Long-term investing vs timing the market

The question is like comparing an apple to a guava: long-term investment is different with short-term investment and should not be compared, both compliments each other. Investing is a matter of strategy and risk tolerance - how much you can afford to lose and how much profit you are targetting. There is no right or wrong choice - its a matter of taking advantage of every opportunities in the market.

Warren Buffett is a long-term investor while George Soros is a short-term speculator. Both are very successful in their own games and among the richest in the world.

I think timing the market is more difficult and riskier. But it's a quicker way to make money. Soros still holds the world record for the highest earnings made in a year - $1 billion in 1993 (he actually made it in just a few days).

In the long run, I believe long-term investors make more money. Buffett is still richer than Soros by about $30 B.

As to managing your own fund, that's ok is you're better than professional fund managers. C'mon those guys aren't that good. :-)

Im more inclined to favor long-term investing to give more solid and more satisfying returns. The reason is that you cant win in speculation every time while in investing, the returns are more certain to come. Soros has the sense to quit the game while his ahead while buffett is still compounding up to this day.

If the starting line is your portfolio today and the finish line is financial freedom, assuming all things being equal... investing (marathon) will always beat the speculators (sprinters).

Investing will compound your portfolio while speculation might win some but will most likely lose it too sometime during the race and the net effect is'nt that satisfactory at all.

In my humble opinion.

my 2 cents:

passive investing, i.e. having someone else manage your money for you whether its in a P5000 mutual fund account or P5M private/institutional/high net worth account is the norm for almost everybody who's too busy or who'd rather focus on accumulating the money to invest.

that's why mutual funds are in business for trillions of dollars worldwide.

the other option, being an active investor by day trading, etc. is imo only for those who are in the (investments) industry.

there's too much an investment of time, education, market/trading experience and REAL money for the everyday investor that success is really limited unless you're one lucky SOB.

To phrase it as "long-term investing vs. market timing" is to over-simplify.

Long-term investing involves to a certain degree some market-timing, simply because investing has to be planned and is carried out only when the conditions for the investment are favorable.

Master investors, way before they invest, have already set down criteria/conditions, either based on hard-nosed research or just intuitions of market sentiment, that when satisfied will prompt them to make the investment. They are patient and they wait. Similarly, if during the course of the investment, one or all of the initial conditions/criteria have been broken, they cash out of the investment. As long as conditions hold, they hold.

People selectively focus too much on long-term investing a la warren buffett, but not much on what set of criteria he employs that allow his investments to be held over such long periods of time. Buffett is highly selective, and his style is way different from the index-fund version of long-term investing. Essentially he also times the market, when he shops for bargains during market downturns. The point missed by most is that he already has a working idea beforehand of the value of the companies on his radar screen, such that during market crashes he can immediately pick out those that have become bargains in the process.

George soros already had an investment thesis that the pound sterling will fall 1-2 years before it actually happened. He had fixed in his mind the conditions and what sort of events will actually bring this thesis to actuality. But he didn't short the pound sterling right there and then. He waited until all the conditions lined up in favor of his thesis. Then he shorted the pound and within days earned his billions. The planning was long-term, but the investment was short-term.

Mutual funds are set up for people who believe they don't have the time nor the patience to study the market. And so investment decisions are delegated to a fund manager.

For some the time and patience spent in this very difficult learning process is well worth it.

Salve,

In my experience so far a mix of both works just fine with regard to equities.. I still hold physical stock certificates of my insurance company which demutualized way back in 1999 (thank God for demutualization!) and 2 other listed firms belonging to the industry sector where I work since the early 90s. These account for 70% of my equities portfolio and I consider them long term investments. Before I fully liquidated my index fund last month after holding on to it for 3 years, it accounted for almost 20% of my portfolio (the gains now kept safe in a non-equity UITF). The remaining 10% is in my online trading account. This is what I use to dabble in “timing the market” (I have an average but dismal passing grade here). The 30% actually constitutes part of my emergency fund since they can be liquidated into cash in 5 banking days maximum.

Depending on your risk tolerance and investment objective, I believe a flexible mix of both long term and short cycle strategies is worth it, instead of simply choosing one s-a-vis the other.

for most people, before planning to be rich, a plan to financially secure should be first established. this plan for security and comfort must be as no-brainer and automatic as possible. (i.e. handing over the funds to a professional fund manager, long term investing). once that plan is established, there is now more freedom to speculate on riskier investments. at least, when things go wrong with the speculation and timing the market, in the end one is still financially secure.

sad thing is, most people don't even have any plan at all...

Why limit long term investing to mutual funds.. you can also be a long term investor thru individual stocks. By doing the latter, you'll avoid hefty sales load and annual fees.