Why Timing the Market Is a Bad Retirement Planning Strategy

Published on September 25, 2016

Retirement PlanningTiming the market is not always a good investment strategy. Finance experts warn that it is especially bad for retirees. Many people trade their retirement plans in the hopes of outsmarting the market and boosting their returns, particularly those who are nearing retirement age.

Those who get into day trading think that they’re better off putting their money to work for them instead of constantly looking for bank and online loans and tapping into emergency funds in order to secure their retirement. However, Rapid Loans warns that many day traders believe they are being astute by timing the market and making big risks without realising the consequences.

Understanding systematized risk

In reality, outsmarting financial markets is a mug’s game. And if you do make your money work, you will only experience short-term gains, not even close to beating the benchmark. Financial markets are extremely efficient and market valuations turn very quickly.

The economy is not a meadow that blooms endlessly. Seasoned investors agree that there’s no point in trying to outsmart the market because the market itself can go crazy. The best strategy may not work the same way when you need it. Because stock prices move around randomly and asset bubbles burst quickly, making big risks without really understanding the market will only get your retirement plans destroyed.

Sensible approach to day trading

But of course, you’d argue, how will you make high returns if you don’t take big risks? As any seasoned investor will tell you, any form of optimism in stock exchange is irrational. If you’re trading your retirement plans, treat it as if it’s just a hobby. Be conservative and only take systematised risks. If you don’t have other reliable sources of income, keep your day trading allocation to a minimum, and put the rest into conservative investments.

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The most sensible strategy when trading your retirement funds is to only make moves you can afford. To come up with your own strategy, you have to do your research, evaluate your progress, follow a clearly-defined plan and don’t devote too much effort and time into it that it causes stress and anxiety.

There is no harm in wanting to maximise your savings so you can achieve the retirement of your dreams. Learning to navigate the market and understanding the complexities of trading are great practical skills that can help you achieve financial freedom. But, bad strategies and uncalculated risks can lead to big losses and may just wipe out that retirement dream of yours.