It’s been said that “timing is everything,” and when it comes to financial markets, most investors would absolutely agree that good timing is essential.
But if you’re a long-term investor like Warren Buffett, who claims his “favorite holding period is forever,” is precise timing really that important to be a successful investor? This is a key question we all must consider carefully, because the answer very much depends on your time horizon as an investor.
Warren Buffett obviously has a VERY long-term investment horizon.
In fact, the two largest stock holdings in Buffett’s Berkshire Hathaway stock portfolio are Wells Fargo (WFC) and Coca Cola (KO), which together account for nearly 40 percent of his total portfolio! He has owned both stocks for several decades, through multiple bear markets and soaring bull markets.
Think about that, both stocks have plunged in value at times over the past 30 years, including gut-wrenching declines from 2000 to 2003, and again from 2007 to 2009; the kind of price declines that would make most investors run for the exit, but not Buffett.
He has never sold, preferring instead to add to his WFC and KO positions on weakness. Today, he owns more than $42 billion worth of these two stocks alone! Talk about taking the long-term view.
If Your Time Horizon isn’t Forever, then Timing is Important
The truth is, many investors have a much shorter time horizon, myself included. If you consider yourself more of a trader, at least for part of your portfolio, then timing is important to stay out of trouble when markets inevitably plunge.
Even Warren Buffett’s investment style has been plagued by poor timing in the past. Buffett himself admitted as much.
Buffett began buying shares of U.K. retailer Tesco several years ago with Berkshire Hathaway reporting a stake worth $1.7 billion at the beginning of the year — just before the company became embroiled in an accounting scandal — bad timing.
Tesco is the worst performing stock in the FTSE 100 Index of UK shares in 2014, and Buffett recently told CNBC, “I made a mistake on Tesco. That was a huge mistake by me.”
The reality is whether you consider yourself an investor or trader, there are two critical elements that must be part of your strategy in my view: selection and timing. In fact, these two factors are opposite sides of the same coin, but both are essential to your success as a short-term trader or a longer-term investor.
Selection is all about using tools that help guide you to the best investments available, stocks, Exchange Traded Funds, etc. Being able to correctly identify the highest-quality stocks for example and eliminate the garbage, stocks that are simply too risky, gives you a huge advantage over investors who refuse to do their homework when it comes to the basic fundamentals.
|Selecting the highest-quality stocks is only one of the important tools needed for investment success.|
Fortunately at Weiss Research, we have developed just such a powerful tool: our award-winning Weiss Stock Ratings, created over a decade ago to help you identify the safest, highest-profit-potential stocks on the market. In fact, our Weiss Stock Ratings are the cornerstone of a new investment service we offer: Martin’s Ultimate Portfolio, which I was proud to help develop alongside Dr. Weiss and the Weiss Ratings and Research team.
Combining Stock Selection AND Trade Timing
Up until now, most of our work at Weiss Research has been focused on fundamental stock selection. Our ratings model helps us identify the very best stocks on the market, those with the most upside profit potential, while steering clear of stocks that are too risky and likely to underperform. But now we have a major new tool that’s all about market timing, the other critical element to investment success.
The Weiss Timing Index is a new and powerful indicator we’ve developed that is all about helping you find the right stock at just the right time so you can more consistently buy lower and sell higher. How does it work? Well, there simply isn’t enough space to go into all the details in this article, but suffice it to say that our Timing Index relies on a variety of familiar technical indicators including: moving averages, momentum and relative price strength, that we combine in a unique way.
If you have an online brokerage account and use their trading software, you’ll find all kinds of technical indicators available, dozens of choices, all of them designed to help you time the market. But generally, they all boil down to one of two categories: Either they try to help you jump on a trend that’s already under way or they warn you of a potential reversal in trend.
The challenge is that, many times all these indicators contradict each other. You may find one indicator that’s bullish, saying green-light go on the trade. Meanwhile, another signal is bearish, flashing a bright red-light, and still another indicator is comfortably neutral, providing no insight at all. What to do?
Our Weiss Timing Index overcomes this all-too common dilemma. Our research and stress tests over a 10-year study tells us that our distinctive system has a knack for finding the sweet-spot for trade-timing. Consistently identifying that unique period of time when the trend is already under way, but still has a long way to go.
And when combined with our Weiss Stock Ratings, the Weiss Timing Index delivered an 80 percent win rate in our tests, correctly identifying short-term stock moves about to take place, and helping us get the timing just right. I don’t know about you, but with over 25 years in the investment business, I know of no one else who has ever created a strategy that gets it right on four out of every five trades!
Bottom line: whether you consider yourself a short-term trader or long-term investor, finding high-quality stocks isn’t really the hard part. But knowing precisely when to buy and sell them can be the tricky part. By using a disciplined, proven strategy to improve both your investment selection and your timing, you can realize more consistent profit potential.