As an options trader, I have the dual challenge of not only getting the direction correct but also the timing. Options have a finite lifetime, and if my read on a play is not timed correctly before the option expires, then I can lose all of my premium. To further frustrate matters, we could see the stock make the expected move after the expiration (this happened before to me on a few occasions, forcing me to bang my head against the wall).
But a stock investor/trader is not so much worried about timing in most cases. Oh sure, we all want to buy our stocks on the bottom and sell at highs – that’s how we grow our accounts. But we have to know that timing our plays is a delicate exercise. Some of the best-timed investments are not always bought at the bottom, rather just averaged over time.
A wonderful, time-tested investment strategy is to ‘leg into’ positions, adding at opportune moments when a stock falls more than it should. Further, a constant investment strategy of dollar cost averaging is prudent accumulation. Putting in discretionary funds on a regular basis into stocks may well achieve a goal of financial independence. Even the best investors could be considered lousy market timers, but if you have a consistent plan of investment there is only one way for your portfolio to go – and that is up!
