A Responsible Version of Market-Timing
Rebalancing your portfolio allows you to 'buy the dip.'
I recently saw this E-Trade commercial. It begins in an auction room where bidders are looking to buy different types of dips--like French onion and spinach and artichoke (I prefer the former). E-Trade jokes that if you think dips are food related and not investment related, maybe trading isn't for you. Though the commercial is tongue-in-cheek, it may prompt investors to think about "buying the dip," or buying investments when prices are down.
What Is Market-Timing?
This got me thinking about market-timing, the practice of trying to predict future market prices and buying or selling accordingly. The goal, of course, is to buy low and sell high. But individual investors aren't great at this. Predicting when an investment or asset class will go up or down is hard enough for professional investors, let alone individuals building their savings.