Seasoned investors know that market timing has historically been little more than a gambling move—try buying some Bitcoin right now in Q4 2017 and see where that takes you. You might still win big, but history has to have losers. But it’s human nature to want to be above average. This is especially true in finance. Everyone wants to have some alpha in the game. After all, you spend your free time reading finance literature, swear off the financial advisors, and even try to educate your colleagues.
I’ve certainly inadvertently “timed” the market when I bought shares of Berkshire B stock in residency. It was at a 52-week high at the time, and by market timing criteria it was too expensive to buy. Guess what? It’s grown by more than a five-fold since then (maybe more).
I came across an interesting article with infographics by Wes Moss (http://clark.com/personal-finance-credit/stock-market-record-high-invest-now/). He breaks down the effects of investing in the stock market at highs and lows. It seems like even if you invest right before a significant market correction, you still come out ahead over time. I remember William Bernstein in his e-pamphlet If You Can commenting about stocks:
“How risky are stocks? You’ve no idea. During the Great Depression, stocks lost, on average, around 90 percent of their value; during the recent financial crisis, they lost almost 60 percent.”
We all have to realize that not everyone can be above average, yet alone beat the market. For a brief while years ago I thought that I could do it, but then realized that I had no time or interest in delving into the financial world while I was inundated in the medical field. That is still the case for me.
I am still in the growth and investment phase of my career. Most of my passive investments are still going towards stocks and bonds while I decide how to diversify my earnings further. I still am working full-time in my medical career and have little time to hold my earnings in cash until the next big investment. Dollar cost averaging works for me, even though the market is perhaps at its relative high.