Time is on Your Side in Catching a Market Bottom

When will the bottom of the stock market finally be here? No one knows exactly when the stock market will hit bottom, but there sure are plenty of people who like to predict exactly when it will be. The truth of the matter is that 99 percent of them will be wrong, and the other one percent will luck their way into being right this one time and will likely never be able to do it again in their lifetime.

Why do the talking heads and all of the financial television mainstays feel the need to pound the table and call a bottom so often? Quite honestly it is very good for their ratings. If the so-called financial guru's simply tell their audience that time is on their side and they should wait for the market to get its act together before committing their capital they are being far too bland and it doesn't make for good television. As wise investors it is a good idea to remember that those television commentators may be smart and know a lot about the market, but they also know that the key to their survival is ratings and viewership.

The problem with so many people calling a bottom is that investors are often too quick to listen to one person's advice because they perceive them as all knowing when it comes to the market and its future direction. Many individual investors are hurt in a big way by committing a large part of their capital at what they believe will be the bottom in a terrible bear market. The levels at which they believe the bottom is here often end up being 30 or 40% above the lows.

The problem with feeling like you need to time the bottom of the market is that hindsight is always 20/20, but when you are in the heat of the moment there is such thing as 20/20. A second problem is that what has happened in a previous bear market might not be exactly how the next bear market works, so there is no easy out from a historical standpoint either.

Timing the bottom of the market is next to impossible and investors are wise to remember that time is one their side when it comes to finding stocks at a good value in a down market. Allow the talking heads to go on about the market bottom and sit on your money market accounts and cash equivalents. As you finally see the fundamentals of the economy and the market rebounding and beginning a solid leg up, then you can feel safer committing that capital of yours.