Broker Check

Market Timing vs. Buy and Hold

January 13, 2021
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Market timing involves making market buy and sell decisions based on your prediction of the future performance of the market. A buy-and-hold investment strategy, in contrast, involves buying in to the market on a regular basis and holding your investments over time.

Why Market Timing Is Difficult

The fact is that the market is an incredibly complex system. Investment returns depend on a wide range of factors. Economists suggest that stock price changes exhibit what they call random walk behavior, meaning that future performance cannot be predicted based on past performance.

Market timers retort that they have built complex models that analyze all factors affecting a stock’s price. Sometimes, these models do accurately predict the movement of a stock price. But too often, unforeseen factors can quickly send a stock’s price up or down.

Also, market timing is a more time intensive strategy. You need to monitor your investments closely to stay on top of all the factors that can affect them.

Buy and Hold

For the average investor, a buy-and-hold strategy is much more practical. While buy-and-hold investors will suffer in market downturns, by staying invested in the market, their investments will recover when the market recovers. While there is no guarantee this will happen, historically, the general direction of the market has been upward.The benefits of a buy-and-hold strategy over a market timing strategy include:

  • It doesn’t require constant monitoring of the market or the news.
  • It’s less complex. You’ll typically make far fewer trades with a buy-and-hold strategy.
  • There are fewer tax consequences. Since you have fewer trades, you’ll have fewer taxable transactions.


Representative is registered with and offers only securities and advisory services through PlanMember Securities Corporation, a registered broker/dealer, investment advisor and member FINRA/SIPC. 6187 Carpinteria Avenue, Carpinteria CA. 93013, 800-874-6910. Randall Wealth Management Group and PlanMember Securities Corporation are independently owned and operated. PSEC is not responsible or liable for ancillary products or services offered by Randall Wealth Management Group or this representative. CA Insurance License: #0I08678.

This newsletter was prepared by Integrated Concepts Group, Inc. The opinions expressed in this newsletter are for general information only and are not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. The views expressed are those of the author and may not necessarily reflect those held by PlanMember Securities Corporation. Material presented is believed to be from a reliable sources and PSEC makes no representation as to it accuracy or completeness.