3. Long-Term and Short-Term Market Timing and Investing

The market that we’ve been in for the last 12 years or so has made traders of us all—we simply can not just buy and hold without making periodic portfolio adjustments. There are short-term and long-term considerations, and many investors have started using market timing for their buys and sells. Many others use portfolio adjustment rules as a way to enhance returns and lower risk. Different strategies are explored in this chapter.

The Risk and Reward of Market Timing

Many investors and traders use market timing to take advantage of market volatility, and Figure 3-1 shows why. Figure 3-1 shows the results of investing $1.00 in the S&P 500 Index in 1966, and Figure 3-2 shows the return over ...

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