Timing the market -- A popular 'myth'

Market timing is the strategy of making buy or sell decisions of financial assets (often stocks) by attempting to predict future market price movements. The prediction may be based on an outlook of market or economic conditions resulting from technical or fundamental analysis. This is an investment strategy based on the outlook for an aggregate market, rather than for a particular financial asset.

Nobody really knows the peak and trough -- the market operates on macro-economic factors and the unpredictable human sentiment. The two prominent human sentiments which drive the markets are -- Greed and Fear. When the markets tank, panic grips even the most elite investor into take wrong decisions.

If one looks at aggregate mutual funds or equity data, it is evident that a lot of investments happen near market peaks and investors even pulling out at market lows. Studies on past data of the dowjones have shown that it is almost impossible to time the market.

Few Tips:

• Invest in equities or equity mutual funds with a minimum 3-5 years timeframe.
• Use direct equity if you have the expertise and the time to track the market regularly.
• Don't invest by market sentiment. It is likely to be opposite of what you should be doing.
• If you are starting off in equities, use mutual funds -- diversified and balanced mutual funds are better options.
• Use the systematic route to create a discipline and also effectively average out the cost.
• Align your equity investments with your key long term financial goals.