Time vs Timing in Trading
I’m pretty sure that at least once or twice in your life you’ve met people saying that time, not timing, is your ally in making wealth. At some point I’d personally agree but if you wish to maximize your trading venture, both time and timing are important. In fact, I’d even put more premium at timing over time because timing exponentially increases efficiency.
Take AC for example.
Buying AC at P100 last 4th quarter of 1998 would have made you earn roughly +900% after almost 18 years. That’s a whooping 9-time fold of your money after 18 years. If you have invested P100,000 in 1998, you almost have P1,000,000 now.
However, if you employ timing in your trading, this would drastically increase your earnings.
Assuming you bought at the low of P100 during the 4th quarter of 1998, somewhere near the end of the 1997 Asian crisis, and sold at the high of P400 and bought back again at P100 when it dipped, sold again at P350 when it peaked, bought back again at P100 when the entire world came crashing because of the Lehman Brothers and if you’re still holding this up to now, you could have made your P100,000 grow to P11,900,000 (assuming price is at P850) after 18 years.
How was it possible? The key is in buying at lower prices and selling at higher prices and letting the price drop (before buying back). Through this way, you get to avoid the price drops, which in a way protects your capital. Avoiding the price drops is the big edge of timing over just waiting in time because you get to keep your money (capital plus earnings from dropping). Earnings and even capital (sometimes) are lost in just merely going long term.
Though both results in really juicy gains, I bet you’d pick P11.9 million over just P900,000 at any given time and day. So consider getting better with timing to increase your efficiency and your odds. Anybody who would tell you that time, and not really timing, is the key to accumulating wealth probably don’t understand how the market moves.
To give you something to work on during the week, do the following:
(1) Pick at least five (5) stocks
(2) Extend period to twenty (20) years
(3) Compute gains if you bought twenty years ago and sold at: (i.) highest point and (ii.) current price
(4) Compute gains if you bought at the lows and sold at the highs
Article by Makoy Velasco, Certified Securities Representative
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