Future Healthcare

Only time will tell with the stock market

Timing isn’t everything. Patrick Convey on why political dramas are not a basis for investment success.

Over the course of the summer, it was not unusual for the stock market to be a topic of conversation at barbeques or other social gatherings.

A neighbour or relative might ask about which investments are ‘good’ at the moment. The lure of getting in at the right time or avoiding the next downturn may tempt even disciplined, long-term investors. 

But the reality of successfully timing markets is not as straightforward as it sounds.

Outguessing the market is difficult

Attempting to buy individual stocks or make tactical asset allocation changes at exactly the ‘right’ time presents investors with substantial challenges. 

First and foremost, markets are fiercely competitive and adept at processing information. 

During 2018, a daily average of $462.8bn in equity trading took place around the world. The combined effect of all this buying and selling is that available information, from economic data to investor preferences and so on, is quickly incorporated into market prices. 

Trying to time the market based on an article from this morning’s newspaper or a segment from financial television is futile. It is very likely that information is already reflected in prices by the time an investor can react to it.