Almost everyone who starts investing sees the peaks and valleys of the stock market and thinks “Wow, if I could figure out how to time when these are I'd get rich!”. However, as most veteran investors know, this is pretty much impossible and I want to show you a straight forward example of why. Look at the four example stocks below, do you think you could develop a system to know when to buy and sell any of them?
https://imgur.com/a/uiT4TYj
Think again, each one of these stocks is generated by going up and down a random percentage between -2.95% and 3.05% each day (up 0.05% each day on average). There is absolutely no correlation between what the stock is going to do and what it was doing previously, and yet despite this, just due to the mathematics of random probabilities there are naturally going to be both sharp and gradual peaks and valleys that can fool you into thinking there is a pattern you can find to predict where it is going. For each of the above examples, it is statistically disadvantageous to sell at any point.
Of course while not all fluctuations within the actual stock market are decided randomly, the vast majority are (or are so unpredictable they might as well be). This is why if you're getting stock in a company that is worthwhile to get stock in, it's far better to buy early and hold rather than trying to time the day to day or month to month fluctuations.
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