Re:Why the Market Is Bouncing
by jfengel on Monday August 15, 2022 @12:14PM
(#32471541)
Basically, you don't. It's called "market timing", and it's widely considered a bad idea.
Market timing is basically trying to estimate the psychology of other people in the market, rather than looking at the underlying value of the assets. People are irrational, and they're not irrational in sufficiently predictable ways to consistently make money off of it. Over a sufficiently long term (perhaps 5 years), you'll do better on average to just let your money sit there through the declines.
That said... it's always really hard when markets get wildly overpriced, like they had been for at least 5 years. Rational analysis would say "Don't be involved with this". Smart people did... but they also had to basically sit on their money for years while the irrationally exuberant market got less irrational.
The saying is that the market can remain irrational longer than you can remain solvent. Trying to out-irrational other people is theoretically profitable but practically impossible.
Market timing is basically trying to estimate the psychology of other people in the market, rather than looking at the underlying value of the assets. People are irrational, and they're not irrational in sufficiently predictable ways to consistently make money off of it. Over a sufficiently long term (perhaps 5 years), you'll do better on average to just let your money sit there through the declines.
That said... it's always really hard when markets get wildly overpriced, like they had been for at least 5 years. Rational analysis would say "Don't be involved with this". Smart people did... but they also had to basically sit on their money for years while the irrationally exuberant market got less irrational.
The saying is that the market can remain irrational longer than you can remain solvent. Trying to out-irrational other people is theoretically profitable but practically impossible.