowering your risk of loss.

I’m sure you can figure out which camp I’m in today. After the run-up since late December, I’ve been expecting some sort of pull-back. Yet the market keeps going up. Several years ago, I missed out an substantial gains because I “knew” the market couldn’t move higher.

Sources:


Predicting Market Tops vs Observing Conditions
Barry Ritholtz – The Big Picture
http://www.ritholtz.com/blog/2012/03/predicting-market-tops-vs-observing-conditions/

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