3 Simple Steps to Timing the Stock Market

Turn on CNBC or click to any investing website and you’ll hear a hundred different opinions every day about timing the stock market.

Half will scream that stocks are heading for a crash while the other half will warn that if you’re not ‘fully-invested’ you will miss out on a terrific bull run.

Lets look to the Graham’s three rules to an expensive stock market can help you avoid high investment fees and bad stock market timing.

Is Stock Market Timing a Fool’s Game?

Understanding that the stock market generally rises around 7% annually over the very long-term gives you a rational idea of what to expect. 

 This helps put things in perspective when stock pundits promise huge returns on individual picks or the market itself.

Is the Stock Market Expensive?

Understanding this long-term return, you should start to wonder when TV pundits talk about double- and triple-digit potential returns in picking stocks. 

Chasing these irrational expectations means taking on a ton of risk and usually results in the investor losing money while their broker gets fat on fees.

Timing the Stock Market with Rebalancing

The better strategy when stocks start looking expensive is a simple rules Graham outlines in the book.

1. No borrowing to buy stocks. This is called buying on margin and should never be done anyway.  2. No increase in the proportion of funds held in stocks. This doesn’t necessarily mean you stop investing in stocks, just that you invest in other asset classes.

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