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Why timing the market is the wrong strategy for investors
Investors could be missing the opportunity to strengthen their portfolio by waiting for the market to bottom out, rather than acting when their goals align.
With property prices declining nationally, investors have been encouraged to act when market conditions align with their goals, rather than waiting for the market to bottom out.
Right Property Group founder Victor Kumar said that buyers trying to wait for the market to bottom out could be missing out on bigger opportunities.
Across his more than 25 years in the industry, Kumar said that he had often seen buyers make the mistake of being inactive and waiting for the perfect time to act.
“A quarter of a century of data and experience tells me that you shouldn’t be timing the market. You can’t time the bottom of the market,” Kumar said.
“What you do need to have is time in the market.”
He said that investors who were waiting for the market to reach its low point could be missing out on the opportunity to act when market conditions had softened.
“There is no one around that is going to ring a bell when it hits the bottom. Not the RBA, not the economists, and certainly not me,” Kumar said.
“What really matters is that you use this softer market to negotiate really well, to look at areas that are undersupplied and to buy within your means.”
Kumar said that buyers needed to be in a position to absorb several rate rises so that they weren’t pushed to the limits of their negative cash flow tolerance.
Additionally, he said that investors should operate on their own timeline, rather than allowing the media or experts to dictate when they were going to buy.
“If you bought quietly with the fundamentals and you bought in a softening market, the time that you have in the market will be far more beneficial than trying to time the market.”
Despite the noise, Kumar said that building a portfolio that builds capital over time was a stronger strategy than rushing into the market.
“You buy well, you buy for the long-term, and you wait for the cycles to come through.”
“If you were to time the market, you’re better off putting a calendar on the wall, taking ten steps back and throwing a dart.”
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