Trying to time the market can be an expensive endeavor

The Ticker

July 22, 1998|By Julius Westheimer

ARE YOU tempted to time your stock purchases? Goldman Sachs' newsletter warns, "By trying to avoid the 'worst' days to invest -- when stocks are highest -- you may miss the 'best' days, and that mistake could damage your performance."

Under the heading "Missing the 'Best' Days," the letter adds, "If you invested every day during the period 1982-1996, you showed an annual 16.78 percent gain. But if you missed the 10 best days, you dropped to 13.39 percent. By missing the 40 best days your performance sagged to 7.53 percent, and if you missed the 70 best days you showed a meager 2.87 percent return."

John Hancock Funds' How to Be a Successful Investor agrees. "Remember that markets rise and fall short-term because of many factors. Attempting to 'time' these moves for quick gains is extremely difficult and very risky."

Speaking of investing, if you put off signing up for your company's 401(k) plan, here's something new to consider. Money magazine says, "Thanks to a recent IRS ruling, your employer can now start automatically deducting a 401(k) contribution from your paycheck." Karen Field, tax manager, KPMG Peat Marwick, says, "If your company adopts automatic 401(k) enrollment, you'll be notified. Unless you opt out, your employer will invest 2 to 3 percent of your pretax income on your behalf. This is great for people who put things off."

MARKET WATCH: "Don't rush into a mutual fund that's closing to new investors. When most funds close, they're already too large to perform well." (No-Load Fund Investor)

"When investing for retirement, don't react to bad or good news. Your 401(k) is intended for long-term investing; expect bumps along the way." (Ted Benna, president, 401(k) Association)

"You don't have to swim in exotic seas to meet a shark. The unwary can be ripped off very comprehensively in home waters." (London's Money Observer)

Pub Date: 7/22/98

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.