So You Want to Time the Market?

by Chris on June 3, 2013

Over the past few weeks I’ve been writing a lot about Tesla, which just so happens to have gone on rocket ride upwards after I bought it. Lucky me, however I don’t really trade stocks. I invest in them for the long term. When I bought Tesla I wasn’t timing the market. My profits are only on paper and I’m don’t really sweat the volatility when it drops.

Anyway, lots of people have told me the stock is a total short, and about the same number of people have expressed huge interest in the global trend towards electric vehicles.

Whenever someone says they want to short the stock I ask them what their conclusion is based on. Usually it’s based on current valuation and belief that the stock will crater soon.

That’s called trying to time the market, and it’s horribly difficult.

If you were not “smart” enough to buy Tesla in the 30-s, 40s, or 50s and ride it up to $100+ in the last few weeks then why should you believe you can time the market?

Today Tesla is down about 7% on no news … again, in hindsight not really surprising to see this. It’s a volatile stock. But if you didn’t short it on Friday why should you believe that you can time the market? What gives you the brilliant idea that you can somehow predict the collapse of this stock, or any stock, or the next big rally?

You probably can’t. Stick to actually investing in stocks based on their business model, or shorting those that are on the cusp of dramatic business declines (which lead to stock price declines).

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